California Bankruptcy Attorney Blog

As Newport Beach commercial loan modification attorneys, we were interested to see a recent article suggesting that the trend of "walking away" from mortgages has now reached the commercial sector of real estate. The Wall Street Journal wrote Aug. 25 about at least three companies that have chosen to default on commercial loans because they believe it makes better business sense than continuing to pay the loans back. The article compares this trend to the debate among residential mortgage holders, where many people have accused walk-aways of failing to meet a moral obligation to repay their lenders, even if it makes good financial sense to abandon the loan. By contrast, the article said, there is less of a stigma for this in the financial world -- in fact, some companies that walked away have even been rewarded financially for what was seen by some as a smart business move.

The article cites at least four commercial property owners that have made strategic financial decisions to stop paying their mortgages and return the keys to the lender. They include Taubman Centers Inc., owner of the Beverly Center in Los Angeles, which walked away from a mortgage on a property in Atlantic City, N.J. Robert Taubman, the company's chief executive, told the Journal that the decision was not made lightly, but the gap between the $52 million value of the property and the $135 million paid was very large. At least one investor, Deutsche Bank's RREEF, reportedly favors companies that get rid of "money pit" properties, as long as their loans do not hold buyers personally responsible for a default. The article said whether a buyer walks away depends to some extent on the lender, noting that at least one borrower blamed its walk-away on its inability to make a deal with the lender. Nonetheless, it said lenders and investors take a financial hit when they are forced to re-sell properties at the bottom of the CRE market.

Our West Covina commercial real estate loan modification lawyers make this argument to lenders whenever we have a client seeking a loan workout in lieu of an outright foreclosure. Unfortunately, not all lenders are listening. As this article suggests, cold logic is likely to lead many CRE investors who bought at the height of the bubble to consider walking away. Those investors are also much less likely to be affected by the "moral obligation" argument being advanced in the residential mortgage debate, simply because commercial real estate is a business transaction for the buyer as well as the seller. Under those circumstances, lenders will probably need to take a hard look at the possible consequences before simply denying a loan workout or extension to commercial investors. Otherwise, they may be stuck with multimillion-dollar properties they cannot sell, or sell for their true value.

Continue reading "Commercial Property Owners Begin Exploring Walking Away to Deal With Debt" »

As Riverside County loan modification attorneys, we were interested to see an article discussing a recent meeting the Treasury Department held about HAMP -- the Home Affordable Modification Program. This is the government-backed loan modification program that has come under fire in many quarters for being ineffective. As the New Republic Online reported Aug. 24, the Treasury Department invited some financial bloggers to meet with officials on various housing finance subjects, including HAMP. At that meeting, the NRO said, some people were surprised to learn that Treasury considered HAMP successful in at least one respect -- in that it slowed the number of foreclosures and stabilized the national housing market. The NRO suggested that this was obvious -- that the intention had always been to "bail out" the banks.

Unlike the NRO, some bloggers reacted with apparent surprise to the idea that individual homeowners were not the intended beneficiaries of HAMP, calling it "cynical" and "cruel" of the government to mislead people about this. The NRO suggested that this was a naïve reaction, saying it had always thought HAMP was "a backdoor bailout for banks" and federal mortgage guarantors Fannie Mae and Freddie Mac. (It appeared to be arguing that this was so because of restrictive rules that applied to refinancing, although the bulk of the article appeared to be about loan modifications, a separate arm of the Home Affordable program.) The article went on to further criticize HAMP for creating "bad incentives" for homeowners, to intentionally fall behind on their mortgage payments in order to qualify for HAMP, only to see their permanent modifications denied at the end of the three-month trial. And so many permanent modifications were denied, the article suggested, because Treasury encouraged banks to start their trial modifications without enough time to fully vet the borrowers.

Our Westminster loan modification lawyers see some merit in the argument that HAMP was intended to help banks rather than borrowers. That has certainly been the effect, and one reason for that effect is that HAMP provides no way at all to enforce the promises lenders make to taxpayers. Stabilizing the housing market was a stated goal for HAMP at the time. So in that sense, if it eased the flood of foreclosures, it has indeed succeeded, even if it did not ultimately save many homes. However, the rest of the NRO's criticisms appear to ignore the role of lenders and loan servicers in HAMP. The government never required borrowers to be behind on their mortgages to participate in HAMP; this was a requirement from some lenders, and it was heavily criticized in the media. Similarly, lenders have control over whether to make the modifications permanent and have attracted a lot of criticism for cases where they declined to make them permanent without any change in the borrower's finances. Finally, the assertion that lenders were rushed into HAMP is simply untrue; many took well over three months to offer any program, and again, were heavily criticized for delaying action so long.

