Tuesday, January 17, 2011
Domestic Violence Court to Open in Pinellas County in 2013
Through the U.S. Department of Justice’s Office on Violence Against Women, the federal government has given a nearly $300,000 grant to Pinellas County in order to establish a new court to address concerns raised by area advocates for domestic violence victims. Slated to open in January, 2013, balance of 2012 will be spent considering new family court practices and identifying existing gaps in the system with respect to domestic violence issues.
Pinellas County has a considerable record of domestic violence – in 2010, 3,439 petitions for restraining orders against spouses or domestic partners were filed, a rate of about nine per day. The majority of cases involving domestic violence in Pinellas County involve abuse by a man against a woman.
One of the most cited problems with the existing domestic violence system is the fact that abusers are often not held accountable for their actions, and there is no effective system in place for ensuring that abusers comply with substance abuse assessments, anger management classes, or other court-ordered requirements. The new court is expected to assist the justice system in handling the high volume of domestic violence cases in the courts, while also ensuring that the parties involved, especially abusers and batterers, comply with specific requirements and regulations. The Pinellas domestic violence activist and outreach community is thrilled with this development, noting that it should aid in the community’s understanding of domestic violence and facilitate cooperation, while ultimately protecting the safety of at-risk women.
The advisory committee charged with implementing the new court plans to create a regularly scheduled compliance docket that will allow judges to ensure abusers are meeting court-ordered requirements. Repeat domestic violence cases will be handled under a separate court docket, allowing the judges to focus on those particularly sensitive matters individually. Currently all domestic violence matters are grouped together. There has also been a call for an increase in the number of batterers and abusers required to take intensive 26-week group counseling sessions – currently, most violators are only ordered into eight-hour management courses.
The funding will cover the hiring of a general magistrate that will help streamline domestic violence and other family law issues, such as divorce, child custody, and visitation, by hearing all related matters on the same day.
The officials and stakeholders involved in the implementation of this court are optimistic that it will greatly help ensure justice is appropriately and fairly meted out in Pinellas County for years to come.
Friday, December 23, 2011
Florida Terminates Foreclosure Mediation Program
Florida Supreme Court Chief Justice Charles Canady terminated the mandatory foreclosure mediation program on December 19th, 2011. “The program was established as a means for the court system to address the overwhelming number of mortgage foreclosure cases coming into the system. The Court has reviewed the reports on the program and determined it cannot justify continuation of the program. Accordingly, … the statewide managed mediation program is terminated,” wrote Canady.
In Administrative Order 2009-065, the state of Florida updated various foreclosure procedures and forms to implement a mandatory mediation program for homeowners whose primary residences were in foreclosure. The Administrative Order was meant to address the increased volume of mortgage foreclosure cases throughout Florida.
Mediation, a form of alternative dispute resolution (ADR), is typically a cost efficient way for adverse parties to resolve their disagreements without resulting to prolonged litigation. The mandatory mediation program had its benefits: the lender was responsible for paying the fees for the mediation and, ideally, the mediation would result in a settlement or modification that would stop foreclosure. The mediations that occurred under the statewide managed mediation program were resulting in a “no compromise” in over seventy percent of cases. This left the majority of participants in foreclosure without any resolution – the exact opposite result of the program’s intention.
With the ruling by the Florida Supreme Court, it will once again be left up to the discretion of local state judges to determine whether mediation will be a beneficial and cost efficient way to solve a foreclosure case.
Wednesday, December 14, 2011
Freddie Mac Changes Short Sale Rules
The national government backed Federal Home Loan Mortgage Corporation, Freddie Mac, announced at the end of November that it would be implementing significant changes to short sale regulations in order to reduce liability risks for realtors. The changes were pushed for by the national Association of Realtors, and essentially rewrite the affidavit requirements for buyers, sellers, real estate brokers, and closing agents in short sale transactions.
Freddie Mac had originally implemented the affidavit system to prevent fraud, namely by placing certain obligations on specific parties involved in the short sale – for example, all of the parties were required to certify in the affidavit that the short sale was an arm’s length transaction, and the buyer was required to assure that he would not resell the home within 120 days without making substantial improvements. The new affidavit requirements go into effect on January 1, 2012, however they may be used immediately.
The critical changes to the affidavit regulations include a new phrase that reduces realtor liability: to “the best of each signatory’s knowledge and belief.” The affidavits also require signers to assure against making a “negligent or intentional misrepresentation” in the sale, and signers cannot be responsible for certifying for any other signer. Also, where the affidavit previously could have been an addendum to a sales contract, it must now be a standalone document signed by all parties.
In addition, Freddie Mac adjusted the requirements for lends, including: Short sale negotiation fees may not be deducted from the proceeds of the sale or charged to the seller; A HUD-1 Settlement Statement must reflect any amounts paid to any party connected to a short sale transaction; The seller may only receive payment if it is offered by the servicer, approved by Freddie Mac, and reflected on the HUD-1.
A short sale is often used as an alternative to a foreclosure, since such an arrangement alleviates foreclosure related fees for both the borrower and the lender, although in most instances it negatively affects the homeowner’s credit. In a short sale, the home is sold for less than the amount owed by the homeowner to creditors. The resulting difference in the amount owed and the amount actually collected for the sale is called a deficiency. In many states, lenders are not allowed to go after borrowers to collect the deficiency, however Florida law allows lenders to pursue short sale deficiencies for up to 20 years, often resulting in the garnishment of wages long after the home is gone. Between November, 2009 and October, 2010 there were nearly 83,000 Florida homes listed as short sales, representing about 20% of all homes on the market that year.
Monday, November 21, 2011
Foreclosure Mediation Could End
With a backlog of approximately 350,000 foreclosures and more on the horizon., there are many in Florida that are calling for a quick removal of the state’s foreclosure mediation program. A recent judicial committee determination echoed the need for removal of the mediation program on the basis that it hasn’t resulted in more people staying in their homes nor has it reduced the considerable bottleneck of foreclosures clogging the courts.
The program was instituted in 2009 by the Florida Supreme Court, ordering the judicial circuit courts to mediate sessions between defaulted homeowners and lenders. Lenders paid $750 for each hearing in the hopes that it would lead to a successful loan modification, such as a lower interest rate or an extension.
However, statistics show that successful mediations have occurred in less than four percent of all statewide cases – the dismal success rate was blamed on borrowers’ inherent mistrust of the program, lenders not willing to settle in mediation, and officials not publicizing the program. It was noted that loan servicers often sent representatives to mediation sessions that did not have full authority to settle. Further, the representatives that were sent refused to consider more than a narrow range of settlement options, most of which were of little value to borrowers. In the end, only 14 percent of all eligible borrowers participated in mediation.
A judicial committee has recommended changes to the program that would allow a judge to send foreclosure cases to mediation on a case by case basis.
Although foreclosure activity slowed through the first half of 2011, as of September one of every nine foreclosures nationwide was in Florida. It is likely that any perceived slowing of the foreclosure rates in Florida is due to the swelling of the foreclosure logjam and does not actually indicate any decrease in foreclosures.
Wednesday, September 28, 2011
Effective May 17, 2011, Governor Rick Scott approved Senate Bill (SB) 408, regulating property and casualty insurance. To suggest that review of the approved bill is confusing is an understatement. After countless reads, luncheons, and discussions with many seasoned sinkhole attorneys, geologists, geotechnical and structural engineers, the most basic explanation of SB 408 is that the new law is going to dramatically affect the largest investment for most consumers...their home.
