California Bankruptcy Attorney Blog

Our Moreno Valley loan modification attorneys wrote last month about the threat of deficiency judgments against borrowers who go into foreclosure. Deficiency judgments are court orders to former homeowners who went into foreclosure, requiring them to pay the unpaid balance on their mortgages. They are obtained when the lender sues the foreclosed homeowner -- a practice that was once rare, but is growing thanks to the flood of foreclosures and the perception that some people who walk away or short-sell can afford to keep paying. California law partially protects borrowers from deficiency judgments, but allows the judgments against any loan that's been altered, such as with a refinance or HELOC, or went into the relatively rare judicial foreclosure process.

Now, the California Legislature is considering a bill that would protect those homeowners as well, the New York Times reported June 22. SB 1178 extends protection from deficiency judgments to people who refinanced took out home equity loans, but only up to the original mortgage amount. That is, if your original mortgage was for $500,000, the lender cannot pursue the balance owed on that $500,000 -- but may sue to recover any extra taken out as a loan. In fact, the Times reported, the original bill protected homeowners who took out any amount as long as it was to finance home improvements, but the bill has changed due in part to lobbying from the banking industry. On the other side is the real estate industry, the Times said, which wants to make sure potential clients can afford to buy again.

The article reports this as a fight between real estate industry and the banking industry, and from a political standpoint, that might be right. But as Brea loan modification lawyers, we see it from the point of view of our clients, who are ordinary people struggling to hold on to their homes and investments. Of course, this bill would benefit our clients by protecting more borrowers from lawsuits. As things currently stand, whether a homeowner is protected is somewhat arbitrary; people who refinanced for a better interest rate are treated the same as people who overextended themselves with a large HELOC. This bill corrects that inequity. It also, as one San Diego attorney in the article notes, takes away banks' ability to squeeze promises to pay out of homeowners as a condition of a short sale -- a practice that takes advantage of sellers who are desperate and frequently don't understand their rights.

Continue reading "State Lawmakers Considering Bill Insulating Homeowners From Deficiency Judgments" »

In a case with extremely interesting implications for San Bernardino County bankruptcy attorneys like us, a federal appeals court has ruled that bankruptcies may be pursued as class actions. Class actions are lawsuits that bring together a large number of people with the same complaint against the same defendant. They are frequently used in consumer rights lawsuits, such as when many people bought the same defective product, but courts disagree on whether they can be used in bankruptcy court. As the National Law Journal reported June 22, the Fifth U.S. Circuit Court of Appeals in New Orleans has ruled that they can, establishing that right for courts in that circuit. However, the Fifth found that the class in this particular case was improperly certified.

In In the matter of Wilborn et al., the U.S. Bankruptcy Court for the Southern District of Texas sought to certify a class of 1,236 individuals or married couples who had filed for Chapter 13 bankruptcy and had mortgages that were owned or serviced by Wells Fargo Bank. They had filed an adversary action against Wells Fargo, claiming that the bank had charged unreasonable fees and costs for services related to the bankruptcy, such as title searches, ranging from $1,200 to $4,000. Wells Fargo did not disclose those fees to the court, they said, and as a result, many had debts that were not covered by their repayment plans. The Fifth Circuit found that the bankruptcy judge may properly certify a class of debtors in an adversity proceeding. However, it added that this class was inappropriate because individual issues, especially varying fees, predominated over issues common to the class.

As Villa Park personal bankruptcy lawyers, we believe this has implications for our practice in loan modification and foreclosure prevention as well as in bankruptcy. If the description of the inflated fees sounds familiar, it could be because Bank of America settled very similar claims this month brought by homeowners who had mortgages through the now-defunct Countrywide Financial Corp. Like many of the Countrywide borrowers, the Wells Fargo borrowers were already in bankruptcy, making the inflated fees particularly exploitive, greedy and inappropriate. If this turns out to be an industry-wide practice, more lawsuits or adversary claims by people in bankruptcy may be on their way -- and the bankruptcy courts may have more opportunities to certify class actions. Finding common concerns across a very large group of debtors might be hard, but a class action would certainly be more effective if thousands of borrowers truly have been exploited in this way.