Continue reading "Bloggers Suggest Obama Administration Intended HAMP as a Bailout of Lenders" »

As Ontario loan modification lawyers, we were disappointed to see fresh evidence that the housing crisis is not going away. On the heels of news earlier in the same week that new home sales have dropped came a post on the Washington Post's Political Economy blog about the number of mortgages in default or foreclosure. According to data released Aug. 26 by the Mortgage Bankers Association, one tenth of American mortgage borrowers have missed at least one payment this summer. Nonetheless, the report said, mortgage defaults are down slightly from the first quarter of 2010, leaving observers with mixed news about the state of the housing market.

This quarter, 4.57 percent of mortgages were in any stage of foreclosure. This is a drop from the first quarter's 4.63 percent, but still higher than the 2009 second-quarter number, 4.3 percent. As such, foreclosures can be said to be up overall, but with some evidence of a drop coming. Further potential good news can be seen in drops in seriously delinquent loans and mortgages at least 90 days past due, both of which are typical precursors to a foreclosure. However, a spokesperson said the Association had also seen a rise in new delinquencies lately, suggesting that more trouble may be coming. The end of the federal home-buyer tax credit in April may also be considered a problem, the article suggested. In all, the spokesperson said the slight decrease in new foreclosures would probably not last, but still described the report as "cautiously optimistic."

Our Perris loan modification attorneys are disappointed that the housing market is not getting better, but we wish we were more surprised. It has been clear for a while that any housing recovery is strictly on Wall Street, not in hard-hit areas like the Inland Empire. Near the end of the article, the author notes that unemployment is around 10 percent -- the same percentage of homes that are missing payments. We do not believe this is entirely a coincidence; unemployment is one of the major predictors of trouble paying a mortgage. For borrowers who do not have a steady income and have run out of savings, there may not be much lenders can do. However, for those delinquent borrowers who do have an income, lenders may still be able to offer loan workouts or other changes. In doing so, they could do themselves as well as the borrowers a favor, by staving off yet another foreclosure and financial loss.

Continue reading "Quarterly Mortgage Bankers Report Finds One in 10 Borrowers Missed Payments" »

Our Moreno Valley consumer bankruptcy attorneys follow media reports about bankruptcy, of course. Like other observers, we have repeatedly read that the financial crisis has triggered so many bankruptcies that they have set a record for filings after the 2005 bankruptcy reform law. That's why we were very interested to see an Aug.18 post from the Credit Slips blog, which focuses on bankruptcy, credit and consumer finance from the perspectives of nine academics. This post was written by guest contributor Alan White, an associate professor at Valparaiso University School of Law in Indiana who teaches bankruptcy, consumer law and contracts, among other things. He posed a question no mainstream newspaper has asked: Given all their debts and defaults, why haven't more consumers filed for bankruptcy?

According to the post, U.S. households' mortgage debt grew by 300 percent in the 11 years between 1996 and 2007, while median income grew by only 40 percent. Unsecured debts such as credit cards also increased, but less dramatically -- possibly because some people used home equity loans to pay off credit cards. When the mortgage crisis arrived and credit was suddenly unavailable, a lot of those borrowers defaulted on their obligations. Credit card "charge-offs" are at 10 percent, up from 3 to 5 percent, White wrote; combined foreclosures and 90-day delinquencies was nearly 10 percent in the first quarter, up from less than 2 percent in other eras. Meanwhile, the Treasury Department estimates that 1.6 million people are eligible for the federal loan modification program. Yet this year's bankruptcy numbers are on track for only about 400,000 people to file for Chapter 13 bankruptcy, he notes, saying this raises the question of when they will file for bankruptcy.

