“The gist is that voluntary mortgage modifications are not reducing principal debt, and are in fact increasing it, and that many modifications are not even reducing monthly payments. In addition, whether a homeowner gets a modification, and what kind they get, depends a great deal on who their servicer is.

“The data in the report covers about 100,000 subprime mortgages, about 4,000 of which were modified in the last twelve months. The most common modifications are interest rate reductions to reduce the payment, interest rate freezes on ARMs, and recasting of arrears and reamortization, which increases principal debt and monthly payments.”

The working title of this not-yet-published study is REWRITING CONTRACTS, WHOLESALE:  DATA ON VOLUNTARY MORTGAGE MODIFICATIONS FROM 2007 AND 2008 REMITTANCE REPORTS.

In many cases, they benefit others, and can leave you and your credit worse off than filing for bankruptcy.

Here’s the inside scoop on Short Sales.A short sale happens when your mortgage lender agrees to release its lien on property when it hasn’t been paid in full.

Who does a short sale benefit? As discussed below, you may not be the major beneficiary.

• The lender gets most of its money without having to spend the time and go through the expense of a foreclosure.
• The person buying your house gets a deal–a lower price then the debt on the property.
• And, perhaps most important, short sales have been latched upon by many Realtors as a way of generating income when the housing market is in the dumps, since they earn commissions on the (lower) purchase price. Be sure to look at who benefits from the short sale: in many cases, it’s everyone but you.

This is because unless the lender agrees, a short sale doesn’t eliminate your obligations under the mortgage, it merely releases the lien from the property. If you do not negotiate otherwise and your state law allows it, you may remain liable for any deficiency that results from the ultimate sale of the property.

A short sale will seriously damage your credit, typically to the tune of about 200 points (the same as a foreclosure, and the same as a bankruptcy).

Finally, many lenders will issue a 1099-C for any forgiven debt resulting from the short sale. Unless you qualify and file special forms with the IRS and state taxing authorities, you can owe taxes on this forgiven amount. The lender can also agree not to file a 1099-C as part of the negotiations over the short sale.

I have negotiated short sales for many clients over the years. There are circumstances when they are the best option. But be wary–there are many situations where they are far more beneficial for everybody else than they are for you.

I generally will not recommend that a client agree to a short sale unless all lenders agree to accept the short sale as payment in full, agree not to issue a 1099-C, and agree not to file a negative credit report as part of the transaction.

Be sure to check with an experienced lawyer who can properly advise you before doing anything.

• St. Anthony Avenue LC, based in St. Louis County. The lawsuit was filed in St. Louis County;
• Private Funding Solutions, based in St. Charles, and its president, Mike C. Rothweiler. The lawsuit was filed in St. Charles County;
• Brian J. Thompson, of Springfield, who does business as “All Decked Out”. The lawsuit was filed in Greene County; and
• Access Mortgage and Financial Corp., of Lansing, Mich., and its agents, David Snyder and Josh Nowell. The lawsuit was filed in Henry County.

for a foreclosure rescue scam.  The investigation was titled Operation Stealing Home. The charges are based on fraud.  Unfortunately there are those among us who prey on the downtrodden and look to score a buck wherever they can.

In this particular investigation Mr. Nixon targeted those who took fees to stop a foreclosure, refinance the home in the debtors name then had the debtor make payments to the foreclosure rescue team.  Some debtors actually deeded over their home, even though they remain liable for the mortgage, to the foreclosure rescue team. Sounds great, right?  The debtor gets to keep the house and the foreclosure rescue team stops the foreclosure right in the tracks.

Why then are these debtors losing their homes today?  It appears that the payments that the debtors were making to these individuals went somewhere else besides the mortgage payments.  Hence the charge of fraud.  Another aspect is that debtor out of desperation gives all the legal rights of their property to the foreclosure rescue team but the debtor remains liable for the debt.  Why should this bother anyone?  If the foreclosure rescue team who now owns your house wants to take out another lien on your house, they can.  They own all the legal rights to the property but you are footing the bill.

If you are in foreclosure think once, twice, thrice and several more times before giving money to any foreclosure resuce company.  First contact a qualified bankruptcy attorney in your area to protect your rights and your home.

Written by Kansas City Bankruptcy Attorney, Rachel Lynn Foley.