Continue reading "Federal Appeals Court Rules Bankruptcy Judges May Certify Classes of Debtors" »

Under the federal Fair Debt Collection Practices Act, one of the numerous restrictions on debt collectors' behavior is a prohibition against misrepresenting themselves as attorneys. So our Chino Hills unfair debt collection lawyers were pleased to see an article from the Legal Intelligencer June 18 about a court decision penalizing a law firm that used its letterhead to try to collect a debt, even though no attorney had reviewed the case and no lawsuit was contemplated. The ruling came from a federal magistrate judge in the Middle District of Pennsylvania, in a case involving attempts to collect on home loan debt after the borrower fell behind on payments. In ruling, Magistrate Judge Andrew Smyser granted summary judgment to the borrower, meaning that borrower won without a trial.

The plaintiff was Darwin Lesher, who went into default on a home equity loan from Washington Mutual. He received two collection letters from the Law Office of Mitchell N. Kay. Both were on law firm letterhead, and both contained language saying no attorney at the firm had reviewed Lesher's account. Lesher sued, saying the law firm letterhead was misleading because it implied a threat of litigation not contemplated and that a lawyer was on the case. An attorney for Kay argued that the letter was not misleading under 2005's Greco v. Trauner Cohen & Thomas, a Second U.S. Circuit Court of Appeals decision saying law firm letterhead is not misleading if it contains a statement saying no attorney has reviewed the account. But Smyser rejected that ruing in favor of a ruling from the Third Circuit, which covers Pennsylvania. Rosenau v. Unifund Corp. said a letter is deceptive if the least sophisticated debtor can find more than one meaning in it -- which Smyser ruled was the case here.

As Westminster abusive debt collection attorneys, we strongly agree. Legal letterhead communicates that the letter is from an attorney, which communicates a threat of litigation. In our experience, most people outside the legal industry don't realize that some attorneys act as debt collectors without using their legal skills. As Smyser said, an unsophisticated debtor would be likely to assume that a law firm is an organization made up of lawyers doing legal work. Including a line saying otherwise in the body of the letter is certainly better than nothing, but it still has the potential to mislead people who are sent into a panic by the letterhead before they even get that far. Collection agencies know this, which is why they try tactics like this to get around the clear prohibition in the FDCPA against misrepresenting themselves as attorneys.

Continue reading "Pennsylvania Court Rules Law Firm Letterhead Misleading Under FDCPA" »

One criticism of the 2005 bankruptcy reform law is its requirement that bankruptcy filers attend mandatory credit counseling before being allowed to fie, and complete a financial education course at the end, before they discharge their debts. Our Fontana individual bankruptcy lawyers have heard criticisms arguing that this is patronizing; adds unnecessary administrative obstacles; and unfairly targets filers who may be in financial trouble through no fault of their own, such as those with medical debts. To assess whether these and other criticisms are true, Professor Angela Lyons of the University of Illinois and two colleagues launched a multi-part study looking at the effectiveness of the counseling requirements. The results of the first phase were recently published by Money Management International, the university announced June 15.

Lyons and her colleagues are tracking people who filed for bankruptcy throughout the bankruptcy process, then plan to follow up three to six months after the bankruptcy is over. The newest publication (PDF) focuses only on the educational value of the initial credit counseling session, which is 60 to 90 minutes and must be completed before the bankruptcy can be filed. During that session, potential filers learn basic personal finance; take stock of their own finances, including debts and assets; and look for ways to improve their finances by adding income or cutting expenses. The researchers then surveyed participants to gauge how they felt about the counseling. More than 99 percent said the counseling was helpful and improved their knowledge, future intentions and attitudes. Not surprisingly, researchers also found that most filers had multiple reasons for going into bankruptcy, but that filers with all types of problems found the counseling helpful.