As Santa Ana personal bankruptcy lawyers, we suspect there's not just one reason why more individuals and couples are not choosing bankruptcy -- there rarely is. But we can think of several reasons, thanks to our experience working with bankrupt people. The sad truth is that Chapter 13 bankruptcy does not help everyone who is trying to keep a home. For one thing, a Chapter 13 bankruptcy will not allow a judge to reduce the principal owed, or "cram down" the loan, on a first home. This makes Chapter 13 less likely to help underwater homeowners. Second, debtors must have a steady income in order to make their payments under Chapter 13, and unemployment is increasingly the driving force in mortgage defaults. Such people might still go into bankruptcy, but the lack of steady income may put them in Chapter 7 instead. Finally, many people feel so strongly that bankruptcy is a moral or personal failing that they are delaying a seemingly inevitable bankruptcy with harmful financial moves like draining their bankruptcy-exempt retirement accounts.

Continue reading "Law Professor Asks Why More Bankruptcies Have Not Been Filed During Housing Crisis" »

As Rialto unfair debt collection lawyers, we were pleased to see a consumer-friendly ruling from a federal appeals court saying that the Fair Debt Collection Practices Act applies to some communications by loan servicers. The decision in Gburek v. Litton Loan Servicing LP (PDF) came from the Seventh U.S. Circuit Court of Appeals, which hears appeals of lower court rulings in the Midwest. Camille Gburek sued her mortgage servicer, Litton Loan Servicing, for hiring a third party, Titanium Solutions, to communicate with her about her mortgage debt. She alleged that Litton violated the FDCPA by telling Titanium about her debt; by contacting her despite knowing she was represented by an attorney; and by using deceptive means (hiring Titanium) to obtain her personal information.

Gburek, a northern Illinois resident, was in default on her mortgage when Litton contacted her to discuss it. This initial letter asked her for a variety of financial information and invited her to contact the company to discuss alternatives to foreclosure. The bottom of that letter contained a standard disclaimer that the letter was an attempt to collect on a debt and that Litton was a debt collector. A few days later, Gburek received a letter from Titanium, a company that facilitates communications between homeowners in default and loan servicers. That letter also asked Gburek to send a lot of financial information to Litton, but it contained language specifically saying Titanium is not a debt collector and cannot accept payments.

Gburek sued. In trial court, Litton moved to dismiss the case, saying the two letters were not covered by the FDCPA because they were not sent "in connection with the collection of any debt" as the law requires. The trial court granted that motion, saying the FDCPA did not apply because the letters did not explicitly demand payment of a debt. Gburek appealed.

On appeal, the Seventh Circuit disagreed. The issue was whether the letters to Gburek were made in connection with the collection of her debts. There's no hard and fast rule for testing this, the court wrote, but past Seventh Circuit cases showed that a demand for payment is not necessary for a communication to be considered an attempt to collect a debt. Other factors to consider include the relationship between the parties and the purpose and context of the communication. Applying these, the court found that both Litton's letter and Titanium's were communications from debt collectors, as were the communications between the two companies. In all three cases, content and context make it clear that the communications were attempts to further debt collection. In this case, the court noted, Gburek was seeking only to survive a motion to dismiss, which is a relatively low bar. The decision does not make a judgment on the underlying FDCPA claims.

As Chino abusive debt collection attorneys, we appreciate the court's ruling on this matter. Although the case does not directly affect our clients here in California, because we fall under a different federal appeals court's jurisdiction, it does set a precedent that our own courts may look to if the issue comes up here. Unfortunately, that is a distinct possibility in California, where unemployment and real estate prices have conspired to keep mortgage defaults high. Illegal debt collection attempts are not uncommon in better times, but with the economic downturn, they have also been increasing. As a result, we would be disappointed but not surprised to see aggressive, illegal debt collection tactics in the mortgage arena as well. This ruling helps show that these tactics are just as illegal from loan servicers as they are from conventional collection agencies.

Continue reading "Federal Appeals Court Rules Fair Debt Collection Practices Act Covers Mortgage Letter" »

As Riverside loan modification attorneys, we were pleased to see reports of a recent study that shatters some of the myths about foreclosures in California. As the Ventura County Star reported Aug. 17, the nonprofit Center for Responsible Lending put out a study showing that most foreclosed Californians were not people who bought more house than they could afford. Rather, the study said, the average value of the home when the loan was made was just under $400,000, and the average square footage was a modest 1,494. More commonly, the study said, people who were foreclosed on were more likely to have gotten high-interest loans, often subprime or Alt-A loans. Those people were disproportionately minorities, the study noted, which led to a disproportionately high rate of foreclosures among Latino and African-American borrowers.

