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States, Banks Reach Foreclosure-Abuse Settlement
WASHINGTON: A landmark $25 billion settlement with the nation's top mortgage lenders was hailed by government officials today as long-overdue relief for victims of foreclosure abuses. But consumer advocates countered that far too few people will benefit. The deal will reduce loans for only a fraction of those Americans who owe more than their homes are worth. It will also send checks to others who were improperly foreclosed upon. But the amounts are modest. It's unclear how much the deal will help struggling homeowners keep their homes or benefit those who have already lost theirs. About 11 million households are underwater, meaning they owe more than their homes are worth. The settlement would help 1 million of them. “The total number of dollars is still small compared to the value of the mortgages that are underwater,” said Richard Green, director of the University of Southern California's Lusk Center for Real Estate. Federal and state officials announced that 49 states joined the settlement with five of the nation's biggest lenders. Oklahoma struck a separate deal with the five banks. Government officials are still negotiating with 14 other lenders to join. The bulk of the money will go to California and Florida, two of the states hardest hit by the housing crisis and the ones with the most underwater homeowners. The two states stand to receive roughly 75 percent of the settlement funds. Of the five major lenders, Bank of America will pay the most to borrowers: nearly $8.6 billion. Wells Fargo will pay about $4.3 billion, JPMorgan Chase roughly $4.2 billion, Citigroup about $1.8 billion and Ally Financial $200 million. The banks will also pay state and federal governments about $5.5 billion. The settlement ends a painful chapter of the financial crisis, when home values sank and millions edged toward foreclosure. Many companies processed foreclosures without verifying documents. Some employees signed papers they hadn't read or used fake signatures to speed foreclosures — an action known as robo-signing. President Barack Obama praised the settlement, saying it will “speed relief to the hardest-hit homeowners, end some of the most abusive practices of the mortgage industry and begin to turn the page on an era of recklessness that has left so much damage in its wake.” The deal requires the banks to reduce loans for about 1 million households that are at risk of foreclosure. The lenders will also send $2,000 each to about 750,000 Americans who were improperly foreclosed upon from 2008 through 2011. The banks will have three years to fulfill terms of the deal. The states have agreed not to pursue civil charges over the abuses covered by the settlement. Homeowners can still sue lenders on their own, and federal and state authorities can still pursue criminal charges. The deal, reached after 16 months of contentious negotiations, is subject to approval by a federal judge. It's the biggest settlement involving a single industry since the $206 billion multistate tobacco deal in 1998. But for the many people who lost their homes to foreclosure in the past two years, some of them improperly, a check for $2,000 is small consolation. “Two thousand dollars won't cover my moving costs,” said Brian Duncan, who was evicted from his Tempe, Ariz., home last April. Iowa Attorney General Tom Miller, who led the 50-state talks, said the $2,000 checks represent the homeowners' best hope of being reimbursed for any amount. They would have had trouble winning settlements in court because of the time-consuming complexity of litigation, Miller said. Mike Heid, president of Wells Fargo Home Mortgage, said the agreement “represents a very important step toward restoring confidence in mortgage servicing and stability in the housing market.” Mark Vitner, a senior economist at Wells Fargo Securities, said the settlement may help the housing market in the long run. That's because it lets banks proceed with millions of foreclosures that have been stalled. Many lenders had refrained from foreclosing on homes as they awaited the settlement. “We've got a lot of issues to work our way through in the housing market,” Vitner said. “What this settlement does is allow that process to get started.” For the banks, the settlement comes mainly as a relief. If each state had sued the lenders and won, the total settlements could have run into the hundreds of billions. And all the lenders have set aside adequate reserves. “It's really a wash,” said Paul Miller, bank analyst at FBR Capital Markets. “A billion dollars is nothing for these large trillion-dollar banks.” The bulk of the settlement will go toward reducing underwater mortgages and refinancing some of them. But the banks had realized they weren't going to collect the loans and had already written down their value, Miller noted. The deal requires banks to make foreclosure their last resort. And they can't foreclose on a homeowner who is being considered for a loan modification. Still, the federal government has a dubious track record of enforcing such rules. The Obama administration's signature foreclosure-prevention program has failed to help more than half of those who have applied to have their mortgage payments lowered permanently. Many have complained that the program is a bureaucratic nightmare. Critics also note that the settlement will apply only to privately held mortgages and not to those owned by mortgage giants Fannie Mae and Freddie Mac. Banks own about half of all U.S. mortgages, or roughly 30 million loans. Fannie and Freddie own the other half. The deal is “another sad example of Wall Street not being held accountable for fraud, perjury and crimes that created the greatest economic crisis since the Great Depression,” said Dennis Kelleher, CEO of Better Markets, a group that advocates stricter financial regulation. “The math does not add up in a massive `robo-signing' scandal that is nothing more than systemic criminal conduct.” The settlement also ends a separate investigation into Bank of America and Countrywide for inflating appraisals of loans from 2003 through most of 2009. Bank of America acquired Countrywide in 2008.
