Posts Tagged ‘bankruptcy’

With foreclosures running at about 20,000 per week, at least 100,000 more families are likely to lose their homes before Congress passes a relief bill. And even then, the measure may fail to stanch the problem unless Congress comes up with something that is significantly better than proposals currently in either chamber. To produce a worthy relief package, lawmakers will first have to scrap most of the provisions in a bill passed last week by the Senate.
That bill would cost $21 billion over 10 years, with $15 billion of the total going to tax cuts that offer no direct help to at-risk families or hard-hit communities. One set of cuts would subsidize renewable energy; another would let businesses take temporarily larger write-offs for losses. A proposed $7,000 tax credit for buyers of foreclosed homes could backfire, encouraging more foreclosures by allowing banks to charge more for repossessed property. A measure to let non-itemizers deduct property taxes is dubious tax policy and bad foreclosure prevention, since it does not target the neediest.

Lawmakers will also have to ditch an unhelpful item in a bill from the House Ways and Means Committee — a tax break for first-time home buyers. It makes no sense to encourage buyers to jump in when further price declines are likely. Scarce resources should be put toward preventing foreclosures.
There are parts of each of the bills that should be preserved, including money for foreclosure-prevention counseling, for issuing tax-exempt bonds to help refinance subprime mortgages and for local governments to buy up foreclosed properties. But that is only a start.Democratic leaders want a final bill that would have as its centerpiece a bold plan for the Federal Housing Administration to guarantee the restructuring of mortgages for at-risk borrowers. An advantage of the plan, given the scale of the problem, is that loans could be modified en masse.

But the plan also has flaws. One is political: taxpayers could be on the hook if F.H.A. borrowers defaulted. Congress cannot ask taxpayers to step up without doing all it can to solve the problem without shifting the risk to taxpayers. The way to do that is to allow bankruptcy courts to modify mortgages for troubled homeowners.
The Senate dropped a provision from its recent bill that would have done just that. In the House, separate legislation on bankruptcy has stalled. It is up to Democratic leaders of the House and Senate to close ranks in support of the measure. Neither chamber can wait and hope that the other will stand up to the mortgage industry, which must not be allowed to undermine a policy aimed at fixing a problem it helped to create.

The plan for an F.H.A.-backed rescue also would rely on lenders to voluntarily reduce the loan balances to a level where the F.H.A. could take over. Volunteerism is not working. What\’s needed is a stick like the bankruptcy amendment. Lenders will be more likely to modify a loan if they know the alternative is having a judge do it.
Lawmakers know what to do. They just need the political courage to confront the mortgage industry.

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The Attorney General of Hennepin stated that some consulting firms have been duping foreclosure victims with promises of help. Six firms located outside the state have been charged by Hennepin County District Court. Injunction is being sought to prevent them from continuing with their business in Minnesota while the court proceedings are in progress. In the suits it is stated that these firms violated the laws of the state by raking in handsome fees for services they promised to deliver. But in reality they did nothing of the sort. As a result of this this foreclosed suffered intensely. More money and time was lost that ultimately led to the very thing they were trying to avoid – eviction.

Attorney General Lori Swanson commented that these firms ‘made a bad situation even worse.’ The companies were blatant enough to host websites advertising their claims. They also used direct mail services to make contacts with the house owners and sweet talked their way into the traumatized hearts of their prey. In each particular case these firms asked for consultation fees ranging from $1,000 to $,2,400. However they slowly made more demands matching further promises from clients who were already neck deep in debts facing and foreclosures.

These scammers approach at the point when the victim is first hit with the news of foreclosure when fear and despair traumatize sanity. Lonnie Sievert lost her house in Brooklyn Park to foreclosure. Her situation was made worse with these cheats. The trio against whom law suits were filed were National Foreclosure Relief of Nevada operating in California, Lewis Loss Mitigation of Alabama (using many names like American Foreclosure Specialists amongst others), also in California and Home Assure of Florida.

