Foreclosures in Your Neighborhood May Affect Your Home Value

As the housing market crash drags on, foreclosures are on the rise due to adjustable rate mortgage payments increasing beyond home owner's budget. Obviously, the foreclosure will affect the home owner's credit report and the ability to purchase another home in the future but what about the home owner's neighbors? Analysts state that 44.5 million homeowners living near foreclosed properties will see a decrease in their home value of up to $5,000 in the coming months. Eric Stein of the nonprofit research group Center for Responsible Lending, estimates that 44.5 million homeowners living near foreclosed properties will see home values drop by an average of $5,000, as foreclosures surge. "The impact of foreclosures on local communities are far worse than any impact these bills would have on the mortgage market." Lower home values mean more trouble for an already doomed home mortgage industry. Less equity in properties makes it more difficult to refinance and cash out equity. That in turn means less money for consumer spending. All this adds up to a very lean holiday season for consumer spending.

See the full article in the Washington Post about pending bankruptcy legislation to help homeowners.

Top 5 Things to Do If You Are Considering Bankruptcy

Every day I counsel with debtors from all walks of life about their remedies under the Bankruptcy code. The biggest hurdles that most debtors face is meeting the document requirements of the new Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Below are the Top 5 things that I would recommend to consumers who may be considering bankruptcy now or possibly in the future.

1. Keep all your paystubs. You will need to show six months of paystubs to your attorney. If you haven't been keeping paystubs, start keeping them now and get a report from your employer of the missing stubs.
2. Always keep a copy of any tax returns you file. Too often people rely upon the tax preparer to keep a copy of the return and are disappointed when they realize the preparer has closed up shop until next year. If you don't have copies of the last four years returns, contact the IRS now and request a transcript.
3. Keep track of your household expenses. If possible, keep receipts for household bills such as vehicle expenses, utilities and charitable contributions.
4. Stop getting credit. Sounds like a no-brainer but you would be surprised at the people who continue apply for credit even up until the day they file.
5. Stop using credit cards now. Period. No explanation necessary on that one.

Junk Fees in Mortgage Foreclosures Only Increase Burden on Consumer

As a consumer bankruptcy attorney I often marvel at the amount of mysterious fees that mortgage companies charge consumers. For instance, I routinely see claims charging hundreds of dollars for inspections fees and appraisals. Recently I requested copies of the so-called inspections and appraisals for which the lender had charged my debtor. I am still waiting for the documents, by the way and question if they even exist. Even still, I find it unconscionable that mortgage companies would charge for payoff statements and fax fees. Only recently has this practice come to the attention of the mainstream media and consumer advocates. Consider a recent article in the New York Times which claims the fees aren't chump change. Countrywide alone raked in $285 million in late fees from customers, a 20% rise from 2005 figures. The article states:

Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.

“Regulators need to look beyond their current, myopic focus on loan origination and consider how servicers’ calculation and collection practices leave families vulnerable to foreclosure,” said Katherine M. Porter, associate professor of law at the University of Iowa.

Mmmm. How do you keep a failing lender from going bankrupt? One late fee at a time.

Alabama House Speaker Creates Task Force to Study Poverty

House Speaker Seth Hammett has formed a task force to study poverty in Alabama. The House Task Force on Poverty intends to identify conditions that create or worsen poverty and to propose legislation or public policy initiatives to reduce or eliminate poverty. Sorry, Mr. Speaker, but you don't need a task force to figure out why people are poor and getting poorer.
Every day I represent people who can't afford to pay their bills and are forced to file bankruptcy. Of those people that I represent, I would say that 95% are unable to pay their bills due to circumstances beyond their control including divorce, job layoffs and high medical expenses for debtors who are uninsured. Combine that with a state that allows corporations to hide behind "at will" laws and payday lenders to take advantage of the consumers who are most vulnerable. Add in the subprime market fiasco which continues to raise the debtor's house payments and higher prices for necessities such as gas and groceries and you have a recipe for poverty. It's not rocket science Mr. Hammett.

Congress Tries to Help Drowning Homeowners

Homeowners who risk losing their home in foreclosure now have some hope. Congress is considering a bill to allow homeowners who file bankruptcy to modify or change the terms of their home mortgages the same way they can modify car loans and other secured debts through their Chapter 13 plan.
HR 3609 Emergency Home Ownership and Mortgage Equity Protection Act would change the current law which does not allow a residential mortgage to be modified in a Chapter 13 bankruptcy. The current law only acts as a temporary fix to allow homeowners to catch up the arrears through the Chapter 13 plan but it does nothing to change the payments on the mortgage. So, if a homeowner has been coerced into an adjustable rate mortgage and their payments have reset to an amount which they can't afford, merely stopping a foreclosure and not addressing the high payments will only put them right back where they started from with the added burden of a bankruptcy on their credit report. The legislation can only help lenders because they will not be burdened with foreclosure fees and they would still be receiving what they would have gotten for the home at a foreclosure sale.
See the text of the bill here.
A second bill, H.R. 3915 Mortgage Reform and Anti-Predatory Lending Act of 2007, would establish common-sense standards to prevent the kind of reckless lending that took place in 2005-2006 and now has so many families in danger of losing their homes.
See the text of the bill here.

Mortgage Lenders Misled Consumers

Many of you heard recently about the push for mortgage companies to refinance or offer workout options for borrowers who risk losing their homes due to skyrocketing adjustable mortgage payments. Some mortgage companies even assured the public that they were in fact offering workout plans to help these homeowner keep their properties. A recent MSN article shows how well mortgage companies keep their promises. The article states:

"A recent survey from Moody's Investors Service of the top 16 subprime loan servicers -- which handle $950 billion in loans, or 80% of the market -- found that they had modified only 1% of their loans that had reset to higher interest rates during January, April and July 2007."

Obviously lenders are not being entirely truthful with the public.

See the article: http://realestate.msn.com/buying/Article2.aspx?cp-documentid=5658441&GT1=10632