This past week, members of the state-run Citizens Property Insurance Corp. voted to approve increases for optional sinkhole coverage, including hikes of more than 2,000 percent in some local areas. While the state Office of Insurance Regulation must approve the proposed rate increases before they can take effect, this will effectively mean that the current annual rate of sinkhole coverage in Hillsborough County that is $156.00 on average would increase to $3,651.00.
The numbers are even more staggering for Pasco and Hernando County. These rate hikes will be devastating. Most homeowners will elect not to carry sinkhole coverage, which, in turn, will provide no relief in the event of sinkhole related damages to their homes. In those instances where the mortgage holder will require the sinkhole coverage, the rate hikes will be unaffordable to most, and could contribute even more to the housing crisis. Banks will force place the insurance and require the borrower to pay in an escrow manner - in Hillsborough County such policy would result in an increaded mortgage payment of nearly $300!
Many of the Senators that supported the bill are now requesting the insurance regulator deny the rate increase request or to delay the consideration of it. Prior to SB 408, Citizens gradually rose rates by a maximum of 10 percent annually. The passage of SB 408 eliminated the cap at which Citizens could raise rates, allowing Citizens to hike rates to the eye opening numbers reflected above.
Even more alarming, assuming that the homeowner will have available sinkhole coverage, the passage of SB 408 created additional provisions designed to limit consumers to access policy proceeds. Such provisions include a new process for insurers' investigation of sinkhole claims, changed the definition of a sinkhole loss to include a further defined structural damage to occur, and limited the timeframe for filing a claim from five years to two years.
While it is undetermined at this time whether the insurance commission is going to allow the rate increase for Citizens, which private insurers will definitely follow suit, one thing is certain: NOW IS THE TIME for consumers to pursue any potential claims if they are exhibiting sinkhole related damage to their home. Otherwise, the time may run before they can protect their interest.
Tuesday, September 27, 2011
Repairing Your Credit After Bankruptcy
The recent recession has spurred a huge national increase in bankruptcy, with nearly 1.5 million people filing in 2010. There is no doubt that filing for bankruptcy has a dramatically detrimental impact on the filer’s credit rating, but it is important to keep in mind that with the right financial decisions, there is hope that the credit rating can be improved.
For many, the prospect of boosting their credit rating seems unattainable and their financial picture seems bleak – they have been denied mortgages, have been offered exorbitant interest rates on car loans, and have had little or no chance of getting any affordable credit whatsoever. What many consumers don’t realize is that while a bankruptcy remains on a credit report for seven to ten years, there are steps they can take to improve their credit rating and reestablish creditworthiness within 12 to 18 months.
One of the first steps a consumer should take is to correct any reporting errors that may appear on a credit report. Obtaining a copy of one’s credit report will enable the consumer to see the full effect of the bankruptcy on his credit rating, but it will also allow the opportunity to correct any mistakes that will perpetuate an already difficult financial situation. Often liabilities that were supposed to be discharged as a result of the bankruptcy were overlooked, and it is up to the consumer to contact the creditors and the credit bureau to ensure that the information is updated.
Consumers hoping to repair their credit in the face of a recent bankruptcy must also be sure to remain current on existing credit obligations. Bankruptcy wipes out many of a filer’s debts, but he might still be on the hook for student loans, child support, and in many instances, mortgages. Staying on top of those non-discharged debts and ensuring payments are made on time will bump up a credit rating.
Another method for boosting one’s credit has just newly emerged: paying rent. Recently the credit reporting agency Experian has stated that it will include rental histories in its credit profiles. Check with your rental company to see if it reports its rental data to Experian – many bankruptcy filers with scores of less than 500 whose rental data was reported saw their scores jump to over 600.
Consumers may also improve their credit rating by using a secured credit card. By putting down a specific amount, say $500, a bank or creditor will issue a credit card authorized for that amount – making regular payments and ensuring that the balance is under control will definitely improve a lower credit score.
While none of these are cure-all solutions, a consumer who is conscious of these possibilities will be in a much better position after a bankruptcy than those who remain oblivious. With a proactive approach, good credit after a bankruptcy is definitely within reach.
Tuesday, September 27, 2011
New IRS Interpretation Allows Deductions for Three Cars
A new bankruptcy court judgment has been issued out of Central Florida that allows for the operating expenses associated with three automobiles to be claimed by a debtor in order to show that he has no disposable income. So long as it can be shown that the car is essential to the debtor’s ability to provide for his or his family’s production of income.
The IRS makes a distinction between operating costs and ownership costs, and places a cap on both. Operating costs generally include those expenses associated with maintaining and running the vehicle, and as of 2011 cannot exceed $244 in the Southern region. Ownership costs are the monthly expenses associated with the vehicle loan or lease, and cannot exceed $496 for one car or $992 for two cars nationwide.
In this case the debtor was subject to liens imposed by the IRS. He possessed three cars, two of which were used by the debtor and his wife. The third car, which was completely paid off, was used by his oldest daughter to drive to school as well as to transport the family’s youngest two daughters. Because the debtor had complete ownership of the car, he was able to claim a $200 dollar deduction for its operation since it was more than six years old and had more than 75,000 miles, in addition to $239 in operation expenses. Along with the ownership costs claimed for the other cars, the expenses of the third car allowed him to claim that he had no disposable income.
The language in the IRS manual explicitly permits the expenses associated with two cars, yet in this instance the bankruptcy court judge permitted the expenses associated with the third car, as those expenses were reasonably related to the debtor’s ability to generate income in order to support himself and his dependents.
Tuesday, September 27, 2011
Misleading Mortgage Ads To Be A Thing of The Past
Beginning August 19, the Federal Trade Commission has applied a new rule aimed at strengthening consumer protections by placing an all-out ban on deceptive claims about consumer mortgages in ads and any other “commercial communication.”
The rule applies generically to, among others, mortgage lenders, brokers, servicers, real estate agents, ad agencies, home builders, lead generators, and rate aggregators, all of which are already under the jurisdiction of the FTC. Businesses outside of the jurisdiction of the FTC, such as banks, thrifts, and federal credit unions, will not currently be subject to these new regulations.
The FTC gives numerous examples of claims that will be prohibited under the new rule, and highlights specific areas of misrepresentation that will not be tolerated. Ads may no longer contain deceptive language regarding the existence, nature, or amount of fees or costs to the consumer associated with the mortgage, nor may they include illusory terms, amounts, payments, or other requirements relating to taxes or insurance associated with the mortgage.
The variability of interest, payments or other terms of the mortgage must be straightforward, and the type of mortgage being offered must be clear. Additionally, the producer of the advertisement or communication must be clearly indicated.
Those who violate the new rule will be exposed to civil penalties by both the individual states and the FTC. The Consumer Financial Protection Bureau will also be able to enforce the rule. Prior to institution of the rule the FTC could only bring action against deceptive mortgage advertisers to get them to stop making false claims – under the new rule, the FTC will be able to bring such an action against the deceptive advertisers and also seek civil penalties, such as fines, against them.
With this rule in place, the FTC claims that there will be a level playing field for legitimate businesses to compete in the marketplace.
Friday, September 23, 2011
Fannie Mae Purchases 400,000 Home Loans from Bank of America
The Wall Street Journal has reported that Charlotte headquartered Bank of America has sold servicing rights to 400,000 home loans to the Federal National Mortgage Association, Fannie Mae. The servicing rights to nearly $73 billion in unpaid principal balances on the home loans went for $500 million, and will be gradually transferred from Bank of America to Fannie Mae over a four-month period, beginning with 100,000 loans in September.
