Tag: Foreclosure

6 Myths About Personal Bankruptcy and Foreclosure

Posted on by Emil Fleysher

When you have found yourself in a financial dilemma and are faced with bankruptcy and foreclosure, you may be thinking this is the worst thing to ever happen to you. You need to remember not to listen to all the myths about personal bankruptcy and focus on the facts. People from all walks of life get in over their heads sometimes and need a financial reset. If you are facing bankruptcy or foreclosure, you should seek the guidance of a seasoned bankruptcy and foreclosure attorney to help you understand what is happening and how to navigate your way through each process. Here we will debunk six of the most common myths about personal bankruptcy and foreclosure. 

Myth #1: You Will Lose All of Your Property

This may be the most common myth you will hear about personal bankruptcy and foreclosure. In the majority of cases, clients do not lose their property. Often, important assets will be protected from seizure due to the bankruptcy exemptions outlined in the U.S Bankruptcy Code. Our bankruptcy and foreclosure attorney can help you understand this code and how it affects your particular case. 

Myth #2: Your Credit Will Suffer For 10 Years

Many debtors think that their credit will be hurt for at least ten years if they file for bankruptcy. This is not the case. The truth is that Chapter 7 Bankruptcy will stay on your credit report for ten years, but your score will be dependent on what you do after the bankruptcy filing. We have many clients whose credit score exceeds 700 within 6-8 months after their bankruptcy discharge. You can start rebuilding your credit as soon as your case is decided. This can include things like:

  • Secured credit card payments
  • Unsecured credit card payments
  • Car payments
  • Mortgage payments
  • Other credit accounts

Chapter 13 Bankruptcy filings stay on your credit for seven years. You will need to resume car and mortgage payments immediately once your bankruptcy filing is complete. These payments alone will increase your score. 

Myth #3: Both Spouses Will Need to File for Bankruptcy

While many aspects of marriage require both spouses to act together, personal bankruptcy does not. Even if one spouse files for bankruptcy, the other spouse’s credit may not be affected. This is often seen when one spouse enters the marriage with high amounts of debt. Things can get complicated when there are joint accounts, but your bankruptcy attorney will be able to discuss your options. 

Myth #4: You Can be Kicked Out of Your Home

Many homeowners think you will be kicked out of your home immediately after missing a few mortgage payments. The reality is that you will not be evicted right away and there are several steps that need to happen if you miss a couple of payments before you end up in foreclosure. You will be able to stay in the home until the foreclosure process is complete and final. There are certain cases where you may have the ability to stay longer. An experienced attorney can help you stay in your home for as long as possible and will try to do whatever they can to mitigate the situation. 

Myth #5: You Cannot Refinance with Another Lender

When the topic of foreclosure arises, many homeowners will try to refinance to avoid losing their home. However, you do not need to refinance with your current lender and can look at other lenders to see if you can find an affordable alternative. You will need to weigh out all of your options before refinancing to find the best solution for your circumstances. 

Myth #6: Foreclosure Ruins Your Credit Permanently

While a foreclosure can stay on your credit report for seven years, this does not mean that your credit is permanently ruined. It may take some time to prove your creditworthiness after a bankruptcy or foreclosure, but making smart financial decisions moving forward will help. Although it often takes years, depending on the actions taken after a bankruptcy and foreclosure, you can get there and we are here to help.

Schedule an Appointment with The Law Offices Of Emil Fleysher Today

After reading about these myths About personal bankruptcy, you know what is next.

When you are drowning in debt, you should contact the Law Offices of Emil Fleysher, P.A. online or call at 888-886-0020 for bankruptcy and foreclosure options. We are happy to set up a free consultation to go over your financial situation and determine the best way for you to navigate these processes.

How To Rebuild Your Credit After A Foreclosure

Posted on by Emil Fleysher

Your home is where you spend most of your time and the last thing that you would ever imagine is facing a foreclosure on it. However, the lender can take ownership of your home through a foreclosure if you do not make your mortgage payments. Not only will you lose your home, but it will also have a heavy impact on your credit. It can be very difficult to recover without the help of a foreclosure attorney by your side. A foreclosure attorney can guide you through the foreclosure process and help you get back on your financial feet once it is complete. Here are some tips for rebuilding your credit after a foreclosure.

Make a Budget and Stick to It

The key to not going into foreclosure in the first place is to stay on top of your bills and stay within a clearly defined budget. Unfortunately, sometimes we make unwise decisions that can be impossible to recover from and lead to foreclosure. Once it is all said and done, the best thing to do is adjust your relationship with money and never let it happen again. You should sit down and look at your finances realistically. Then, you should create a budget that you can stick to without falling into debt. Now that you have a realistic look at your finances, you will need to stick to that budget and not slip up, as this can harm your credit in the long term. 