Here’s the inside scoop on Deeds in Lieu of Foreclosure.A deed in lieu of foreclosure is when you transfer the title to your house back to the lender through a quitclaim deed. This lets the lender obtain title to the property without having to spend the time and go through the expense of a foreclosure. You can’t do this without the lender’s consent, however, and it can be difficult to get the lender to agree.

This is because if there are second mortgages, tax liens, judgment liens, mechanics’ liens, or other liens or claims against the property, they remain following a deed in lieu, and the lender may have trouble selling the property with these liens outstanding. A foreclosure wipes them out. Many lenders therefore prefer to foreclose and get clean, marketable, title without any unforseen problems.

Even if the lender agrees, a deed in lieu doesn’t eliminate your obligations under the mortgage (unless the lender agrees to do this), it merely transfers title from you to the lender. if you do not negotiate otherwise and your state law allows it, you may remain liable for any deficiency that results from the ultimate sale of the property.

A deed in lieu will seriously damage your credit, typically to the tune of about 200 points (the same as a foreclosure, and the same as a bankruptcy).

Finally, many lenders will issue a 1099-C for any forgiven debt resulting from the deed in lieu. Unless you qualify and file special forms with the IRS and state taxing authorities, you can owe taxes on this forgiven amount. The lender can also agree not to file a 1099-C as part of the negotiations over the deed in lieu.

I have negotiated deeds in lieu for many clients over the years. There are circumstances when they are the best option. But be wary–there are many situations where they are far more beneficial for the lender than they are for you. Check with an experienced lawyer who can properly advise you before doing anything.

A recent report on National Public  Radio focused on a scam wherein people at risk of foreclosure on their home inadvertently give away their home to scam artists.

These scam artists, holding themselves out as providing Foreclosure Rescue, prey upon people who are about to lose their homes.

Under these scams the owner is lead to believe that  he is signing over the deed to the house to the foreclosure rescuer for one year while it helps to repair the owners credit.

The homeowner is told that they can continue to live in their house mortgage-free, and then buy back his house after a year. What the owner is not told is that the scam artist, working with a straw buyers  (an individual that lends his identity and good credit to the operation in return for a fee) takes out a bigger mortgage that essentially cashes out any equity in the
house.

The entire report can be heard at http://m.npr.org/news.jsp?key=393236&rc=bu.

The old saying is true:  "If it seems too good to believe, it probably is."  Before signing any document regarding your home, consult an attorney. 

Of course, with every crisis, there will be scam artists who will try to make money from the less fortunate, and there will be those that try to stop the scam artists. The Florida Attorney General, Bill McCollum, recently filed a lawsuit against a business in Clearwater, Florida for the use of unfair and deceptive practices against the public. The company named Law & Associates, LLC was sending out direct mail solicitations to Floridians who were going through the foreclosure process. The company offered foreclosure consulting services, but charged a large up front fee for those services, never followed through on the services, and failed to return monies despite a money back guarantee.

This scam involves the company monitoring the public records for foreclosure filings. Once they obtain the names and addresses of the individuals being foreclosed upon, Law & Associates, LLC immediately starts a direct mail campaign aimed at getting the homeowner to pay the consulting fee. (Interestingly, a search of the Florida Bar’s website reveals that that there is no known member of the Florida Bar listed as Thomas E. Law, II., so it appears this guy is not an attorney, yet is trying to capitalize on his last name and give the appearance of having the ability to do what he states).

Either way, the distressed homeowner is told that they have 72 hours to contact the company and when they do contact the company, they are told that they are eligible for the program, but they have to come up with a consulting fee of $1,500 to $2,000 for the company to take their case.

If the distressed homeowners can come up with the funds, then they must sign a contract which pretty much waives the consumer’s rights to have their money back. To realize the impact of this strategy, you have to realize the vulnerability of the distressed homeowners. These are good people who are desperate to save their homes, and they have probably been around the block several times with their lenders trying to get the mortgage modified or had their payments sent back to them for one reason or another, and they just want some relief.

Interestingly, there is a legitimate way to fight the mortgage companies in foreclosure legally; however, very few attorneys defend foreclosures. At the Dellutri Law Group, we defend foreclosures in Southwest Florida.

I will watch this case closely and monitor the Attorney General’s website to see if anything comes of this lawsuit.