Currently the fifth largest company in the United States by total revenue, as well as the second largest non-oil company, Bank of America is expected to continue to unload similar loans in the future as they focus on strategies to accommodate borrowers with deeper relationships with the bank. Fannie Mae, whose primary purpose is to expand the secondary mortgage market by securitizing mortgages through mortgage backed securities, will not service the loans directly, but will facilitate the transfer of the home loan portfolios to servicers that have a high rate of success in minimizing credit losses.
Some commentators have speculated that Fannie Mae’s purchase of these servicing rights is tantamount to a back door bailout of Bank of America by the federal government - Bank of America has seen its stock plummet over 40% so far this year as it struggles to manage its mortgage portfolio. Bank of America has asserted that the sell-off is a part of a sale and transfer strategy designed to address legacy mortgage issues, with an overarching objective of overcoming the mortgage crisis by handling defaulted loans and initiating loan modifications wherever possible.
Notwithstanding this transfer to Fannie Mae, Bank of America will continue to service more than 12 million first mortgage and home equity consumers in all 50 states and the District of Columbia. Bank of America also conducts operations in more than 40 non-U.S. countries.
Tuesday, September 13, 2011
Which Credit Score is Your Real Credit Score?
Knowing your credit score before you apply for a car loan, mortgage, credit card, or other financial service can be critically helpful and can save you a lot of time and trouble. However, not all credit scores are the same, and so it can be extremely confusing for consumers who try to make sense of the different scores posted by the multitude of different credit rating agencies.
FICO scores are the most trusted of credit rating schemes, as they provide a reliable snapshot of a consumer’s creditworthiness for lenders. Yet there are numerous other credit rating schemes that may provide different scores for the same consumer. Equifax, for example, can report a FICO score, but it also has the proprietary Equifax Credit Score. While FICO rates credit with a score from 300 to 850, the Equifax Credit Score rates from 280 to 850, creating the possibility for discrepancies in identical borrowers. Experian Credit Scores range from 330 to 830; TransUnion TransRisk New Account Scores range from 300 to 850 and are most similar to FICO scores; VantageScore credit ratings range from 501 to 990. The reality is, there will almost certainly be differences in credit ratings between the different credit rating agencies, but for most consumers who are merely attempting to keep track of their rating on a regular basis, an exact FICO score isn’t necessary.
Consumers that are preparing to take out a significant loan, a mortgage for example, would be better off obtaining a precise FICO score. TransUnion and Equifax can provide FICO scores to consumers on a one-off basis for a flat fee, or in a subscription format for consumers that will require multiple views. Accurately knowing one’s credit score prior to applying for a loan can help consumers to more effectively work with bank officers to achieve the best possible terms. For that reason, the fees associated with pulling one’s FICO score might be justified for a consumer preparing for a home loan, but for the casual consumer only interested in a snapshot of their credit the non-FICO credit scores will certainly be sufficient.
Friday, September 9, 2011
Most U.S. Metro Areas Enjoying Decrease in Foreclosures
Foreclosures are down nationwide as banks take longer to act against borrowers who are delinquent in paying their mortgages. In the first half of 2011 nearly 85% of U.S. metropolitan regions with populations greater than 200,000 saw a drop in foreclosure rates as compared to the first half of 2010.
Data used to conduct the study was collected from notices for defaults, scheduled home auctions, and home repossessions, all indicators that can show that a home may be lost to foreclosure.
Out of 211 of the nation’s largest municipalities, 178 saw a decline in foreclosure activity of the first half of the year. Analysis shows that the declines are likely attributable to impediments in the foreclosure process caused by documentation problems that came up last fall – considerable paperwork had to be resubmitted on many homes that were destined for foreclosure, spurring an outbreak of government and regulatory agency investigations of the lending and banking industry.
The decline in foreclosure activity can also be linked to mortgage banks avoiding action against delinquent borrowers in favor of home loan modifications or other schemes that will keep borrowers in their homes and out of default.
Unimpressive home sales have also influenced lenders to refrain from evicting foreclosed homeowners, allowing the property to sit vacant and unsold for months.
Florida held some of the metropolitan areas that saw the biggest annual declines in foreclosure activity, likely aided by the fact that Florida is a judicial foreclosure state that requires courts to sort out foreclosure issues in such volumes that significant hurdles are inevitable. These declines mark a much welcomed change in Florida’s foreclosure rates, which in July ranked seventh in the nation, with one in every 372 home loans being foreclosed. The news at the beginning of 2011 was even worse, when Florida was ranked first in the nation for foreclosures, with one out of every four of the nations foreclosures occurring in Florida. The constantly improving trend is good news for Florida’s homeowners, and forecasts show that the cooling off in foreclosure rates might continue in the short term.
Tuesday, September 6, 2011
Premiums May Increase for Sinkhole Insurance
The State of Florida has more sinkholes than any other state in the nation, providing an important part of the aquifer system that supplies 95% of Florida’s drinking water by allowing rainwater to replenish groundwater. Despite their ecological importance, sinkholes also create tremendous destruction of property, sometimes literally swallowing houses whole. Due to increased urbanization of sinkhole regions in Florida, FEMA has reported that the number of sinkholes as doubled since 1930, and insurance claims resulting from property damage are skyrocketing – from 1987 to 1991 insurance claims for damages increased 1200%, costing nearly $100 million.
In 2007 the Florida legislature responded to the complaints of Citizens Property Insurance Corporation clients regarding elevating sinkhole insurance premiums – as a result of a special session, the State Senate froze Citizens rate increases for sinkhole insurance and implemented a 10% annual rate increase cap for subsequent years.
Despite these safeguards implemented by legislature nearly five years ago, some Citizens policyholders are about to see their premiums increase 2000%, with a 429% average statewide increase, due to the legislature’s passing, and Governor Scott’s signing into law, of a 2011 bill (SB 408) that removed the 2007 rate increase cap. The Office of Insurance Regulation has yet to officially approve the increases applied for by Citizens, and some state senators are demanding that policyholders and members of the public have the opportunity to voice their concerns with the proposed rate hike.
Rallies in protest of the proposed premium increases were held in many west Florida counties on August 16, and while Citizens customers await the decision of the Office of Insurance Regulation, many wonder if they will be able to come up with extra money demanded by the insurance company or if they will face the prospect of losing their homes.
Thursday, September 1, 2011
Ocwen Financial Corp, the West Palm Beach home loan servicer, has adopted and expanded a shared appreciation loan modification program first pioneered by West Coast servicers that helps homeowners avoid foreclosure and stay in their homes. While it essentially seems as though Ocwen is telling mortgagors to go ahead and default on their mortgages in order to get their principal cut, doing so actually allows the company to clean-up outstanding loans that are moving towards foreclosure.
Industry experts have suggested that Ocwen’s motives in allowing for such a loan modification program might not be based in generosity or benevolence to the mortgagors that they service – servicers are reimbursed for advances when a loan is modified or the loan goes into foreclosure. Since Ocwen’s program is directed towards borrowers that have already defaulted Ocwen stands to be reimbursed.
This program differentiated from the majority of shared-appreciation programs that pursue underwater borrowers that still pay their mortgages. Such a reduction in principal creates a strong motivation for borrowers to mitigate their default, especially since homeowners that never expect to regain equity on their homes have little incentive to make payments. Ocwen’s expanded program allows for a loan to be written down to 95% of the home’s current market value, which would thereafter be forgiven in one-third increments over three years so long as the homeowner is diligent in paying the modified loan. Once the house is sold or refinanced, the borrowers would keep 75% of the appreciation and share 25% with loan investors.