Pay Your Bills on Time

One of the most significant impacts on your credit score is your payment history. You need to prioritize making payments on time, especially on things that can affect your daily living or credit. These can be things like utilities, car loans, and credit cards. If you have a hard time keeping up with bills, create reminders or try autopay features. Discuss a plan of action for paying your bills with your foreclosure attorney. 

Look at Your Credit Utilization

When you are rebuilding your credit, you should monitor your credit utilization. This measure keeps track of your credit card debt and your total credit limit. It should stay under 30%, and if it is higher than that, you can see a negative impact on your credit score. A foreclosure attorney will suggest that you do not keep any credit balances and stay on top of payments when opening new accounts. 

Get a Secured Credit Card

Another tip that a foreclosure attorney would advise for rebuilding your credit after a foreclosure is to start with a secured credit card. It can be challenging to get approved for a traditional credit card with a low credit score. This is where a secured credit card comes in; these credit cards require a deposit and will have a spending limit. It will impact your credit score, so make sure that you are making payments on time. 

Have Some Patience While Rebuilding Your Credit

Your credit is one of the most important things you need to monitor for your financial health. Rebuilding your credit score after a foreclosure can be difficult, especially without the guidance of a foreclosure attorney. This process takes time and you will need to have patience. But it is possible to improve your credit and get you back on track.

How The Law Offices Of Emil Fleysher Can Help With Rebuilding Your Credit

When you are all out of options or are trying to avoid foreclosure, you should consult with a foreclosure attorney that has the knowledge and experience handling cases like yours. You may have tried credit counseling or doing things on your own to no avail. It is time to leave it to the professionals at The Law Offices of Emil Fleysher, P.A. Contact us online or call us at 888-886-0020 for a consultation today.

Foreclosure Or Bankruptcy?

Posted on by Emil Fleysher

While foreclosure and bankruptcy are often confused or lumped together, they are not the same. You should remember that these are two different legal processes. However, sometimes they can work in tandem for your best interests. To get the best possible outcome, you will need an attorney experienced in both bankruptcy and foreclosure proceedings. Not every attorney can handle both cases, so you must use the right one. 

How Does Foreclosure Work?

Foreclosure relates directly to your home or property and your mortgage lender. This process allows your mortgage lender to collect on their loan or take your home when you have become highly delinquent on your payments. Foreclosure means that you may lose your home and any other property deemed fit by the court. It is often the last step your mortgage lender takes when attempting to collect a debt. Once in their possession, they will sell your home or property to recoup some of the money you owe them.

How Does Bankruptcy Work?

Bankruptcy is unlike foreclosure in that the debtor/borrower is the one who chooses whether and when to file. An individual or business can file for bankruptcy to discharge debts or create a personal reorganization to restructure their debt. Filing for bankruptcy gives you the opportunity to have a financial fresh start. However, it can adversely affect your credit profile and prevent you from obtaining certain loans for up to 4 years. For that reason, you should consult with an attorney to weigh the pros and cons. 

When you decide to file for bankruptcy, your lawyer can help you choose which chapter will work best for you. A Chapter 7 Bankruptcy can cancel most debts, but you have to meet certain criteria to qualify. It will temporarily stop your foreclosure, but only for a few months. A Chapter 13 Bankruptcy gives you the option to restructure and reduce your debt, as long as you can show that your monthly payment is feasible. Chapter 13 Bankruptcy provides you with several options with regard to foreclosure that are not available in Chapter 7. You should discuss your options with your bankruptcy and foreclosure attorney. Many people will attempt to file the bankruptcy case on their own, but that is a big mistake as you may make a small error on your filing that results in a huge problem, perhaps even making your situation worse. 

Can Bankruptcy Help Foreclosure?

The short answer is yes. Bankruptcy can and does stop foreclosure proceedings, but for how long depends on what you do in your bankruptcy case. Regardless, bankruptcy can create a much needed time cushion for you to reevaluate your options and either save your home or leave on your own terms.

Should You File for Bankruptcy Before or After Foreclosure?

If you are facing foreclosure and are considering filing for bankruptcy, timing is everything. It will also depend on what you are trying to do with your home. Depending on your circumstances, filing for bankruptcy may be beneficial before or after your foreclosure proceedings. You should discuss your goals and circumstances with your attorney to formulate the best strategy. 

If you consider filing before foreclosure, you should consider whether you are attempting to get a loan modification. Filing for bankruptcy before foreclosure will put an automatic stay and pause the foreclosure. This can give you more time to decide what you will do with the home. The moment the bankruptcy has been approved or denied, the stay ends, and the foreclosure process may resume. Obtaining a bankruptcy discharge may also relieve you of your debt service payments, thus helping you qualify for a loan modification. 