As Yorba Linda personal bankruptcy attorneys, we're happy to hear that the counseling is helping the majority of filers. We opposed the 2005 reform law and continue to have significant misgivings about its effects, including the increased administrative hurdles it requires. But if this law ends up benefiting bankruptcy filers by helping them make good financial choices, we're happy to celebrate that aspect of it. In our experience, bankruptcy is not a decision that most people make lightly or without an emotional struggle. This makes us concerned about the mandatory credit counseling, which could implicitly or explicitly tell filers they should be ashamed of being in bankruptcy, or of the actions that led them there. Unfortunately, shame keeps a lot of filers from seeking help before the damage to their financial lives becomes large or irreversible. We'd prefer official bankruptcy rules that do not discourage people who need help from seeking it.

Continue reading "Study Suggests Mandatory Financial Counseling During Bankruptcy May Help" »

Our Upland predatory lending attorneys have written several times in this space about the legal actions against Countrywide Financial Corp., and after its buyout of Countrywide, Bank of America. Countrywide customers have benefited from several legal settlements, including settlements allowing them to modify their loans, thanks to legal actions brought privately and by state attorneys general alleging that Countrywide engaged in predatory lending practices. Now, Bloomberg News reported June 7, Bank of America has settled a lawsuit brought by the Federal Trade Commission alleging more wrongdoing by Countrywide -- charging inflated and illegal fees to homeowners who went into default. The FTC said the $108 million penalty is one of the largest in its history. The money will be returned to more than 200,000 borrowers.

According to the article, the illegal behavior targeted homeowners who were already behind on their mortgage payments. Countrywide allegedly charged these homeowners up to 400 percent of the normal fee for services like property inspections, and sometimes didn't give any notice of extra charges. When homeowners went into bankruptcy, Countrywide allegedly inflated the debts it entered into the bankruptcy court, essentially using the system to get extra money from bankrupt borrowers. The U.S. Trustee program, which enforces bankruptcy laws, worked with the FTC to resolve the case; an official would not confirm that it was also referred for criminal prosecution to the Justice Department. An FTC spokesman said the agency would need some time to reconstruct how much money is owed to individual borrowers, in part because "most frat houses have better record-keeping" than Countrywide did.

As Pico Rivera predatory lending lawyers, we are pleased that the FTC has been able to recover compensation for people who were taken advantage of by Countrywide. As the FTC spokesman points out, the borrowers targeted were people who were already struggling financially, so badly that they had trouble making their mortgage payments. Piling illegal and excessive fees onto the top of that is cynical and exploitive. Unfortunately, that's consistent with other cynical and exploitive behavior by Countrywide, including targeting minorities for expensive subprime loans -- regardless of their financial health -- and writing loans to people they knew couldn't make payments, knowing that the loans would quickly be securitized. The FTC spokesman mentioned that his agency could do more to prevent this kind of exploitation if Congress gives it rule-making power over the mortgage industry, and we hope Congress follows through.

Continue reading "Bank of America Settles FTC Lawsuit Over Excessive Fees for Countrywide Customers" »

Our Redlands commercial real estate loan modification attorneys have been writing a lot this year about the dire predictions for the commercial real estate market. On June 9, Fortune magazine ran an article outlining those predictions and contrasting them with the optimistic view taken by other observers. In fact, the article starts by posing a question: Where is the commercial real estate crash that was predicted? It gives a lot of potential answers to that question, depending on the observer's perspective as well as the segment of the market being examined. But in the end, the article notes that commercial real estate has a tough road ahead even if investors are optimistic.

The article starts with non-securitized CRE loans. In that area, some observers -- notably including Elizabeth Warren, TARP committee chair and financial watchdog for the Obama administration -- are predicting a market meltdown that will trigger failures of small to mid-sized banks with too many investments in bad assets. On the other side are people who believe the market will bottom out rather than collapse, thanks in part to government intervention. Investors are also helping themselves by finding creative ways to restructure their debts, and some investors are eager to get back into the market while prices are still low. Meanwhile, investors in commercial mortgage-backed securities have more to worry about, the article suggested, because a great many of them written during the boom years have low ratings. And speculative commercial loans not backed by assets, such as construction loans, are also risky and have already contributed to bank failures.