Ocwen initiated implementation of the new program with 800 defaulted underwater borrowers in numerous states, and plans to further expand implementation into 33 states, conditional upon clearance from the Treasury Department. The program is anticipated to help borrowers by keeping them in their homes, which is something supported by consumer advocacy groups and borrowers alike.
Friday, August 19, 2011
Effects of Foreclosure Not So Drastic After All
According to a recent study by the Federal Reserve, the effects of foreclosure do not result in dramatically significant changes in the life or well being of those who find themselves in that situation - they do not end up in comparably less desirable neighborhoods or in more crowded living conditions after they have foreclosed on their home.
Economists have extrapolated data gathered in the study to infer that foreclosure does not represent a sizeable enough economic burden to significantly reduce housing consumption. The data shows that foreclosures have no impact on the size of the house, and very few individuals end up living in situations with additional housemates in order to defray living expenses; rather, the majority of individuals that went through the survey were found to be living in a single family home, as they were before, only this time under a lease.
The similarities between before and after foreclosure persist in the make-up of the neighborhood, with most of those consumers sampled remaining in areas with similar or identical median incomes, median house values, and median rents compared to their old neighborhoods. Statistically, only 22% of foreclosed borrowers moved from a single family home into a multifamily rental building; the overwhelming majority, around 75%, remained in single family homes.
The Fed sampled data consisting of 37 million individuals, finding further that around half of borrowers with loans that were about to be foreclosed moved out of the home within two years, implying that some borrowers continue to live in a home without paying rent before eventually being evicted, or that many borrowers in the sample group managed to find some kind of loan modification program or obtain refinancing.
In Florida foreclosure activity slowed through the first half of 2011, likely on account of Florida’s judicial foreclosure processes. Only one Floridian city, Cape Coral-Fort Myers, was included in a list of the country’s highest foreclosure rates, a fact which stands in sharp contrast to the first half of 2010, when cities in Florida made up nine of the top 20 foreclosure rates nationwide.
Monday, August 15, 2011
Tampa Bay Among the Highest Divorce Rates in the USA
According to a recent study, the Tampa Bay area has one of the highest divorce rates in the United States, with other Central Florida metropolitan areas also showing high divorce rates.
At 15.9 %, Tampa Bay has the highest divorce rate in the State of Florida and the tenth highest in the nation, with nearly 360,000 local residents falling into this category. Nearby Bradenton-Sarasota-Venice had the sixth highest rate in the state, with 14.87 %, or about 87,000 citizens.
By contrast, the lowest divorce rate in the US is claimed by Provo, Utah, at 7.37 %. The lowest divorce rate of the Floridian metropolitan areas surveyed was Gainesville, with 10.69 %
Divorce costs the U.S. public tens of billions of dollars annually, generally in court expenses. The private expenses incurred by separating couples can run into the realm of tens of thousands of dollars.
Divorce rates seem to be perpetually on the rise – in 2005, married adults were found to divorce two-and-a-half times as often as married adults in 1980, and four times as often as in 1955. Statistically speaking, between 40% and 60% of all new marriages will result in a divorce, and the likelihood that a marriage will end in divorce within the first five years is 20%.
In Florida, a divorce is technically a “dissolution of marriage,” and it is one of the many states that does not require fault as a grounds for divorce – either husband or wife may file for the dissolution at will.
If you or someone you know is facing a legal separation or potential divorce, it is important to understand the legal ramifications divorce has on parental rights, real property rights, distribution of retirement accounts and payment of credit card debts.
For a free consultation to discuss your rights in a divorce, contact a Tampa divorce lawyer at Yesner & Boss.
Tuesday, August 9, 2011
Can Social Media Sites Like Facebook & Twitter Ruin Your Bankruptcy?
Social Media sites, and Facebook in particular, have changed the practice of law. Because social media sites are public and the information is credible (the owner of the account provides all of the information via posts), many lawyers and governmental officials have created social media investigation departments within their firms. Divorce lawyers regularly review the opposing party’s Facebook profile for evidence of adultery or hidden assets; prosecutors present online photos to juries as evidence of guilty behavior; and collectors troll social media sites looking for assets and debtors. Is it too soon to say that bankruptcy trustees will eventually realize that the social media sites are a good source to find inconsistencies with debtors’ bankruptcy schedules.
Social Media is truly taking over the world by storm. According to Facebook, they have over 750 Millions active users and according to Twitter, they have over 400 million monthly users who send out 200 million tweets a day. Needless to say, both sites have huge audiences. Could some of that audience be members of the United States Trustee’s office or debtor’s creditors?
To the individuals who are privy to the privacy settings of Facebook and Twitter, limiting access to one’s profile to “friends” is not a dead end for investigators. Online information can easily be subpoenaed – so do not assume any right to privacy for online materials.
To give debtors a brief understanding of when careless social media activity can have serious implications, here are 3 instances:
1. Personal Property Not Listed
Debtors are required to list their personal property when filing bankruptcy. Debtors may be able to protect some of their property by using federal or state exemptions. However, the property that is not protected by any exemptions may be seized by the Bankruptcy Trustee to be liquidated in order to pay creditors.
Pictures posted from the holidays or birthdays showing that new flat screen television or sports car without those items being listed in the bankruptcy petition that was filed afterwards may be seized or debtors may be required to pay non-exempt equity in the property.
Or what if debtors file in August, and they forget to list the new engagement ring that they received on July 4th, but on debtor’s Facebook or Twitter page, debtor posted engagement pictures of the ring and changed their dating status from “Dating” to “Engaged to…” for all of their friends to see, the Trustee could (although unlikely) try to come after that engagement ring or make the debtor pay back the non-exempt equity.
2. Vacations and Luxury Spending
Another way your social media could damage chances at a successful bankruptcy filing is if the Trustee or Bankruptcy Court finds out that the debtor has been taking “luxury trips” with credit cards or other funds. If debtor posts pictures of family trips to the Caribbean or a romantic getaway to the Mediterranean, the courts could require the debtor to pay back the expenses incurred on the vacation. When posting pictures to Facebook or Twit pics to Twitter, this could make the Trustee second guess debtor spending habits.
3. New or Unlisted Jobs
If the debtor has filed a Chapter 13 bankruptcy then the debtor should be making monthly payments to the Bankruptcy Trustee. Those payments were largely determined by debtor’s income and the amount of disposable income the debtor had at the end of each month at the time of debtor’s bankruptcy filing.
If the debtor just received a new job offer and is excited to tell family and friends by posting an announcement on their Facebook wall or Twitter feed about their new job and the pay raise the comes along with it, this could be information that the Chapter 13 Bankruptcy Trustee may use to increase the debtor’s monthly payments. Again, the more money a debtor makes should result in more disposable income. The Trustee can then use that extra disposable income to pay back more of debtor’s unsecured creditors.
Along the same lines of getting a new job – what if the debtor has a side business that, in their opinion, does not produce a substantial amount of income so the debtor does not list it on their bankruptcy petition. If a Trustee finds out about this other business through Facebook or Twitter, this income could be recalculated into the debtor’s monthly income which may push the debtor above the Means Test forcing debtor to file a Chapter 13 bankruptcy and pay back at least a portion of what debtor owes to creditors. In addition, a lie of omission is still a lie that potentially carries criminal penalties in bankruptcy court.