The study is based on foreclosures of 877,173 homes in California between September of 2006 and November of 2009. In addition to the data on original price and size, the study noted that three-quarters were priced below median home values in their areas, and that 50.3 percent of foreclosures stemmed from refinancing rather than original loans. It also included a great deal of data about how subprime and expensive loans related to race. In 2006, it said, 53.7 percent of African-Americans and 46.5 percent of Hispanic borrowers received high-rate mortgages, while only 17.7 percent of non-Latino white borrowers did. This was true across all sizes of mortgage, it said, suggesting that income and size of home were not factors. As a result, the study said, 48.7 percent of the people foreclosed on were Latinos, even though they are 36.6 percent of the state's population and received 29.9 percent of loans. Figures were not given for other racial groups. Foreclosures were concentrated inland, in the San Joaquin and Sacramento valleys and the Inland Empire.

Our Rancho Cucamonga loan modification lawyers have known part of these conclusions for months. Several studies, including the Federal Reserve Board study cited in the article, have shown that subprime loans are more likely to lead to defaults, even after looking at factors like housing price changes and credit score. At least one other study, and several lawsuits, suggests in turn that subprime loans were far more likely to be offered to minorities during the "housing boom"; at least one "reverse redlining" lawsuit has been file alleging that a bank specifically targeted African Americans for such loans. This data does not prove that lenders made decisions purely on racial grounds -- we would prefer to see data on the borrowers' incomes and credit -- but it provides strong evidence suggesting it. If it's true, it is not just shameful, but also illegal.

Continue reading "Study of California Mortgage Defaults Finds Most Not Caused by Over-Borrowing" »

A recent article about protest marches on Chase banks throughout California caught the eyes of our Ontario loan modification lawyers. As Watsonville's Register-Pajaronian reported Aug. 12, protestors in that city and many others, including Los Angeles, marched on the banks to call attention to what they saw as the banks' willingness to take public money and do business in a way that harms families and communities. The marchers were upset about the continuing wave of foreclosures facing Californians, despite efforts to promote loan modifications and short sales instead. They also criticized the bank for taking "bailout" money in September of 2008, yet failing to pay millions in property taxes on properties they acquired during the bailout.

The march was tied to a report released Aug. 10 by the Alliance of Californians for Community Empowerment. That report said Chase and other banks were paying too little in taxes because the properties they have acquired during the financial crisis have not been reassessed, costing local California government entities millions of dollars. In April, the assessor-recorder for San Francisco, Phil Ting, made similar allegations, saying his city was owed $1 million by financial companies. The California Tax Reform Association has put that figure at $11.8 million for San Francisco and $50 million for the state as a whole. The Chase protesters said this was unacceptable for a bank that had taken taxpayer money in the bailout. They also cited mistakes or abuses by Chase in loan modification efforts by individual homeowners. A Chase spokesperson said borrowers don't have trouble getting loan modifications if they meet federal standards.

As Norco loan modification attorneys, we know from experience that this is not true. Throughout the housing crisis, we have heard firsthand, and read many articles, about lenders who repeatedly lose paperwork, ignore calls, give their borrowers contradictory information and make other very basic business mistakes. These are not mistakes that are targeted at people who don't meet HAMP standards -- they are indiscriminate mistakes, and many of them happened to people already enrolled in HAMP. As we've written here many times before, we've come to believe that lenders do this because they simply don't want to make loan modifications. Rather than admit it and accept the negative PR, some have chosen to string along borrowers, giving them false hopes for a loan modification the lender never intends to grant. The protesters have every right to be disturbed that a lender would do this while simultaneously accepting government money.

