Wednesday, February 27, 2013

Banks Are Making Progress with Mortgage Relief Efforts

Have you been paying close attention to federal efforts to deal with the foreclosure crisis?  A recent article in the Chicago Tribune suggests that there’s good news: U.S. banks appear to be on track with mortgage relief.

Earlier this week, we referred to the 2012 settlement intended to reduce foreclosure problems and mortgage abuses.  In fact, recent Illinois Supreme Court rules reflect upon some of the criteria in this federal-state settlement in which the top five U.S. banks agreed to fund consumer relief and resolve allegations related to bank misconduct to the tune of nearly $20 billion.  While the state Supreme Court rules are likely to produce quicker results in our state, it looks like federal actions to address foreclosures are having a positive impact.  What does this mean in practical terms for homeowners in Illinois?    

Terms of the Settlement

Last February, Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and Ally Financial agreed to pay almost $20 billion, most of which “was earmarked to help distressed borrowers stay in their homes.”  

According to Reuters, settlement agreement funds generated through short sales can only count partially in the banks’ fulfillment of this financial agreement.  Short sales are home sales in which the bank avoids foreclosing on a property by agreeing to take a lesser amount for the property than what the borrower owes on his or her mortgage.  For example, if a borrower owes $500,000 on her mortgage, in a short sale, the bank might agree to take $400,000 in order to avoid foreclosing on that home.  Typically, homeowners prefer short sales to foreclosures, and the short sales usually end up costing banks less in the long run, too.

But, in working to speed foreclosure relief, one of the important long-term goals of the settlement includes limiting the number of short sales.  The point of relief efforts at the federal and state levels is ultimately to keep borrowers in their homes.

Given that short sale funds can only count for a small part of the banks’ financial obligation to borrowers, the settlement agreement was intended to increase principal reductions, meaning financial assistance for borrowers that would help them to keep their homes.  Principal reductions can include loan modification or refinancing help.

What Have the Banks Done So Far?

North Carolina Banking Commissioner Joe Smith is the watchdog who oversees the 2012 agreement.  He recently indicated that he is “encouraged by the consumer relief piece of the settlement,” and that he’s “satisfied” with the infrastructure for the banks to work within, although there’s always more work to do.

In terms of successes, several of the banks indicated that they were “on track” to meet their financial obligations by the end of 2013, with some as early as this spring.  According to records in Reuters and the Chicago Tribune, more than 320,000 borrowers have received assistance to stay in their homes.  This relief came in the form of loan modifications, refinancing help, and some loan forgiveness.  Smith reported that the banks have given $45.8 billion in relief to homeowners thus far.

However, a large percentage of that money “came in the form of short sales.”  While Reuters praised the banks’ efforts thus far, it reminded its readers that the banks must do more to fulfill their agreement. Smith emphasized that the banks need to “improve their compliance with the servicing standards laid out in the settlement,” since he’s continuing to see complaints about how the banks address problems with loans.

Are you an Illinois borrower who may benefit from some of this relief?  If you’re currently concerned about paying your mortgage and keeping your home, an experienced foreclosure defense attorney can explain how state and local relief programs can help you.

See Related Blog Posts:
Loan Modification Plans May Be Falling Short
Foreclosures in Illinois Near Top of Nation in 2012

Monday, February 25, 2013

New Illinois Supreme Court Rules Aid Struggling Homeowners

Are you currently dealing with a pending foreclosure?  The Illinois Supreme Court recently issued new rules that will affect the nearly 77,000 pending foreclosure cases in Cook County.  Last Friday, the Chicago Tribune reported that that these new rules will require lenders to exhaust all efforts to help borrowers before they seek a foreclosure judgment.  In fact, lenders will have to prove that they’ve taken certain steps to reach a resolution with homeowners before they can take any final actions.  The Chicago Business Journal reported that the rules are set to take effect by June 1 at the latest, impacting the nearly 139,000 homes in our state that are currently in the process of foreclosure.

