Mortgage – Fleysher Law

How Will Filing Bankruptcy Affect My Chances of Getting a Mortgage or Refinance?

Posted on September 3, 2021February 23, 2022 by Emil Fleysher

Many clients have been asking lately about how filing bankruptcy will affect their options with regard to obtaining a mortgage or refinance. The short answer is that “it depends.” What does it depend on? 3 things…

(1) whether your case was filed as a Ch. 7 Bankruptcy or as a Ch. 13 Bankruptcy;

(2) whether your case was “dismissed” or “discharged”; and

(3) what type of mortgage loan you are applying for.

GOVERNMENT INSURED (FHA/HUD)

The Department of Housing and Urban Development (HUD) governs FHA mortgages and the approval process. HUD has specific guidelines for borrowers applying for a mortgage after a bankruptcy filing. Most of the requirements for this program can be found within HUD Handbook 4000.1, also known as the Single Family Housing Policy Handbook.

According to the Handbook, 2 years must have passed from the date the Bankruptcy Court entered the discharge in a Ch. 7 filing. If the bankruptcy was discharged less than 2 years from the mortgage application date, then the application will be downgraded and likely denied.

With a Ch. 13 Bankruptcy case filing, the waiting period is 1 year from the date when filing the case happened (if you have made all of your Ch. 13 payments on time and your case is in good standing). However, it is important to note that the Ch. 13 Trustee and/or Bankruptcy Court must approve a mortgage application while your Ch. 13 case and payment plan are still pending.

CONVENTIONAL LOAN (FANNIE MAE / FREDDIE MAC)

With a Ch. 7 Bankruptcy fling, you must wait 4 years from the date of filing your bankruptcy case before you will be under consideration for a conventional or standard mortgage or refinance. With a Ch. 13 Bankruptcy filing, you must wait 2 years from the date of your Ch. 13 Bankruptcy Discharge. Or, 4 years from the date your Ch. 13 Bankruptcy case receives dismissal.

This is according to the Fannie Mae Selling Guide. However, if you can demonstrate extenuating circumstances and provide supporting documentation, this waiting period can be shortened to just 2 years for both Ch. 7 and Ch. 13. Extenuating circumstances are defined by Fannie Mae as “nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations.” On the other hand, if you have filed multiple bankruptcy cases, then the waiting period may be extended to 5 years from your latest bankruptcy case dismissal or bankruptcy discharge.

Interestingly, the waiting period for a mortgage approval under these Fannie Mae guidelines after a Foreclosure is 7 years; eclipsing the waiting requirement compared to bankruptcy by an additional 3 years. Fannie Mae does state in these guidelines that in the event “both a bankruptcy and foreclosure are disclosed on the loan application, the lender may apply the bankruptcy waiting period if the lender obtains the appropriate documentation to verify that the mortgage loan in question was discharged in the bankruptcy.”
With that, it is often advisable for borrowers to file bankruptcy after foreclosure. They must do this in order to discharge any remaining unsecured debt AND to shorten the waiting period.

Applying for a Mortgage Post-Bankruptcy

Now that you know the applicable waiting periods, it’s important to set yourself up for success. Just waiting the required periods after the bankruptcy filing, discharge, or dismissal are not enough. You must work on improving your credit score. Also, remain current on all of your open accounts, establish stable and satisfactory income. And, organize your bank and tax documents.

If you have any questions about applying for a mortgage or other loan before, during, or after bankruptcy, please feel free to contact my office.

When Mortgage Transfers Go Awry

Posted on March 9, 2015February 22, 2023 by Emil Fleysher

The Fourth District Court of Appeal ruled against HSBC Bank USA in a foreclosure case for lack of standing. The defendants, Donna and Marc Murray, appealed a final foreclosure judgment against the bank with the argument that they failed to validate that the mortgage originator transferred its rights. Judge Melanie May wrote on behalf of the unanimous panel “In this foreclosure puzzle, one of the pieces is missing”.

In fact, the Murrays had their original mortgage note with Option One Mortgage Corp., who did business as Sand Canyon Corp. HSBC filed for foreclosure in February 2009. This is when the homeowner became delinquent on their loan claiming they own and hold the mortgage. However, the mortgage from Option One was not assigned to HSBC Bank USA until April of the following year. And even after that, the note itself was still payable to the servicer.

When Sand Canyon completed the mortgage assignment the following year, they backdated it to 2007; providing HSBC all the back-up they needed to claim its entitlement to enforce the mortgage terms as a “non-holder in possession with the rights of a holder”. Furthermore, Palm Beach Circuit Senior Judge Howard Harrison presided over the bench trial. “They got the mortgage. They got the records. They got the servicing. They got the whole thing. They just don’t have the endorsement, and is that fatal?” Harrison asked. “In other words do you have to go and get, and then start over again? That’s the question. I don’t know the answer.”

Conclusion

Ultimately, Judge Howard Harrison ruled in favor of HSBC. The homeowners argued that HSBC did not connect the dots as Option Once changed names, ownership, and branding in the in-between years with several other companies servicing as depositors and servicers. What the court could not ignore is the fact that the mortgage note still remained payable to Option One. Even without a legal transfer to the bank. Moreover, the court went one step above and created a one-page diagram as an appendix. They were listing all the corporate hands on the mortgage. And, they left a dotted line representing “the missing piece in the chain of transfers.”

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, 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.

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 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.

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.