Contact The Law Offices of Emil Fleysher Today

If you need a bankruptcy attorney or a foreclosure lawyer, you should look no further than The Law Offices of Emil Fleysher, P.A. Contact us online or call us at 888-886-0020 for a free consultation. We can guide you in the right direction when you are facing foreclosure and trying to decide if filing for bankruptcy is a viable option.

No Foreclosure If No Default Notice Received

Posted on by Emil Fleysher

The Fourth District Court of Appeal ruled in favor of the homeowner over Deutsche Bank in a foreclosure case over the notice of default. In fact, the property that the bank was trying to recover is in Port St. Lucie, one of the cities hit the hardest by the housing bubble. However, the hay that broke the camel’s back came from the mailing address to which the notice of default was sent to. The homeowner’s attorney argued back. They said that the bank did not send the notice of default to the property address as stated on the terms of the mortgage, thus violating it. But, instead sent the notice of default to a PO Box.

Although the property was unoccupied at the time, the appeals court agreed that there was a violation of the contract. And, has asked for the moving of the case to the trial court; for dismissal for prejudice for noncompliance with the mortgage’s acceleration. Furthermore, fourth District Judges Carole Taylor, Robert Gross, and Spencer Levine all sided with the homeowner in an unsigned opinion. Also, the homeowner’s other defense was not addressed. In fact, the argument was that the bank presented a backdated mortgage assignment and did not prove standing to foreclose.

If you have questions about Foreclosure, Loan Modification, Bankruptcy, Short Sale, or other alternatives, please feel free to call my office at 888-886-0020. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Loss Mitigation Programs Overview

Posted on by Emil Fleysher

In the wake of the housing crisis, lawsuits against lenders, and settlements between government entities and some of the world’s biggest banks, an alphabet soup of loss mitigation programs have emerged and re-emerged.

To help make sense of all of the available loss mitigation programs and how they relate to your situation, I have prepared the below outline. It describes substantially all of the major programs offered on residential loans today. All but one of these loss mitigation programs have the same purpose. That particular one is for the borrower that wants to keep their property but needs assistance to do so. The last program on the list is for borrowers who either prefer not to keep their property; or have accepted that there is no way for them to do so. And, they simply have more interest in avoiding losing the property in a foreclosure sale.

I hope this outline of loss mitigation programs makes the options more digestible and easier to understand.

Programs Designed for Borrowers Wanting to Keep their Home

I. Home Affordable Modification Program (HAMP)

  1. Overview
    1. If you you have a job, but you’re still struggling to make your mortgage payments, you may be eligible for the Home Affordable Modification Program (HAMP®). HAMP may lower your monthly mortgage payments in order to make them more affordable and sustainable for the long-term.
    2. If you currently occupy your home as your primary residence, we encourage you to contact your mortgage servicer as soon as possible to begin the HAMP evaluation process.
    3. In an effort to continue to provide meaningful solutions to the housing crisis, effective June 1, 2012, the Obama Administration expanded the population of homeowners that may be eligible for the Home Affordable Modification Program to include homeowners:
      1. Who are applying for a modification on a home that is not their primary residence, but the property is currently rented or the homeowner intends to rent it.
      2. Who previously did not qualify for HAMP because their debt-to-income ratio was 31% or lower.
      3. Then, those who previously received a HAMP trial period plan, but defaulted in their trial payments.
      4. Lastly, those who previously received a HAMP permanent modification, but defaulted in their payments, therefore losing good standing.
    4. If you are a homeowner who falls into any of these criteria, you may be eligible for a modification under the expanded criteria.
  2. You may be eligible for HAMP if you meet all of the following criteria that you:
    1. Obtained your mortgage on or before January 1, 2009.
    2. Owe up to $729,750 on your primary residence or single unit rental property
    3. Owe up to $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental property
    4. The property has not been condemned
    5. Have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments (non-owner occupants must be delinquent in order to qualify).
    6. Have sufficient, documented income to support a modified payment.
    7. You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

I. Principal Reduction Alternative (PRA)

  1. If your home is currently worth significantly less than you owe on it, MHA’s Principal Reduction Alternative (PRA)’s purpose is to help you by encouraging mortgage servicers and investors to reduce the amount you owe on your home.
  2. You may be eligible for PRA if (you):
    1. Fannie Mae or Freddie Mac do not own or guarantee your mortgage.
    2. Owe more than your home is worth.
    3. Occupy the house as your primary residence.
    4. Obtained your mortgage on or before January 1, 2009.
    5. Your mortgage payment is more than 31 percent of your gross (pre-tax) monthly income.
    6. Owe up to $729,750 on your 1st mortgage.
    7. Have a financial hardship and are either delinquent or in danger of falling behind.
    8. Have sufficient, documented income to support the modified payment.
    9. Lastly, you must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
  3. Participating servicers must develop written standards for PRA application. The largest servicers include Bank of America, CitiMortgage, JP Morgan Chase, and Wells Fargo.