Continue reading "Protesters Call on Chase to End Foreclosures and Pay Allegedly Overdue Property Taxes" »

As Pomona loan modification lawyers, we were surprised and impressed by a recent article from the Los Angeles Times. The piece, dated August 5, discusses the fight by 23-year-old Zeenat Ali to help her parents avoid foreclosure on their Diamond Bar home. Ali is not an attorney and has no special legal background, but the article says she has won several victories in the family's struggle with Deutsche Bank, the holder of the mortgage. She has won procedural fights on the foreclosure itself, and is also suing the bank, alleging that it marketed the family's refinancing loan deceptively and later reneged on an offer to modify that loan. The Alis may still lose their home, the article said, but Zeenat Ali has successfully delayed the foreclosure and impressed observers with her untrained legal skills.

Her parents, Shahida and Ather Ali, had lived in the home for 24 years and raised three children there. When they came from Pakistan, they were an engineer and a doctor, but in 2005, they decided to open an adult day-care business. To do that, they took out a loan for $800,000 from the Small Business Administration, using the home as collateral. Then they refinanced the house with an option-adjustable-rate mortgage for $250,000. They kept their payments low at first to put money into the business, but that increased the loan balance, just in time for high-interest payments to start. The home was foreclosed in December and they stopped paying the loan four months ago.

In her lawsuit, Zeenat Ali argues that the refinance loan was marketed deceptively. But a large part of the suit deals with how Deutsche Bank handled the foreclosure. She alleges that the Alis' mortgage servicer rejected a $30,000 check from her parents in November, saying they had to apply for a loan modification first. So the Alis filled out the loan modification paperwork within a week and sent it back with the check. In the meantime, she alleges, Deutsche Bank was in the process of foreclosing on the house, without notifying the family as required by law. A bankruptcy attorney told the newspaper that even if the Alis win this claim, they may not collect much money and may still lose their home. Zeenat Ali successfully fought attempts by Deutsche Bank to move the lawsuit into federal court -- impressing legal observers -- but because foreclosure is still a real possibility, she has now hired a lawyer to help.

Our Orange loan modification attorneys wish the Alis well in their lawsuit and foreclosure. If the rejected $30,000 payment -- a substantial number -- was enough to keep them out of foreclosure, Ali may be able to successfully argue that the bank should never have foreclosed to begin with. However, under the Truth in Lending Act or a claim for common-law negligence, the actual damages -- that is, the financial loss to the family -- may be calculated according to the equity they had in their home. In this case, that could be little or nothing, because the home is worth less than their loan debt. "Statutory damages" awarded under the TILA have a maximum of $2,000 -- which is unlikely to make up for the loss of a home of nearly 25 years. This case exposes a flaw in consumer protection laws that gives lenders minimal consequences for abusing their borrowers.

Continue reading "Diamond Bar Medical Student Fights to Save Parents' Home From Foreclosure" »

As San Bernardino commercial real estate loan modification attorneys, we were interested to see an article on a new wave of foreclosure that could come directly from the federal government. According to an August 3 article from the Wall Street Journal, The Federal Reserve Bank of New York is on the verge of deciding how to handle its "toxic" real estate portfolio, acquired when it took over assets from failed investment firm Bear Stearns in 2008. That $29 billion portfolio includes 50 commercial real estate loans and 9,000 residential loans, which are collectively worth about $5 billion, the article said. The Fed has already foreclosed on one commercial property, a mall in Oklahoma that is now up for sale, as well as homes in four states.

The New York Fed and its nationwide parent, the Federal Reserve Bank, don't generally make direct-to-consumer loans. According to the article, being thrust into that business by the Bear Stearns bailout puts the Fed in a tricky position, with conflicts between its role as a steward of the economy on the one hand and its need to dispose of the assets responsibly. Politics could also affect its work. The commercial loans lost 35% of their value in the two years before March of 2010, the article said -- but the Fed wants to avoid selling those assets at discount prices because it might hurt the economy. Buyers have been found for only $1 billion of the loans, and in a down market, the Fed could be stuck with properties it can't sell. It may also hesitate to modify commercial real estate loans that are joint ventures, because restructuring could take away its control.

In a way, our Irvine commercial real estate loan modification lawyers are gratified to see the Fed struggling with the same issues facing lenders and private investors in commercial real estate. Understanding those issues at one government agency could help guide better public policy from other agencies. But restrictions on modifying loans are bad news for everyone involved. If the Fed can't sell its properties, foreclosing doesn't make much sense. But if it also can't restructure some of those loans, it may have no other realistic choice but to foreclose. This is bad for the Fed and, by extension, taxpayers because it weighs us down with liabilities. Of course, it is also bad for the property owners who are foreclosed on, who lose their investments and their properties. And it's also likely to disrupt things at the businesses using those properties -- retailers, offices, hotels, multi-family housing and more.

