New Home Equity Theft Law In New York Continues To Hurt The Homeowners It Was Supposed To Protect!

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The new law that I have written about in earlier posts is continuing to make life miserable for NY homeowners in foreclosure. I have personally seen investors run scared and leave homeowners in a lurch. Many people want to sell their properties to end a foreclosure and potential buyers are terrified of the 2 year rescission period under the new law. While I think the risk of rescission is minimal if the transactional documents are done properly, buyers and investors are still reluctant to buy foreclosed properties. They are also afraid of the additional new requirement that at least 82% of the consideration in any transaction pass to the homeowner. I have been able to help some homeowners, but not everyone who calls me. And I get calls all day every day from people in foreclosure. It seems like there is a mortgage default epidemic.

In some cases, homeowners are being forced into bankruptcy or simply lose their home – all thanks to our brillant New York legislators who didn’t have the foresight to see what they were doing. This is called the law of unintended consequences. More to follow as I talk daily to frightened homeowners.

US Trustee Eases Up On Random Audit Procedures In Bankruptcy

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Here is an announcement I received as a member of the National Association of Consumer Bankruptcy Attorneys regarding the easing of US Trustee audit document requirements in bankruptcy cases: Read more

Homeowners In Default Are Finding Mortgage Loans Hard To Find

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High-risk loans are tough to find

Tuesday, May 8, 2007

By JANET FRANKSTON LORIN
ASSOCIATED PRESS

With a second child on the way, Chris Shields and his wife, Michelle, wanted to move from their two-bedroom apartment in Southern California to a house with more space.

But because their timing coincided with this year’s shakeout in the mortgage market, their credit now isn’t good enough to get a loan to purchase the house they wanted with no money down.

Rising interest rates and dropping home prices have squeezed a market that had been propped up by risky loans and easy credit during the housing boom. As mortgage bills came due, foreclosures rose, and the easy credit dried up for families like the Shieldses. Read more

Groups urge changing of bankruptcy rules – As foreclosures rise, they want it easier for homeowners to keep homes

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The Associated Press is reporting on the on-going problem that the Bankruptcy Reform Act presents to those with financial trouble. In my practice, I have seen a decline in bankruptcy filings since the peak in 2005, however, most of the people affected by this were the potential Chapter 7 filers – often those with no home or no equity and mostly credit card debt. Chapter 13 bankruptcy is still very much alive and useful for the homeowner looking to protect equity and reinstate a mortgage loan. On the other hand, bankruptcy has become more burdensome, and it is filled with “gotchas” that seem more designed to give lawyers and their clients grief, than to serve any real useful purpose. Experienced bankruptcy attorneys can succefully navigate their clients through the bankruptcy minefield and help them save their property and resolve debt problems, but it is now clear that the reforms to the Bankruptcy Law have failed.

One “reform” that is perhaps the most useless is the new requirement for credit counseling. I have never seen a credit counselor who could help a homeowner deal with a mortgage problem. Not ever. Not even once. None of my colleagues have either. Why did Congress decide to impose this burden on homeowners? Credit counselors are not lawyers and often have no idea what legal or financial alternatives might be available to individuals, other than debt consolidation, which is not a solution for a mortgage default. The Courts are now trying to wrestle with the question of whether the failure to get a credit counseling certificate means that a Chapter 13 case is dismissed or just stricken. This is a key distinction because it affects a homeowner’s rights if there is another Chapter 13 filed soon after. It is astonishing how out of touch with reality Congress was when they passed this law. A requirement that helps no one, causes confusion, wastes time and money, and even has the Judges all mixed up! I’ll write more on this in future posts. Here’s the AP story – Read more

NYS Banking Dept. Summary Of The New Home Equity Theft Prevention Law

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Here is a good adobe pdf handout from the New York State Banking Dept. that explains the new Home Equity Theft Prevention Law. I addressed some of the problems with this new law in my last post “The New Home Equity Theft Prevention Law Hurts Those It Was Intended To Protect.”. If you have any questions about this new law, please email me.

The New Home Equity Theft Prevention Law Hurts Those It Was Intended To Protect

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The NY Times is reporting the State’s new law – – which is designed to prevent the theft of equity by scammers who prey on desperate homeowners in foreclosure – – is actually hurting homeowners in foreclosure. I have already seen this in action in my practice. Many homeowners in foreclosure decide to sell their property. Sometimes it is because they don’t want it anymore. Sometimes, their LTV is too high to refinance and they don’t have a sufficient budget for a feasible Chapter 13. Many of them have legitimate buyers for legitimate prices. As of February 1, 2007, the State doesn’t care. Sales by these homeowners are now officially a pain in the you know what. All in all, it has not been a good two years for financially distressed borrowers. First, in October 2005, Congress slams them with a “consumer protection” revision of the Bankruptcy Code that does anything but protect consumers. Now, it’s New York’s turn. I wish our legislators would wake up and see the reality of what they have done. Legitimate bankruptcy cases and now, legitimate sales of property to avoid foreclosure, are filled with gotchas. The law has become a specialized minefield that very few New York attorneys can navigate. The troubled homeowner who goes to a general practioner for advice is inviting disaster. Many investors/buyers are scared.

Here is the NY Times take on this law: Read more