What does it mean to “surrender” your home in bankruptcy?

Posted on May 9, 2012February 22, 2023 by Emil Fleysher

Florida Bankruptcy Attorney Chapter 7 Chapter 13 — Surrendering your Home in Bankruptcy

When you surrender your home, that is assets or belongings in Chapter 7 Bankruptcy, you’re doing nothing more than indicating a willingness to let it go. You’re not actually giving it away to anyone. By filing for Chapter 7 Bankruptcy, you are attempting to discharge your obligation to pay certain debts. In return, you agree to surrender your property/home that is not classified as “exempt” under the bankruptcy laws as applied in Florida.

Trustee’s Goal

However, the bankruptcy code does not force the bankruptcy trustee to take the non-exempt property. Instead, the trustee’s goal and obligation is to collect and sell the non-exempt property. That is so that some of that money can go towards paying back some of your creditors. If the trustee determines that taking the property, appraising it, storing it, selling it, etc., will not result in a worthwhile gain for the creditors, then that trustee will in all likelihood abandon his or her claim in the property. In other words, the trustee will probably not attempt to take your house in bankruptcy; if there is no equity to be had.

Bank Has to Obtain The Title

Furthermore, discharging your personal obligation to pay the mortgage doesn’t mean the bank automatically takes the title and becomes the owner of the house. Instead, the bank has to get title to the property. The bank can do this either by foreclosure (in state court and outside of bankruptcy), deed-in-lieu of foreclosure, short sale, or other legal means.

Unless and until the bank obtains the title to the house by one of these methods, the title remains in your name. And, the house is still legally yours. While you are no longer personally liable to the bank for any deficiency on the mortgage after bankruptcy, you do still own the property. That means you’ve got to comply with all local laws regarding ownership. Avoid zoning violations, keep the pool fenced, comply with your HOA, etc. If you get a citation after your bankruptcy is filed, you will be on the hook for it. If your home is in a condo or HOA, you may still be liable for post-filing fees that accrue.

Ultimately, deciding whether or not to surrender your house in bankruptcy is a personal one. And, it should be discussed with an attorney.

Homeowners are Sinking Deeper Underwater

Posted on May 9, 2011March 8, 2022 by Emil Fleysher

According to a recent Bloomberg article, more than 28 percent of U.S. homeowners owed more than their properties were worth. This is in the first quarter of 2011. This was the biggest drop in U.S. home values since 2008. Home prices fell approximately 3% in the first quarter of 2011. And, they are expected to fall as much as 12% before the year is over. The unemployment epidemic and ever-increasing foreclosure inventory seem to be the leading factors in the sinking housing market.

The U.S. unemployment rate rose to 9% in April, up from 8.8% in March. While foreclosures fell to the lowest level in three years in the first quarter as lenders worked through a backlog of flawed paperwork, filings are likely to jump 20 percent this year; reaching a peak for the housing crisis.

In my opinion, until the inventory of loans originated in the 2005 – 2007 apex are resolved (either through a deed in lieu transfers, mortgage modifications, foreclosures, or short sales) the sinking housing market will continue. Recovery will require efforts and sacrifices on the part of the banks. Also, the courts, the legislature, and on we the people. In other words, everyone that enjoyed the wild party during the boom years is going to have to help clean up the mess.

Can a Mediation Save your Home from Foreclosure?

Posted on March 3, 2011March 8, 2022 by Emil Fleysher

In 2009, Florida Supreme Court issued an order mandating foreclosure mediation for all residential homesteaded properties. In other words, upon filing a foreclosure action on a primary residence, the banks now have to attend mediation with the borrower. This is before the case can proceed, or at least provide the borrower with the option. Under this order, borrowers have the right to ask their lenders for a “plaintiff’s disclosure” before mediation. It can include four things. Firstly, a payment history. Secondly, a current appraisal of the property. Thirdly, the bank’s estimate of the mortgage loan’s present net value. Lastly, documentary evidence proving the bank owns and holds the mortgage note.

Design of Mediation Program

The mediation program is designed to function as a fast track for mortgage loan modifications where the borrower was unable to get results working directly with the servicer outside of the court system. The documents required of the borrower are essentially identical to those required under the Making Home Affordable Modification (HAMP) program. The difference is that the bank’s attorney is supposed to provide an accounting of the loan. And, a “Net Present Value” of the property which should facilitate a smoother more transparent negotiation. There is a mixture of reports as to whether the bank’s attorneys are providing this information accurately and promptly.

However, the more frustrating problem is that the plaintiff/bank/servicer’s attorney may not have the authority to settle. That is because its client does not have the authority to settle. Sound confusing? It is. It is often the case that the servicer is bringing the foreclosure action on behalf of the true owner of the loan/note (usually another bank or Real Estate Investment Trust). Without a grant of authority from the true note holder, the servicer’s attorney is powerless to enter into a settlement agreement at mediation.

Statistics and Results

The statistical results of this mediation program are so far, scattered and inconclusive. A December analysis released by the Florida Supreme Court showed about 6 percent of cases referred to mediation statewide result in written settlements for homeowners. Although, the inclusion of all circuits did not happen. For example, the report shows that 12 percent of mediations ended with written settlements last month in Broward County. But, no figures are available for Palm Beach County. Furthermore, the report did not provide any details as to the number of cancellations of mediations or postponing and for what reasons. I am hoping that a more thorough and inclusive report will be issued at the end of 2011’s first quarter.