NJ- First in the Nation

Posted by kevin on February 18, 2016 under Foreclosure Blog | Be the First to Comment

Took a break for awhile. Spending lots of time doing modifications and checking into causes of action under Regulation X. Also, just wrapping up a Chapter 13 (5 payments to go). Saved the house, stripped the second mortgage, and got hefty sanctions against the servicer. Now, back to foreclosures.

I lived in NJ for my entire life with the exception of college and law school. So, I have been the recipient of all those barbs about New Jersey for a long time. Enough to give you a complex. So, a couple of months ago, when I saw in a local newspaper that NJ is #1 at something, it gets my attention. Only problem is that it said that NJ had the highest rate of foreclosure cases in the US. 1 out of 171 housing units is subject to a foreclosure filing. That is more than double the national average.

Looking more at the numbers, activity is up 27% over the prior year, but new foreclosures are actually down. That means that the vast majority of the cases are winding their way through the court system.

In the past three days, I have received calls from people who are at various stages of foreclosure. All need help. One just received a Notice of Intent to Foreclose. That is at the beginning of the process. Others are facing sheriff sale in less than 10 days. Those people are at the end of the process.

The facts are that the courts in NJ have trended in favor of lenders in foreclosure matters. The Feb 1 published decision in Curcio is just another indication that borrowers have an uphill battle. The trend is most pronounced at the end of the process. Once a default is entered, it is getting increasingly more difficult to convince a judge to set aside the default and allow the borrower to go forward with his or her case. Forget about situations where default judgment is entered. Your chances of overturning a default judgment or slim- less than 5%.

So, a little advice. If you are behind on your mortgage and get a Notice of Intent to Foreclose, get in to see an attorney. You may have a case that will resonate in the foreclosure court. Or you may have a situation where a Chapter 13 bankruptcy will work. A modification should always be considered, but if you follow the mod path without addressing the foreclosure, you are setting yourself up for a potential fall.

When you are dealing with an attorney, make sure that he or she is looking at an integrated approach which will utilize all your options to get a result that will work for you.

Let’s Get Realistic

Posted by kevin on September 13, 2015 under Foreclosure Blog | Comments are off for this article

If you have read my blog over the last few years, you know that I represent borrowers. You know that I have pointed out forcefully what lenders and servicers have done wrong. Moreover, I have pointed out my frustrations with the courts, servicers, and government.

We are in the latter stages of the mortgage crisis. It is not clear that the federal government will continue the MHA- HAMP programs for much longer. However, there are still hundreds of thousands of mortgages that are in default and those cases need to be resolved.

So, you are a borrower. You may have gone into default when your option arm mortgage had an interest rate change. You could not afford the $3500 per month new payment You may have been in default for 2 or 2 1/2 years. Then, you were able to get a modification at $2800. Not a great deal, but it was better than being thrown out on the streets. You paid that for a year, but have not made any mortgage payments or real estate tax payments or insurance payments since the beginning of 2012. That comes out to more than $200,000 of payments that you have not made over the years and you still have a roof over your head.

Whoa! That does not sound too empathetic. But that is how most chancery judges in NJ are going to look at you. Chancery is the old equity court. Equity, they tell us, tries to balance the pro’s and con’s of a case to come out with a just decision. On the one hand, you, the borrower, took 200K, 400K, 600K and did not pay it back. On the other hand, the bank has shoddy paperwork or fudged your income (usually with the borrower’s knowledge). Does that mean you get a free house? That is tough for a judge to swallow.

Many of the procedural defenses such as standing in securitized trusts and violations of the Fair Foreclosure Act are no longer bases for relief. Potential clients call all the time and tell me that they were the victims of predatory lending because they were given a mortgage that they could not afford except by looking to the collateral. That is a primary definition of predatory lending under the federal regs and OCC guidelines, but it generally falls on deaf ears in court. In NJ, we have three published opinions (and a few more unpublished opinions) dealing with predatory lending and consumer fraud violations. One deals with a black family in Newark. The other deals with a Hispanic person on a modification. The third deals with an 83 year old woman who lost her house in a scam involving a contractor that took back a mortgage on her property to finance the installation of new aluminum siding.

What do these cases have in common? They all involve taking advantage of unsophisticated people who did not have a lawyer. Moreover, those unsophisticated people were either minorities or old people. In other words, in practical terms, it appears there is a demographic element to the way the law of predatory lending/consumer fraud is applied in NJ. Now, I do not believe that is a proper interpretation of what predatory lending is, but that is how it applied in NJ.

