Sacramento Bankruptcy Lawyer Blog

A recent article by Alejandro Lazo of the Los Angeles Times titled, The number of Californian entering foreclosure is at lowest level since 2007.

DataQuick, a San Diego Research firm reported that Notices of Default filed against California homes has dropped 17% form the previous quarter. A total of 56,633 homes received a notice of default, which is the first formal step in the foreclosure process.

DataQuick further reported that on average, California homes were taking 10 months to complete the foreclosure process which is approximately 1 month less than the previous quarter.

The reasons given for the recently decline in California homes foreclosing is 1) homeowners are challenging foreclosures in court and 2) banks are negotiating a settlement with regulators over faulty repossession practices.

Experts believe that the current decline in foreclosures is probably short lived because the banks are readjusting themselves. However, it is believed that the banks still have a tremendous amount of shadow inventory and they do not want to saturate the market.

Furthermore, the article points out that the reductions in foreclosures are back to 2007 levels. However, 2005 through 2007 was the tail end of the bubble, indicating that the most distressed homeowners in California bought their properties during the times when home prices were at their highest and lending practices were at their worst.

So, boasting about foreclosures dropping to 2007 levels should not lead to a celebration.

Additionally, the need for serious and real foreclosure relief is still needed and congress needs to pass a principal reduction in mortgage program in order to provide California homeowners with real relief.

The Chapter 13 Trustees in the Eastern District recognized that California homeowners still need relief and encouraging Debtors who have filed for relief under Chapter 13 Bankruptcy to seek modifications of their home loans. The Chapter 13 Trustees office is providing brochures on the Making Affordable Home Program "HAMP" at the court house.

In addition, the National Association of Consumer Bankruptcy Attorneys ("NACBA"), introduced its "Principal Paydown Plan", which is a new proposal to address the troubled mortgage industry that is causing massive foreclosures throughout California. The Principal Paydown Plan, does not require legislation if it is adopted by investors, insurers, and government agencies. These key stakeholders would mandate the affirmative acceptance of Chapter 13 plans that contain a precise provision detailing and implementing the plan.
NACBA is not giving up on the bankruptcy mortgage cramdown. However, NACBA offers the Principal Paydown Plan as a tool and interim solution that can be used to help homeowners during this time of crisis in the absence of formal legislation. The key elements of the NACBA's Principal Paydown Plan are as follows:

• This plan restructures certain undersecured (underwater) mortgages in Chapter 13 bankruptcy cases so the homeowner can pay down the loan principal and reduce negative equity and acquire equity faster than with the existing loan.
• This is accomplished by reducing the interest rate to 0% for five years, letting the borrower's entire monthly loan payment go directly to the principal.
• During the five-year period, the borrower's minimum monthly housing payment is calculated similar to a HAMP modification payment, at 31% of gross income.
• At the end of the initial five-year period, the remaining principal balance is amortized over 25 years at the Freddie Mac survey rate.
• The bankruptcy judge, with the assistance of the Chapter 13 Trustee, reviews the borrower's budget to confirm the eligibility of the borrower and feasibility of the payments; and they oversee the implementation of the plan.
• There is no cramdown - the benefit to the borrower is achieved by actually paying down the loan.
• In exchange for this benefit, the borrower agrees to a general settlement of all claims against the lender and servicer and avoiding future title and loan litigation.
• The federal government and US taxpayers' substantial liability on Fannie Mae and Freddie Mac (all GSE) owned and insured loans would be reduced by this plan.
• Private mortgage investors will benefit similarly.
• Everyone wins with this plan - even the borrower's community and local government benefit from improved neighborhood stability.

Sacramento Bankruptcy Attorneys can help you with the needed steps to obtain a modification while in a Chapter 13 Bankruptcy.

The Supreme Court ruled that MERS, the Mortgage Electronic Registration System, can foreclose on a Deed of Trust.

During the housing boom, many lenders sold their loans on the market. When a lender sells its loans, the new owner of the loans is generally assigned a Note and Deed of Trust. Lenders got clever and established a new entity called MERS, which would be assigned the Deed of Trust but not the Note. When a home owner would default on a loan, whoever owned the Note would contact MERS and instruct them to foreclosure on the home owner.

Can MERS, the holder of the Deed of Trust, and not the Note foreclose?

Many law firms have advised home owners who are desperately trying to save their homes that they can stop their foreclosure by arguing that MERS has no "Standing", no legal right under the law to foreclose on the home owner's property.

