NJ- Still Significant Foreclosure Activity

Posted by kevin on July 25, 2017 under Foreclosure Blog | Be the First to Comment

NJ had 35,000 foreclosures filed in 2016. That is about one half the amount of annual foreclosure actions filed at the height of the mortgage crisis, but it is still significantly higher than the 20,253 foreclosures filed in 2005. And, at the time, 2005 was a record year.

Bankrate lists New Jersey as the worst state when it comes to foreclosures. Statewide the rate of foreclosure is one unit in 515. The national average is one unit in 1636.

There are a myriad of reasons for this dubious honor, but that is not the point of this blog. Readers should be aware that New Jersey still has a foreclosure problem. Individual home owners should be aware that there are steps to be taken if you fall behind on your mortgage.

The first thing that you should do if you are delinquent is not to bury your head in the sand, or hope that things will work out. If you take that approach, I assure you that things will not work out.

There are many factors which go into an analysis of a foreclosure situation. How much is the mortgage? How much is the property currently worth? Is it a single family residence or rental property? If rental, is it rented and for how much? What is your income? What is the monthly principal, interest, taxes and insurance (PITI)? Is the loan interest fixed or variable and what is the current rate? Is there a second mortgage? What other debts do you have? What loan documents do you have? Were you represented by an attorney in the loan transaction? And probably, the most basic factor is what is it you want to accomplish?

Once your situation is analyzed, you can start to put together a strategy. Maybe, you do not want to keep your home that is grossly “underwater”. In that case, a short sale may be an appropriate strategy. Maybe, you are only a few months behind and have significant credit card debt and doctor’s bills. In that case, a Chapter 7 or Chapter 13 bankruptcy may be an appropriate strategy. Maybe you were put into a loan that you could not afford. In that case, litigation (that is, fighting the foreclosure in court) may be the answer. Maybe you could benefit from a modification. Even though the federal HAMP program was phased out as of December 31, 2016, Fannie Mae and Freddie Mac have their own programs which could significantly lower your monthly payment. Moreover, private lenders have what are called “proprietary” mortgage modification programs which may be helpful.

As you can see, there are options available. Moreover, you are not limited to one option. I have had clients who fight the foreclosure in State court and then seek a modification, or a Chapter 13. Others seek a modification and then file Chapter 13, or seek a modification while in Chapter 13.

The key is, seek help early in the process. Even the most experienced foreclosure/bankruptcy attorney may not be able to help you if you call and say, ‘I have a sheriff sale tomorrow. Can you help?’

Ocwen Takes It on the Chin

Posted by kevin on December 24, 2014 under Foreclosure Blog | Comments are off for this article

MHA (Making Home’s Affordable) was set up by the government to induce lender’s to make deals with borrowers whether it be mortgage modification, dealing with second mortgages, short sales, deeds in lieu.

Oh excuse me, MHA may be about modifications, short sales and the like, but the inducement is not to the lender but the servicers. Not the guy that owns the mortgage, but the bean counter who collects the payments and sends them to the appropriate party.

What’s the big deal? Well, in defending foreclosure cases for the last 5 years, and reading pooling and servicing agreements, I have concluded that the interests of the servicer is many times in conflict with the interests of lenders or investors in securitized trusts. Investors and lenders usually fare better if they can work out a deal with the borrower. Servicers, on the other hand, seem to do better if there is a foreclosure.

That is why I was not too surprised to read the numerous stories about Ocwen getting hammered by the New York Superintendent of Financial Servicers. As part of the 150 million dollar settlement, William Erbay, the founder of Ocwen, is being forced out as CEO. Ocwen must come up with one hundred million in foreclosure relief and fifty million is going to be paid to Ocwen customers in NY. Do we have any governmental agency in NJ that protects borrowers? Heaven forbid. Moreover, Ocwen’s operations are to be monitored by an independent monitor for two years. Stock prices have fallen by 30% in that last week. Moreover, a $39 billion deal with Wells Fargo may be down the crapper.

What did Ocwen do? Basically, what most servicers do; that is, jerk around borrowers. However, Ocwen did it on a scale that made other servicers look like the JV (stealing a term from the Prez). For example, complaints against Ocwen were two times more frequent than complaints against BOA and 5 to 6 times more frequent than complaints against Wells Fargo. ( I have dealt with BOA and WF, and they are not what I would call “user friendly”).

Ocwen ran up costs by farming work out to affiliates which had strong ties to Ocwen and its executives. They backdated letters to borrowers which made it look like they were responding in accord with regulations under Dodd-Frank. According to Richard Cordray, the head of the CPFB, Ocwen took advantage of borrowers at every stage of the process. Another strategy attributed to Ocwen is that they would accept a package of documents and information from a borrower, wait 29 days, and then, instead of deeming the package complete for review by underwriter, Ocwen would send a deficiency letter to the borrower and request updates. What was not in the articles, but what I fear happened, was that Ocwen used the incomplete application as the basis for extracting additional monthly payments out of the borrowers during the so-called trial period. If you were to cross-check those payments against the servicing agreement, I would not be surprised to find out that the servicer kept a portion (if not all) of those payments.

Ocwen is not only servicer that plays games, but they got nailed. I would not be surprised if other servicers wind up on the wrong side of regulators in the future.

Merry Christmas.