Continue reading "Federal Bank Could Foreclose on Commercial Properties From Bailed-Out Bear Stearns" »

Among the many articles about the large financial reform bill passed in July, our Riverside County loan modification attorneys were pleased to see an article zooming in on a provision specifically intended to help troubled homeowners. The San Francisco Chronicle's Net Worth column reported July 29 on the Emergency Mortgage Relief Program, which provides $1 billion for homeowners who are behind on mortgage payments. The program is not intended to replace loan modification programs like the Home Affordable Modification Program or private programs offered by lenders. Rather, it provides temporary loans to homeowners who are unable to pay their mortgages because of unemployment or medical problems.

In fact, the Emergency Mortgage Relief Program was created in 1975, but never funded until the financial reform bill was signed in July. The $1 billion in authorized funds will be available to homeowners starting on Oct. 1 and will be administered through the Department of Housing and Urban Development. The assistance is aimed at homeowners who are at least three months behind in their payments on a primary residence because of a substantial reduction in income due to involuntary unemployment, underemployment or medical problems. There must be a "reasonable prospect" that the homeowner will be able to make his or her own payments again in the future. In total, participants are eligible for 12 to 24 months' worth of mortgage payments, or up to $50,000. The assistance can take several forms, including loans, but HUD is not sure yet how it plans to administer the program.

Our Orange loan modification lawyers are pleased to see the federal government take this step. To be sure, it can't help homeowners whose financial problems are expected to be permanent or very long-term. But for someone who lost a job and has been unable to replace it in the bad economy, this program could be a lifeline. Lenders frequently have their own forbearance programs -- in which they suspend payments for a few months while the homeowner recovers from a financial shock -- but this program offers several advantages over such a forbearance. The federal program appears to have a much longer duration -- a total of 24 months -- and the "low-interest loan" envisioned by Rep. Barney Frank in the article would likely be cheaper than the interest on a mortgage written during the housing boom. And of course, a federal program would have no concerns about preserving profits, unlike lenders, whose profit-consciousness is widely blamed for the glacial pace of loan modifications.

Continue reading "Emergency Foreclosure Aid for Homeowners Included in Federal Financial Reform Bill" »

Our Perris personal bankruptcy attorneys also work with homeowners who are seeking to avoid preventable foreclosures, so we were very interested in a recent CNNMoney.com article on using bankruptcy to stop a foreclosure. The July 21 article explained that it's true that bankruptcy can allow some people to keep their homes. And even if a bankruptcy can't save the home, the article noted, it may be able to prevent a huge tax bill if the home is foreclosed and the remaining debt is forgiven. But bankruptcy won't allow everyone facing foreclosure to keep their homes, the article said -- only those who have a steady income with which to make payments.

Anyone who files for bankruptcy gets an automatic legal order stopping collection on all debts, including foreclosure for non-payment of a mortgage. However, the article said, it's important to have a steady income if you wish to keep the home, because bankruptcy can't stop mortgage payments for good. Typically, homeowners file for Chapter 13 bankruptcy, which rearranges their debts and puts them on a long-term payment plan, rather than Chapter 7, in which filers sell most of their assets. The article noted that bankruptcy judges can't "cram down" the mortgage to the current value of the home, but they can remove second mortgages if the home's value is below the amount owed on the first mortgage, which can shrink the total owed significantly. And because the IRS considers forgiven debt a form of income, bankruptcy can protect homeowners from owing taxes on the "income" from a mortgage debt that was written off after walking away.

As Fullerton individual bankruptcy lawyers, we're glad to see major news outlets discussing these issues in detail, because we know more and more homeowners are having to think seriously about them. The article notes that bankruptcy has major disadvantages, including a black mark on your credit for ten years as well as sale of your assets or handing over control of your finances to a trustee. We believe the advantages for people with serious financial problems may outweigh the disadvantages -- but this is a very personal decision, based on each person's individual financial circumstances as well as personal feelings. Individuals and married couples who are considering a bankruptcy as a way to avoid foreclosure should speak with an experienced attorney who can explain their options before taking any legal actions.