The mortgage scam seen in this episode is a common one. A person contacts a homeowner in trouble with their mortgage, under the premise that they can help the homeowner “save their home.” The homeowner quitclaims their deed to their home to the person, with promises that once the homeowner gets back on their feet they can get the house back.

Instead of helping protect the home, the buyer got a house for much less than the true value of the house and he turned around and sold the home for a quick profit and the family lost their home without realizing that they just gave away their home forever.

People must be careful who they trust, particularly with an asset as valuable as a home. Once a new owner has title to a property, they have all legal rights to do whatever they want with the property and there are many things that they can do besides selling it to someone else.

They can refinance the property and take cash out. They can collect “rent” from the former homeowner, but not pay the mortgage loan that is still in the original homeowner’s name. They can put up the home as collateral for another loan. They can evict the original homeowner and rent to someone else.

Since foreclosures are usually public record, it is easy for scam artists to find homeowners in trouble. If you are in trouble with your mortgage, don’t sign over the deed to your house to try to keep it. Call an experienced bankruptcy attorney who will talk to you about Chapter 13 bankruptcy, or other options that might be available to help you keep your home and protect you too.

See also Kurt O’Keefe’s Article: Foreclosure Scams; and also Pam Stewart’s Article Texas Homeowners in Foreclosure - Beware of Foreclosure Rescue Scheme!

Call an experienced bankruptcy attorney in your area before things get worse! A good attorney will tell you if she thinks that bankruptcy will help, or if there is a better option that she can suggest.

This is the plea of a very tired bankruptcy attorney at the end of a long week, who just met with yet another client at the 11th hour at the end of the foreclosure process. Had this client come to me when the foreclosure started, I might have been able to solve the problem without too much trouble. Chapter 13 would have provided a simple and affordable solution.

There are a few things that I know of that might have avoided bankruptcy altogether. Instead, I am trying to fix a problem that is months in the making and is much worse than it needed to be. I may be able to help, but it may be too late and this family may lose their home. This is not the only client that came to me this week seeking help in bankruptcy as a last resort.

If you are facing foreclosure please read the following:

Why hire a lawyer? Meeting with a bankruptcy attorney does not mean you are going to file for bankruptcy. It means you are going to get legal advice from an attorney who may, or may not, recommend bankruptcy. If they recommend bankruptcy and you don’t want to file you can say no. However, you need to know the true facts about bankruptcy when you make your decision.

If your friend tells you not to filing bankruptcy, see a bankruptcy lawyer anyway! Unless your friend is both a lawyer, and a lawyer with lots of bankruptcy experience, please don’t listen to what your friend says. People just don’t know the facts about bankruptcy.

Mortgage companies are not working for you just because they are discussing settlement. They are not your friends. You owe them money. Just because you are talking to them doesn’t mean that they are not going full steam ahead in plans to take your house.

The longer you wait to meet with a bankruptcy attorney, the harder it may be to fix, and you don’t want to wait until it is too late. You don’t have to file for bankruptcy just because you look into it, but I really want to stop telling people I could have helped them “if only you had come in sooner.“

Moreover, in most the agreements I see, the borrower also is waiving many important rights and causes of action/counterclaims that they may have under the mortgage.  This is because as part of the workout agreement, the lender almost always has the borrower execute a release of all claims they may have had against the lender.  

This means that if there was a predatory lending cause of action under statutes such as TILA, RESPA, HOEPA, FDCPA, FCRA, or other cause of action that the borrower may have been able to assert against the lender, they have now lost that right.  And chances are, they were a victim of some sort of predatory lending, otherwise they wouldnt need the workout agreement! 

The better practice is generally to file a Chapter 13 Bankruptcy.  With a Chapter 13 Bankruptcy, the borrower will maintain all their predatory lending claims against the lender, and be in a far better position to cure the arrears on the mortgage.   Instead of signing a release and having to come up with 1/2 the arrears in lump sum payment, the borrower does not need to sign any release or bring any money to the table.  

Moreover, the arrears can usually be spread over the next 5 years. Likewise, past property taxes and HOA fees can also be spread out over the next 5 years.  The list goes on and on! 

So if you are considering a workout of your mortgage, always seek legal counsel first.  And more importantly, make sure you also seek legal counsel on the ramnifications of a Chapter 13 Bankruptcy instead.  Chances are, in most cases, the Chapter 13 Bankruptcy will be quicker, cheaper, and more powerful than any loan modification. 

Written by Michael Doan