As Newport Beach commercial real estate loan modification lawyers, we hope the optimists are right. We and our clients would prefer an economic recovery to another real estate crash, especially one involving loans big enough to bring down banks. If you are looking for reasons to be hopeful, this article might give you some reasons, especially as to conventional, non-securitized CRE loans. However, a commercial real estate recovery relies on investors to make smart choices -- and on lenders to allow some out-of-the-ordinary financial moves. In our role as loan modification attorneys throughout the residential mortgage crisis, we saw repeatedly that lenders did not want to do anything they considered risky or a threat to their bottom lines, even if it made long-term sense for both parties.

Continue reading "Report Outlines Optimism and Pessimism in Commercial Real Estate Market" »

As San Bernardino consumer bankruptcy lawyers, we are closely following the unprecedented growth in bankruptcy filings for individuals and couples. The American Bankruptcy Institute predicts a record number of filings this year, enough to break last year's record for number of filings since the 2005 bankruptcy reform law. But according to a June 9 article from USA Today, bankruptcy filings might be even higher if bankruptcy were an option for more people. Experts in the article say that because bankruptcy doesn't allow the discharge of all kinds of debts, some get no benefit from filing. Other people in financial distress don't file because they cannot afford it. In either case, the article said, some experts believe such people have gone into "informal bankruptcy" without the legal protections of a proper bankruptcy.

The article describes several groups who can't benefit from filing for bankruptcy. One is people with a large amount of student loan debt, especially debt on private rather than federal student loans. Student loans are not dischargeable in bankruptcy unless the filer can show "undue hardship." This rule once applied only to government loans, but was changed to include all student loans -- including unregulated, high-interest private loans -- during the 2005 bankruptcy reform. Proving undue hardship requires an extra trial and lots of extra expense with no guarantee of success. Congress is considering making private student loans once again dischargeable, with predictable blowback from the financial industry.

Another group is simply too financially strapped to pay for bankruptcy filing. According to the article, the 2005 law added more requirements that drive up costs, and attorney and filing fees have also risen. According to one academic paper, these costs keep all but a fraction of potential filers from pursuing a bankruptcy. Unfortunately, delaying a bankruptcy can create even more financial problems for debtors and rob them of resources they need to make a fresh start. Free legal services and fee waivers are out there, but the recession has made both harder to get than they already were.

Finally, the article notes that bankruptcy filing also cannot usually save a home that is threatened by foreclosure. Since the 1970s, bankruptcy law has allowed judges to reduce the principal on any loan but the loan on a primary home -- including loans for vacation homes, boats and other luxury items. An attempt to change the law back failed in Congress last year. A new federal rule forbids lenders from turning down loan modification requests solely because the borrower has also filed for bankruptcy, but borrowers in trouble still cannot turn to bankruptcy to keep their homes.

We are pleased that this article is calling attention to some of the major flaws of bankruptcy law. As Fullerton individual bankruptcy attorneys, we see those flaws firsthand because we work with bankruptcy law and bankruptcy clients every day. The 2005 law was ostensibly intended to reform the bankruptcy process to curb abuses of the system, but many observers believed that the real goal was to discourage bankruptcies, by making effective ones harder to get and more expensive. This article suggests that at least to some extent, those critics were right -- bankruptcies are out of reach for some people who are in real financial trouble. That's a shame and a missed opportunity for our legal system to do some good for vulnerable Americans.

Continue reading "Experts Concerned That Bankruptcy Is Unavailable to Some in Financial Distress" »

Our Corona debt collection harassment lawyers wrote recently about a New Mexico man who is suing a debt collector for alleged threats to blow up his house. On the heels of that story came a June 1 article from ABC News about another egregious violation of the law and basic decency by a debt collector. Allen Jones of Lewisville, Texas sued Advanced Call Center Technologies for making multiple collections calls to him that used profanity, at least one racial slur and racially charged language. The debt in question was under $200, Jones said. After a trial in state court, a jury found that ACT had violated a state fair debt collections law and awarded Jones $1.5 million in damages. A lawyer for ACT said this was not the standard practice and that the two employees involved no longer work at the company.

