Foreclosure Defense

Published on: February 3, 2012

Can you see the mortgage servicers’ conflict of interest that is killing the Florida and nationwide housing market?

conflict of interest.jpg Why aren’t we seeing any legislation or rules addressing servicers’ inability and unwillingness to modify loans even when the modification is clearly in the best interest of the investor-owner of the mortgage? Florida foreclosure defense and bankruptcy attorneys see the conflict of interest daily between mortgage servicers and their own clients, why doesn’t the government?

Servicers say they are doing their utmost to help homeowners in need. I say Pinocchio. Uncle Sam has proposed HAMP, HARP and a few other programs. However, the servicers just shrug and pretend to comply, while pocketing trial payments and huge servicing fees. It is a well known fact that servicers get paid much more when a loan is in default and eventually forecloses. Until we address the conflict of interest and incentivize servicers to modify loans, nothing will change. Pinocchio is running this show.

In an interview on January 28, 2012, by CNN Your Bottom Line host Christine Romans, Chip Parker, a foreclosure defense attorney in Jacksonville, Florida states it’s definitely systematic. He describes how it’s a daily occurrence that a mortgage servicer such as Citi Mortgage or Wells Fargo will absolutely refuse to work with someone, even though a VA guideline requires it when the VA guarantees those loans.

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Published on: January 15, 2012

Avoid the Cancelled Debt and 1099-C Minefield

By Christie D. Arkovich, P.A.

I speak with many clients in the Tampa Bay, Florida area who have heard of cancelled debt and 1099-C forms but they do not really understand the impact of the taxable events that occur in a short sale. An understanding of how a 1099C works in a short sale is especially important at this time of the year.

Whenever a creditor cancels or forgives debt following a debt settlment, short sale or even a foreclosure, the creditor must report the amount of the cancelled debt to the IRS on a Form 1099-C. Under Section 108 of the IRS Code, the IRS imputes the cancelled debt as additional income to you. So if you make $50,000 in annual salary, but your house was sold at a short sale where the loss to the lender was $100,000 (not an uncommon fact pattern in Florida), you will be deemed to have earned $150,000 that year or the next – depending upon whatever year the lender files the 1099-C.

There are three exceptions to this rule. First, you file bankruptcy prior to the issuance of the 1099-C. If debt is discharged in bankruptcy, it is not attributable to you as income. Even if you receive a 1099-C, you can respond by filing your own Form 982 to remove its taxability because of the bankruptcy.

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Published on: October 19, 2011

Can Florida Homeowners Reduce Their Mortgage to What the House is Worth?

By Christie D. Arkovich, P.A.

Our Florida clients have recently been asking me if there is a new law allowing them to reduce their mortgage balance to the value of their home. This is not accurate and I am not sure where this is coming from. My guess it may be from somewhat misleading and overly optimistic advertisement flyers that are sent to people who have a foreclosure filed against them.

In bankruptcy, specifically a Chapter 13, we can strip a second mortgage. But the court cannot require a first mortgage company on a primary home to reduce the principal balance on their home. Implying otherwise, is simply misleading and inaccurate.

There is also no federal or state law that requires a first mortgage to be reduced to the value of the home.

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Published on: October 15, 2011

Mortgage Modification Success Often Determined by HAMP participation and TARP bailout funds

By Christie D. Arkovich, P.A.

Mortgage modifications are often determined by whether the owner (not servicer) is either a participant in HAMP or a recipient of TARP bailout funds.

Here’s how to check on your lenders:

First, use our Resource page on our website to look up who likely owns your loan by doing a Fannie, Freddie or MERS lookup search.

Second, see if the owner of your loan is a HAMP or other governmental program participant.

Third, see if the owner of your loan was a recipient of TARP funds in the 2008 bailout.

If your loan passes the above tests, your lender is required to run you through a HAMP analysis (even if they would prefer a short sale). You can qualify for a HAMP modification whether or not you file bankruptcy, although you might find the success rates are higher in a bankruptcy. The Tampa Division bankruptcy courts just established a formal mediation program in October 2011 for homeowners who have experienced difficulty in obtaining mortgage modifications.
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Published on: October 12, 2011

PLEASE Support the NACBA Bankruptcy Principal Paydown Plan NOW!

By Christie D. Arkovich, P.A.

Follow this link for a one page concise description of the Principal Paydown Plan we’ve written about in the past (to allow mortgage payments made during a Chapter 13 bankruptcy to go directly to principal thereby reducing the underwater portion of your mortgage). The idea is to encourage homeowners to keep their home because it will make good business sense to do so and help to reduce the volume of foreclosures. Please take a moment to show your support by signing a petition presently before the White House (remember the bankers have their PACS and lobbyists, while we have our clients’ support and grass roots campaigns to effect change!).

Follow these steps to sign the petition:

1) Click here to get to the petition.

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Published on: October 12, 2011

Tampa Division, Florida New Bankruptcy Court Mediation Opportunity

By Christie D. Arkovich, P.A.

The Bankruptcy Court for the Middle District of Florida, Tampa Division, has recently implemented a mediation program for homeowners wishing to modify their first mortgages. The Orlando Division has had a similar program in place for a year or more and reports a success rate of 70%, unlike the state foreclosure mediation program which has a success rate of less than 5%. Combined with a reduction of debt in a Chapter 7 or even a stripped second mortgage in a Chapter 13, you may find keeping the house to be affordable with a modification. HAMP for instance reduces the interest rate to as little as 2%, may extend the term or carry a portion of the principal without interest to the end of the loan. If you believe that you can afford a (PITI) payment that is approximately 31% of your gross income, you may want to take advantage of this program.