Many people have grown to love social media, especially Facebook and Twitter. It allows people to stay in touch with friends and family, meet loved ones, and keep up with the news. However, it has also allowed the world to peer into people’s personal life. Many Trustees are not doing it now, but a time will come when they will. Interestingly enough, according to many reporters, it can take less than two minutes to find out a lot about a person and their assets by simply looking online. Profile privacy is an easy way to keep people from finding out too much information and of course, debtors disclosing all assets and property to their attorney helps as well. If the debtor’s attorney knows about their property and their wishes to save it, then they can almost always protect it, or at least put the debtor in the best situation to keep as much of it as possible.
Wednesday, June 1, 2011
Federal Rules Governing Foreclosure Alternatives About to be Simplified
Things are about to become at least a little easier for homeowners who have borrowed from the federal government. The two government lenders, Fannie Mae and Freddie Mac, have recently been instructed to work together to create a set of uniform rules for handling delinquent mortgages. The revised rule system will benefit borrowers by requiring the lenders to contact borrowers earlier than is currently required to inform them of delinquency, better communication between lender and borrower, and quicker decision-making on the part of the lenders. In addition, the lenders will be required to push harder for foreclosure alternatives such as loan modifications and short sales, even if an account has already been referred for foreclosure. The consolidated set of rules will become effective as of September 30, 2011, and it is expected that the revisions will provide better loss mitigation options to both lenders and borrowers alike.
Thursday, May 26, 2011
State Mediation Program Unsuccessful So Far
The foreclosure mediation program implemented by the Florida Supreme Court in late 2009 has, unfortunately, been a resounding failure. While mediation can provide a favorable outcome for both borrower and lender, lenders are finding themselves unable to reach a compromise in situations where borrowers are not only unable to pay their original mortgage payments, but are actually unable to pay anything at all. While critics point out that there have only been a few hundred successful settlements since the mediation program began, supporters point out that even a relatively low number of successful mediation's is helping unclog the courts and providing economic relief for the successful borrowers and lenders. That, they argue, makes the program worthwhile, even if it has not yet reached widespread success. Experts suggest that the biggest roadblock to successful mediation thus far has been unresponsiveness on the part of borrowers, who may, whether out of confusion or fear of being swindled, have largely been ignoring the attempts to mediate. Perhaps a more uniform program would help borrowers understand why they are being contacted about mediation and what benefits mediation can provide, thereby increasing the rate of success of the mediation program.
Thursday, May 05, 2011
Mortgage Woes Hit Bank of America's Bottom Line
It's not just the average American consumer who is feeling the pinch of the nation's uneven economy. Bank of America Corp. is also facing having to do more with less these days. Already stung by a troublesome mortgage portfolio, the banking giant, less-than-stellar returns within profitable operations and costly legal settlements weighed heavy on the company's first-quarter bottom line.
There is no doubt, however, that Bank of America's mortgage business poses the biggest concern. Not only did it have to absorb $548 million in expenses and fines over its handling of Fannie Mae and Freddie Mac loans and $1 billion of repurchase-related costs related to government sponsored enterprises, but Bank of America also paid a $1.6 billion settlement to Assured Guaranty Ltd., which had backed up a portfolio of the bank's home equity and first-lien loans.
"The legacy costs, they just cannot get this behind them. Every quarter they try to reassure the Street that 'Most of this is behind us,' but they're having trouble dealing with it," Paul Miller, head of financial services research at FBR Capital Markets, told American Banker. "We've been factoring roughly $1.5 billion (of mortgage repurchase-related costs) a quarter — we're going to have to look at taking those numbers up."
A continued weakening in the housing and residential lending markets as well as housing prices nationwide have also dented Bank of America's mortgage arm. After announcing layoffs of 3,500 workers and contractors, Bank of America had to set aside a higher-than-anticipated $1 billion to cover representation and warranty claims.
"As far as [the house price index] going forward, we expect gradual improvement over the second half of the year," Bank of America's chief executive Brian Moynihan said, American Banker reported. Moynihan, however, said any gains would be modest. "It's a fairly simple picture: All of the businesses have moved back to profitability except our mortgage business."
Though Bank of America reported its first profit in three quarters -- $2 billion – it did not come close to meeting analysts' expectations. Its earnings mostly came on the back of declining credit-loss provisions, falling from $5.1 billion in the fourth quarter to $3.8 billion in the first quarter. Bank of America's revenues fell to $26.9 million, a 16 percent decline from a year ago. Only the company's wealth and investment division reported a year-over-year increase in revenue.
"Our largest initial concern is that the magnitude of mortgage-related items may not decelerate as rapidly as we have been expecting," wrote Sandler O'Neill analyst Jeff Harte.
Monday, May 02, 2011
Dishonesty Among Landlords Leads To IRS Changes
As more and more landlords fail to report income from rental properties, the IRS is developing a plan to combat the problem. The Treasury Inspector General for Tax Administration (TIGTA), which is responsible for monitoring the IRS, reports that landlords misrepresented their rental earnings by as much as $12.4 billion since 2001. The IRS disputes the figure provided by TIGTA, but does acknowledge that there is money that goes uncollected each year that could make a big difference to the government's revenue stream. In fact, it is predicted that by simply increasing the number of audits performed on filers who own rental property could generate an extra $27.3 million in just five years.
Agreeing that more can be done to collect on unpaid taxes, the IRS hopes to increase the number of audits it performs on tax returns with rental income beginning in the summer of 2013, although the IRS admits that their resources (or lack thereof) may dictate the amount that they can afford to increase auditing.
Changes that can be expected for the 2011 tax year include a requirement that landlords with passive activity loss, as defined by the Tax Reform Act of 1986, will need to submit an additional form with their tax return, as well as a requirement that real estate agents report their total net earnings or losses. Both measures are expected to increase the revenue generated by the annual tax returns.
Friday, April 29, 2011
Florida Hit Hardest, Trying to Recover
Florida has received $1 billion dollars in federal funding in order to help ease the ravaging effects of the housing crisis. The money funds the Hardest Hit Fund, which aims to provide mortgage assistance to approximately 40,000 Florida homeowners. For borrowers who are not more than 180 days late in their mortgage payments, the Fund can either provide up to six months of mortgage payment assistance (up to $12,000) for homeowners who are currently unemployed or underemployed or it can provide up to $6,000 to help make a delinquent mortgage current if the homeowner has recently returned to work after being unemployed or underemployed. The program expects success based not only on the financial assistance being provided to struggling homeowners, but also due to the fact that homeowners will be maintaining responsibility for their homes and will still be expected to contribute financially to their mortgages. Florida was chosen as one of the states hit hardest by foreclosure as a result of low employment rates and plummeting home prices.
Friday, April 29, 2011
Bankruptcy Courts Offer Loss-Mitigation Programs
Bankruptcy courts in three Northeastern states are offering loss-mitigation programs as a way to deal with a rising tide of residential foreclosure cases that are filling their dockets. In two states, nearly 35 percent of the court's loan-modification programs, or LMPs, have been approved.
"Bankruptcy courts can play an important role in avoiding unnecessary foreclosures and facilitating mortgage modifications through the implementation of LMPs," John Rao of the National Consumer Law Center Inc. in Boston in wrote in the March issue of the ABI Journal.
The programs, available in the Southern District of New York, Rhode Island and Vermont, are seen as a solution to the ineffectiveness seen within the federal Home Affordable Modification, or HAMP, program, which faces a possible repeal in Congress. The LMPs, which establish loss-mitigation periods and dates for the filing of the status and final reports, allow for mortgage servicers to terminate negotiations, provided homeowners are given due process.