Continue reading "Homeowners Considering Walking Away May Be Better Off Choosing Bankruptcy" »

At the beginning of 2009, our Fontana loan modification lawyers wrote about many articles outlining the struggles homeowners face when they seek a loan modification. This type of news coverage has dropped off in recent months -- not because it's no longer true, unfortunately, but because it's no longer surprising. That's why we were pleased to see a June 22 report from radio station KPCC about the ongoing struggles faced by at least some homeowners who are trying to get a permanent loan modification, but face indifference, delays and mistakes by their lenders. In addition to costing thousands of dollars with no guarantee of success, the article noted, the delays are bad for the overall economy and cause serious emotional distress to the people whose finances, homes and lives hang in the balance.

The article focuses on the experience of Jean Wilcox, who lives in an upscale gated neighborhood in Irvine. Wilcox has been trying for more than two years to get a loan modification through the Home Affordable Modification Plan, the federal program for distressed homeowners. She says she's completed three-month trial modifications of her loan three times, but that each time, her bank denies her a permanent loan modification for no reason that was made clear to her. Unfortunately for her mortgage holder, Chase Bank subsidiary EMC, Wilcox is a banking and real estate attorney, which means she understands her rights. She is now looking into suing the bank. An attorney with the Orange County Legal Aid Society added that banks frequently claim they didn't receive her clients' paperwork, sometimes five or six times in a row, despite fax confirmation sheets and other documentation. Chase is among those most frequently cited for such delays, as well as for denying permanent modifications.

As Hesperia loan modification attorneys, we wish we could say that Chase is the only such bank. But in fact, our experience, through our practice as well as the media, has been that many servicers are guilty of this same behavior. Lenders that have little trouble staying organized in other areas of their business are unable to retain even basic organization in their loss prevention departments. We do not believe that the problem is genuine lack of organization, especially since this crisis has been going on for more than a year. Rather, we believe the banks are making cynical financial calculations using, as the article said, the net present value of the home to determine whether they would make more money selling it as a foreclosure or modifying the loan. If they think foreclosure is the more lucrative move, we believe they will do everything they can to avoid granting a loan modification -- even if that means deceiving the homeowner for months or years. This is why less than one half of one percent of the money allocated to HAMP has actually been spent.

Continue reading "Report Examines Ongoing Problems With Loan Modifications Even in Wealthy Areas" »

As San Bernardino loan modification attorneys, we were interested to see a piece saying California is seeing its lowest rate of default notices in three years. Default notices are the first step toward a foreclosure, and according to a July 22 article in the Los Angeles Times, the number of such notices dropped dramatically in the second quarter of this year. Statewide, default notices dropped 43.8% over the same quarter in 2009 and 13.6% over the first quarter of 2010. Here in Southern California, the plunge was even more pronounced, at 46.9% over the past year and 15.23% over the first quarter. Troubled Riverside County saw the biggest one-year drop at 49.2%. The numbers come from MDA DataQuick, a real estate information company based in San Diego.

The article suggested that the drop may be due to a slight increase in housing prices and increasing willingness by banks to consider short sales and other foreclosure alternatives. Increased housing prices put fewer homeowners underwater, which economists believe means fewer of them will consider walking away from their mortgages. Furthermore, the article noted, the housing crisis has forced banks to tighten their lending standards dramatically, which means newer loans are more likely to be performing well, and that underperforming subprime loans have not been written. However, the article also said that lenders have increased their seizures of homes that have already been foreclosed on, which have been in foreclosure for an average of 9.1 months. Banks feel increasing pressure by federal regulators to get those loans off their books, the article said, and one result is that trustee's deeds in California are up 11.2% from the first quarter and 4.4% from last year.

Our Chino Hills loan modification lawyers hope the trend toward fewer foreclosures lasts, because a housing recovery would benefit our clients and almost everyone else. We believe the decrease in new foreclosures may have something to do with home prices bouncing back, but we also suspect that the market is simply running out of loans that are candidates for foreclosure. This far into the housing crisis and the recession, many folks who are in serious financial straits have made decisions about how to handle their mortgages, or had decisions forced upon them. And as the article notes, tighter lending standards mean fewer bad loans have been written in the past year or so. We'd also like to note that the large amount of homes that have been foreclosed on for months but not seized seems a lot like a "shadow inventory." We hope lenders are responsible in the way they put these homes on the market.