What will these rules mean for current homeowners?  In brief, the changes are going to make it more difficult for lenders to foreclose on struggling borrowers.  They’re designed to “better inform and protect the tens of thousands of Illinois homeowners” who are still in serious danger of losing their homes due to the crash of the housing market nearly six years ago.  If you’re worried about losing your home, these new rules may be here to help.

What Led to the New Illinois Rules?

The new rules, according to the Chicago Tribune, are nearly two years in the making.  They reflect legal shifts across the country that have been aimed at struggling homeowners.

In the past year alone, many national efforts have contributed to protecting homeowners who are already in the process of foreclosure or nearing foreclosure.  For example, the $25 billion national mortgage foreclosure settlement from 2012 involved the nation’s five largest mortgage servicers in making some changes to the foreclosure process.  That settlement intended to fix certain problems by requiring closer monitoring of foreclosure documents to prevent dual-tracking, a process in which lenders work with borrowers to help them stay in their homes while they also take steps to repossess those very same homes.  According to the Consumer Financial Protection Bureau, these mortgage servicing rules are scheduled to go into affect in about a year, early in 2014.

With rising foreclosure problems in Illinois, the state Supreme Court wanted to step in to help.  In April 2011, Chief Justice Thomas Kilbride and Justice Mary Jane Theis formed a 14-member committee to consider ways for improving the foreclosure process and submitting recommendations to the Illinois Supreme Court.  At this point in 2011, there were 70,000 pending foreclosures in Cook County alone, and the numbers have since gone up.

Related to the national rules, the committee made suggestions for improving the foreclosure process in Illinois.  As a result, the new Illinois state Supreme Court rules will also seek to correct problematic issues in the foreclosure process, but they’ll be broader reaching.  The Illinois rules will apply to all mortgage services, and unlike the national ones, these rules will take effect much earlier.

What Changes Can I Expect to See with the New Rules?

By June 1st, the latest date by which these rules will go into effect in our state, lenders will be required by law to take extra steps before filing for a foreclosure judgment.  As mentioned earlier, lenders will have to show that they have exhausted avenues by which to prevent homeowners from losing their homes.  What does “exhaustion” mean here?  The Chicago Business Journal emphasizes that it places the burden for a foreclosure on the lender to show that they’ve done all they can to reach a resolution with the borrower before seeking a foreclosure judgment.  The rules specify that lenders will be required to “submit detailed documents at the start of the foreclosure process,” and they will also have to abide by procedures for notifying borrowers who are in default and in danger of losing their homes.

Are you one of the many homeowners in Illinois who is facing foreclosure?  An experienced foreclosure defense attorney can discuss your options with you today.  Contact us to learn more.

See Related Blog Posts:
New Law Speeds Up Illinois Foreclosures
More Funds Committed to Illinois Foreclosure Victims

Friday, February 22, 2013

New Law Speeds Up Illinois Foreclosures

Do you live in an area blighted by vacant and abandoned properties?  Many Chicago communities have become accustomed to these visual signs of the foreclosure epidemic.  A new Illinois law may help to revitalize these afflicted neighborhoods.

On February 8, Governor Pat Quinn signed a new piece of legislation that will “fast-track” foreclosure proceedings for vacant or abandoned single-family homes and multi-family buildings in Illinois.  According to local news station WREX, this new law can shorten proceedings to just a few months, compared to the typical two-year process of a foreclosure in the state.

History of Senate Bill 16

The new law began as Senate Bill 16, and it has taken almost two years to pass.  Illinois State Senator Jacqueline Collins sponsored the bill, which was intended primarily to streamline and quicken the foreclosure process.  By December 2012, it had unanimously passed both the Illinois Senate and Assembly.  Collins indicated that the legislation was intended to shorten the duration of the foreclosure process from about 500 days down to about 100 days—the difference between years and months.    