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Repairing Your Credit
Credit scoring and reporting is not a bankruptcy law issue; it is more a matter of personal finance. What follows is a Guest Post of Mr. Ed O'Brien who works in the area of personal credit, and who maintains a website on the subject. It’s no secret that bankruptcy wreaks havoc on your credit. Based on bankruptcy and credit reporting law, bankruptcy can be listed on your credit report for up to 10 years. In the meantime, you’ll find it hard to get approved for new credit cards and loans. You don’t have to wait the full 10 years to start getting credit again . . . and you shouldn’t since there are techniques to repair your credit after bankruptcy. Credit reporting law allows accurate information to be listed on your credit report, so trying to remove a legitimate bankruptcy from your credit report prematurely will be a waste of time. You should, however, check your credit report to make sure your bankruptcy is reported accurately. Accounts that were discharged in bankruptcy should reflect a $0 balance and bankruptcy status. Otherwise, it looks like you have outstanding delinquent debt. If a discharged account isn’t reported accurately, you can dispute it with the credit bureau. Next, you should get new credit within a year or two after your bankruptcy discharge. Skip regular credit cards completely because you’ll undoubtedly be denied. Instead, apply for a secured credit card which is a type of credit card that requires you to make a security deposit against the credit limit before you can be approved. The security deposit is the creditor’s guarantee that you won’t default on the balance. The creditor can use your security deposit if you default or file bankruptcy again. But, if you use your credit card responsibly and make all your payments on time for several months, you can get your deposit back. Some secured credit cards will start you out with a credit limit as low as $100. That’s not much of a credit limit so make it your goal to save up $500 that you can use to get your first secured credit card after bankruptcy. Choose wisely because many secured credit cards charge high annual fees and interest rates. Shop around just like you would for a regular credit card. Use your card, but use it wisely. Avoid the mistakes that led you to bankruptcy. Keep your balance low, ideally below 30% of your credit limit, and pay it off before the due date every month. Doing this begins to re-establish a positive payment history on your credit report. A history of timely payments will improve your credit – payment history is 35% of your FICO score. Staying out of debt will also help since your level of debt is 30% of your FICO score. Don’t neglect the financial basics which play a key part in your credit health. Managing your money well is a prerequisite to building good credit. Create a budget for your income and stick to it as you spend throughout the month. Make sure you’re not overbooking your financial commitments and you’ll be less likely to rely on your credit cards to get you through. Credit repair takes time, especially after a bankruptcy. Keep taking the right steps, making timely payments on a few credit lines with low balances and your score will improve.
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Debt Ceilings Make Chapter 13 Cram-Downs
People usually don't know this, but you can cram down a mortgage on investment properties in a Chapter 13 bankruptcy. My clients get excited at this prospect. I have at least two clients interested in using a Chapter 13 to both strip a second mortgage on their homestead and reduce the mortgage balance on at least one rental property. Sounds like a great plan, right. Unfortunately the plan usually doesn't work because of Chapter 13 bankruptcy's unsecured debt ceiling. You cannot file Chapter 13 bankruptcy if your total unsecured debt exceeds approximately $330,000. Most courts, including the Middle District of Florida (Tampa), consider as part of the unsecured debt load, the total amount of stripped-off second mortgages on the debtor's homestead as well as amounts crammed down ("reduced" or "wiped clean") on the debtor's investment property mortgages. You also have to watch out for the secured debt ceiling of approximately $1.1 million. You have to investigate both debt ceilings if you're seeking to cram down or strip mortgages in a Chapter 13 plan. The debtor has some control valuating their properties when proposing a plan and mortgage reduction. You also sometimes have the freedom to adjust your proposed property values so that you don't create too much unsecured debt with the mortgage reduction to get below the secured debt ceiling. If you cannot make it in Chapter 13 your other alternatives are to short sale the property prior to filing bankruptcy to reduce your overall debt, or simply walk away from all the properties in a Chapter 7. The last alternative, and much more complicated and expensive route would be to file a Chapter 11 bankruptcy, which does not have debt ceilings. This option is not feasible if the Debtor only has one or two investment properties.
