Blessing in Disguise?

Posted by kevin on April 4, 2013 under Foreclosure Blog | Comments are off for this article

In a prior blog, I informed you that the mediation program was being cut back because it ran out of funds. Bad thing, right? Well, my grandmother used to tell me that God closes one door only to open another. I am hoping that is the case with the mediation program.

As my website states, we fight foreclosures. Why? Because we like to fight? We hate the lenders? We live to litigate? No, because by pushing back, we hope to get a better settlement.

There is certainly room for settlement. Properties all over NJ are underwater, particularly in urban areas in Passaic, Hudson and Essex Counties. People from all over NJ got mortgages that they could not afford based on inflated property values that may or may not have been legit in 2006, but certainly bear no resemblence to reality in 2013. In other words, you may owe $500,000 on a house that is worth only $300,000. If the lender throws you out on the street in a foreclosure, then the lender has to sell the property. No one today will pay more than $300,000 (and probably less) for a property whose fair market value is $300,000. It is irrelevant that $500,000 is owed. Moreover, many of my clients don’t want to make a deal where they owe twice what the house is worth because it will take 20 years to dig out. So, why don’t the lenders make a deal based on fair market value? (I have theories on that which I will share with you in future blogs- but let’s stick with this point.)

One of the reasons for lender intransigence is that their lawyers perceive that the courts are not beating them over a head with a hammer to be reasonable. Up until now, the judges have been pretty much invisible in settlement negotiations. Now, I am not blaming the judges entirely. Chancery judges got hit with a tsunami of foreclosure lawsuits with little help. They were buried. The mediation program pretty much sidestepped the judges, who historically have been the architects of settlement in the NJ court system. Mediators try hard but the lenders know that they have no teeth. So, in effect, the lenders or, more appropriately, their servicers have taken over the process and not for the benefit of the borrowers.

Now, mediation is in trouble. There is no funding for lawyers helping borrowers or HUD counselors. Pretty soon there will be no money for mediators. How can that be good? I’ll tell you. If no one else is left, the judges will be forced to step into the fray. Just yesterday at a discovery conference, a judge in Bergen nearly floored me when he said that he is available for settlement conferences. Believe me, I have not heard that often in the last 3 years. In the Guillaume case, the Supreme Court said that, historically, chancery judges have the power and flexibility to make case by case determinations relating to the Fair Foreclosure Act. Why not use that power, experience and flexibility to effect reasonable, practical settlements?

Maybe the right door will open.

Foreclosure Settlement- Yeah Right

Posted by kevin on February 14, 2012 under Foreclosure Blog | Comments are off for this article

Last week, with incredible fanfare, the media and the Administration announced a $25 Billion settlement between and among the Federal government, all states except OK, and major banks (Ally, BOA, WF, JP Morgan-Chase, Citi). Clients have been calling or emailing me all week from north in Bergen and Passaic Counties to south (at least for me) in Monmouth and Ocean counties. Is it a good deal? Can they get a reduction in principal to bring the amount due down to what the property is worth? Will the bank/servicers finally deal straight?

Don’t hold your breath. First, the 25B translates to only 5B cash from the banks. 17B is earmarked for a reduction in amount due which will go to about 1,000,000 households that are underwater. Of course, the statistics show that there are over 11 million households underwater to the tune of about $700B. So, about 2.5% of the underwater households will be helped, and most of those households are current on their mortgages. 3B goes to homeowners who are underwater but current with the intended purpose that they will be able to re-finance when they get a reduction in principal. However, the reduction in principal is only about 20K per household. So, who really is going to be helped?

If you have been foreclosed on, then you can get a cash payment of up to $2000. In Northern New Jersey, that will pay for about one month rent or maybe your moving expenses.

Who is going to enforce this deal? Joe Smith, the banking commissioner of North Carolina, is in charge. But, we do not know what staff he has and what type of enforcement powers he has.

Finally, and similar to Obamacare, the deal has been announced and praised but no one has seen the final draft of the agreement. Why? Because my understanding is that it has yet to be finalized and drafted. Once you see the final written copy, you and I will be in a better position to see what’s what. I am afraid, however, that what we are going to find is another deal that is good for the banks and bad for the consumer.