mortgage modification – Fleysher Law

Using the Bankruptcy Cram Down to Save Investment Property

Posted on November 28, 2013February 22, 2023 by Emil Fleysher

Many clients come into my office seeking assistance with modifying their investment property mortgages. The first question I usually get is “will the bank reduce my principal down to what the property is worth?”
The answer is that offering meaningful principal forgiveness is very rare in conventional “HAMP” or “Proprietary” modifications. Unfortunately, this results in investment properties becoming unaffordable and impossible to maintain. However, these clients often get speechless. This happens when I advise them that they can cram the mortgage loan amount down to the fair market value of the property in Ch. 13 Bankruptcy.

What is ˝Cramdown˝?

A “cramdown” in a Chapter 13 bankruptcy enables the borrower to reduce the principal balance of a mortgage loan down to the actual market value of that property. While this Chapter 13 cram down may be utilized to save a car, boat, or other property, the benefits are best realized in saving investment real property. The catch is that most courts require paying off the balance in the 5-year Ch. 13 payment plan. However, there may be exceptions and an attorney should be consulted to determine and explain your options.

For those borrowers in South Florida who may benefit from and are considering the cram down, the time is now for doing so. This is because property values in Broward & Palm Beach counties have been rebounding substantially in recent months. As the values go up, so does your potential balance under the Ch. 13 cram-down. Also, the bankruptcy case can be filed and initiated at any point; whether you are current on the mortgage or in foreclosure.

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.

South Florida Bankruptcy Filings Continue to Fall

Posted on July 3, 2012February 22, 2023 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 July 3, 2012February 22, 2023 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.

Lenders Prefer Short Sales to Foreclosures

Posted on July 3, 2012February 22, 2023 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 July 3, 2012February 22, 2023 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.

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.

Forced Placed Homeowners Insurance Policies

Posted on July 3, 2012February 22, 2023 by Emil Fleysher

If you think your homeowners insurance is too expensive, then you would be interested to hear Mark Kunzelmann’s story. Mr. Kunzelmann is a 49-year-old network specialist. Just over a year ago, he let the policy on his four-bedroom, North Palm Beach home expire.

But you would not believe what the oversight, which was later remedied, cost him, approximately $10,000 for a few months’ worths of coverage. If your home is financed then you must have homeowners insurance that protects the lender’s interest in the property. If for some reason you let the policy lapse, then your bank can obtain a force-placed insurance policy. And, they can pass on the charges to you. In Mr. Kunzelmann’s case, his lender, Wells Fargo got a policy that was way above his budget.

The policy that was acquired cost him nearly $18000.00 dollars a year. And, Wells Fargo got an 11 percent commission from Assurant. Turns out many lenders have relationships with insurance companies. So, when homeowners allow their policy to lapse they will turn to that entity for a policy. Needless to say but “It left a very bad taste in my mouth,” Kunzelmann said. “I told them, ‘If you do this to me, I’m going to sue you and take my business elsewhere.’ ” Kunzelmann has followed through on his threats. He recently refinanced his mortgage with another lender. And, he has filed a federal lawsuit in order to recoup not just his loss, but the loss of the thousands of fellow Wells Fargo customers who suffered a similar fate.

National Mortgage Settlement

Posted on July 3, 2012February 22, 2023 by Emil Fleysher

National Mortgage Settlement seems to take some time.

As part of the national mortgage settlement signed in March of 2012, Chase, Bank of America, Citigroup, Wells Fargo, and Ally Financial have agreed to offer at least $10 billion in loan forgiveness or principal reduction. In fact, they are offering it to an estimated 11.1 million homeowners who are in default or underwater. After three months the banks’ distribution of this relief is slow. According to housing counselors that The Huffington Post surveyed, only a few individuals got an offer of a principal reduction. That is out of dozens who applied for modifications. These institutions are not indicating how much principal they have written off. Even though a report to the government on their efforts is due in September of 2012.

Baloon Payment

It seems that principal reductions are very rarely seen. And, banks are more likely to offer the homeowner a principal forbearance. It moves the payment of most of the debt to the end of the loan’s term. In fact, this is identified as a balloon payment. During the first few years of the housing crisis, banks and other institutions that service loans made life difficult for hundreds of thousands of homeowners. All of those who tried to obtain a loan modification and failed. Moreover, the institutions lost paperwork, failed to follow up with borrowers. And, they even pushed homeowners who were current on their payments into foreclosure.