Each individual has a story to tell, Terry Lake is one. She has filed for bankruptcy in an effort to save her house. She gave something around $2,400 to one of the trio for this advice of filing bankruptcy. Another person, Lake, had more or less the same story to tell. Intuition had warned him that the promises were false and yet he got taken in by smart sales talk. To add sacrilege to injury the website of the American Foreclosure Specialists underlined the fact that the firm was run by Christians quoting lines from the Bible. One of the victims who chose this particular firm for its religious tone was Chantae Grandsberry of Brooklyn Centre.

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A federal grant has been made of $4.3 billion to help 7,000 foreclosure victims in Minnesota. It is the second largest sanctioned in the country related to the present crisis. It will help the state to hire more housing counselors to steer the borrowers through the maze of lender bureaucracy. Governor Tim Pawlenty commented that the state wants to go all out to prevent foreclosures. However he warned that it does not involve the foreclosure deferment bill that is raising much controversy while navigating through the House and Senate. This bill will make Minnesota the first state to announce a hold on some of the foreclosures while permitting borrowers to make reduced payments for a year. Pawlenty added that he would veto the bill when it would come to him. The step would have grave consequences that had not been anticipated. It will push up credit costs for the residents of Minnesota.

Apart from the federal grant the Marquetter Financial Companies will give the state more aid worth $5000,000 to help those who will benefit from a bridge loan and avoid foreclosure.
Minnesota has been particularly hard it. It is expected that there will be 37,000 foreclosures in 2008. Legislators at state and federal level are scrambling for solution as the entire socio-economic structure of the country is adversely affected. On Tuesday the Minnesota House passed a number of foreclosure related bills that would step up financial assistance and give protection to tenants and mobile house owners.

Packages aimed at foreclosure assistance are moving through the Congress as well as the Senate. This will sanction funds to local governments to enable them to buy foreclosed units, increase the scope of mortgage assistance and permit bankruptcy judges to modify the terms of the house loans. But it is not all smooth sailing. Senator Ellen Anderson (Democrat) said that the deferment bill is required to buy time allowing the Congress to find out more comprehensive measures to solving the foreclosure crisis, looming large over US. She commented that while the 37 extra counselors are most welcome nevertheless it is vital that the house owners are given more time to breathe form the foreclosure embrace that is choking them. The number of counselors will be doubled but the problem will remain with out of the state lenders. With the mortgages being bundled into packets it is now difficult to locate the lenders stationed around the globe.

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The Democrats have brought in a bill that if made effective will curb further foreclosures by changing laws related to bankruptcy. This was the opinion given by Senate majority leader, Harry Reid, Democrat from Nevada last Thursday. He apprehended that in all likelihood Republicans will block the bill. The test vote might extend up to Friday latest. If the Republicans stall the limited debate Reid will try to bring it back to the Senate floor the following week. He said that he would permit amendments to the bill that White House has threatened to veto.

He qualified his statement by adding that the amendments would relate to the present housing problems that has entangled 2 million house owners who are all set to face foreclosures and will not include other red hot issues like estate taxes. The Republicans in the Senate are scheduled to present their own interpretations of the housing bill on Thursday.
The clause in the bill that is causing controversy is about allowing judges to cancel bankruptcy debts.

If the bill is blocked by the Republicans Reid will manage to bring it back to the Senate floor sometime late the following week. By then the Ohio and Texas presidential primaries will be completed and the two senators, Clinton and Obama, backing the bill will return to Washington to give support to the legislation.

The criticism leveled by the Republicans is that the bill is actually a bail out to the lender’s lobby. The bankruptcy reform provision will give the right to judges to modify the principal of the mortgages on first time residences. The new measure is more bold than the economic stimulus package signed by Bush last Wednesday. This bill termed Foreclosure Prevention Act of 2008 includes many items that the Democrats had wanted to be incorporated in the original package related to economic stimulus. The Democrats in the Senate are keen to see the bill bypassed in the usual committee review process so as to fast track it for consideration when the Congress returns after the recess. The bill plays up to the popular sentiments of voters and there are many members seeking re-election. As such the bill must be enacted into law – opines many. Reid feels that in the face of an uncertain economy the bill is the right dose of medicine. The bill should be carefully considered so that those seeking help are nothurt by it.

