Today is the Day! – New Rules for Homeowner’s Take Effect courtesy of the Consumer Financial Protection Bureau

Happy New Year everyone!  I wanted to get this article from the Washington Post out there for everyone.  The Consumer Financial Protection Bureau has implemented new rules for all servicers that every homeowner should know.

http://www.washingtonpost.com/business/economy/new-mortgage-rules-aim-to-protect-home-buyers-owners/2014/01/09/f928ebaa-793e-11e3-b1c5-739e63e9c9a7_print.html

New mortgage rules aim to protect home buyers, owners

By Danielle Douglas, Friday, January 10, 12:01 AM

Six years after the housing meltdown exposed fissures in the system, new mortgage rules that will take effect Friday stand to remodel the market.

Housing groups worry that changes meant to shield Americans from abusive lending practices that contributed to the financial crisis will make it harder for many to buy homes. But experts say the rules will create sustainable homeownership by ensuring that borrowers can afford to repay their home loans.

“The rules may cut some credit [availability] at the margins, but as a whole they will ensure that borrowers have a product they can afford,” said Sam Khater, deputy chief economist at the housing data provider CoreLogic. “The terms of the debate are always about access to credit, but it’s also about access to sustainable homeownership.”

The reforms written by the Consumer Financial Protection Bureau aim to protect Americans in the process of buying a home and if they run into trouble paying their mortgages.

In prepared remarks for a field hearing in Phoenix on Friday, CFPB Director Richard Cordray said the bureau is taking a “back to basics approach to mortgage lending practices. No debt traps. No surprises. No runarounds.”

Lenders will have to verify borrowers’ income, assets and debt before signing them up for home loans. Such common-sense practices anchored the mortgage market for decades but were cast aside in the lead-up to the meltdown as banks relaxed standards to churn out more lucrative loans. The result was millions of homeowners who were unable to manage their mortgages once the market tanked.

In response, the CFPB has created a category of home loans that offer lenders broad legal protections against borrower lawsuits, provided they adhere to certain criteria. These “qualified mortgages” limit upfront fees and bar risky features such as no-interest periods that can leave homeowners stuck with unsustainable loans. The loans are available to consumers who have a debt burden that is no more than 43 percent of income.

In real estate markets such as Washington, where prices are high, prospective buyers could run up against the limit as they stretch their finances to buy homes. But some of the nation’s largest banks, including Wells Fargo, have said they will offer loans for high-priced homes that do not conform to the new standard.

David Stevens, chief executive of the Mortgage Bankers Association, is concerned that lower-income borrowers, who would fall outside the debt-to-income ratio requirements, will not fare as well as wealthier consumers.

“We’re seeing institutions building business models to take advantage of that side of the market, charging 8 percent to 9 percent interest rates,” he said. “We need clear consumer protections . . . but nobody wants to push middle-class families on the margins into a shadow industry of high-priced mortgages.”

In the year since the CFPB finalized the mortgage rules, the bureau has made tweaks for a smoother implementation. Stevens said he wants the bureau to relax the debt-to-income ratio, which he said may be unnecessary because regulators have eliminated risky loan features.

Lenders are under no obligation to issue only qualified mortgages; they just have to verify that borrowers have the ability to make their loan payments. However, banks, which have doled out billions in recent years to settle lawsuits related to mortgage abuses, are likely to gravitate toward the protections afforded under the new loan category, analysts said.

The qualified mortgage rule is part of a broader collection of reforms that include changes to the way borrowers interact with mortgage servicers. These firms that collect mortgage payments were criticized for mishandling borrowers’ requests for lower principle or interest payments during the meltdown.

Now, mortgage servicers will have to maintain accurate records, offer ongoing access to staff members and provide options for delinquent homeowners to avoid foreclosure or face enforcement from regulators.

“It may seem silly that we need rules to tell servicers to answer the phone; not to lose people’s paperwork; to tell borrowers how much they owe,” Cordray said. “But we have lived through the financial crisis. We have seen with our own eyes the grave dysfunctions in the mortgage market.”