Each week, I have people call me and state that they are victims of predatory lending and/or they were jerked around by servicers in modification applications or they were scammed by a Florida or California outfit in the modification. They want me to guarantee that if I take their case, they will not be foreclosed on, or guarantee that there will not be a sale after judgment, or guarantee that they will get a modification that they deem affordable. And while you are at it, could you keep your fees low because money is an issue.

Neither I nor any other attorney can make such assurances except as follows: if you repay all arrearages before final judgment, your mortgage will be reinstated. Moreover, if you file bankruptcy, the foreclosure action will be stayed for a limited period of time in a Chapter 7 and could be effectively stayed for 5 years in a Chapter 13 if you make all required payments going forward including your current mortgage payments and all arrearages. Short of that, no guarantees.

What we can do is explain to you your defenses and come up with a strategy to defend the case through trial and possibly appeal. We can review your modification applications or put together a new one. We can analyze whether there are any violations of the Dodd-Frank regulations. We can analyze whether Chapter 13 makes sense for you. And we can tell you the approximate cost for each type of service. But we cannot pull rabbits out of hats no matter how much we would like to.

So, be realistic when you seek legal counsel.

Stop a Foreclosure

Posted by kevin on May 30, 2015 under Foreclosure Blog | Comments are off for this article

Both Chapter 7 and Chapter 13 will stop a foreclosure.

The Bankruptcy Code says that a bankruptcy “petition filed… operates as a stay, applicable to all entities, of—… any act to… enforce [any lien] against any property of the debtor… .” See Section 362(a)(4). This means that the mere filing of your bankruptcy case will immediately stop a foreclosure from happening.

But What if the Foreclosure Still Occurs?

But what if your bankruptcy case is filed just hours or even minutes before the foreclosure sale, but the foreclosing mortgage lender or its attorney can’t be contacted in time for them to be informed? Or what the lender is contacted in time but messes up on its instructions to its foreclosing attorney so that the foreclosure sale mistakenly still takes place? Or what if the lender refuses to acknowledge the effect of the bankruptcy filing and deliberately forecloses anyway?

As long as the bankruptcy is in fact filed at the bankruptcy court BEFORE the foreclosure is conducted, the foreclosure would not be legal. Or at least would very, very likely be immediately undone. It does not matter whether the foreclosure happened mistakenly or intentionally.

A Foreclosure by Mistake

If a foreclosure happens by mistake after a bankruptcy is filed, or because the lender didn’t find out in time, lenders are usually very cooperative in quickly undoing the effect of the foreclosure. It is usually not difficult to establish that the foreclosure occurred after the bankruptcy was filed, and that usually quickly resolves the issue. If a lender fails to undo such a foreclosure after being presented evidence that the bankruptcy was filed first, the lender would be in ongoing violation of the automatic stay. This would make the lender liable for significant financial penalties, so they usually undo the foreclosure right away.

A Foreclosure Purposely Conducted after Your Bankruptcy is Filed

This almost never happens. If you are harmed by a foreclosure intentionally done after your bankruptcy filing, you can “recover actual damages, including costs and attorneys’ fees, and in appropriate circumstances, may recover punitive damages.” See Section 362(k). Bankruptcy judges are not happy with creditors who purposely violate the law. Enough of them have been slapped that most creditors know better.

Chapter 7 vs. Chapter 13

For purposes of stopping a foreclosure that is about to happen, it does not matter whether you file a Chapter 7 or Chapter 13 case. The automatic stay is the same under both.

But how long the protection of the automatic stay lasts can most certainly depend on whether you file a Chapter 7 “straight bankruptcy” or a Chapter 13 “adjustment of debts.” That’s because even though you get the same automatic stay, each Chapter gives you very different tools for dealing with your mortgage. That’s why your mortgage lender will likely react differently depending on which Chapter you file under and how you propose to deal with the mortgage within each.

Bankruptcy Mediation Program

Posted by kevin on April 10, 2015 under Foreclosure Blog | Comments are off for this article

The United States Bankruptcy Court for the District of New Jersey has a foreclosure mediation program. To date, I have not utilized this service. After a review of the rules, I doubt that I would ever use the program.