When a home owner files for bankruptcy protection under Chapter 13, a home owner can reorganize and restructure their mortgage arrears over a 5 year term instead of having to come up with a lump sum payment generally being demanded by many banks. A Chapter 13 bankruptcy gives home owners time to get caught up on their mortgage payments. Also, Chapter 13 allows home owners time to seek a modification on their home loan.

Many law firms have been preying on home owners by offering to stall their foreclosures by arguing that MERS is prohibited from foreclosing because MERS is not the holder of the Note. Home owners have been mis-lead into thinking that they no longer owe the mortgage loan because of the difficulty in determining who owns the Note

The bankruptcy judges in the Eastern District have been concluding that although MERS may not own or be the holder of the Note, the Note still exist. The Courts have concluded that someone does hold the Note and the home owner does in fact owe someone - It may not be MERS, but there is a secured lender that has a security interest in the home owners' real property.

David Streitfeld, a reporter for the New York Times reported in the recent article, Banks go easy on some borrowers, that millions of Americans are struggling with foreclosures and are seeing little relief. However, big banks, such as Bank of America and JP Morgan Chase are offering borrowers who are not in default offers to cut their debt and or easing the mortgage terms on their loans. It appears that JP Morgan Bank and Bank of America are quietly modifying loans for tens of thousands of borrowers who have not asked for help but who the banks believe to be at special risk.

Some of the Banks appear to be proactively over hauling loans for borrowers who have the Option ARM loans. These loans allow borrowers the option of skipping the principal payment and some interest payments for an introductory period of several years. The unpaid balance would be added to the body of the loan. These are the loans that became popular in the late stages of the housing boom but which bank now consider to be potentially troublesome.

JP Chase and Bank of America and other big lenders are currently negotiating with the Obama administration and the attorneys general over foreclosures.

The Banks are taking the position that cutting mortgage balances would be unfair to borrowers who remain current as well as impractical because so many loans are securitize into pools owned by investors. Brian Moynihan, Bank of America's chief executive told the attorneys general that cutting mortgage balances would send the wrong message to borrowers who have been struggling to pay their mortgages. Jamie Dimon, of JP Morgan Chase bluntly stated that Chase would not be reducing the principal balances.

Bank of America and Chase are not doing enough to help borrowers. Borrowers want to stay in their homes.

Hopefully, the Banks will realize that it is would be wise to help struggling homeowners now before it is too late. Sacramento bankruptcy attorneys can help you stay in your home.

Same Sex couples have not been allowed to file a joint bankruptcy petition. This is about to change. A same sex couple married during the short period of time in 2008 when they were able to in Sacramento County. On February 2, 2011, the same sex couple filed a joint chapter 7 bankruptcy petition in the Eastern District of California.

Historically, same sex couples have not been allowed to file joint bankruptcy petitions because the Federal Bankruptcy Code definition did not have a provision for such filings.

The result of same sex couples not being allowed to file joint petitions is that they end up have to file two separate cases and pay double filing and attorney fees.

Most consumers who are considering filing bankruptcy are already experiencing a financial hardship. Therefore, same sex couples are hit with an ever greater burden because they must come up with double fees in order to be entitled to relief under the US Bankruptcy Code.

A local Sacramento bankruptcy attorney has decided to take on the United States Trustee, the office that oversees bankruptcy cases.

The local attorney filed a joint bankruptcy petition for the same sex couple in the United States Bankruptcy Court in the Eastern District. As a result, the United States Trustee filed a motion to have the case dismissed because the Sacramento same sex couple is eligible to file a joint petition under the current bankruptcy law. The United States Trustee move the Bankruptcy Court to dismiss the jointly filed petition arguing that under U.S.C. § 302 the term "spouse" as defined in 1 U.S.C. § 7, the Defense of Marriage Act (DOMA), is limited to a person of the opposite sex. In opposition to the US Trustee motion, the same sex couple filed a response contending that (1) they qualify under section 302 to file a joint petition; (2) no cause exists to dismiss their case under section 707 (a); and DOMA is un-constitutional.

The Federal Bankruptcy Judge denied the U.S. Trustee's Motion to Dismiss the same sex couples case holding that that the same sex couple who are two women were legally married and could go forward with their joint case. The Judge further concluded that dismissing the same sex couples case was not be in the best interest of the debtors or their creditors and insufficient cause existed to dismiss their joint petition.

