Massachusetts Bankruptcy Lawyer » mortgage

Making homes affordable through HAMP

Administrator — Wed, 20 Oct 2010 14:15:14 +0000

Many homeowners considering bankruptcy for unsecured debts have questions about concurrently modifying their home mortgages using federal relief available through the Home Affordable Modification Program (HAMP). This relief is available for homeowners whose monthly mortgage payment exceeds 31 percent of their verified gross (pre-tax) income. These homeowners must own a one- to four-unit home that is their principal residence; have received their mortgage on or before January 1, 2009; have a mortgage payment (including taxes, insurance, and homeowners’ association dues) that is more than 31 percent of their gross (pre-tax) monthly income; owe an amount that is less than or equal to $729,750 on their first mortgage for a one-unit property (with higher limits for two- to four-unit properties); and have a documented financial hardship. The Making Home Affordable Program which administers this relief uses applicants’ financial information to determine whether the applicants suffer hardship.

If you are in an active (open) Chapter 7 or Chapter 13 bankruptcy case, you must be considered for a HAMP modification if you, your attorney, or the bankruptcy trustee submits a request to the loan servicer. If you are in a HAMP trial period plan and subsequently file bankruptcy, you may not be denied a HAMP modification on the basis of the bankruptcy filing. Loan servicers can extend the trial period, but only for an additional two months, resulting in a maximum five-month trial period. Even if you have received a Chapter 7 bankruptcy discharge, you are eligible for HAMP. If you did not reaffirm your mortgage debt, the following language must be inserted in the Home Affordable Modification Agreement: “I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the Loan Documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.”

Financial reform implications

Administrator — Tue, 20 Jul 2010 18:48:35 +0000

The public has been eager for “financial reform” in the wake of a severely weakened real estate market and a slowdown in economic growth so sudden that many institutions within and associated with the financial industry required government assistance. Mortgage applicants will now be required to be on more solid footing, as lenders will now be required to fully document a borrower’s income before agreeing to provide a mortgage loan. Lenders will also be required to determine that borrowers can otherwise repay their loans. While it is unfortunate that homebuyers wound up in situations where they could not afford their loans, with these reforms it is unlikely there will in the future be the wave of debtors facing a mortgage deficiency after foreclosure or short sale. It is also likely that certain credit accounts might be given preference by retail merchants for the lower transaction fees associated with them. This will hopefully give consumers more choices and perhaps encourage debtors to keep their accounts in good standing.

Foreclosure process

Administrator — Wed, 17 Feb 2010 18:51:21 +0000

In the February 8, 2010 issue of Massachusetts Lawyers Weekly, James L. Rogal, who practices at Ablitt Law Offices in Woburn, MA representing mortgage lenders and servicers doing foreclosures, wrote an opinion piece titled “Borrowers bear responsibility in foreclosures.” What may be of interest is his explanation of the foreclosure process in Massachusetts. There is not the swiftness with the foreclosure process that there is for other legal actions such as eviction or wage garnishment. Banks rarely begin foreclosure after the first month of default. Only after the borrower is already several months in default does the mortgage lender or servicer send the borrower a notice of default giving him 30 days to cure the default. The next step is that the borrower is served with a 90-day right-to-cure letter as required by G.L.c. 244, s.35A (Acts of 2007) in the event the default is not cured or the borrower does not enter into some type of workout with the mortgagee. The bank cannot conduct any foreclosure activity during this 90-day period other than collecting principal and interest. Only after the 90-day period if the borrower is still in default can the bank file a complaint to foreclose with either the Land Court or the Superior Court. In about three to four months, the Land Court issues an order of notice with a return day approximately 45 to 60 days later. At that time, the formal notice of foreclosure is served on the borrower. The foreclosure sale by public auction is scheduled after the return of service is filed and after the judgment is issued by the court. The bank serves the borrower with a notice of sale as required by G.L.c.244, s.14. This notice of sale period lasts an additional 25 to 30 days. This whole process from service of the 90-day right-to-cure letter to completion of the foreclosure sale is about 160 to 180 days if the complaint is filed in Land Court and a little less if in Superior Court.