"Bankruptcy court mediation programs can fulfill a much-needed role in ensuring that foreclosures do not proceed without consideration of alternatives if requested by the parties," Rao wrote.
One of the federal program's significant issues, Rao says, was homeowners were seldom given a reason for a rejection. Though foreclosure proceedings against homeowners must halt upon their acceptance into a HAMP loan-modification agreement, those still under consideration for the program aren't afforded the same protection.
In loss-mitigation requests filed from Nov. 1, 2009, to Dec. 31, 2010 in New York and Rhode Island, nearly 35 percent of the cases resulted in successful loan modification for the homeowners.
"The number of modifications attained should not be the only goal of the LMPs. Providing for a fair and transparent process, judicial efficiency and speedy outcomes are other measures of success," Rao wrote.
Tuesday, March 29, 2011
Fewer Foreclosures Stress Florida's Court System Finances
Plummeting foreclosure filings in Florida, a state hard hit by the U.S. economic slowdown, have led to a $72.3 million budget shortfall for the state's court system, prompting the chief justice to seek $42.5 million in temporary funding.
Without the infusion of cash, Chief Justice Charles Canady told Florida Gov. Rick Scott that the state's courts will need employees to take furloughs to help make up for the shortfall. Canady said such furloughs will negatively affect court operations.
Though falling short of meeting Canady's request, Scott's office transferred $14 million from trust funds related to mediation, arbitration and court education to keep the courts running through April. In the meantime, state budget officials will look for the root of the problem and potential solutions before determining whether to supply another $28.5 million.
One contributing factor to the court's financial shortfall has been a significant slowdown in filing fees, primarily related to, a controversy over mortgage servicing companies filing improper documents.
Since 2009, Florida's court system has relied on these fees for a significant portion of its funding. This year alone, 80 percent of the court system's $462 million budget would come from all case filing fees, with court officials predicting that real-estate filings would provide three-quarters of that amount.
Those projections, however, were wrong. In February, foreclosure filings dropped to about 8,200, the lowest in more than four years. At one time, in October 2008, more than 38,000 foreclosures were filed with Florida's courts.
Though the state's court system anticipates foreclosure filings to steadily grow in the next fiscal year, as properly documented foreclosure filings are expected to enter the system, Canady is hoping the Florida Legislature will move the majority of court funding away from filing fees.
Friday, March 18, 2011
On one side we have Wells Fargo & Co. and Ally Financial Inc., two big banks considering pilot programs that would allow struggling homeowners to refinance "underwater" mortgages into U.S. Federal Housing Administration programs.
On the other end, though, sits U.S. House Republicans and their bids to eliminate the FHA's so-called Short Refi program, which the banks, in position to write down the value of these credits, need to get these programs off the floor.
With more than 20 percent of all U.S. homeowners being underwater, or possessing negative equity, on their mortgages, the FHA wants the nation's banks to tap into the Short Refi program and provide relief to borrowers and cut back on home foreclosures. Negative equity, one of the main reasons behind soaring foreclosures, severely affects the modification or restructuring of a loan.
"Without question, "FHA Commissioner Dave Stevens said,"the FHA Short Refi program has been a difficult one to get off the ground."
Banks have been hesitant to embrace a requirement within the Short Refi program where they must write down a loan by at least 10 percent and make sure the total loan-to-value ratio, after refinancing, doesn't exceed 115 percent. To qualify, homeowners must be up to date on mortgage payments and meet the FHA's underwriting guidelines. A year into the program, less than 200 borrowers have tapped into it.
For the most part, banks and investors have little interest in cutting balances for borrowers current on mortgages.
"We believe that principal writedown is absolutely needed," Stevens told a U.S. House subcommittee. "It's one of those key remaining variables left to address outside of modifications to get this economy — this housing economy — right-sized."
In Washington, D.C., though, there's little taste for such programs. U.S. Rep Spencer Bachus, R-Alabama, is leading a Republican effort to shut down four foreclosure-prevention programs. The Short Refi program and the Home Affordable Modification Program are among them.
"In an era of record-breaking deficits, it's time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners," Bachus said.
Other obstacles remain, too.
Fannie Mae and Freddie Mac, two agencies that manage about 50 percent of mortgages serviced by lenders, don't want their loans refinanced through FHA because it would reduce the value of their performing loans, possibly creating the need to increase its debt from the U.S. Treasury.
Tuesday, March 15, 2011
GOP Legislation Targets Loan-Modification Programs
Four programs designed to help struggling American homeowners keep their most valuable possession are being threatened with extinction by Republicans in the U.S. House of Representatives. One of the four, the Home Affordable Modification Program, sits squarely in the bull's eye.
The HAMP program, introduced by President Barack Obama two years ago, was expected to help up to 4 million homeowners change their mortgages, making them more affordable in a bid to stave off foreclosure proceedings. In that time, only 1 million borrowers have benefited from the program. In the proposed legislation, only future assistance is at peril as aid already provided wouldn't be rescinded.
"In an era of record-breaking deficits, it's time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners," said Rep. Spencer Bachus, R-Alabama, chairman of the U.S. House Financial Services Committee. "These programs may have been well intentioned, but they're not working and, in reality, are making things worse."
Also derided as ineffectual and too costly, the other programs targeted by House Republicans:
- the Neighborhood Stabilization Program, which steers money for rehabilitation efforts in foreclosure-ravaged neighborhoods;
- the FHA Refinance Program, where the Federal Housing Administration assisted borrowers who were "underwater," or owing more than their house is worth, with mortgage payments; and
- the Emergency Mortgage Relief Program, a $1 billion program that provided assistance to borrowers having trouble meeting their monthly obligations because of a medical issue or losing a job.
Committee member U.S. Rep. Barney Frank, D-Massachusetts, defended the Neighborhood Stabilization Program.
"The attack on the Neighborhood Stabilization Program is an attack on cities," he said. "This program provides important funding to cities that have already been hit by the foreclosure crisis and allows them to cope with the blight, expense and destabilization that come with the presence of large numbers of empty properties."
Monday, March 14, 2011
Dueling Foreclosure Settlements
As a proposed settlement with major U.S banks accused of mishandling home foreclosures takes shape, the Office of the Comptroller of the Currency, which regulates these financial institutions, isn't lending its support, the Washington Post reported recently. The agency believes the proposed $20 billion-plus fine and mortgage procedures being sought by President Barack Obama's administration and state attorneys general simply doesn't work.
Instead, the OCC, which operates independent of the administration, is working on its own settlement package against banks accused of flawed and fraudulent dealings within foreclosures. The agency has sent its own proposed changes, which focus on modifying mortgages in default, to the banks it oversees.
Among other issues, the OCC's so-called draft orders also try to lower the banks' financial risks that may results from mortgage modification and foreclosure process. The agency is also weighing financial penalties and the severity of punishment for banks that have committed foreclosure infractions.
With the Obama administration pushing for a solution to help struggling homeowners as waves of foreclosures impede economic recovery across the United States, especially in Florida, the lack of consensus represents a continuing division over the best way to right a weak economy.
The OCC and other bank regulators are accused inside Washington of being too soft on banks, placing more emphasis on the industry's concerns than homeowners struggling to meet monthly obligations. Conversely, agencies seeking a solution face criticism that their efforts, designed to ease this burden, will only exacerbate recovery efforts.
As these competing proposals for change take shape, any decision about the depths of penalties the banks may face, including whether the proposed $20 billion-plus fine would be used to help distressed borrowers, must satisfy the Obama administration's goals of staving off an expected 1.5 million foreclosures, the Post reported.