Housingwire reported that many community advocates have praised the bill from its inception, since foreclosure-related home vacancies have tarnished the image of certain Chicago neighborhoods.  In addition to shortening the foreclosure timeline, Collins also conceived the bill to raise more than $20 million to “clean up vacant homes and lots,” and to generate millions in grant funding to provide housing counseling to struggling homeowners.  Given that Illinois foreclosures were near the top of the national average during 2012, this legislation would come as relief to community advocates and homeowners alike.

How the New Law Affects Illinois Homeowners and Potential Buyers

According to the Chicago Tribune, the new law permits a lender to file a motion seeking “expedited foreclosure proceedings” on single-family homes and multi-family buildings that are “not legally occupied.”  The law, which will go into effect on June 1, 2013, has a new “sliding scale” for foreclosure filing fees that ranges from $50 to $500, depending on the lender’s annual number of foreclosure actions.

In addition to unclogging the foreclosure buildups in the court system, the fees will generate approximately $120 million over the next several years, which will be directed to local municipalities to offset costs of cleaning up abandoned properties and funding homeowner-counseling programs.

Governor Quinn indicated that the law would do precisely what Senator Collins intended.  According to Quinn’s statement in the Chicago Tribune, the new law will help to restore neighborhoods that have been negatively affected by foreclosures, providing legal mechanisms and funding to clean up vacant and abandoned properties.  These changes will help to reduce crime in the affected areas, as well as to decrease the visual blight of home vacancies.  Additionally, Quinn emphasized that the law will also help to prevent these afflictions in the first place—the new legislation will provide nearly $13 million for counseling agencies, which will help to keep families in their homes.  This support will help nearly 18,000 struggling households in Illinois.

Are you facing foreclosure or concerned about the length of time and demands of filing a foreclosure motion?  An experienced Illinois foreclosure defense attorney can answer your questions and discuss your options with you.  Contact us today.

See Related Blog Posts:
Foreclosures in Illinois Near Top of Nation in 2012; Illinois Land Bank Aims to Revitalize Communities

Thursday, February 14, 2013

Loan Modification Plans May Be Falling Short

The federal government is expanding its mortgage loan modification program, but it may be too late to bring relief to struggling homeowners.  Started back in spring 2009, the U.S. Treasury Department’s Home Affordable Mortgage Program (HAMP) doesn’t seem to be living up to its hype.  A Huffington Post report emphasizes that when the program was introduced, President Obama “promised to help 3 million to 4 million borrowers” through loan modifications that would restructure their mortgages in order to lower monthly payments and prevent foreclosure.  Yet according to an article in North Jersey News, this program “has fallen well short of its goals.”  As of January 2013, nearly $30 billion funds have been allocated for homeowner assistance programs and only $2.3 billion have been spent.  Further, only about one million mortgages have been permanently modified under the plan, compared with 4.8 million loans modified through private programs.  Despite these problems, the government is creating new guidelines in another attempt to help homeowners keep their homes.

Why Hasn’t the Modification Plan Been Effective?

According to many homeowners, the program is too strict.  One New Jersey woman indicated that she and her family were turned down three times for a loan modification through HAMP.  David Stevens, a former housing official in the Obama administration, indicated that the program has tough guidelines in order to ensure that funds aren’t spent on homeowners who plan to abuse the system.  Others cite different problems for the failures of HAMP.  For example, a lawyer at the National Consumer Law Center indicated that the problem lay with mortgage servicers, who weren’t interested in taking on the added expenses associated with loan modifications.  Some advocates blame the federal government, arguing that mortgage servicers should have been legally required to do loan modifications instead of simply being encouraged to do so with incentives.  Strikingly, the government-owned “mortgage giants” Fannie Mae and Freddie Mac have never been required to forgive mortgage debt, and new changes to HAMP won’t address this problem.

However, advocates for HAMP indicate that it has had a positive effect that certain consumer advocates overlook.  Andrea Risotto, a U.S. Treasury spokesperson, said that the government program opened more doors for borrowers to keep their homes than ever before, and that on average, homeowners who received HAMP loan modifications now save a median $544 per month.  Some consumer advocates agree, pointing out that loan modifications through HAMP have steadily increased in number since its creation in 2009, and that the program still has a chance to meet its goals by the end of 2013.