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A senate bill targeting prevention of foreclosures has come under attack from the White House for being a bailout scheme benefiting lenders and speculators. In fact the President might use veto powers to stall it.

The bill aims to allow bankruptcy judges to wipe out mortgage dues and provide billions for redoing abandoned properties. The Democrat led Senate is scheduled to discuss and pass the bill. But due to Iraq issues the measure has been postponed. This ‘Foreclosure Prevention Act’ is laced with multi layers that will attract criticism and support from both sides.
The plan to allow local housing agencies refinance wobbly loans by the issuing of bonds that are free from taxes is supported generally by the Bush administration. The issue about permitting bankruptcy judges to play around with house loans is resented by the mortgage industry as well as many Republicans. Lenders feel that by touching bankruptcy laws, borrowing costs would be pushed up. To guard themselves against bankruptcy the lenders will tend to hike up their charges. It will further muddle the market and pass on the costs to consumers at a point of time when just the reverse action should be taken, commented David Kittle, speaking for the Mortgage Bankers Association. The Democrats argue that the comprehensive plan was the right dose of medicine for the foreclosure malaise hitting right across the nation and spilling over to international markets. But White House said that the price was too heavy and would not meet the requirements of those in need – the besieged borrowers.

The increasing number of foreclosed houses going up for auction sales has hit the once zooming real estate markets in Florida, California, the Southwest and Midwest. Many areas are plagued with job losses aggravating the situation. The Democrats envisaged the bill to help the localities where foreclosures were the most affected. It is a big question whether the Republicans in the Senate will continue to be docile to Presidential orders or think about the welfare of the states they represent.

While arguments are thrown back and forth the nation suffers pockmarked with abandoned houses. Not only the borrowers but the renters too suffer – being abruptly evicted for not knowing that the house was foreclosed. Landlords vanished with security money leaving the renters high and dry. Hapless deserted pets are facing the consequences of man’s reckless unplanned behaviour.

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There are plans to legalize reduction of mortgage balances for borrowers. But lenders are up in arms against it. Two bills are pending before the Congress that would authorize judges to reduce mortgage debts. If it sees the light of day then thousands of borrowers would be saved from foreclosures. But lenders are seeing red. How can judges seize mortgage portfolios? Advocates for the consumers argue that considering the present unique situation such a law is the call of the hour.

The two bills – Emergency Home Ownership and Mortgage Equity Protection Act of 2007 as well as the Foreclosure Prevention Act of 2007 aims to help house owners who are in bankruptcy. To avail of its benefit the borrowers will have to be residing in their houses and holding sub-prime non conventional mortgages like interest only. About 600,000 would then be able to stave off foreclosure in 2008 and 2009. In industry language this policy is known as the cram-down. It will bring down mortgage balances and monthly payments in relation to the decrease of the value of the house.

Governments and consumer groups are frantically persuading lenders to modify loans. They are doing so but the numbers are not sufficient to halt the march of foreclosures. There are more foreclosures than modifications – the ratio being 7:1 respectively. Sub-prime ARM modification ratio is 13:1.

Opponents of the bills argue that these will increase the mortgage borrowing costs for all. Prospective house buyers – that is anyone who applies for a mortgage will be affected. Those who have taken risky loans should now be prepared to face it – one cannot eat the cake and have it too. The borrowers are being indirectly encouraged to continue making bad debts. By forgiving debts the risk is transferred from borrowers to lenders – those who invest in mortgage backed securities. Thus in the long run interest rates will have to go up to attract investors. Everyone’s interest rate will go up by 1 ½% - a $200 month increase on a $2000,000 loan contracted for 30 years at fixed rate. It will drive away investors to other fields as they will fear that this might happen again. The solution is not to forgive debts but to postpone it. The cram-down plan will benefit a very limited few considering the vast numbers at risk. In the country there were 800,000 bankruptcy filings.