Kathleen Pender of the SFGate.com reported in a recent article titled FHA to Offer Short Refis that the FHA is now offering certain borrowers who are current on their payments and owe more than their homes are worth refinancing into a new mortgage guaranteed by the, Federal Housing Administration (FHA) but only if the owner of their first mortgage agrees to reduce the principal balance by at least 10 percent. This is called the FHA short refi program. The benefits to this type of program is that instead of selling a home for less than the outstanding debt (a short sale), the homeowner refinances for less than the outstanding debt.

Most homeowners that I have met with report that many banks tell them that they "must be behind in their mortgage payments" before the banks will talk to them.

Since many homeowners are current with the mortgage payments, but are barely holding on, this program may prove to be very helpful.

Today's homeowners are faced with having to make large payments on loans where the properties are no longer worth the amount that is owed against their homes.

Often, homeowners are finding themselves paying much higher amounts than their new neighbors who have just moved in next door after purchasing their new home on a short sale or from a foreclosure sale. Existing homeowners are frustrated because they have in many cases put large down payments on homes and are paying twice as much for the same house as their neighbors. In many of these situations, homeowners are simply making the decision to walk away from their homes because it no longer makes any economic since to keep paying on these homes.

This new FHA - Short Refi Program may offer the help many homeowners have been waiting for.

Northern California Bankruptcy attorneys can help homeowners get relief with their second mortgages.

Jim Wasserman, reporter for the Sacramento Bee reported in a recent article titled California home foreclosures hit Latinos hardest, study says, that California Lenders foreclosed on more homes owned by Latinos and African American then any other ethic groups. The National Council of La Raza (CRL) reported 48% of all homes that were foreclosed in California were owned by Latinos and African Americans. The study further indicated that about 11% of all California's foreclosures - 69,176 occurred in El Dorado, Placer, Sacramento, Solano and Yolo counties. Thus, nearly 6 out of every 10 homes that were foreclosed in California were owned by African American and Latinos. For additional information, go to the National Council of La Raza website.

Latinos and African Americans were hit the hardest because dishonest brokers preyed upon them by selling them high-cost loans. In particular, Latinos were steered into risky loans products that were bound to fail. The CRL study further reported that most of the Latinos borrowers were not buying far more house than they could afford. Paul Leonard, director of the CRL was quoted as saying "that these were regular folks in modest-priced homes, but were sold loans that were harder to sustain when the bubble burst and through the unemployment that followed".

We have seen more African Americans and Latinos filing bankruptcy as a result of the foreclosure of their homes and due to the fact that they are being sued by Lenders who hold second deeds of trusts or second mortgages on their homes.

Solano bankruptcy attorneys can help with either discharging or wiping out most second mortgages.

Bankruptcy and Retirement

For many of our seniors, filing bankruptcy has been unthinkable. There are practical considerations, such as:

• The type of debts--secured (for example, homes and cars) and unsecured (credit cards, personal loans);
• Income--for work or from retirement; and
• What property you own that may be protected if you file for bankruptcy (such as retirement accounts, pensions, IRSs, etc.

Consideration of Bankruptcy

Some of Your Assets May Not Be Touched. Retirement accounts, Social Security Benefits and home equity may be exempt (protected and excluded) from the claims of your creditors under the Bankruptcy Law.

Be Honest About Your Finances. Don't ignore your financial problems and watch for signs that a parent or grandparent might be trying to hide their problems.

The Reality of Debt. Poor choices are frequently made when you rely on poor advice. You may sell assets to pay debts that may be discharged in bankruptcy,

Is Bankruptcy a Good Strategy?

Bankruptcy may fit into a strategy that will preserve your retirement assets and your retirement plans and might be best in your situation. Bankruptcy may remove some debts--particularly the credit card debts.

However, it is also important to look honestly at the causes of your financial problems and take action to avoid them in the future. If your debts are related to gambling--you may need help beyond the scope of bankruptcy.

Successful retirement is hard. Talking to a knowledgeable and experienced attorney who practices bankruptcy law, elder law, and estate planning law may help you decide what to do.

Questions for Your Attorney-- Should I think about bankruptcy?

How would the payments my mother receives through her reverse mortgage be treated in bankruptcy?

If I keep making minimum payments on my medical expenses and credit cards--how long will it take to pay them off?

My two biggest assets are my paid-for house and my retirement accounts--what happens in bankruptcy?