However, there seems to be a reasonable explanation as to why there still has not been much change these last few months. Fannie Mae and Freddie Mac, which are the government-backed mortgage giants that control 60 percent of the mortgage market refused to participate in principal reduction; except for limited circumstances. These two entities hold 29.2 million mortgages, 3.3 million of these loans are underwater. According to Edward Demarco, director for the Federal Housing Finance Agency; loan write-downs are a “moral hazard” since the practice might encourage borrowers now current on their mortgages to stop making payments.

Only time can tell whether or not this new settlement will actually help the millions of homeowners across the country desperately reaching out for help.

Nationstar Buying up Mortgage Servicing Rights

Posted on June 21, 2012February 22, 2023 by Emil Fleysher

Bank of America Corp. has released roughly $10.4 billion in residential mortgage-servicing rights to Nationstar Mortgage Holdings Inc.; as Bank of America looks to alleviate a portion of its mortgage-servicing obligations. This is only a small piece of more than $430 billion mortgage-servicing rights or MSRs. This then makes Nationstar the largest non-bank mortgage servicer in the U.S. Traditional banks, have removed themselves from the servicing business as regulatory scrutiny, new capital requirements weigh on these mainstream lenders.

As a mortgage servicer, Nationstar will provide administrative support on loans; held by banks, government organizations, private funds, and other owners of securities and mortgage loans. Nationstar will generate revenue primarily from the unpaid principal balance of loans serviced.

In 2010 it was discovered that a number of banks had engaged in “robo-signing”. This was when bank officials signed off on foreclosure proceedings without proper documentation, as well as other unethical practices. The incident caused numerous lawsuits by homeowners and investigations by federal and state regulators. This led to a $25 billion settlement earlier this year with the five largest U.S. mortgage servicers, which are Bank of America, Wells Fargo & Co., Citigroup Inc., J.P. Morgan Chase & Co., and Ally Financial Inc.

While a few banks own most of the residential-mortgage-loan servicing rights, Nationstar who is a non-bank servicer believes the industry is shifting toward non-bank servicers. Many banks seek to exit from the servicing business, which has proven to be volatile and capital intensive.

Lien Stripping on TBE Property in Chapter 13

Posted on May 14, 2012February 22, 2023 by Emil Fleysher

When deciding whether to file a Chapter 13 Bankruptcy together with your spouse, there is a new interesting factor to consider. In a recent case, the next thing happened. Judge Cristol denied a Chapter 13 Debtor the ability to strip a lien off of his home. Lien stripping is a great benefit of Chapter 13. It allows an underwater property owner to knock off a second mortgage, provided it does not have full security.

However, debtors will now have to take into account how their home is owned when considering lien stripping. In this case, the filing of Chapter 13 was individual or without the Debtor’s spouse. The entirety (TBE) of the Debtor and his wife owned the home as tenants. TBE means neither spouse owns the home individually, but each spouse owns the whole or entirety.

The Judge determined that individual debtors do not have permission to strip down or off a mortgage. That is unless the other spouse is also a joint debtor in the Chapter 13 case. Unfortunately, this is a burden of TBE ownership. When a property is owned TBE, any type of ownership change requires joint action by both spouses. On the upside, Chapter 13 allows a debtor to voluntarily dismiss their case at any time, unlike Chapter 7. So if you file Chapter 13 individually and you want to strip a lien, then you may voluntarily dismiss your case. And, you may refile with your spouse included.

Stripping an Unsecured 2nd Mortgage in Chapter 7 Bankruptcy. Can it be?

Posted on May 14, 2012February 22, 2023 by Emil Fleysher

Previously, lien stripping was something that could only be done in Chapter 13. However, a recent opinion from the 11^th Circuit has changed that rule. Here, a Chapter 7 debtor in Georgia sought to strip off a second mortgage that was totally unsecured. The 11^th Circuit reversed the Bankruptcy Court. And, they found that the lien could be stripped off pursuant to the plain language of the Bankruptcy Code.

It is an old belief that the Supreme Court’s decision in Dewsnup v. Timm precluded a Chapter 7 debtor from stripping off a lien. However, the Supreme Court only addressed stripping down in Chapter 7. Stripping down is the process of reducing a secured claim to the value of the property it secures. There is a very clear difference between the two.

While this is a Georgia case, 11^th Circuit decisions are controlled in Florida; because Florida is part of the 11^th Circuit. Accordingly, it will be interesting to see how bankruptcy judges in our district rule when they face this new case law.