Jones has eight of the calls recorded to voice mail. In them, the caller uses the "n-word" and several types of profanity. ABC News plays the voice mails in its video report:

One of his attorneys said it was the worse case he'd ever seen and that jurors might not have believed it if it hadn't been recorded. In addition to the profanity and racial language, the messages allegedly included a sexual comment about Jones's wife. The calls came as early as 6 a.m. and as late as 11 p.m., both of which are outside the times federal law allows debt collection calls to be made. Jones said he had actually paid the credit card debt ACT was calling about and said so to the callers, but this didn't stop the harassment. In addition to the $1.5 million, the jury awarded him $50,000 for mental anguish and $143,000 in attorney fees.

As Placentia debt collection abuse attorneys, we see plenty of stories about abusive debt collection tactics. But, as the attorney for Jones said, the alleged actions in this story go beyond even the normal abuses and deceptive tactics used by collection agencies. Jones sued under a Texas state consumer protection law, but all of the alleged actions described in the article violate the federal Fair Debt Collection Practices Act as well. That law forbids calls that use abusive or profane language; threats; and calls outside of the hours of 8 a.m. to 9 p.m. in the debtor's time zone. It also forbids communicating after a request for validation of the debt, which Jones may or may not have requested. Failure to follow the FDCPA makes debt collectors like ACT vulnerable to a federal lawsuit, in which victims can win up to $1,000 plus attorney fees. Jones won a great deal more in state court, suggesting that the jury in that case sought to punish ACT and set an example for other collection agencies using illegal tactics.

Continue reading "Texas Man Wins $1.5 Million from Debt Collector That Used Obscenities and Racial Slurs" »

Our Rancho Cucamonga abusive debt collection attorneys frequently tell clients that you cannot be arrested for failing to pay a debt in the United States. While this is technically true, a recent article in the Minneapolis Star-Tribune shows that some debt collectors are finding ways around it. According to the June 9 article, debtors in some states are being arrested and thrown into jail for contempt of court after they miss court hearings or court-ordered payments of their debts. The practice is under the radar, the article said, but uses government resources and money to enforce private debts as well as costing debtors money and sending them to jail, sometimes with no warning and over very small debts.

The practice is not followed in every state, the article said, and some law enforcement agencies don't have the funds to make arrests in non-criminal cases. But when they do, it can come as a shock to people who didn't realize their unpaid debts could land them in jail. The article tells the story of a woman who was jailed overnight for missing a court hearing related to a $6,200 credit card debt. Like many debtors, she ignored the notices she received because she had no history with the debt collection company and assumed it was a mistake or a scam. Another woman was jailed for a $250 credit card debt that led to a lawsuit that she says she was not notified about. In some cases, courts order debtors imprisoned indefinitely until they come up with a payment (difficult when you're in jail). Consumer advocates say the practice also penalizes those who have the least, who are more likely to miss payments and also more likely to be financially harmed by bail and impound fees.

As Garden Grove debt collection harassment lawyers, we don't even know where to start explaining what's wrong with this practice. Federal debtors' prisons were abolished in the 1830s, and most states followed suit in that era. Thanks to a 1970s Supreme Court ruling, it is unconstitutional to jail someone only for a debt; in fact, the state constitutions of Tennessee and Oklahoma forbid the practice. These people are being jailed for violating a court order, not for debt, but that's a technicality. In addition, jail for nonpayment is essentially jailing someone for being too poor to pay. As the article points out, the practice of putting debtors in jail makes the court system an arm of the private debt collection company, inappropriately spending taxpayer money to do the work of private industry. The arrests sometimes stem from disputed debts or unethical behavior by debt collectors, like failing to properly serve court papers for a lawsuit, so they can be unfair. And perhaps most importantly, jailing debtors is a violation of their rights and dignity.

Continue reading "More States Are Jailing Debtors for Contempt of Court Related to Debt Payments" »

Our Moreno Valley loan modification attorneys have worked with distressed homeowners for well over a year, from the beginning of the mortgage crisis. In that time, we've heard numerous complaints from borrowers about lenders that grant a loan modification while also pursuing a foreclosure, which sometimes means the home is repossessed even while homeowners believe they're on the path to financial security. Lender policies and the federal Home Affordable Modification Program ban foreclosures before a loan modification is complete, but it happens anyway, due to poor intra-lender communications and a lack of independent oversight. Now, as the San Francisco Chronicle reported June 2, the California legislature is considering yet another ban, but with some teeth: Borrowers would be able to sue lenders that foreclose in violation of the law.