In short, the program is available to debtors in Chapters 11, 12 or 13. A Chapter 7 debtor can participate with the permission of the court. Debtors include only individual debtors so if title to the property is in the name of a corporation or LLC, you are SOL. The property must be the principal residence of the debtor. So, pure rental property is out.

The debtor is required to make adequate protection payments to the creditor during the mediation. Here is where the program breaks down. The adequate protection payments amount to 60% of the principal and interest payment plus 100% of escrows. Say your P&I are $3000 per month, you pay $12000 in real estate taxes and another $150 per month for insurance. Your monthly payments during the mediation amount to $2950 per month.

1800- 60% of 3000
1000- 1/12 of taxes
150- Insurance

2950- Total

That is 71% of the total payment prior to filing. Depending on what your arrearages are,

What I try to do is figure out what I would be paying in a modification on principal and interest and make that the adequate protection payment. I also explain to the creditor how I arrived at that figure. I agree to pay the insurance going forward to avoid the force placed insurance super surcharge which is usually more that double what the debtor is required to pay for insurance. Then, the ball is in the creditors court to demand more money as adequate protection. If they want more, they will ask for it or file a motion.

Happy Anniversary

Posted by kevin on November 27, 2014 under Foreclosure Blog | Comments are off for this article

I have been quite vocal concerning how the current Administration sold out the people by backing off on Chapter 13 cramdown in 2009. Instead, we got HAMP and MHA. The first few versions were just awful. Borrowers were routinely being ripped off by servicers on trial modifications;payments were made and glommed by the servicers; permanent mods were not given; and the borrower had no recourse because the courts said absent a permanent mod (and contractual relationship) the borrower had no standing to sue the servicer.

In late 2012, with HAMP version 4, I thought that we might have something. At least on paper, it seemed better than previous versions. Well, in real life, not the improvement that I expected. Why? The servicers still run the show. The government wags it finger at the servicers and tells them to fly right, but nothing substantive happens. Finally, the GSE’s, Fannie Mae and Freddie Mac, and the VA are not covered by the government program, MHA.

Why am I saying Happy Anniversary? I represent a elderly woman in a Chapter 13. As part of the Plan, we proposed a modification which called for capitalization of arrearages and a reduction in the interest rate to 4% escalating to 5% on the first mortgage loan to JP Morgan Chase . Junior encumbrances were to be stripped for lack of equity.

If you are familiar with HAMP Version 4, you know that the proposed mod is pretty much plain vanilla. On November 25, 2013, I sent a complete modification package to Chase to modify a note payable to JP Morgan Chase. In mid- February, 2014, the servicer (also Chase) called with good news and bad news- my application was deemed complete and was scheduled to go to underwriting, however, the servicing rights were being transferred to another servicer. I was assured that my file would be forthwith sent to the new servicer and I would have a decision right away. Guess what? I did not believe the Chase people.

It took a month to find the right servicer ( the new servicer assigned the loan to a subservicer). Then it took another month to find out who the point of contact person was. BTW, the point of contact person is very cordial and smart , but he is not running the show. By mid May, I was told that Chase had not yet sent the file to the new servicer so I had to start from scratch. I sent a complete, updated application with documents and proposal in late May.

In NJ, the Chapter 13 trustees will push to confirm plans with mods conditionally. The condition is that the debtor has to get the mod within 4 months of the confirmation or the case is dismissed. Because of the confusion with the new servicers, I was able to put the confirmation off until June. However, I had to make 3 appearances (no, they would not let me do it over the phone) to plead my case and get a lecture from the trustee for not having a mod in place. Every three weeks or so, my client gets a letter from the servicer asking for an updated whatever. Within a few days, we comply with the request(s). September comes and goes and the trustee files a notice that we are in default because we do not have a mod in place and requests that the case be dismissed. I am forced to file a written response. We have a hearing in mid-December.

The point of contact persons assured me that we would have a decision by the end of November, but nothing yet. He also tells me, for the first time, that the loan was sold to Freddie Mac so we are not operating under HAMP guidelines. In the meanwhile, the paralegal at the lender files a motion to vacate the stay because we do not have a mod as set forth in the confirmation order. Thank goodness, her boss pulled the motion.

You can’t make this shit up. To add insult to injury, I checked my time records last week to discover that I have spent more time on the modification than I did on the nuts and bolts Chapter 13 case including motions to strip. Go figure. To be continued.