III. Second Lien Modification

  1. If your first mortgage went trough permanent modification under HAMP and you have a second mortgage on the same property, you may be eligible for a modification. Or, principal reduction on your second mortgage as well, through MHA’s Second Lien Modification Program (2MP). 2MP works in tandem with HAMP to provide comprehensive solutions for homeowners with second mortgages to increase long-term affordability and sustainability. If the servicer of your second mortgage is participating, they can evaluate you for a second lien modification.
  2. You may be eligible for 2MP if you meet all of the following criteria:
    1. Your first mortgage went trough modification under HAMP.
    2. And, you must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.
    3. You have not missed three consecutive monthly payments on your HAMP modification.
  3. Servicers participating in 2MP are:
    1. Bank of America, NA
    2. BayviewLoan Servicing, LLC
    3. CitiMortgage, Inc.
    4. Community Credit Union of Florida
    5. GMAC Mortgage, LLC
    6. Green Tree Servicing LLC
    7. iServeResidential Lending, LLC
    8. iServeServicing, Inc.
    9. J.P.MorganChase Bank, NA
    10. NationstarMortgage LLC
    11. OneWestBank
    12. PennyMacLoan Services, LLC
    13. PNC Bank, National Association
    14. PNC Mortgage
    15. Residential Credit Solutions
    16. ServisOne Inc., dbaBSI Financial Services, Inc.
    17. Wells Fargo Bank, NA

IV. FHA Home Affordable Modification Program (FHA-HAMP)

  1. FHA, VA and USDA all offer mortgage modification programs for struggling homeowners designed to lower monthly mortgage payment to no more than 31 percent of the homeowner’s verified monthly gross (pre-tax) income — making monthly mortgage payments much more affordable. If the Federal Housing Administration (FHA) insures or guarantees a loan that you have, you may be eligible for a program, offered through that government agency.
  2. For information on FHA and participating servicers, call FHA’s National Servicing Center at (877) 622-8525.

V. USDA & Veteran’s Affairs Home Affordable Modification (VA-HAMP)

  1. FHA, VA and USDA all offer programs for struggling homeowners that strive to lower your monthly mortgage payment to 31 percent of your verified monthly gross (pre-tax) income — making monthly mortgage payments much more affordable.
  2. If the Department of Veterans Affairs (VA) insure or guarantee a loan that you have, you may be eligible for a program through that government agency.

VI. Second Lien Modification Program for Federal Housing Administration Loans (FHA-2LP)

  1. If you have a second mortgage and your first mortgage servicer agrees to participate in FHA Short Refinance, you may be eligible to have your second mortgage on the same home reduced. Or, eliminated through the FHA Second Lien Program (FHA2LP). If your second mortgage servicer agrees to participate, the total amount of your mortgage debt after the refinance cannot exceed 115 percent of your home’s current value.
  2. You may be eligible for FHA2LP if you meet the following criteria that you:
    1. Are eligible for FHA Short Refinance.
    2. Obtained your mortgage on or before January 1, 2009.
    3. You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.
  3. Program Availability:
    1. If the servicer of your first mortgage agrees to an FHA Short Refinance and you have a second mortgage on the same home, the first mortgage servicer will work with the second mortgage servicer to reduce or eliminate the second mortgage.
    2. More than a dozen mortgage servicers have agreed to review homeowners for FHA2LP when the first mortgage servicer has agreed to a refinance under FHA Short Refinance.

II. Home Affordable Refinance Program (HARP)

  1. If you’re not behind on your mortgage payments but have been unable to get traditional refinancing because the value of your home has declined, you may be eligible to refinance through the Home Affordable Refinance Program (HARP). HARP’s purpose is to help you get a new, more affordable, more stable mortgage. HARP refinance loans require a loan application and underwriting process, and refinance fees will apply.
  2. You may be eligible for HARP if you meet all of the following criteria:
    1. Freddie Mac or Fannie Mae must own or guarantee the mortgage.
    2. The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
    3. The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
    4. The current loan-to-value (LTV) ratio must be greater than 80%.
    5. The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.
  3. If Freddie Mac own your loan, you may check your potential eligibility for HARP here.
  4. If Fannie Mae own your loan, you may check your potential eligibility for HARP here.