The settlements, once reached, look to resolve allegations, which surfaced last fall, that banks practiced flawed and fraudulent foreclosure practices: that banks didn't follow federal rules requiring mortgage modifications, ignored state laws when foreclosing and not being truthful to federal housing programs.
In a related development, the Washington Post also reported federal officials are talking with banks about a settlement that addresses the significant documentation problems that forced major U.S. lenders, including banks, to freeze thousands of foreclosures last fall. Improvement of staffing levels and designating key officers to ensure proper oversight of mortgage modifications and foreclosures are among the proposals. Another idea would keep banks from starting a foreclosure proceeding while modifying a mortgage.
Tuesday, March 8, 2011
At a time when frugal spending represents a smart and even necessary financial strategy, the lure of holiday spending showed that Americans still have not embraced living within their means.
Four cases in point:
- A Federal Reserve consumer credit report showed revolving debt, made up primarily of credit card debt, grew in December for the first time in 27 months. The 3.5 percent increase, measured at an annual rate, include charge-offs, or uncollectible debt, from credit card companies.
- First Data, a private company which processes transactions for merchants, reported all card spending grew 6.5 percent in December from the previous year. First Data follows credit, debit and electronic benefit transfers cards in its calculations.
- Overall holiday spending, MasterCard Advisors SpendingPulse reports, increased 5.5 percent in the seven weeks before Christmas 2010, compared with the 2009 holiday shopping season. Clothing, jewelry and high-end items were credited for the gains.
- Credit card companies Visa and MasterCard noted that spending in the United States jumped a combined 8.3 percent for the fourth quarter.
Despite the spending increases,the credit card monitoring company Experian reported the average debt on credit cards held by American consumers in December fell 4 percent, compared with year-ago figures. Still, the average credit card statement was $4,284 in December 2010, Experian said.
"You've got people who already had good credit and were pretty much managing their credit, and because of the risk, paid down their debt even more," said Maxine Sweet, Experian's vice president for public education.
The mixed data details that a rebounding economy left some consumers feeling confident enough to spend more during the holidays. Others, however, lacking economic confidence because of job losses, crushing mortgage payments or other financial concerns, used credit cards for life's basic needs and expenses. In either case, retailers view increased credit spending as a positive sign.
Tuesday, March 1, 2011
Rock-bottom prices on residential properties have led many recent buyers to pay in cash. With so much mistrust of lenders and the complications that come with mortgages, the number of all-cash property purchases in 2010 was up 14% from 2008. Industry experts credit the dragging property market with bringing sale prices to what may be their absolute lowest, leading many investors to take advantage of the prices by paying the entire purchase price in cash. They point to trends showing that the worse shape the economy is in the higher the rate of cash purchases – this trend is not just limited to real estate, but purchasing in general. One of the reasons is the difficulty borrowers seen as a good credit risks face when trying to secure a loan in a poor economic situation.
In addition, cash purchasers are frequently able to negotiate a substantially reduced purchase price due to the fact that they are paying in cash, allowing sellers to receive their money quicker and with less red tape.
Thursday, February 24, 2011
Anti-Consumer New Jersey Court Sides with Bank of America
The United States District Court in New Jersey agreed that the actions of Bank of America ("BOA") in refusing to honor a loan modification agreement fail to rise to a level allowing the borrower to sue BOA for violations of New Jersey's Consumer Fraud Act, N.J. Stat. Ann. §56:8-1 to 20 ("CFA"). The decision comes in the case Papoutsakis v. Bank of America.
The facts are simple, and likely common throughout the Country. On March 7, 2009, Plaintiff entered into a loan modification agreement with BOA, and from May through October 2009 made the modified mortgage payments pursuant to the agreement. However, in November 2009, BOA returned the modification payment and included an intent to foreclose. The borrower's attorney immediately sent notices to BOA confirming the terms of the modification and the borrower resumed his monthly payments until February 2010, when his payment was again returned by BOA. As is common, with the returned payment, BOA included documentation advising the borrower that he may be eligible for a loan modification as a remedy to prevent foreclosure! The borrower's attorney again sent a letter to BOA. As described by the Court in the facts of the case:
BOA failed to respond to this letter. Instead, Plaintiff [borrower] received two form letters from BOA: the first advised Plaintiff that he was eligible for the "Home Affordable Modification Program;" and the second advised Plaintiff that BOA was in the process of addressing Plaintiff's questions and concerns.
Thereafter, the borrower through his attorney filed a complaint in New Jersey state court alleging that BOA violated the New Jersey CFA. Mr. Papoutsakis requested that the Court: enforce the modification agreement, accept all payments made pursuant to the modification, remove penalty charges and late fees, prohibit foreclosure, punitive treble (triple) damages, and payment of all borrower's attorney fees.
The state court, on BOA's motion, transferred the case to federal court, where it was dismissed without prejudice.
The federal court ruled that the refusal of BOA to adhere to the modification agreement failed to rise to the level of an "unconscionable commercial practice" giving rise to liability under the CFA. The court did provide a roadmap on how this claim might have been brought to create potential liability under the CFA:
This Court does not make light of the present economic climate in this country and the grave implications that may arise from a breach of Plaintiff's Modification; however, these circumstances alone are not sufficient to establish an unconscionable business practice. Plaintiff does not allege or substantiate that Defendant's [BOA] breach of contract was done in bad faith or lacked fair dealing. As such he has not alleged any adequate substantial aggravating circumstance for his breach of contract claim to "rise to the level of an 'unconscionable commercial practice.'"
Although Florida law differs from New Jersey law, it is likely that more of these types of cases will be filed as banks refuse or forget to honor their modification agreements. Given the ruling in this case, it would appear that the New Jersey Federal Court is biased towards the lenders, however the deficiencies in the pleadings could be overcome to impute liability to BOA. A lesson to be learned by the next person who has BOA breach a valid modification agreement.
Wednesday, February 23, 2011
Commercial Real Estate Market Improvement: Slow, Not Necessarily Steady
Although the commercial real estate market has suffered losses of $80 billion in recent years, analysts are encouraged by rising property values – some areas seeing increases of 30% from two years ago. Commercial property values appear to be increasing most in larger cities and metropolitan areas, whereas property values continue to struggle in smaller towns and cities throughout the country. The prevalence of low property values in smaller towns is likely a large contributing factor to the overall rate of delinquent commercial-mortgage-backed securities, which have increased more than 8% since 2007.
The recent rise in commercial property values has helped revitalize the commercial market. However, analysts are still noting stunted growth due to lenders' propensity to hold off foreclosure proceedings in favor of negotiating agreements with borrowers who cannot pay according to the original terms of their loan.
Meanwhile, experts point out that rental and occupancy rate for commercial real estate can only truly bounce back and reach pre-recession rates when new jobs are created and demand for this type of real estate becomes stronger. The commercial property market cannot continue to grow and prosper without a vast increase in new jobs; with a mere 36,000 new jobs in January 2011, the commercial market will not be able to sustain the growth that it has seen in the past year.
Friday, February 18, 2011
Consumer Protection During the Debt Collection Process
Consumer protection is a broad term used to describe many different areas of the law like debt collection practices, products liability or unfair and deceptive trade practices. What is common among all areas of consumer protection law is the focus on preventing injury or harm to the consumer in free market transactions. This is certainly the case in the area of consumer debt collection, where the law is geared at preventing abuse, harassment, unfair and deceptive collection practices, public embarrassment, and the disclosure of private information.