Forgiveness of Indebtedness Income- 2014

Posted by kevin on December 19, 2014 under Foreclosure Blog | Comments are off for this article

If you owe money to a bank, say on a mortgage loan, and the bank accepts a short sale which nets them 200K but you owe 300K, then you have 100K of what is called “forgiveness of indebtedness” (FOI) income for which you may be required to pay taxes. Historically, the primary methods of getting around FOI income and the related taxes were to file bankruptcy or prove that you were insolvent at the time. In 2009, because of the mortgage meltdown, Congress eliminated FOI income on short sales, deeds in lieu of foreclosure, etc of primary residences- but not permanently.

That law ran out at the end of 2013. This left some of my clients who did short sales, etc in 2014 in financial limbo.

Well, the recent budget bill which passed in Congress last week extended the law which eliminates FOI taxes on primary residence for 2014. That is good news. In addition, taxpayers can deduct mortgage insurance premiums paid in 2014- private and public. Newspaper articles indicated that Congress was pushing for 2 years on these bills, but the Administration held out for 1 year.

There is a payback, sort of. When Ed DeMarco was head of the FHFA, he stedfastly refused to allow principal reductions on mortgages owed by or sold to investors through FNMA, Freddie Mac, FHA, VA. The media lamented that if only the president could get his guy, Mel Watt, into the position of head of the FHFA, then the government loans could be subject to principal reduction. Well, Watt is in, but there is still no principal reduction on the government loans. Moreover, the Mortgage News claims that since FOI income tax relief is being extended, Watt can use that trinket to avoid principal reduction. Let’s see how that plays out.

2014- NJ- Where We Are

Posted by kevin on January 2, 2014 under Foreclosure Blog | Comments are off for this article

For the US as a whole, foreclosures are at their lowest level in years. Nationwide, home prices are up 13.6% over the prior year. Unemployment is supposedly below 7% but those numbers are fudged so much that, frankly, I do not know what they mean.

New Jersey, however, is not faring as well as the rest of the US. Unemployment is at about 8.4%. Values of single family homes are up only 4.9% in north NJ. Price levels are comparable to those of 2004 and are 20% below the peaks reached in 2006. In Bergen County, prices rose only 3.6% while Passaic did a little better with 8.8% increases in single family residences.

Nearly 7% of NJ homes are slated for foreclosure according to CoreLogic. That is the second highest amount in the country. Only Florida at 7.1% is higher. In New Jersey, 10.6% of homeowners are at least 90 days behind on their mortgages.

New Jersey is a judicial foreclosure state. That means that a lender must file a complaint and then obtain a final judgment before it can schedule a foreclosure sale. This slows the process down considerable. Even in uncontested cases, it can take 180-200 days to get to sale (double that or more if aggressively contested). On the other hand, in non judicial foreclosure states, the process can be over in 45 days. The trustee of the deed of trust (the equivalent to a mortgage in NJ) sends the proper notices. If the loan is not brought current, the trustee can schedule a sale. Courts get involved only when the borrower files a complaint to stop the sale.

Because the process takes longer in judicial foreclosure states, there is a longer backlog. It is anticipated that in NJ foreclosures will continue at the 2013 pace until well into 2015.

What should you do if you are delinquent on your mortgage or on the brink of becoming delinquent. Time to take stock. If you are our of work, you have to get back into the game. No work, no history of income, no way you are going to be able to get a modification. However, a modification is not right for all people. If your house is still underwater, and comparable rental property is available for 60% of your current mortgage payment, well maybe it’s time to deed the property back to the lender. You will never recoup your money on that house.

Be wary of short sales. I rarely see a scenario where a short sale makes sense to a homeowner except in situations where association fees continue to mount. You do a lot of work on behalf or your lender and all you get in return is a 1099 for the shortfall which, in some cases, leads to a tax liability to Uncle Sam.

Finally, remember that although HAMP (actually MHA with HAMP being their modification alternative) is better- much better than it was a few years ago, you are still at the mercy of the servicer. Sometimes, I have seen really good mod offers; other times I just walk away shaking my head. However, just like the lottery, you gotta be in the game to win.

Feel free to contact our offices to discuss your situation.


Posted by kevin on June 1, 2013 under Foreclosure Blog | Comments are off for this article

The Government’s Making Homes Affordable programs, including the much maligned HAMP modification program, were in effect through December 31, 2013. If you have read previous blogs, you know that I was not a fan of the prior versions of HAMP. Not the least of my criticisms was that HAMP does not apply to GSE loans; that is, Fannie Mae, Freddie Mac etc. However, the latest re-incarnation (which hit the public last fall with handbook at the end of 2012) has some good things to say about it. One major problem, however, was that since the program was ending at the end of 2013, many homeowners would not file in a timely manner.

On May 30, 2013, the feds took some of the pressure off. Jack Lew, the new Treasury Secretary, announced that the HAMP program (along with the short sale- deed in lieu program and the unemployment program, and others) will continue through December 31, 2015. A supplemental directory (gives us the details) is due to be published next week. In addition, on the same day, FHFA announced that the programs for Fannie Mae, Freddie Mac, VA and FHA will also continue through the end of 2015. Even though the GSE programs do not allow principal forgiveness at this time, they are worth looking into.

If you look at the Home Page of my foreclosure website, you will see that our main emphasis is on fighting foreclosure through the litigation process. That was because the Making Homes Affordable programs (including HAMP) stunk the place out. And our experience indicated that aggressive litigation was the best path to securing a respectable modification. Now, as the programs are getting better with age, I am reconsidering a limited change to our approach. Yes, we litigate when necessary. But if you are the proper candidate, we will assist with modification proposals even if no litigation is involved. Be on the lookout for changes to our HOME page.