SB 1275, sponsored by Democrat Mark Leno of San Francisco, would also set down detailed modification rules. Not surprisingly, lenders oppose it, saying it codifies HAMP, which has been changed several times since it was introduced in early 2009. A banking industry spokeswoman also said lenders oppose the lawsuit provision, because they believe it would create lawsuits for minor technical violations and further delay foreclosures. Leno, the bill's sponsor, said the lawsuit provision is needed because HAMP does not hold lenders and servicers accountable for violating the foreclosure ban. In addition, the bill would cover the 25 to 30 percent of borrowers who are not eligible for HAMP.

To illustrate the problem, the article tells a story about a Bay Area homeowner who was literally on the phone negotiating a loan modification when a real estate agent came to the door and told him the house had been foreclosed. Jose Vega said he handed the agent the phone and told him to work it out with the lender, JP Morgan Chase. The Chase representative on the phone knew nothing about the foreclosure. Chase eventually halted the foreclosure and the Vegas are still in the house while they wait for a decision. A Chase spokeswoman said the bank's policy is not to foreclose while considering a loan modification.

As this article and numerous others show, policies like that have done nothing to stop improper foreclosures. That's why our Fontana loan modification lawyers support the private right of action created by SB 1275, and any other accountability tools. As things currently stand, lenders like Chase who break their own policies -- not to mention the requirements of HAMP -- face zero consequences. This is equivalent to not having any such rule in the first place. The right to file private lawsuits would give consumers the ability to enforce their rights. If this creates frivolous litigation, as the banking spokeswoman implied, we believe courts are well-equipped to filter bad lawsuits from good. As for codifying HAMP, we don't believe there's anything wrong with codifying a valuable provision of the law (and applying it to all homeowners), regardless of whether the law later changes.

Continue reading "California Considering Law Banning Foreclosures Before Loan Modification Decision" »

Over the past few months, our Riverside commercial real estate loan modification attorneys have written repeatedly about financial-industry predictions for the commercial real estate market. Almost none of those predictions have been good in 2010. In a June 10 article, Dow Jones Newswires notes yet another black outlook on the commercial real estate market, specifically in commercial mortgage-backed securities. The prediction comes from Moody's Investors Service, which has revised its original estimate that 8 to 9 percent of loans on CMBS will be delinquent by the end of the year. Following to a small jump in delinquencies in May, Moody's now predicts that 9 to 11 percent of CMBS will be delinquent by the end of 2010.

Last month's jump was from 7 percent delinquency to 7.5 percent delinquency. This may not seem like much, but it follows two months of modest declines, which gave some observers hope that the commercial real estate market was making a comeback. The article says Moody's revised its prediction to account for continuing high rates of unemployment, as well as the economic troubles in Europe that may have effects on the U.S. market. This is in addition to the existing troubles in the CRE market, which has been suffering for more than a year. Moody's Analyst Nick Levidy said some sectors of the CRE market are showing signs of improvement, while others bear the brunt of the downturn. The highest delinquency rates in May were in hotels and multifamily housing, both of which had default rates at 13 percent. But office properties saw the highest jump in delinquencies, from 4.6 percent to 5.6 percent. Regionally, the highest delinquency rates are here in the West.

As Costa Mesa commercial real estate loan modification lawyers, we're not surprised to see that the West is hurting. California, Arizona and Nevada could be considered the troubled residential mortgage capital of the U.S. (with Florida competing). Assuming that troubled residential mortgages spring from general economic troubles like unemployment, it makes sense that the commercial sectors in the same region would also be affected. In fact, the Dow Jones article notes that Nevada is the state with the most CMBS delinquencies, at 23 percent. That is, nearly a quarter of all commercial properties in Nevada are in foreclosure or heading that direction. In addition to harming the property buyer and the general economy, this can also hurt the stability of the lender, which of course is not getting paid back on its loan. If widespread enough, this could hurt the economic recovery for everyone.