Florida's Consumer Collection Practices Act (FCCPA), and the companion federal statute the Fair Debt Collection Practices Act (FDCPA) are the two key consumer protection statutes during the debt collection process. Many legal scholars and courts have found the FCCPA to be a laudable attempt to curb the abusive practices in the creditor-debtor relationship. Because of the FCCPA, consumers in the state of Florida are protected during the entire debt collection process.
Another powerful consumer protection exists that can also drastically limit creditor calls. Creditors can only contact a consumer's cell phone if they have permission to do so. When done properly, a consumer can revoke the permission of any creditor to contact their cell phone. In the digital age where a cell phone is now a portal to our social and business lives, repeated incoming calls from creditors are distracting, disturbing, and disruptive.
The debt collection process is a very stressful situation. The consumer protections statutes provide ways to control the creditor and limit the stress. Consumers can also take comfort in the fact that violations of the consumer protection statutes can result in the award of money damages and the recovery of attorney fees and costs for the consumer. These violations can also be used to leverage settlements and offset consumer debt.
The exercise of consumer rights and the policing of creditor collection activity is the personal responsibility of the consumer. By acting early in the collection process, with the assistance of an attorney, a consumer can maximize the consumer protections allowed under law.
Friday, January 21, 2011
Anti-Consumer Supreme Court Issues Opinion Favoring Credit Card Companies
Justice Elena Kagan delivered her first Supreme Court opinion on Tuesday, January 11, 2011. The Court agreed with her 8 – 1, with only Justice Antonin Scalia dissenting. Unfortunately, Judge Kagan's decision was a big win for creditors and a disappointing loss for consumers.
The case, Ransom v. FIA Card Services, concerns the treatment of automobile expenses in bankruptcy and is a widely contested issue between bankruptcy trustees, debtors, and creditors. To add to the disappointing ruling, Justice Kagan's decision overturns the majority opinion of bankruptcy judges in the Middle District of Florida, Tampa Division.
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was enacted by Congress to correct perceived abuses of the bankruptcy system. The main focus of the Court's decision centered on the "means test" which is a test designed to ensure that debtors who are able to pay their creditors actually do so. In the context of a Chapter 13 case, the means test provides a mechanical formula to calculate the debtor's disposable income. The debtor's disposable income is then used to calculate the amount of money the debtor must repay to his creditors over the 36- to 60-month life of the bankruptcy plan. The language at issue in this case is:
The debtor's monthly expenses shall be the debtor's applicable monthly expense amounts specified under the National Standards and Local Standards, and the debtor's actual monthly expenses for the categories specified as Other Necessary Expenses issued by the Internal Revenue Service for the area in which debtor resides. §707(b)(2)(A)(ii)(I) (emphasis added).
The "National and Local Standards" refers to IRS tables listing standardized expense amounts for basic necessities – in this case automobile expenses which the IRS breaks into "Operating Costs" and "Ownership Costs." The IRS defines "Operating Costs" as things like oil changes, car maintenance, fuel, etc., and "Ownership Costs" as monthly loan or lease payments. These costs are deducted from the debtor's gross monthly income (along with other expenses irrelevant to the analysis of this case) to determine the debtor's monthly payment to creditors.
Mr. Ransom filed Chapter 13 bankruptcy and deducted the allowed "Operating Costs" and "Ownership Costs" of his free and clear cars. FIA Card services objected claiming that "Ownership Costs" should be disallowed because the debtor makes no car payments, and with these costs disallowed more money would be available to all unsecured creditors during the life of the bankruptcy plan.
Justice Kagan and the Court did an extensive statutory analysis on the language of the Bankruptcy Code focusing on the word "applicable" in the statute. Ultimately, the Court decided that the word "applicable" referred to the availability of the deduction and held the deduction unavailable since the debtors made no car payments. Justice Scalia dissented giving no weight to the word "applicable" and instead giving it construction in terms of "where to look in the appropriate table." Justice Scalia would have had the Court rule in favor of the debtor, thus allowing him to have a higher deduction to income and paying less to his unsecured creditors over the length of the plan.
Unfortunately for debtors, the majority opinion controls so that someone who owns a car free and clear has no entitlement to these deductions, and therefore would have to pay more to unsecured creditors in a Chapter 13 plan. This may cause some debtors to go borrow against their free and clear automobiles prior to filing so that they are entitled to the deduction. However BAPCPA prevents attorneys from counseling clients to obtain more debt in order to file bankruptcy. Moreover the cash obtained from the refinance of the car would belong to the bankruptcy estate and used to pay back creditors. It is certainly a bad sign for consumers that the Supreme Court has taken an anti-consumer stance in Justice Kagan's first opinion, and during a time in our Country's economy where consumers need every break we can get. Certainly, more planning is necessary for borrowers considering filing bankruptcy if they own a car free and clear.
Wednesday, January 19, 2011
The government goes to the trouble of providing a hotline to review rejected loan modifications for potential borrowers. But why did the government choose to run the hotline through a company created and funded by a mortgage servicer?
The Homeownership Preservation Foundation is a non-profit group that was created, staffed, and is funded by Residential Capital, LLC, a large mortgage servicer that created the group as a branch of their own company.
Neither the Treasury Department nor the employees of the Homeownership Preservation Foundation are blind to the concerns over the group's ability to remain neutral in the advice they give to borrowers whose loan modification requests have been rejected, however. The Treasury acknowledges it, but reasons that using an organization funded by the industry is the best way to keep from "confusing" borrowers. After all, the Foundation had already created a toll-free hotline to help rejected borrowers receive answers and explanations for their modification rejection.
On the other hand, supporters of the Foundation can point to commentary by independent housing group experts, who have acknowledged that the Foundation's counselors are able to provide more information and assistance to borrowers because of their detailed knowledge of the lending process.
While the hotline has received approximately 1.8 million phone calls, the Foundation does not track the outcome of the calls, leaving no way to interpret whether the hotline is successfully providing neutral advice to borrowers.
If you have been rejected for a loan modification or are interested in pursuing a modification with your lender, contact Yesner & Boss, P.L. for an unbiased assessment of your options.
Wednesday, January 12, 2011
Wells Fargo has pledged to make approximately $2.4 billion load modifications for California borrowers with adjustable rate mortgages. In addition to the large load modification payment, California's Attorney General, Edmund "Jerry" Brown reached an agreement with Wells Fargo wherein Wells Fargo will pay the state of California $33 million to put toward the prevention of foreclosure as well as reducing the effects foreclosures have already had on borrowers. Attorney General Brown stated that the money will be distributed to about 12,000 borrowers who lost their homes due to foreclosure.
Wells Fargo admits that adjustable rate mortgages, which are loans that begin with low, seemingly manageable payments but eventually mushroom to exorbitant rates that few borrowers can afford, are unfair and harmful to borrowers; however, it is quick to point out that it did not originate any of the loans it is seeking to remedy. Instead, the loans were issued by Wachovia and World Savings Bank, both of which have since been subsumed by Wells Fargo.
Prior to these promises, Wells Fargo had already modified more than 50,000 adjustable rate mortgages, reducing borrowers' principal balances by $2.9 billion. In addition, Wells Fargo remains open to increasing the amount they spend on loan modifications, depending on how the housing market responds and progresses in the future.
This progress in California is promising for Florida borrowers, too. Wells Fargo representatives express hope that they can reach similar agreements in all 50 states, and as the fourth-largest bank in the nation, other banks may be encouraged to follow suit.