Continue reading "California Default Notices Hit Lowest Rate in Three Years, But Repossessions Increase" »

As Anaheim commercial real estate loan modification attorneys, we were interested to see a recent item in the Orange County Register's Lansner on Real Estate blog. The July 15 post reported on a study saying the number of California hotels whose mortgages are in "high financial distress" rose by 18% in the second quarter of 2010. High financial distress means the mortgage is in default or foreclosure. The information comes from Atlas Hospitality Group, a company that sells hotels in California. The blog noted that past reports have suggested firmer room rates and fewer vacancies at hotels, but that trend is not reflected in the report. This post comes on the heels of a similar July 14 post saying one in four Orange County office properties are still empty.

In all, the report said, the rate of distressed properties was 132% higher than it was in the second quarter of 2009. This large number is not a surprise to people who have followed the commercial real estate market crash. Atlas said that in Orange County, four hotels were owned by banks and 19 were in default. That's up from two foreclosed properties and 14 in default in the first quarter. Those numbers also represented a big jump from the second quarter of 2009, when one hotel was in foreclosure and nine were in default. Riverside County had the most foreclosed hotels in the state, at 11. The report suggested that the real number of distressed properties may be much higher, with more than 1,000 California hotels operating on "some kind of forbearance agreement." Interestingly, however, it noted that only 12 of the 100 foreclosed properties in the state had been resold by banks.

Our San Bernardino County commercial real estate loan modification lawyers suspect that banks would love to sell more properties -- if they could. Having followed the commercial real estate market throughout the year, we believe banks are having a hard time selling foreclosed properties for the same reasons that their former owners had trouble paying the mortgages. The bad economy means commercial property owners are having a hard time filling vacancies in their buildings, which in turn means they aren't making the revenue they need to pay their loans. This, in turn, means there just isn't a lot of money in commercial real estate right now. The bad economy also depresses commercial real estate prices, which could attract investors -- but only those who are willing to take on some risk.

Continue reading "Hotel Seller's Study Says More California Hotels Are in Financial Distress" »

Our Newport Beach loan modification lawyers saw an article recently suggesting that the wealthy handle mortgage distress differently from the rest of society. According to a July 9 article from the New York Times, the wealthy are far more likely to stop paying their mortgages than working-class and middle-class homeowners. Using data compiled by real estate data company CoreLogic, the newspaper said more than one in seven mortgages of more than $1 million is delinquent, as compared to one in 12 mortgages below $1 million. The newspaper noted that this does not in itself prove anything, but suggested that wealthy people may default at a higher rate intentionally, because they view an underwater home as a bad investment.

The article also looked specifically at homes purchased as investments. Among those with mortgages of over $1 million, the delinquency rate is 23% -- nearly a quarter of all such homes. Those with mortgages under $1 million had a delinquency rate of about 10% -- higher than the rate for owner-occupied homes, but less than half of the rate for the more expensive investment homes. Here in California, the wealthy Bay Area community of Los Altos had five foreclosure auctions listed in the local weekly paper. Before the crash, one worker at that paper said, it was surprising to see even one foreclosure listing a month. Observers in the article suggested that the wealthy are more likely to see defaulting as a matter of cutting their losses from a bad investment, whereas less well-off people may see walking away as morally or civically bad. The economist also said the rich are more likely to have resources to fall back on when they walk away.

As Rancho Palos Verdes loan modification attorneys, we believe both of those interpretations are right. Getting rich does not necessarily require ruthlessness, as the economist said, but it certainly helps to have good sense when it comes to money. If you believe your million-dollar property will never be worth what you owe, it makes good business sense to abandon the investment and minimize your losses. This logic applies to less expensive homes as well, but as a law professor told the Times, the business sense of the wealthy may not be as affected by arguments that abandoning a home is irresponsible or shameful. However, it's also very much worth noting that the wealthy are far more likely to have somewhere else to live, or the means to find a home quickly, if they do walk away from their homes. Less wealthy people may be more likely to keep paying because they don't have those resources.

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