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Nicki Fernandez Asmer Delivered Keynote Address
On Tuesday, August 23, 2011, Nicki Fernandez Asmer delivered the Keynote Address at Law Review CLE's Seminar on The Essentials of Foreclosure Defense at the Hyatt Regency Tampa. The seminar was entitled "The Second Wave of Foreclosures: A Tsunami or a Ripple?" Fernandez's address covered the topics of Non Judicial vs Judicial Foreclosures, Loan Modification, Short Sales, Deed in Lieu, Tax Issues, Bankruptcy Issues and Ethical Considerations. Here's what some of her colleagues had to say about her address: Thanks for sharing your experience in the foreclosure process. You provided a wealth of useful information for the practitioner. Rudy V. I really enjoyed your portion of the class. It is obvious you have been dealing with this part of the law for quite some time. I have been working on short sales and REO’s since 2003 and I realize how complex the issues can be for these transactions. Ted M.
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Nicki Fernandez Asmer to Deliver Keynote Address
Nicki Fernandez Asmer is honored to deliver the Keynote Address at Law Review CLE's Seminar on The Essentials of Foreclosure Defense at the Hyatt Regency Tampa on August 23, 2011. The seminar is entitled "The Second Wave of Foreclosures: A Tsunami or a Ripple?" Fernandez's address will cover the topics of Non Judicial vs Judicial Foreclosures, Loan Modification, Short Sales, Deed in Lieu, Tax Issues, Bankruptcy Issues and Ethical Considerations. Foreclosures, declining property values, persistent high unemployment rates, backlogged courts, and scrutiny from state and federal regulators concerning the proprietary of lenders foreclosure paperwork suggests that there is no immediate end in sight to the foreclosure crisis. Almost universally, economists predict that a massive second wave of foreclosures is on its way as lenders ramp-up their foreclosure filings. In this seminar attorneys will learn the latest developments in all facets of the foreclosure process so that you can assist clients in avoiding foreclosure, defending foreclosure, and / or seek alternatives to foreclosure. This course has been approved by the Florida State Bar and fufills a total of 8 hours of CLE credits. For more information about the Seminar, click here.
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Foreclosure Laws
. . . You Have Options
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Many Florida residents find themselves facing tough economic challenges these days. The economic downturn faced by our country has caused many hard working Americans to lose their jobs, face foreclosure, consider bankruptcy, or pay their debts by cashing in their hard-earned retirement savings.
Attorney Niurka Fernandez Asmer will offer you potential solutions to those facing financial hardship and the possibility of losing their home. Here are some options to consider:
Option 1: LOAN MODIFICATION
A loan modification is the first of many options a Florida homeowner must consider before cashing in any retirement savings to pay their mortgage. Attorney Asmer will work with lenders in an attempt to lower your monthly mortgage payments. Under the federal HAMP program, if a homeowner is faced with a financial hardship and their mortgage payment exceeds 31% of your income, the bank mustevaluate the loan for a modification under the "Making Homes Affordable" program. If the borrower does not qualify under HAMP, then the lender may entertain an internal modification of your current loan. BE ADVISED: Not all borrowers will obtain a loan modification. The banks will review bank statements, pay stubs, tax returns and other financial documents to determine your debt to income ratio. If your debt is too high, you may not qualify. Additionally, if your total arrearage exceeds 30% of your total mortgage, then you may fall outside the guidelines of the federal program.
OPTION 2: FORECLOSURE DEFENSE
Foreclosure Defense can be a very powerful tool if you are trying to obtain a loan modification from your lender, or have a short sale offer on your property. Many times, a lender will proceed with a foreclosure action before the modification application has been reviewed. Banks are usually unwilling to cooperate without court intervention. If this occurs, Fernandez Florida Law will force your lender to attend mediation in order to negotiate a loan modification that both parties can accept. Exercising your legal rights under Florida and Federal law will also provide you with additional time to obtain a loan modification, short sale, or, if necessary, file for Chapter 13 Bankruptcy to catch up on your back payments.