Many reasons exist for the higher rates of success for mediations in bankruptcy. First and foremost, a bankruptcy filing tends to eliminate credit card, medical bills or second mortgage payments allowing for more income to be directed toward the first mortgage. Lenders attorneys have pointed to the smaller, more experienced bankruptcy mediation departments at banks or servicers that allow for better outcomes.

The Tampa Division just approved a standard fee of $1800 for their mediation program this past week payable to the debtor’s attorney in a Chapter 13 Plan (spread out over 5 yrs is $30 monthly). The cost of the mediator will be $350 for two hours split between the mortgage company and the debtor. This is the only fee that will be payable up front at the mediation.

Published on: October 10, 2011

New Florida Court Admin Orders re: Foreclosures

By Christie D. Arkovich, P.A.

I’ve written previously about the Florida Legislature not renewing the designated funding for residential mortgage foreclosure cases. On July 1, 2011, most counties were forced to curtail or even shut down entire divisions when the money ran out.

In response, the Tampa judges in Hillsborough County, Florida put into place a new Administrative Order S-2011-029 setting forth new foreclosure procedures. This Order contains provisions that are intended to increase efficiency of the judiciary to stay on top of the foreclosure filings that are expected to increase the end of this year. One provision allows for the disposition of non-summary judgment motions without a hearing.

This refers mostly to the Motions to Dimiss or Motions for More Definite Statement although many motions fit this definition. A Motion to Dismiss or Motion for More Definite Statement is typically the first response to a foreclosure summons filed by foreclosure defense attorneys. The intent is to make sure that the Plaintiff’s Complaint contains sufficient allegations as to who they are and how they claim an entitlement to foreclose. The thinking is if the Plaintiff claims to have the right to foreclose, then why hide the ball? File a Complaint that properly alleges standing and attach a Note, Mortgage and documents to show the chain of transfers and default. This would eliminate unnecessary delays and discovery. The Florida Supreme Court felt the same way when in February 2010 it instituted a requirement that a Plaintiff “verify” the truth of the allegations before filing a Complaint.

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Published on: September 14, 2011

Modification Tips and Tricks

By Christie D. Arkovich, P.A.

Over the past few years in our foreclosure defense and bankruptcy practice, we’ve learned a little bit about mortgage modification in Florida and here are some tips and tricks of which homeowners should be aware:

Call your mortgage servicer and ask about their HAMP program and participation. Any bank who accepted TARP bailout funds back in 2008, or who has signed a servicing agreement are required to consider any potentially qualifying borrower for HAMP. HAMP modifications often provide for interest rates of as little as 2% and are usually more beneficial than in house mods.

Under a HAMP mod, you don’t have to miss a mortgage payment to qualify. You can simply submit an affidavit of impending hardship. Use the words “imminent default”. This avoids the lender telling you that you have to be three months deliquent for them to consider a mod, and then changing the story when you call again in three months by now requiring you to be current to modify your loan.

Ask about the Principal Reduction Alternative (PRA) if you are upside down in your mortgage.

Ask about the Hardest Hit Funds (HHF) available in the states hardest hit by the recession.
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Published on: September 7, 2011

President Obama’s Mortgage Woes: New Approaches are Necessary

By Christie D. Arkovich, P.A.

The ordinary household is drowning in mortgage debt. Sure, some homeowners were reckless, but most were not. Regardless of fault however until the mortgage crisis is fixed and our unemployment is cut in half, our country’s households will continue their downfall. This Thursday, President Obama is to announce some sort of plan to reduce unemployment and provide solutions to our mortgage crisis.

The New York Times editorial recently addressed NACBA’s Principal Paydown Plan. I urge everyone to read this editiorial and contact your representatives or the Whitehouse to support this plan which would amend the bankruptcy code to allow mortgage payments in a Chapter 13 Plan to go directly to principal thereby reducing or eliminating the underwater portion.

New approaches are necessary. HAMP has probably caused more foreclosures than it helped because of the poor implementation by the banks and mortgage servicers. For instance, I can’t count the number of homeowners who have said that their mortgage company told them they had to be three months behind before a modification could be discussed, only to call three months later and hear that modifications are only available for borrowers who are current. This doesn’t even count the homeowners who have given up after submitting their paperwork umpteen times. Or those on endless trials only to be told they don’t qualify and now owe $30,000 back payments by Friday. Oh and they can’t get a loan to catch up the arrears because their credit has been dinged by the servicer who failed to explain that a mortgage modification would destroy their credit.
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Published on: August 14, 2011

Principal Paydown Approach Could Drastically Slow Florida Foreclosures

By Christie D. Arkovich, P.A.

NACBA (National Association of Consumer Bankruptcy Attorneys) responded this weekend to the government’s latest approach to the foreclosure crisis with what I call the Principal Paydown Plan.

Rather than turn us into a nation of renters under the recent suggestion that Freddie and Fannie rent their foreclosed properties or sell them as rentals, NACBA suggests again that a Chapter 13 bankruptcy can be modified to help families avoid foreclosure on massively underwater property. Without more focus on prevention, our housing market is certainly facing additional downturns.

The Principal Paydown Plan would require the reduction of interest on a primary mortgage to 0% during a Chapter 13 Plan thereby relegating the entire payment to principal (plus escrow). At the end of the bankruptcy, the debtor would have paid down their mortgage in many cases to the approximate fair market value of the property helping to slow the foreclosure numbers for those homeowners who would otherwise strategically default believing that their home value will take 10 or more years to recover.

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