According to a recent report by the Mortgage Asset Research Institute, mortgage fraud nationwide jumped 42 percent in the first quarter of 2008, with Florida reporting the highest number of cases.  Florida accounted for 24 percent of all material misrepresentations for loans originated during the first quarter of 2008, according to the institute’s press release.

California is ranked second, followed by a three-way tie for third among Illinois, Maryland and Michigan. The majority of reports submitted for Florida and California involve properties near the coastline, with Miami and Los Angeles accounting for half of all misrepresentations reported in the top two states. Read the rest

Loan modification is an obvious alternative to foreclosures that leave banks owning lots of houses.  Banks get a loan that is performing, even if at a lower dollar value and borrowers stay in their homes.  One would think that truism would have penetrated the corporate thinking of lenders.  However, I have no evidence in support of that proposition.

I wrote earlier about a client who had actually been offered a loan modification, the first one I had actually seen.  When the final papers arrived for signature, they came burdened with new and impossible conditions:  the borrower was to pay off IRS liens junior to the loan being modified and was to obtain the signature of officers of the two junior mortgage lenders, agreeing to the modification. Huh?

The best one can say for this fiasco is that the entity handling the loan modification is understaffed or under prepared. I can’t find that the lender’s offer has worsened my client’s position, but in the end, the problem is unsolved.  Bankruptcy undoubtedly awaits.

Recently my colleague, Craig Andresen, wrote an article on the Bankruptcy Law Network explaining how a Chapter 7 Bankruptcy filing will stop a foreclosure.  This is generally true, but as with all general statements, there are exceptions.  The states of Connecticut and Vermont have a unique form of foreclosure that a Chapter 7 case will not stop.

Most all states require that a foreclosed home must be auctioned at some point.  The details vary; some states require the auction to be done with court supervision and others allow the auction to take place without any court action.  However, in Vermont and Connecticut, there is another kind of foreclosure: strict foreclosure.  The concept of strict foreclosure does not involve an auction at all.   Read the rest

Filing bankruptcy does not relieve a unpaid lender of the need to foreclose on its collateral to get title to the property.  I’ve encountered a number of clients lately who think that the decision to file bankruptcy will keep a foreclosure off their credit record. Not so.

The end product of bankruptcy is  a discharge of the debtor’s personal responsibility for debts.  Liens generally remain unaffected by a bankruptcy discharge.   While the Chapter 7 debtor must set out his intentions with respect to debts secured by his assets, merely stating that one intends to surrender property does not change legal title to the property.

It is the foreclosure itself that moves title to the property that is the collateral for the debt from the borrower to the buyer at the foreclosure sale.  It is missing payments that lowers credit scores, regardless of how the property ultimately changes hands.

So, filing bankruptcy may delay a foreclosure and eliminate any issues of deficiency judgments or liability to cut off junior lien holders; it is not a substitute for a foreclosure.

Once I’ve explained that, I then need to attack the mindset that wants to gauge alternate strategies by starting with their impact on future credit.  A woman’s work is never done<g>.

NC Governor Mike Easely signed a law making NC the first state to ban mortgage brokers from charging borrowers for unnecessary and unneeded surcharges such as “yield spread premiums” which essentially gives a kick-back to brokers who guided borrowers into higher interest loans subprime loans - whether they need it or not. The Center for Responsible Lending issued a press release North Carolina Acts to Rein in Reckless Home Lending with the passage of the North Carolina Home Loan Protection Act (HB 1817). According to the CRL

The new law directly addresses the current subprime crisis, weeding out questionable business practices on mortgage financing that are driving massive subprime foreclosures. A key provision in the law requires lenders to verify that their customers have the ability to repay the loans they are offered. This is particularly important for subprime mortgages with adjustable interest rates, since lenders must consider future rate increases before approving loans.

“North Carolina is simply saying that lenders must return to common-sense underwriting practices,” said Michael Calhoun, President of the Center for Responsible Lending. “Until the subprime market veered out of control, all reputable lenders documented income and verified a home buyer’s ability to repay the mortgage.”

Susanne Robicsek, Charlotte NC Bankruptcy Lawyer

Every homeowner should get a life of loan history or transaction history for his or her home mortgage at least once year and review it to see how your payments are posted and what charges have been assessed against your loan.  Many times a mortgage servicer will post your payment to a suspense account (especially if the payment is different than the amount that was due).  Later, the mortgage servicer may take money from the suspense account to pay an item called “corporate advance”.  Whenever you see a corporate advance, you should always question it.  Typically, corporate advances are disbursements for servicing related expenses (not taxes and insurance) that the servicer has paid with servicer funds - these fees may include foreclosure expenses, attorney fees, bankruptcy fees, and force placed insurance.  Read the rest

Call it what you will–a perfect storm, dominoes falling, an avalanche, a wildfire. In fact, the aphorisms just roll off the tongue, uh, keyboard. But the facts don’t change:

The mortgage crisis that sparked a wave of foreclosures is now responsible for a rising tide of bankruptcies….

“Rising tide…” That’s another one. Real estate markets have tanked before, and bankruptcies filings have risen before. What seems to be the source of wonder in the present series of events is the willingness of homeowners to walk away from the homes they own. Personally, I don’t find it all that surprising. Read the rest

Foreclosure defense attorneys are becoming increasingly frustrated by the dismal foreclosure statistics and are seeking help from our nation’s criminal prosecutors to investigate the possibility of bringing “foreclosure mills” and banks to justice under the Racketeer Influenced and Corrupt Organizations Act (RICO).

Usually, when we hear terms like “organized crime” and “RICO,” we think of Tony Soprano and John Gotti.  However, when the mortgage industry conspires to defraud middle class America, it make the Sopranos look more like the Brady Bunch.

Every day, thousands of foreclosures are being illegally filed by foreclosure mills, with the full knowledge that their clients (the plaintiffs) do not have the legal standing to file the case.  These banks and lawyers are not stupid.  They know that 99%+ of all foreclosures in this country are never contested by the homeowner or real estate investor, but it still does not make it right. Read the rest

There are two types of foreclosures in the United States: judicial and non-judicial.  Judicial foreclosure requires a court hearing to proceed.  The non-judicial type usually just requires a trustee or escrow company to comply with proper notices and then sell the property, sometimes with a sheriff.  Some states allow both kinds of foreclosures, and some just the judicial process.

Generally, a non-judicial foreclosure is a lot quicker than the judicial kind, so in states allowing either, the norm is for non-judicial foreclosures.  California, for example, allows both kinds of foreclosures, but there are about 99 non-judicial foreclosures for every judicial one!

My colleague, Mike Doan, wrote a couple of excellent posts on the non-judicial process in California.  Likewise, there are a myriad of posts on the judicial process in these pages.  (See, for example, New York foreclosure defense lawyer Jay Fleischman’s excellent discussion of New York foreclosure laws.)

Which type of state are you in?  Check this map for your state’s laws.  And always check with a competent and knowledgeable attorney in your area.