It is possible that the average borrower will not feel a major impact from the new rules, because lenders have become more conservative since the crisis, said Ghazale Johnston, managing director of Accenture Credit Services.

“In the last few years, a lot of these lenders have spent time strengthening their underwriting requirements and putting in place tighter internal controls,” she said. “The impact of that has been higher-quality loans being originated. The steps banks have taken to eliminate the risks have inadvertently helped them prepare for the rules.”

 

Why is my loan modification taking so long?

For many homeowners and their attorneys (including me), we have been playing the loan modification document game with the mortgage company for 9, 12, 18 months without an affirmative approval or denial.

It is very important if you are going to pursue a loan modification that you let your bankruptcy attorney know and keep them involved in the process, especially if you are in a Chapter 13 because this modification will need to be approved by the Court. In addition, please keep copies of all documents you send and followup with your point of contact every seven to ten days.

Independent Foreclosure Review Payments

The Independent Foreclosure Review’s individual review of foreclosure cases is over. The settling parties have decided the one by one review process was too cumbersome, so they will just to hand out settlement money directly to those effected by foreclosure.

If you had a mortgage in foreclosure in 2009-2010 with Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, or Wells Fargo, you may have received a notice form Rust Consulting about pending payment as part of the Independent Foreclosure Review. Don’t worry its not a scam, the checks are valid. Amounts vary from $300 into the 5 figure range.

If you are planning on filing a bankruptcy, tell your attorney about any notice you receive regarding the Independent Foreclosure Review payment or Rust Consulting. We can help you with exemption planning to keep the Independent Foreclosure Review payments away from creditors.

If you have already filed bankruptcy and receive a Independent Foreclosure Review payments, it becomes trickier. Simplest thing to do is to talk to your bankruptcy attorney first before cashing the check. Depending on your state, you may have enough exemption to exempt the Independent Foreclosure Review payment. There are some legal arguments to be made that the Independent Foreclosure Review payment is not property of the estate as it arose post-petition. Or the payment might just be too small for your bankruptcy trustee to care. Again, this is where your bankruptcy attorney’s knowledge of local trustees and practice will be invaluable.

Ohio Supreme Court sides with homeowners in the neverending foreclosure mess

Reposted with permission by Marc Dann, Esq.

Yesterday, the Ohio Supreme court issued an important decision affecting Ohio Homeowners who are now or who have recently been in foreclosure. In Federal Home Mortgage Corporation v. Schwartzwald the Court unanimously agreed with the position that our firm has been strongly advocating for the past 4 years that only someone who actually holds a homeowner’s note and mortgage may use the courts of Ohio to foreclose on their homes.

This seems obvious. But apparently not to the loan servicers and their foreclosure mill co-conspirators who gleefully sued thousands of Ohioans on behalf of entities that had no right the use the courts of Ohio.

The Court correctly held that Article IV of the Ohio Constitution limits the use of the Common Pleas Court to parties who actually have a dispute with one and other. One doesn’t need to be a lawyer to understand that A can’t sue B for a debt that B owes to C. Apparently that logic wasn’t so obvious to the lenders and loan servicers who originated millions mortgages (often predatory ones) between 2001 and 2008 and sold and resold them to each other and unsuspecting bond holders on Wall Street. For any one remembers playing musical chairs as a child, think of the notes and mortgages originated last decade as the chairs and the originators, special purpose entities, investment banks and Bond Trusts as the players.When the music stopped in 2008 when the Market for mortgage backed securities crashed, we have learned that it is surprisingly unclear who was holding notes and mortgages of Ohio Homeowners.

That is why all of the major lenders and loan servicers in Ohio simply ignored the legal requirements of owning someone’s note and mortgage and just filed for foreclosure in he name of whatever entity they “thought” was the last to buy the note. Believe it or not, thousands of lawsuits for foreclosure in Ohio were filed by entities that simply don’t have any dispute with the homeowner they were suing. In the Schwartwald Decision, the Ohio Supreme Court has said definitively that courts that granted Judgments in such circumstances were without jurisdiction to do so, and that courts that our currently deciding cases must dismiss those where the lender did not possess the note and mortgage prior to filing their foreclosure complaint.

