Scott Lanin

Federal Program Is Not A Real Foreclosure Solution For Most

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The NY Times is reporting today that the FHA Secure Program has helped very few people solve foreclosure because of the eligibility requirements. Here is the link to the article. I’ve blogged about this in the past. Most of the talk about foreclosure assistance from the Federal Government is just window dressing intended to give the appearance that they are trying to help. Clearly, they are not. Supposedly, they are now going to make it easier for people to qualify for help. We’ve heard this before and I would not count on it.

For the most part, foreclosure remains a private battle between borrowers/homeowners and their lenders. More and more, defaults are being triggered by the resetting of adjustable rate mortgages. As the problem grows, borrowers should remember that time is not on their side. The clock is ticking while lenders’ attorneys are running up a bill for collection work that gets added to the borrower’s principal. Borrowers meanwhile often go for months without any legal help, without realizing that they are actually paying the lenders’ lawyers to sue them! Too often I get calls from frantic homeowners only days before the sale.

If you’re in default, call an attorney right away. I offer free consults by phone as do most attorneys, so there is really no reason to delay in getting legal advice. Do not wait for the Federal Government to save you. If you do that, you will probably lose your home in foreclosure.

Scott Lanin

Credit Counseling Is A Useless and Mean Requirement In Chapter 13 Cases

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Congress decided in 2005 to revise the Bankruptcy Law and make credit counseling a requirement. In my nearly 20 years of working in the legal field, I have never seen nor heard of a single case of any person who has ever saved their home because of a credit counselor. While untrained counselors who work off of scripts may offer some marginal benefit to a renter with credit card debt, the entire process of counseling is totally useless to the homeowner with mortgage arrears. Yet, Congress imposed this requirement for bankruptcy. Many believe it was done to put “gatekeepers” in place to prevent abusive filings. But who are the gatekeepers? What qualifies them to do this and have they really helped anyone with a mortgage default?

Failure to comply can have serious consequences. Courts are debating whether to strike a case or to dismiss it when the counseling certificate has not been filed. Dismissal is serious because the automatic stay protections are limited in repeat filings under the new laws.

One court has noted the particularly harshness of the counseling requirement, noting that there are some circumstances where counseling would be an “empty charade.” See, In Re: Lena M. Elmendorf, www.websupp.com/data/SDNY/7:06-cv-06040-7-SDNY.pdf.

Scott Lanin

Foreclosure Crisis – Who’s To Blame?

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There is an on-going debate about who is to blame for the current mortgage foreclosure crisis. The NY Times has just reported on the issue, stating that a lot of the blame is being placed on mortgage brokers. Mortgage brokers, in turn, say that lenders’ loose lending requirements in 2005 is responsible. From what I have seen in my Manhattan law practice and in speaking to lenders, brokers and borrowers throughout the New York metro area, most of the agents who put these loans together have now moved on. The gold rush is over and they’ve closed up shop or downsized. One of my pending cases in the New York Supreme Court involves a predatory lending claim against a major institutional lender based in part on representations that were made by a broker acting on behalf of the bank.

Here is the NY Times article.

Scott Lanin

Foreclosures Are Increasing

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Foreclosure filings are up more than 57% from a year ago and it is expected that many people will continue to face trouble as adjustable rates re-set. I have clients calling me daily who say that their payments have increased to the point where they cannot afford their own house. Some payments have doubled. The question that is being debated now, by lenders and borrowers, by Democrats and Republicans, is who is to blame for all this? Is it the homeowner who took an adjustable rate loan once, knowing that it might be difficult to pay back if values decline? Or, is it the lender who made thousands of these loans?

MSNBC.com reports on the recent trends here.

Scott Lanin

Disappearing Equity Lines And Mortgage Foreclosure

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It’s hard enough now to get a new home equity credit line. Lenders have restricted their underwriting guidelines, subprime lenders have closed, and real estate values have declined. But surprise, surprise, even those who already have an equity line may find that is has suddently disappeared. The NY Times is reporting that major lenders are freezing home equity lines because of a concern over declining values. This may happen even to those who have good credit and are current on payments. For those in foreclosure or who are close to defaulting on their first mortgage loan, this has some significance. Read more

Scott Lanin

Four Reasons To File Chapter 13 Bankruptcy

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Here are what I’d consider to be the four main reasons why someone might file Chapter 13 bankruptcy instead of Chapter 7:

1. You need a repayment plan to reinstate mortgage arrears.
2. You have non-exempt assets that would be liquidated (sold) by a Chapter 7 trustee.
3. You don’t qualify for Chapter 7 under the means test because your income is too high.
4. You have non-dischargeable debts.