VIII. FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance)

  1. If you’re not behind on your mortgage payments but owe more than your home is worth, FHA Short Refinance may be an option that your mortgage servicer will consider. FHA Short Refinance’s purpose is to help homeowners refinance into more affordable, more stable FHA-insured mortgage. If your current lender agrees to participate in this refinance, they must reduce the amount you owe on your first mortgage to no more than 97.75 percent of your home’s current value.
  2. You may be eligible for FHA Short Refinance if you meet the following criteria:
    1. Fannie Mae, Freddie Mac, FHA, VA or USDA do not own or guarantee your mortgage.
    2. Then, you owe more than your home is worth.
    3. You are current on your mortgage payments.
    4. Also, you occupy the house as your primary residence.
    5. You are eligible for the new loan under standard FHA underwriting requirements.
    6. Your total debt does not exceed 55 percent of your monthly gross income.
    7. Lastly, you must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.

Affordable Unemployment Program (UP)

  1. If you are unemployed and depending on your situation, MHA’s Home Affordable Unemployment Program (UP) may reduce your mortgage payments to 31 percent of your income or suspend them altogether for 12 months or more.
  2. You may be eligible for UP if you meet all of the following criteria that you:
    1. Do not have a job and you are eligible for unemployment benefits.
    2. Occupy the house as your primary residence.
    3. Have not previously received a HAMP modification.
    4. Obtained your mortgage on or before January 1, 2009.
    5. Owe up to $729,750 on your home.
  3. More than 100 HAMP-participating servicers can offer UP to eligible unemployed homeowners.
  4. You may be required to make a partial payment, not to exceed 31 percent of your verified monthly gross (pre-tax) income including unemployment benefits.
  5. You will be evaluated for a HAMP mortgage modification at the end of your UP forbearance period if it is available at that time.
  6. UP is not currently available for homeowners with mortgages held by Fannie Mae and Freddie Mac; however, both have their own forbearance arrangements for unemployed homeowners. Please contact your mortgage servicer to see if you are eligible.

X. Hardest Hit Fund (HHF)

  1. Early in 2010, Treasury announced that the Hardest Hit Fund® would provide more than $7.6 billion in aid for homeowners; in states hit hardest by the economic crisis. Since then, state housing finance agencies have used the fund to develop programs that stabilize local housing markets and help families avoid foreclosure. Hardest Hit Fund programs complement the Making Home Affordable Program but are not limited to homeowners eligible for Making Home Affordable.
  2. Hardest Hit Fund programs vary state to state, but may include:
    1. Mortgage payment assistance for unemployed or underemployed homeowners
    2. Principal reduction to help homeowners get into more affordable mortgages
    3. Funding to eliminate homeowners’ second lien loans
    4. Help for homeowners who are transitioning out of their homes and into more affordable places of residence.
  3. For more information, visit Florida’s Hardest Hit Fund page or contact your state housing finance agency.

I. FHFA Streamlined Modification Initiative (SMI)

  1. The SMI has been designed to curb losses to the government-owned Fannie & Freddie by letting borrowers that are behind 3 months or more bypass the notorious red tape and associated with typical loan modifications. However, applicants may still provide documents relating to their financial hardship to save even more money.
  2. According to the FHFA, the Streamlined Modification Initiative (SMI) will begin July 1, 2013 and expire on August 1, 2015.
  3. In order to qualify, applicants must be at least 90 days late on their mortgage; have a loan that was first made on or before July 1, 2012; and have less than 20% equity in their home.
  4. The program is offering fixed interest rates and payment terms of up to 40 years. Some “underwater” borrowers who owe more than their homes are worth will not be required to pay interest on at least some portion of the principal balance.

Program for Borrowers Not Interested or Not Able to Keep their Home

Home Affordable Foreclosure Alternatives Program (HAFA)

  1. If you can’t afford your mortgage payment and it’s time for you to transition to more affordable housing, the Home Affordable Foreclosure Alternatives (HAFA) program is there for you. HAFA provides two options for transitioning out of your mortgage: a short sale or a Deed-in-Lieu (DIL) of foreclosure. In a short sale, the mortgage company lets you sell your house for an amount that falls “short” of the amount you still owe. Furthermore, in a DIL, the mortgage company lets you give the title back, transferring ownership back to them.
  2. In either case, HAFA offers benefits that make the transition as favorable as possible:
    1. Unlike conventional short sales, a HAFA short sale completely releases you from your mortgage debt after selling the property. This means you will no longer be responsible for the amount that falls “short” of the amount you still owe. The servicer guarantees the waiving of the deficiency.
    2. In a HAFA short sale, your mortgage company works with you to determine an acceptable sale price.
    3. HAFA has a less negative effect on your credit score than foreclosure or conventional short sales.
    4. When you close, HAFA may provide $3,000 in relocation assistance.
  3. You may be eligible for HAFA if you meet all of the following criteria that you:
    1. Have a documented financial hardship.
    2. Have not purchased a new house within the last 12 months.
    3. Your first mortgage is less than $729,750.
    4. You obtained your mortgage on or before January 1, 2009.
    5. You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.
  4. HAFA is available for mortgages that Fannie Mae and Freddie Mac own and guarantee or serviced by over 100 HAMP participating mortgage servicers.