OPTION 3: SHORT SALE
If you do not qualify for a loan modification based on your decreased income or debt to income ratio, you may have to sell your property. If the value of your home is worth less than the note owed on your property, you will have to get a short sale approved by your lender. This is a very document intensive negotiation process, which must be handled by an experienced real estate attorney. The same documentation necessary to apply for a loan modification are required in a short sale. However, the bank may want to negotiate and provide a counter-offer to the contract for sale. If you do not have an experienced attorney reviewing the bank's closing documents, you may still be liable for a deficiency on your mortgage.
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OPTION 4: DEED IN LIEU OF FORECLOSURE
If you do not qualify for a loan modification and are unable to sell your home, you may want to consider a deed in lieu of foreclosure. This is basically turning your keys over to the bank. In some circumstances (not all) the bank will offer cash in exchange for waiving any deficiency on the mortgage. Basically, you agree not to fight the foreclosure process, move out and the bank will pay you to leave quietly. Again, you should have an experience real estate attorney review your deed transfer documents to ensure that you will not be liable to the bank on the note if you are surrendering your property.
OPTION 5: CHAPTER 13 BANKRUPTCY
It used to be that Bankruptcy was a "bad word," and held a stigmatism to its meaning. Now a days, the bankruptcy courts are overwhelmed with bankruptcy filings to either discharge debt or reorganize personal debt. Filing a Chapter 13 Bankruptcy allows an individual to eliminate unsecured debt, keep their homes, and retain their retirement investments. A Chapter 13 enables homeowners to catch up on their mortgage payments and pay off a percentage of credit card debt over a 3 – 5 year period, interest free, based on their disposable income. In a chapter 13 bankruptcy you may also be able to "strip off" any junior liens (second mortgages) if your property is underwater and does not secure any second lien holders. At the completion of your payment plan, if any debt is left over, it is discharged by the Bankruptcy court.
OPTION 6: CHAPTER 7 BANKRUPTCY
Finally, for those individuals who do not qualify for Chapter 13 Bankruptcy due to lack of income, a Chapter 7 Bankruptcy would discharge most of your debt without a repayment plan. However, this option will not save your home from foreclosure. If you obtain a loan modification and have additional credit card debt, you can still file for Chapter 7 bankruptcy and keep your home. In the end, Chapter 7 provides you with a fresh start.
With so many options available, it is important to contact an attorney with experience in both bankruptcy and foreclosure litigation. To learn more, contact Fernandez Florida Law today at 813-412-5605 or email Attorney Asmer at Info@FernandezFloridaLaw.com. All initial consultations are free.
Call Fernandez Florida Law Today
For a Free Consultation of Your Legal Options
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Call Fernandez Florida Law today for a consultation to learn your rights and options available to you. If you are facing bankruptcy, foreclosure or violations of consumer rights Fernandez Florida Law can help you navigate through the complex legal process and provide resolution. Call today and let us help protect your legal rights.
Fernandez Florida Law will represent you in the county court systems in Pasco, Pinellas, Hillsborough, Manatee and Polk County.
Fernandez Florida Law is a full service law firm, practicing in the areas of Real Estate Law, Foreclosure, Bankruptcy, Loan Modifications, Short Sales, Condo and HOA laws, and Construction Law. Our main office is located in Tampa at 4803 S. Himes Ave, Tampa FL 33611. Call 813-412-5605 to schedule a free consultation. Press 1 for English; presione 2 para Español.
Fernandez Florida Law's has a second location in Clearwater Florida located at Hodusa Towers, National Properties Trust, Inc., 28870 U.S. Highway 19 N, Suite 300, Clearwater FL 33761. Call 727-282-1910 to schedule a free consultation. Press 1 for English; presione 2 para Español.
We are open 9 am to 5 pm Monday through Friday, excluding Holidays. You may reach a member of our staff at Info@FernandezFloridaLaw.com, or continue to browse FernandezFloridaLaw.com.
The hiring of a lawyer is an important decision. The information contained on this website is not intended to provide you with legal advice about your specific case. Only a lawyer you hire should make decisions on your behalf. Any correspondence made between yourself and our law office via this website does not and will not constitute an attorney-client relationship. If you are in need of an attorney, please call our office for a free initial consultation to discuss your case privately.