What does this mean for Ohio Homeowners:
First, it is important to understand that courts do not have an obligation to independently review cases to determine whether or not the party suing has standing to do so. Someone who is sued by a lender or servicer that does not hold the note and mortgage must put the information about the lender’s lack of standing before the court. The Schwartzwald Decision makes it more important than ever that homeowners being sued for foreclosure in Ohio retain a lawyer to represent them. While this can conceivably be done by some one without a lawyer, it is a rather sophisticated and complicated argument and can best be put forward by a lawyer who is experienced in defending foreclosures. Our firm and others offer payment arrangements that make retaining counsel affordable to homeowners who are in foreclosure. For those who qualify, local legal aid offices have some of the best staff and volunteer foreclosure defense lawyers in Ohio.

Second, if you have been sued foreclosure over the past several years, even if the matter has been resolved by way of a loan modification or a cash for keys settlement, you should consult a lawyer about whether or not you have claims against the companies involved in suing you. Under the Federal Fair Debt Collection Practices Act and Ohio’s Consumer Sales Practices Act you may have claims for damages and attorneys fees, but they both have short statutes of limitations, therefore time is of the essence. Our firm and others will bring some of these claims on a contingent fee basis, meaning that you would not owe a fee unless we recover damages on your behalf
Most importantly, it may be possible to seek an order vacating a judgment of foreclosure particularly if the real estate has not yet been sold at Sherriff’s sale.

The critical lesson from this important decision is how important it is for homeowners who are facing foreclosure to fight back by challenging every claim that is made. Believe it our not, in thousands of cases throughout Ohio and the Country the largest banks in America and their foreclosure mill lawyers cheerfully sued thousands of Ohioans for debts that weren’t owed to them. The courage of the Schwartzwalds and the brilliant work of their superb lawyer Andy Engel has cleared the path for thousands of Ohioans to seek justice.

Is surrendering a property the same as letting it foreclose

So you have decided that you can no longer afford your home mortgage payments; you also realize that in this difficult real estate market, there is no equity and you can not either sell the property, or get the bank to approve a short sale due to the fair market value.  You are now faced with the decision what to do about it.  You have several options at this stage.

First, you could simply do nothing, pay nothing and wait for the bank to foreclose upon your home, and kick you out.  Where I practice in Massachusetts, it would take at least 150 days from the date the bank decided to send you a letter with their intent to foreclose before an auction could occur.  Even after the foreclosure sale, the new owners will need to have you evicted.  The whole time this is happening, you can save money for a down payment on your next place to live.  If this does happen however, and the lender sells your property at a foreclosure sale for less then what is owed to them, they can seek a deficiency judgment and come after you for the remaining balance.  The lender can even seek a judgment in court which will incur interest, for example in Massachusetts, a judgment incurs interest at 12% a year until the debt is paid off, and the judgment is good for 20 years, where the creditor can chase you, garnish your wages, and attach your bank account or tax refunds.  With all of this said, you can see that option one is probably not going to be yours best bet.

Second, you can try to surrender your property.  There are several ways you might go about surrendering your home.  You can try to contact the mortgage company and offer them a deed in lieu of debt.  What this means is that you will agree to leave the house, transfer the title to the mortgage company and in exchange, the lender will agree not to pursue you for any shortage.  This can often be difficult and the bank has absolutely no obligation to accept the deed in lieu.  You can also file a bankruptcy and inform the court and your creditor that you will be walking away form the house.  The benefit of this is that the bank and you may at that point come to terms with a surrender date, or at the worst, once you receive a discharge of debt in your bankruptcy, the lender will not be allowed to chase you for the deficiency.  In addition, once you file your case, the law imposes an automatic stay on the lender doing anything, so you may be able to again stay in the home for several months if not even more time, and save some money where you are not making payments.