Continue reading "Investment Ratings Company Issues Grim Revised Predictions for CMBS Market " »

As Riverside commercial real estate loan modification attorneys, we've been following the news about commercial mortgage-backed securities for the same reasons we follow news about unsecuritized commercial loans. Unfortunately, that news continues to be grim. According to a June 2 article from the Wall Street Journal, financial ratings company Fitch released a study that day showing that investors in CMBS lost an average of 57% of their principal in 2009 in mortgages that were foreclosed on or sold. That's much higher than the historical average of 37%, the newspaper said. Worse, Fitch's study predicts that this rate will exceed the historical average throughout this year and into next year, creating severe losses for investors.

The problems with CMBS are the same as the problems with the commercial real estate market generally, the article said. With the economy struggling, many tenants are giving up their office space or negotiating breaks on rent. That means property owners are having problems finding tenants at all, retaining them and charging enough rent to cover costs. At the same time, buildings are losing their value because all real estate is losing its value. This leaves some building owners underwater on their loans, which means they can't refinance when the loan comes due -- or when they find that they don't have enough income to pay off the loan in the first place. All of these factors contributed to a delinquency rate of about 8.4% in June, the article said -- more than triple the rate from a year earlier. And that creates the very high loss severity rate projected by Fitch for CMBS this year and next year.

Our Los Angeles County commercial real estate loan modification lawyers are not pleased, but also not surprised. We have watched commercial real estate throughout the year. Ratings agencies -- and real-life data -- have consistently shown heavy losses in CRE, for all the same reasons discussed above. It's not surprising that this would eventually affect the investments of securitized CRE, just as the subprime mortgage crisis in the residential housing market has affected investments in securitized mortgages. The question is, what will lenders do about this? Residential mortgage lenders have not been enthusiastic about helping struggling borrowers reach a loan modification, and many have, correctly or otherwise, blamed securitization for blocking the way. If lenders have similar problems modifying securitized CRE loans, however, they run the risk of major losses that could bring down a small to mid-sized bank.

Continue reading "Ratings Company Predicts Record Losses in Commercial Mortgage-Backed Securities" »

As Chino consumer bankruptcy attorneys, we were interested to see an early report on the number of bankruptcies filed in May by individuals and married couples. The Wall Street Journal's Real Time Economics blog reported June 2 that the number of personal bankruptcy filings fell in May, for the second month in a row. May saw 136,142 bankruptcy filings, which was down 6% from April. April also saw a decline from March's numbers, but previous filing numbers had been trending upward for at least a year, tracking the economic decline. The numbers come from the American Bankruptcy Institute, a trade group including consumer bankruptcy attorneys as well as accountants and other financial professionals.

Samuel Gerdano, the executive director of ABI, told the blog he didn't think the two-month downward trend reflected what bankruptcies will do overall in 2010. Gerdano said the overall trend is upward, in his opinion, and filings will continue to rise. The blog noted that despite the two-month respite, personal bankruptcies are still currently 9% higher than they were at this time last year, and 15% higher than they were in the first five months of 2009. And of course, Americans are still struggling with all the same problems that drive bankruptcies higher, including high unemployment and limited access to credit. Perhaps for those reasons, Gerdano predicted that personal filings could go as high as 1.6 million for all of 2010, which would top 2009's 1.4 million and set a new record for bankruptcy filings after the 2005 bankruptcy reform.

Our Lakewood personal bankruptcy lawyers continue to see these trends reflected in our own work helping individuals, couples and small businesses handle serious financial problems in the most advantageous way possible. It's no surprise that bankruptcies (not to mention foreclosures) would continue to be high as long as other signs of economic problems for real people -- not just Wall Street -- are present. We cannot explain the drop in the bankruptcy filing rate in recent months, but we suspect Gerdano is right that it's a temporary blip. And as the blog post points out, the ongoing oil spill in the Gulf of Mexico could push numbers even higher in the surrounding Gulf states, as owners of small fishing and tourist businesses lose their ability to make a living. Delays in that effect mean those numbers could jump later this year.