For more information regarding bankruptcy and retirement, contact Sacramento and Solano attorneys.

The US government will provide funds to assist struggling unemployed California homeowners pay their mortgage payment.

Starting November 1, 2010, federal funding will aid California homeowners who are out of work and need assistance in paying their mortgages. The funding will come from a federal program known as the Asset Relief Program. For more information about mortgage assistance, visit this website CalHFA Mortgage Assistance Corporation. The federal government is adding an additional $476.2 million to the state program that will pay homeowners up to $1,500.00 per month. Struggling homeowners will be allowed up to $1,500.00 per month, not to exceed 6 months. Of course, there is a catch. California homeowners must qualify. In order to qualifying for the program, California homeowner must be out of work, eligible for unemployment benefits, and live in a home that is tied to a problem mortgage. In addition, homeowner must be fewer than 90 days behind on their mortgage payments and have income less than $70,000 for couples in El Dorado, Placer, and Sacramento and Yolo counties and less than $54,000.00 for couples in Yuba and Sutter counties.

This government program is designed to help prevent homeowners from losing their homes to foreclosure. The program estimates that 19,000 unemployed California borrowers will be helped.

Sacramento's unemployment rate has hit a record high of 12.4% and nearly 20% in Yuba and Sutter counties. Although these funds will help, I fear that many California homeowners are already more than 90 days behind on their mortgage payments. In addition, many homeowners in Sacramento and Solano Counties have been unemployed for over a year and have fallen behind on their payments in an attempt to qualify for programs such as the Home Affordable Modification Program (HAMP). Now, it will be difficult for people to attempt to qualify for these new funds that will be available November 1, 2010.

However, for those who qualify for the funds will be able use those funds to assist them make their mortgage payments until they either get back to work or granted a home loan modification.

Homeowners who fall behind on their mortgage payments and need time to catch up may also benefits by filing Chapter 13 Bankruptcy. Homeowners can use the funds received under this new program to help make their ongoing mortgage payments and put any mortgage arrearages (past due payments) inside a Chapter 13 bankruptcy. Sacramento and Solano bankruptcy attorneys can help you.

Jonnelle Marte, reporter for the Wall Street Journal outlines the new rules for credit card companies in a recent article titled, "New Law Forcing Credit-Card Issuers to Play Fair" Starting August 1, 2010, credit card companies implement the latest credit card rules under the new Credit Card Act, formally known as the Credit Card Accountability and Disclosure Act which requires card companies to give consumers 45 days advanced notice before increasing interest rates, changed fees and other changes.

The new Credit Card Reform Act, which was signed into law by President Obama, created a new consumer-protection agency. This new consumer agency oversees and affords Sacramento consumers more consumer protections. Sacramento Consumers will be entitled to more time and rights to reject changes to their accounts, such as over the limit fees and increased interest rates

One of the most important changes that I believe will help Sacramento consumers is the provision which provides those consumers who pay more than the minimum payment with the expectation of reducing their debt balance, the credit card companies will have to apply the excess amount to the amount with the higher interest rate.

The credit card companies have taken steps to counter act the new protections for Sacramento consumers. Unfortunately, the news may not be enough to give Sacramento consumers enough relief. However, it is good start. Sacramento bankruptcy attorneys can help you with your consumer debt problems.

Darrell Smith of the Sacramento Bee reported in his article "Road to Recovery - Its still rough going for small businesses" on the impact that the economy has had on Sacramento small businesses. More than 500 local firms have filed for bankruptcy protection in the first quarter of this year. Sacramento is said to be a small-business town, which provides nearly 90% of the local private sector jobs. In order for Sacramento small business to get back on track, they need the SBA to back loans. Without these loans, Sacramento small businesses can not hire, expand and stay afloat. Resulting, in Sacramento business seeking protection and the services from local Sacramento bankruptcy attorneys, such as Brooks & Carpenter, attorneys at Law.

I have talked to some local companies that were once providing SBA loans to Sacramento small businesses and they have advised that their loans have dropped 70%.

Every week, I meet with Sacramento small business owners who need help because that they have not been able to acquire loans for operating cash and expansions. Chapter 13 can help reorganize, reduce and restructure debt for some small Sacramento business owners. Chapter 13 can provide immediate relief for sole proprietors. Chapter 11 can provide relief for sole proprietors, Limited Liabilities Company, Partnerships and Corporations.