What are the New Changes and How Can They Help You?

Starting in 2013, the Treasury Department will pay Fannie Mae and Freddie Mac the same loan modification incentives as banks.  Although Fannie and Freddie won’t be required to do loan modifications, these incentives should lead to more of them in 2013.  More significantly, the government has extended HAMP for an extra year.  When the program was established in 2009, it was set to expire by the end of 2012.  Now, the federal government has until the end of 2013 to meet the goals it originally laid out.

Additionally, the eligibility guidelines have “been relaxed” in order to help more homeowners.  While HAMP initially was limited to homeowners whose mortgage payments “took at least 31 percent of their total monthly income,” the new guidelines permit homeowners with more affordable mortgage payments to qualify for assistance.  

Are you behind on your mortgage payments and risking foreclosure?  You may qualify for a loan modification or other assistance.  A foreclosure attorney can help with your options.

Related Blog Posts:
Underwater Property Owners Step Away from the Cliff; Att. Gen. Madigan Announces $3 Million for Foreclosure Mediation Programs, but will They be Effective?

Tuesday, February 12, 2013

Defeating Debt-Buyer Scams and Lawsuits

Are you already concerned about bills piling up, threats of foreclosure, and collection phone calls?  In certain cases in which you’re receiving calls about money you owe, you may be dealing with debt-buyers, many of whom have no legitimate claims for debt.  What’s worse, debt-buyer scams can lead consumers who already have scarce financial resources to avoid paying legitimate debts, hurting themselves and their lenders in the process. You want to be sure that your hard-earned money is going toward legitimate debts.  So how can you tell if you’re dealing with a debt-buyer scam?  A recent article in Clearinghouse Review suggests that there are ways to identify these scams and to protect yourself against them.

What Are Debt-Buyer Lawsuits?

Sometimes referred to as ‘junk debt,’ debt-buyer lawsuits concern consumer debt that is purchased very cheaply, “for pennies on the dollar,” and often with no underlying documentation related to your original contracts or payment histories.  The companies that buy these debts and institute these lawsuits are often called ‘junk-debt investors.’  After purchasing old debts, these investors will start a lawsuit against the debtors who are listed on the accounts they’ve just purchased, whether or not they have a valid legal claim to that money.

It’s important to keep in mind that there is a difference between traditional debt collection and a debt-buyer lawsuit.  In traditional debt collection, the original creditor is trying to collect money that is actually owed.  In these cases, the debt collector has a direct connection to the company or agency from which you borrowed the money being collected.  Differently, debt-buyer lawsuits have no direct connection to the original creditor.

So, is junk debt money you actually owe?  For many people, this kind of debt may be real in some ways—from an old credit card or another older account that you’ve abandoned.  But in many cases, it may not be debt that you actually owe.  In many cases, the statute of limitations may have already passed.  There is a specific period of time in which a creditor can bring a lawsuit against the debtor, and this is called a ‘statute of limitations.’  Additionally, some of the debt for which these debt-buyers are suing could be debts that have already been discharged in bankruptcy.  Often, when debt-buyers are involved, people who owe money to creditors can be sued twice for the same debt!

Who is Targeted?

According to a recent Legal Aid Society publication on debt deception, debt-buyers such as the ones mentioned here tend to have the most substantial impact on the “lowest-income communities” and “communities of color.”  In short, these debt-buyers seek out persons who may not have access to knowledge about their legal rights in these situations.  Often, the debtors who have been targeted do not show up to court after the debt-buyers have initiated a lawsuit, and this can lead to a default judgment.  This means that the court entered a judgment against the debtor simply because she or he did not appear in court.

What Does the Law Say about Debt-Buyer Lawsuits?