Contact Us

Now that you know of these loss mitigation programs, you know what the next step is.

If you have questions about foreclosure, loan modification, bankruptcy, or other alternatives, please feel free to call my office at 888-886-0020, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Options for Florida Homeowners with Homes that are “Underwater”

Posted on by Emil Fleysher

What are your Options if your House is Underwater? More and more Floridians are coming to the unsettling realization that their homes are now worth less than they owe on their mortgage(s). This unfortunate scenario is commonly referred to as your house being “underwater.”
One of the most common questions that clients ask is “What are my options if my house is underwater?” Generally, the answer is that you have 6 options and their descriptions are below.

I. Continue Paying

If you can afford the payments and are more comfortable paying an over-priced loan than walking away from it, you may decide to keep paying.

  1. Pros – The pros of continuing to pay on the loan as it stands include
    1. protection of your credit score
    2. predictability of future payments
    3. household stability
  2. Cons – The cons of continuing to pay on the loan as it stands are
    1. substantially inflated housing payments
    2. compromised standard of living due to high cost of housing
    3. little or no chance of building equity in under 20 years

II. Deed in Lieu of Foreclosure

If you want nothing more to do with the property and are ready to “walk away,” then offering the bank a Deed in Lieu of Foreclosure (“Deed in Lieu”) may be the choice for you. A Deed in Lieu describes a situation in which the borrower agrees to vacate the property. And, abandon any claim or rights to the property. Banks like this option because it saves them the expenses and delays associated with judicial foreclosure. In return, most banks are willing to waive any deficiency claims that may result after the subsequent sale.

  1. Pros – The pros of offering the bank a Deed in Lieu include…
    1. An instant solution to the problem, allowing you to move on right away and start rebuilding your credit
    2. Potential waiver of any deficiency judgment
  2. Cons – The cons of offering the bank a Deed in Lieu include…
    1. It will have nearly the same effect on your credit score as a foreclosure. However, you will save your credit score from the damage that having successive late mortgage payments would cause.
    2. There are tax implications when any debt is forgiven. This results in a cancellation of debt that the IRS considers to be taxable income. However, exceptions to this rule include Insolvency (your total secured debts were higher than the Fair Market Value of your assets at the time of foreclosure sale). And, Bankruptcy (filing for Ch. 7 Bankruptcy would discharge this liability).
    3. A Deed in Lieu is only possible if there are no junior liens on the property (i.e., home equity loans or 2nd mortgages)

III. Short Sale

A short sale is a type of pre-sale in which the bank agrees to let you sell the property for less than the full amount owed. And, to accept the proceeds of the sale as full satisfaction of the debt.

  1. Pros – The pros of Short Selling the property include…
    1. Potential waiver of any deficiency judgment
    2. Slightly less negative impact on the your credit score
  2. Cons – The cons of Short Selling the property include …
    1. There are tax implications when any debt is forgiven. This results in a cancellation of debt that the IRS considers to be taxable income. However, exceptions to this rule include Insolvency (your total secured debts were higher than the Fair Market Value of your assets at the time of foreclosure sale); Bankruptcy (filing for Ch. 7 Bankruptcy would discharge this liability); and the Mortgage Debt Relief Forgiveness Act which has been recently extended through December 31, 2013.
    2. While a Short Sale may be slightly better for your credit than a full foreclosure, it still has a substantial negative impact. However, for those unable or unwilling to file for Bankruptcy, a Short Sale may be the best option in avoiding facing a deficiency judgment later on.

IV. Loan Modification

The intent of a modification is to eliminate the arrearage and reduce monthly mortgage payments for homeowners who have recovered from financial distress but whose net income has been reduced to a level lower than it was before the default, such that they can no longer afford the original loan.