The entire process definitely lasts longer than a typical Chapter 7 bankruptcy case. While these steps are particular to Massachusetts, banks have to go through the procedures of the local state courts in the home’s jurisdiction in order to recover their interest in the property. The process is not easy for banks, but when they are faced with no other choice after a borrower’s default, they need to begin. Borrowers can take from this the lesson that the best way to protect their own liability after the start of foreclosure is to seek a discharge of their debts if they qualify to do so.

Disclaimer: This does not constitute legal advice. Please contact a bankruptcy or foreclosure attorney in your jurisdiction for questions related to your individual situation.

Mortgage modification

Administrator — Mon, 15 Feb 2010 20:00:19 +0000

Homeowners filing for bankruptcy but keeping their house may wonder how long they need to wait before they are able to modify the terms of their mortgage. The answer would depend on the bankruptcy case. Mortgage modification is a popular option these days for homeowners wishing to continue staying where they are but needing assistance because of limitations on their means along with drastic reductions in home values. While the automatic stay applies to all accounts held by a bankruptcy debtor, the mortgage company may contact their account holder directly to discuss the terms of continued payments. However, they would be prevented from practically effectuating a change in mortgage terms until after the debtor has received an order of discharge for a Chapter 7 case or until after the approval of a Chapter 13 reorganization plan by the court. In the District of Massachusetts, the deadline for objections is generally set approximately two months after the date of the creditors’ meeting and soon thereafter the court can be expected to grant an order of discharge if there are no objections. However, if the case is prolonged for any reason, this would then prolong the granting of discharge for this period. Debtors should know from their bankruptcy lawyer the estimated period of time for them to receive a Chapter 7 order of discharge based upon the date set for objections to the case.

Disclaimer: This does not constitute legal advice. Please contact a bankruptcy attorney in your jurisdiction for questions related to your individual situation.

Short sales and foreclosures – Walking away may not be that easy

Administrator — Wed, 03 Feb 2010 21:35:38 +0000

Short sales (selling a home for less than its value) and foreclosures, are more common these days, but are not necessarily the right prescription for homeowners facing decreasing property values, especially when the borrower can continue to afford mortgage payments. A recent article, expresses surprise at homeowners facing responsibility for a loan deficiency. This result is the combination of the poor real estate market and lenders’ need to enforce the terms of their original contract.

Simply put, a short sale with a release of title is not enough. A release of any loans owing on the property needs to be negotiated as well or the short sale is little more than a foreclosure in practice. Former property owners whose homes were foreclosed upon even several years prior would be well-advised to carefully review their credit report in order to determine that they still do not owe for such accounts. A qualified real estate attorney in your area should be able to inform you of your liability to pay a loan after short sale and may refer you to a qualified bankruptcy practitioner who can help you possibly discharge or at least work out this debt.

Mortgage fraud

Administrator — Tue, 04 Aug 2009 19:45:30 +0000

I just read this article about Mortgage fraud in Reader’s Digest. Unless you have been living under a rock for the past year, surely you would have heard about the companies that advertise on TV/Radio/fliers about Credit consolidation and how they can reduce your mortgage or refinance your home or reduce your debt. They make it seem so easy. But the reality is that it’s never that easy to refinance or reduce your debt. The article provides some great information and resources at the bottom if you really need help with foreclosure or if you think you may be the victim of a housing scam. Also, if you have come to the stage of thinking about bankruptcy, please bear in mind that many bankruptcy petition preparers who advertise really low rates, may be only petition preparers and not attorneys. A bankruptcy attorney would be able to guide you through the whole process of bankruptcy and put your mind at ease. There are various reliable resources online to point you in the right direction starting with your local area bar association. The Massachusetts Bar Association has a Dial-a-Lawyer program where you can call and ask questions to an attorney directly free of charge.

Please be careful during these tough times as the article mentions that scammers may be out there to take advantage of you when you are scared and confused. As always I provide a disclaimer that if you have any questions about Bankruptcy please contact a qualified Bankruptcy attorney in your jurisdiction.