There are many ways to identify these junk-debt investors, and there are important legal terms to keep in mind.  In addition to the “statute of limitations” point discussed above, there is other language to consider.  For example, in order to be liable for a debt, the caller attempting to collect that debt must be able to “prove a valid chain of assignment.”  This means that the debt collector has to show proof of a chain from the original lender to the junk-debt investor.  Often, these scammers can’t do this.  Also, these junk-debt investors can’t prove an “account stated.”  In debtor-creditor situations, the consumer must agree to pay a specific amount to his or her creditor, and in cases of debt-buying, that junk-debt investor must establish a new agreement with the consumer in order to have a valid collection agreement.   While these terms can seem confusing or overwhelming, the most important thing to keep in mind is that you can seek legal help if you’re the victim of a debt-buyer lawsuit.  If you believe you have been targeted by a debt-buyer lawsuit, contact an experienced attorney today who can help.

Related Blog Posts:
Be Wary of Cement Blocks Disguised as Rescue Floats; Sandra Emerson: Foreclosure Warrior

Saturday, February 2, 2013

Dignity Mortgages May Offer Help in the Homeownership Crisis

Were you financially unprepared for the housing crash?  Are you still dealing with bad credit despite your steady income?  A newly proposed mortgage loan might be an answer to your real estate woes.  Although Illinois has yet to see the same decrease in foreclosures that many other states are beginning to experience, future mortgages for those who were hard hit by the downswings of the economy may seem out of reach.  However, according to The Chicago Tribune, housing advocates are promoting a new kind of sub-prime loan that could have positive long-term effects.

What is the Dignity Mortgage?

Renamed the “Dignity Mortgage,” this type of loan is intended for potential buyers with lower incomes and lower credit scores.  The borrowing terms still begin with “the classic sub-prime tradeoff: a higher rate for a higher-risk clientele.”  In fact, a recent article in the National Mortgage Professional Magazine colloquially described the loan as “sub-prime with training wheels.”  Yet, while loans of this type begin with higher sub-prime interest rates, those same rates would later be reduced when the borrower makes timely payments.  In short, the Dignity Mortgage works on a “good behavior” system: it starts with a high interest rate, but it rewards you by lowering your interest rate as long as you consistently make on-time payments.

The idea for the dignity mortgage comes as a response to the increasing difficulty in obtaining a home loan.  As Illinois and the nation continue to feel the effects of the housing crash, access to homeownership is a serious concern.  Housing advocates specifically cite the need for a growth in homeownership in families with steady incomes who still fall within the low- to moderate-income brackets—groups that are noticeably underrepresented in the Federal Reserve home-lending statistics.  The dignity mortgage is intended as a homeownership solution.  

What are the Long-Term Effects?

Housing advocates see only positive outcomes with the dignity mortgage proposal, since the terms of the loans preclude many of the problems that led to the housing crash in the first place.  An article in American Banker indicates that dignity mortgages, unlike many of the harmful subprime loans that are now associated with foreclosures across the country, require credit counseling programs and proof of income before borrowing.  Additionally, the loans would require a 10% down payment—no more 100% financing.  A dignity mortgage could help you to “buy the home you need, not the home you may want.”

What does a loan like this mean for you in terms of costs, payments, and interest rates?  At the start of the loan, most borrowers will pay 1.25% more than the average good-credit borrower.  For example, a borrower with excellent credit might have an interest rate of 3.5%, while a dignity mortgage borrower may start with a 4.75% interest rate.  However, after only five years of consistent on-time payments, you could find yourself in the position of borrowers with nearly perfect credit and a large initial down payment: a 3.5% interest rate for the duration of your loan.  Although these mortgages have yet to be approved by lenders, housing advocates insist that these loans could help to increase homeownership while preventing future foreclosures.  Are you are currently at risk of foreclosure or reconsidering your homeownership options?  Contact a real estate attorney today to discuss your options.  

See Related Blog Posts:
Reestablish Your Credit and a New Loan May Be Possible Sooner than You Think; Housing Continues to Show Signs of Life