Continue reading "Bankruptcies Down in May, But Trade Group Predicts Continued Upward Trend" »

The New York Times published a story recently that caught the attention of our Rancho Cucamonga loan modification lawyers. According to the May 31 article, the delay between a legal foreclosure and an eviction is longer and longer these days -- and some borrowers are taking advantage of it. The article casts this as a "loan modification" that brings the loan payment down to $0, allowing borrowers to continue making ends meet or save money for a new home. These borrowers don't necessarily feel ashamed, the article said, because some believe the lenders are dishonest, unwilling to help and may even be responsible for the mortgage crisis because they made bad loans.

The article quotes LPS Analytics, which says the average time between delinquency and eviction is 438 days, more than 14 months. In January of 2008, that average was 251 days, between 8 and 9 months. More than 650,000 American households had not made a loan payment in 18 months, LPS said -- and with 19% of those, the lender had not even started repossession. The article focuses on the decision by Alex Pemberton and Susan Reboyras, a Florida couple with two daughters, to stop paying their mortgage. They say the home is worth less than half of the $280,000 they owe, and blame the lender for allowing them to take out a home equity loan outside the bank's own debt to income guidelines. Instead of paying the mortgage, Pemberton said the couple has sunk the money into their small attic-restoration business, which is recovering in a way that the Florida housing market is not.

This article has attracted a lot of attention on the New York Times website, undoubtedly in part from people who believe Pemberton and Reboyras are doing something wrong. While our Costa Mesa loan modification attorneys certainly don't recommend going into foreclosure if you can avoid it, we're not sure it's wrong to make the best financial move for your own situation. In fact, a capitalist system depends on individuals to make decisions in "rational self-interest." This is why our system usually allows large businesses to make decisions that aren't in other parties' best interests -- including the bad loan Pemberton claims his mortgage lender made. By deciding not to pay, Pemberton and Reboyras are meeting the same low standard. They are also taking advantage of lenders' own foot-dragging on evictions, which uses foreclosed homeowners are free caretakers of homes that lenders may be keeping in "shadow inventory."

Continue reading "More Homeowners Taking Advantage of Long Delay Between Foreclosure and Eviction" »

Our San Bernardino debt collection harassment attorneys see a lot of reports about bad behavior by debt collectors. But even so, we were surprised to see an article about a man who is suing a phone company for threatening to blow up his house. A May 27 article from ABC News tells the story of Al Burrows, 45, who says a Verizon Wireless representative threatened to blow up his "[expletive] house" over a $308 debt Burrows owed on an account he had opened for his stepson. The threat upset Burrows and his wife so much that they eventually moved away from the house in Las Cruces, NM and into another state that the article did not name.

Burrows and his attorney told ABC that Burrows already knew about the debt when he got the call. In fact, Burrows said, he had already worked out a payment plan with Verizon. The second caller even acknowledged that the payment plan existed, the article said. Nonetheless, Burrows played a tape for the TV reporter of a woman who demanded immediate payment or, as she said, "I am gonna blow your [expletive] house up." His wife was so shaken that Burrows asked his brother to visit so his wife wouldn't be alone while Burrows was at work. Eventually, they left the state. Burrows also says he called Verizon to complain, but was not believed and has received no apology. His lawsuit seeks unspecified financial damages.

As Westminster unfair debt collection lawyers, we're interested to see that this alleged abuse came directly from the original creditor rather than a third-party debt collector. As a rule, third-party collection agencies are more likely to be abusive, in part because the debt has already been written off by the time they get involved. By contrast, a company like Verizon has an interest in collecting in a way that leaves the door open for future relationships. Possibly for this reason, the federal Fair Debt Collection Practices Act does not apply to original creditors -- and neither do many state laws, including New Mexico's version of the Act. That means Burrows is probably claiming that Verizon's behavior violated another law, including state laws about personal injuries. If the FDCPA did apply, however, the use of obscenity and threats would be a clear violation, as these are among the many unfair actions prohibited by the law.

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