Just because you file a bankruptcy and on your petition states you’re surrendering the property, this action in and of itself does not convey title.  The lender has a process they must follow and obtain relief from the automatic stay.  After this happens, they can then choose to either accept your surrender of the property, or move forward and foreclose.  There is no obligation for the lender to actually accept your surrender, just like negotiating a deed in lieu of debt.  However, as stated earlier you are protected against any future law suits on the value of the mortgage in relation to the foreclosure sale price.

Regardless of which avenue you choose to pursue, you owe it to yourself to at least speak to a consumer debt attorney who can advise you on your various legal rights and risks of any decision in your jurisdiction.

Court Adds Additional Requirement to Foreclose in Massachusetts

The Highest Court in Massachusetts has made foreclosure just a little bit more complex and difficult for lenders. More specifically, in June of this year, the Massachusetts Supreme Judicial Court in the case of Eaton v. Federal National Mortgage Association, held that a bank who seeks to foreclose against an owner of real estate in MA must have in its possession not only the original notarized mortgage, but now must also have the original notarized promissory note. These are two separate documents, and the paper trail required is now doubled, which clearly provides additional protection for consumers and burdens of standing for lenders seeking to effectuate its alleged rights to foreclose on a property. This additional requirement will now likely delay many foreclosures due to the fact that when loans are sold from one lender to another, many papers seem to get lost and even if the mortgage is present, the second document, the note, must also be present.

If a homeowner is going to defend against a foreclosure in Massachusetts, a good first step is to send a certified letter to the loan servicer demanding a certified copy of the original mortgage, and original note pursuant to the General Laws of Massachusetts, Chapter 244. While foreclosure law varies from state to state, the Massachusetts decision highlights an important universal rule; you can not take a home if you do not own the right to do so.  In simple terms, in order for a bank to foreclosure they must prove that the bank is entitled to receive the monthly mortgage payments, and simply the fact that a consumer was paying them is not enough, the Court will now require the proper paperwork to show ownership, or more succinctly, as it was recently put by Henry J. Sommer, supervising attorney at the Consumer Bankruptcy Assistance Project, “The basic fact, which I think is true anywhere, is that if you don’t own a mortgage and note, you don’t have a right to foreclose on somebody’s house,” he said. “That is really what this decision boils down to”.

One significant comment of caution when asserting the note defense is that this holding does not seem to be retroactive. By that, I mean to say that this will not help homeowners who have already been foreclosed upon or those in the process prior the June 22, 2012.  If however, a notice to foreclose has been received subsequent to the June 22 holding, the defense is not only valid but a must first line of defense against banks seeking to take a homeowner’s or investor’s real estate for lack of payment.

If you are facing a foreclosure action, your best bet is to immediately seek the counsel of an experienced debt relief attorney in your state.

Myths and Truths About Chapter 7 Bankruptcy, Part V

(Legal Series: Read the previous parts at www.lickerlawfirm.com)

Myth: A Chapter 7 bankruptcy will prevent a foreclosure or repossession.

Truth: A Chapter 7 bankruptcy will not prevent a foreclosure or repossession. A person should not file a Chapter 7 bankruptcy if they are trying to prevent a foreclosure or repossession and/or are behind on their payments. A Chapter 13 should be filed in that case. In a Chapter 7, a person should be current on their vehicle and/or home. There is an automatic stay that is implemented in the Chapter 7 as well as the Chapter 13; however, there is no repayment plan in a Chapter 7 bankruptcy like there is in a Chapter 13 bankruptcy.

Therefore, if a person files a Chapter 7 bankruptcy when they are delinquent on payments, the creditor will most likely immediately file a motion for relief from the automatic stay. If the debtor is unable to catch up on payments by the time of the hearing on the motion for relief, the court will likely grant the motion for relief, and the car or home can be repossessed or foreclosed.

Myth: In a Chapter 7, debtors will lose their house and/or vehicle.

Truth: In a Chapter 7, debtors will not necessarily lose their house or their vehicle just because it is included in the bankruptcy. All assets must be listed in the bankruptcy petition.