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Detroit has seen ups and downs during the last forty years. At one time it was proud to have the highest figures as regards house ownership in the entire country. Today it topped the ranks of foreclosure offenders in 2007.

This has aggravated its woes. About 5% of all the houses in Detroit was in some stage of foreclosure in the previous year. The rate is five times higher than the national average. It is 68% higher than 2006. There were 72,616 default/action notices or bank repossessions on 41,273 units in the Wayne County cities of Detroit, Livonia and Dearborn. In the adjacent counties of Oakland and Macomb foreclosures are also on the rise. Here more than 2% of all the houses were in the foreclosure embrace – the rate being 95% higher than 2006. Of the jumbo cities in US, 86 saw foreclosure increases – of these the notables were Stockton, California, Las Vegas and Nevada, with the last two ranking second and third.

Detroit has been reeling under the automobile crisis. Nearly 150,000 have lost their jobs because of trimmings in the auto industry. Workers are being offered half the wages as a compromise. Little wonder then that foreclosures increased.

Michigan has the third highest foreclosure rate in the country with over 2% of all houses sitting in the risk zone. There was an increase of 68% over 2006 and an awesome rise of 282% from 2005. Michigan has the highest number of sub-prime loans as well as unemployment rate.
Personal bankruptcies rose in US by 30% in January. Over 1 million sub-prime adjustable rate mortgages are ready to reset in the current year of 2008. The American Bankruptcy Institute is gearing up to meet the avalanche.

The Attorney General of Michigan organized a workshop in Detroit on 12th February focusing on the foreclosure crisis. Kevin Anderson was one of the many with a sad story to tell. He had been peddled a mortgage then went up from $1,300 to $1,778. In all probability it will go up to $2,778 per month – something well beyond his means. Another person named Duane Fox said that he had refinance his house twice for a house that has been his for generations. Both times fees on various heads were charged but still the debt is a staggering $80,000.
The general feeling is that this sub-prime ARM programme was a crime from the start – set to fail.

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Although the county is not seeing the same number of foreclosures as elsewhere the rate, when compared to last five years in this region, is high. The panacea seems to be a lower interest rates coupled with foreclosure prevention counseling action. The rates rose when the sub-prime mortgage was introduced and loans on house equity became legalized as well as popular. This is the opinion of some local realtors like Patsy Anderson representing an organization of realtors. However foreclosures in Matagorda County has not reached epidemic proportions. Each month there is anything from 5 to 13 foreclosures. Five years ago there were only 2 or 3. In 1980 the situation had taken a downward turn but now it is worse. Second mortgages on home equity have caused more and more people to lose the roof above their heads.
Home equity loans are being blamed for this rise of foreclosures in this region. It is aggravated when people lose their jobs or are compelled to take lower paying assignments. Some have to commute on foot to distant places to survive. Divorce and bankruptcy are also major causes for foreclosures.
The house owners should sit up as soon as they get warnings that things are not going right. One should not wait for dues to pile up for two or three months. There is hope that the recent cut in interest rates will allow some house owners to modify their present mortgage opines Tommy Savage, a representative of a local bank. The best thing to do is to restructure the loan and turn to those who can help in that matter. Borrowers may be able to benefit from lowers interest rates provided their credit ratings are satisfactory. The mortgage lenders should be directly contacted.
Bay City Home Program has now a section dealing with foreclosure prevention for those who are in a financial fix, assured its director Carol Smylie. There are many who took the low interest loans but cannot manage the spike and this is leading to foreclosures. Together with this are personal reasons that are unavoidable like ill health, unemployment and break up of marriage.
A workshop scheduled for Saturday includes realtors, lenders, house inspectors and representative of the construction industry. Answers will be given to individual questions and information provided so that people can stand up to foreclosures. There is hope in the horizon will all pitching in for succor.

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