  1. Pros – The pros of modifying your loan include…
    1. You can stay in the home at a payment that is affordable based on the income information you provided to the bank to get the modification.
    2. No dramatic negative impact to your credit score
  2. Cons – The cons of modifying your loan include if you:
    1. Suffer a reduction in income you will no longer be able to afford the payments and will have to start the process over.
    2. Are “upside down” on your mortgage after the modification, you will still be paying substantially inflated housing payments
    3. Are “upside down” on your mortgage after the modification, you may still be compromising your standard of living due to high cost of housing
    4. And, if you are “upside down” on your mortgage after the modification, you may still have little or no chance of building equity in less than 20 years.

V. Litigation / Foreclosure Defense

If none of the above choices are acceptable to you, then you may be interested in pursuing a Foreclosure Defense strategy. In short, a foreclosure defense strategy affords you the opportunity to stop making payments on the mortgage, property tax, and property insurance while an attorney defends your legal rights against the foreclosure action.

  1. Pros – The pros of pursuing a foreclosure defense strategy include…
    1. The opportunity to save your monthly housing expenses for an indefinite period of time. This money can be later used for moving expenses, housing, or as a down payment on a subsequent home purchase.
    2. This option gives you the most time to get your affairs in order and to plan for your next step.
  2. Cons – The cons of pursuing a foreclosure defense strategy include…
    1. You will eventually lose the house unless the bank agrees to allow resumption of payments or full payment of the loan is tendered (this is also referred to as “redemption”).
    2. You will have the dramatic negative impact of a foreclosure on your credit score.
    3. The servicer may pursue a deficiency judgment for the difference between the amount of the mortgage loan and the foreclosure sale price.
    4. If the bank waives the deficiency, there may be tax implications. This results in a cancellation of debt that is considered by the IRS to be taxable income. However, exceptions to this rule include Insolvency (your total secured debts were higher than the Fair Market Value of your assets at the time of foreclosure sale) and Bankruptcy (filing for Ch. 7 Bankruptcy would discharge this liability).

VI. Bankruptcy

Filing a Chapter 13 Bankruptcy may enable you to “strip off” any fully unsecured liens on your property. If your home is worth less than what you owe on your first mortgage, then any subsequent mortgages are fully unsecured in that there is no equity in the property above the first mortgage to secure them. In this scenario, a Chapter 13 bankruptcy may enable you to discharge the debts associated with the subsequent mortgages as well as strip off the liens completely. At the end of your successful Chapter 13 payment plan, you keep the house with only the first mortgage.

  1. Pros – The pros of pursuing a Chapter 13 Bankruptcy strategy include…
    1. Discharge and strip of any 2nd mortgages or Home Equity Lines of Credit
    2. Discharge of most unsecured debt (including credit cards, medical bills, etc.)
    3. Once the Chapter 13 plan is confirmed, all creditors must abide by the terms and honor the outcome.
  2. Cons – The cons of pursuing a Chapter 13 Bankruptcy strategy include…
    1. Filing Bankruptcy will negatively impact your credit score
    2. The Chapter 13 plan will last 3 or 5 years and you only get your discharge if and when the plan is completed.
    3. Bankruptcy may not be the best option for everyone at every time and an attorney should always be consulted with prior to making a decision as to whether or not to file.

If you have questions about foreclosure, loan modification, bankruptcy; or other alternatives, please feel free to call my office at 888-886-0020. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

South Florida Bankruptcy Filings Continue to Fall

Posted on by Emil Fleysher

South Florida bankruptcy filings were down substantially in the 2nd quarter, compared to last year; according to data released by the U.S. Bankruptcy Court for the Southern District of Florida. Personal bankruptcy filings (Chapter 7 & Chapter 13) in Palm Beach, Broward, and Miami-Dade counties totaled 7,194. This is from April through June of 2012; down 23% from 2011.

Bankruptcy filings can be linked in large part to the rate of foreclosure filings. And, foreclosure sales, both of which slowed in 2011. This is due to the banks’ robo-signing debacle and nationwide settlement with states’ attorneys general. While foreclosure filings have begun to pick up steam again, many homeowners are avoiding bankruptcy. They are doing this by obtaining loan modifications or participating in the short sale process.

Bankruptcies increased in 2007 and 2008 following the collapse of the housing market. But, they are now starting to taper off with the demand for housing in South Florida starting to make a come-back and the willingness of servicers to participate in the loan modification process improving.

A struggling homeowner tends to file for bankruptcy just before the bank is scheduled to repossess a property. The bankruptcy filing temporarily halts the foreclosure action and buys the borrower more time to negotiate with the lender. When the value of a property is less than what’s owed, the lender can go back to court after the foreclosure. Moreover, they can hold the homeowner responsible for the difference. Bankruptcies wipe out these so-called deficiency judgments. A bankruptcy also may discharge a second mortgage.

If you have questions about foreclosure, loan modification, bankruptcy; or other alternatives, please feel free to call my office at 954-484-9987. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Florida Grabs a Chunk of Foreclosure Settlement Money for State Budget

Posted on by Emil Fleysher

Out of $334 million in cash payments sent to Florida in a multibillion-dollar mortgage settlement with major banks, more than $33 million will help strengthen the state’s budget. In fact, Florida is one of several states taking a portion of the $2.5 billion in cash payments from banks. And, Florida is using it for programs not directly related to the foreclosure crisis. So, Florida’s total take in the $25 billion national settlement is worth about $8.4 billion.

About $334 million of that came in the form of a cash payment to the state. Furthermore, the attorney general’s office has maintained that most of the money will go to directly to help home­owners. Moreover, settlement documents indicate that Bondi negotiated the 10 percent civil penalty; resulting in a $33.4 million cash payment to the general fund. For now, Florida is only using 10 percent of the cash payment to strengthen its general budget. However, some other states are using all or a majority of their funds to plug large budget holes. A few states have clauses similar to Florida’s, directing 10 percent of the money to general revenue as a penalty.

$300 Million to Go

Still, some states have decided to use all of the funds for homeowners. In fact, they are citing that they were the main victims in the robo-signing scandal. The remaining $300 million in Florida’s settlement cash has not yet been allocated. Bondi asked members of the public for suggestions on how to spend the money this month. Moreover, he has stated that it would be used to provide direct relief help for homeowners. Housing groups have advocated for the money to be used for legal aid for homeowners and low-income housing programs.

If you have questions about foreclosure, loan modification, bankruptcy; or other alternatives, please feel free to call my office at 954-484-9987. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Lenders Prefer Short Sales to Foreclosures

Posted on by Emil Fleysher

Short sales are exceeding the number of foreclosure sales in South Florida. Broward County had 1,831 short sales in the first three months of 2012, compared with 1,476 foreclosure deals. On a quarterly basis, this is the first time short sales have outnumbered foreclosures in Broward since early 2008. Short sales also exceeded foreclosures in Palm Beach County and across Florida from January through March.

Banks are more motivated to do short sales because of the messiness and the risk of foreclosures. After a homeowner defaults on a mortgage, the bank files a foreclosure lawsuit. But, the two sides often continue to negotiate a resolution. A short sale is when the lender allows the homeowner to sell for less than what’s owed on the mortgage and absolves the homeowner from paying a deficiency. Foreclosures can be lengthy. It takes an average of 861 days to complete a foreclosure in Florida. This is one of the longest timelines in the nation. There’s a backlog of cases in Florida courts because in 2010 some bank employees admitted they had signed off on thousands of cases without proper review. As a result, some major lenders temporarily suspended foreclosures.

Time Frame of Short Sales

A short sale in Florida takes an average of 603 days. Although, many now are happening much faster sometimes within a few months. They are helping the housing market recover. That is because they more quickly put distressed homes in the hands of cash buyers or owners who can afford the mortgages. The number of Broward short sales in the first quarter of 2012 increased 30 percent from the same period a year ago. Statewide, short sales rose 18 percent from a year ago. Some of the biggest lenders, including Bank of America and Chase, now offer thousands of dollars to homeowners to complete them.

If you have questions about foreclosure, loan modification, bankruptcy, or other alternatives, please feel free to call my office at 954-484-9987, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

Voluntary Dismissals and Foreclosure Paperwork Irregularities Examined

Posted on by Emil Fleysher

The Florida Supreme Court got a request. It has to do with the prevention of lenders from escaping sanctions for using fraudulent documents by filing voluntary dismissals. The issue is whether courts have the authority to reject the voluntary dismissals of the cases. And, instead impose sanctions, including dismissing the foreclosures with prejudice. Attorneys asking for dismissal with prejudice argue. They state that the current system allows every party who comes before the courts to lie, cheat, or steal; knowing if they are caught they can simply voluntarily dismiss and clear themselves of that fraud.

The banks argue that when a party has not been harmed then that party cannot seek to undo a voluntary dismissal. Moreover, they agree that sanctions are justified if a submission to the court is improper. To deter improper conduct, courts have many punishments. Lawyers and parties already face a variety of sanctions if they use fraudulent documents.

If you have questions about foreclosure, loan modification, bankruptcy; or other alternatives, please feel free to call my office at 954-484-9987. Or, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

This ruling could have a major effect on the state’s backlog of foreclosure cases as well as future lending practices. A change of this scale would impact general credit and lending practices. Also, the backlog of foreclosure cases in the court system. The threat of sanctions would force lenders to continue litigating unstable cases, rather than cure defects in a new proceeding.