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Foreclosures In The Third Quarter Topped The Record

While Wall Street might be recovering it is clear that Main Street is not.  That is not an unusual disconnect, but it does represent a reason for a spike in bankruptcy filings.

According to CNN and other sources, despite government and lender efforts to halt foreclosures, in the third quarter of this year 937,840 homes received a foreclosure letter, whether a default notice, auction notice or bank repossession notice.  This according to RealtyTrac.  This means that 1 in  every 136 homes in the United States were in foreclosure during the 3rd quarter.  This is a 5% increase from the second quarter, and a 23% jump over the third quarter of 2008.  The numbers are down slightly for September, but not by much.

These statistics are disturbing for a number of reasons, not the least of which the stats demonstrate that foreclosures are rampant, and there does not seem to be any end in sight.

As what happens with most bulk operations, this is resulting in less oversight by mortgage servicing companies that tends to follow debtors into bankruptcy.  As a result, the automatic stay is violated in aggressive, and sometimes unusual, ways, as the mortgage companies work at recovering not only properties but in recouping their losses.

The bottom line is that this plow-through philosophy in regard to mortgage loans in default, and the systematic drive to recover losses by the mortgage servicing companies, results in bad bankruptcy practices.

(Videos) The YouTube Debtors Revolt Is Winning Some Victories

As to the YouTube based Debtors Revolt, you have to believe that consumers have at least found a new way of making their plight heard by the powers that be at these large financial institutions.  And, there are signs that, at least in limited circumstances, that the tactic is working.

Now as reported by HuffPo, Bank of America has cut another deal with a YouTuber that its call center and lack of concern had previously ignored.  It is strange that the bank staff cannot feel compelled to listen to their customers and debtors when an appeal is made in person and in private, but they cannot ignore the appeal when it is made in public.  That, if nothing else, represents a shameful practice.

We presented the YouTube video of Ben Frasier on this site earlier.  (See it below as well).  Mr. Frasier stated that he would not make any more payments on a $30,000 personal line of credit unless Bank of America would let him settle up with a lump sum.  Bank of America was not interested in the offer when he made it over the telephone.  Bank of America apparently took notice when it was made public.

First, Bank of America settled with Ann Minch who helped start the YouTube revolution back in September.  (See her video below as well).  Now, it has agreed to settle with Ben Frasier.

As was reported on HuffPo, BofA's agent made the following offer, "Based on the new payment amount from you of 15,134.78 and the credits to that account that I stated below, it would leave a remaining balance on the account of roughly $12,215.00. I would then be able to set that amount to a 60 month payoff term and an interest rate of 8.99%. The new payment on that amount for the 60 months would be roughly $260.00".  Mr. Frasier stated that he would accept the offer as soon as he saw it on paper. He told the HuffPo that he is happy with the deal even though he thought the way he got it was ridiculous.

Read more at: http://www.huffingtonpost.com/2009/10/09/debtors-revolt-bank-of-am_n_315351.html

Read more at: http://www.huffingtonpost.com/2009/10/09/debtors-revolt-bank-of-am_n_315351.html

The Bank Tax On The Middle Class

As reported by HuffPo and others of late, banks and credit unions in this country raked in an eye-popping $24 billion in overdraft fees in 2008, this according to the nonprofit Center for Responsible Lending.  But, that is not the scary statistic.  That would be that this figure is an increase of 35% from 2006.  These fees and increases effected 51 million people, and they do not even consider another substantial increase in these fees this year.  Some say this year the fees will exceed $27 billion and, as it has been pointed out, this is the first time that banks and credit unions have increased these fees during a recession.  In short, they are kicking people when they are down.

How bad is this?

Well, it represents about $470 per person per bank account affected.  It means that the poor cannot effectively afford a bank account to manage their money in this increasingly online and debit card based world, and it means that everyone else is forced to live with a type of bank tax, the amount of which most would scream about if it was being handed out by the federal government.  The only ones that avoid this tax are the richest bank customer.  And, I do not really know, but I would bet, that a bank would not be silly enough to rip this money out of the bank account of a congressperson (Republican or Democrat).  Otherwise, the tax is so pervasive that no one else can much escape it.

Now, of course, the banks and credit unions bill these fees as a convenience for customers who otherwise would see their purchases denied.  The problem is that the cost of such losses is nowhere near the level charged.  Further, the banks and credit unions have configured their systems so as to present them as a trap for consumers who do not know the precise dollar amount in their checking accounts.

It is fine to say everyone should know at all times their balance, but in this day of debit cards, coupled with online providers and the banks dipping into customers' accounts at will (often changing their collection dates, increasing the amounts taken from the account and on other terms without fair warning).  A perfect example of this is that, as a condition of my non-negotiable contract for health insurance for my family, these funds come out of my account each month.  In the past, these funds came out on the 20th of each month (or the 22nd depending on a weekend or holiday).  Now you can plan for this.  Except, I receive a letter from my insurance company informing me in August that my premium would increase substantially come my October payment.  Two things happen, of which I was not aware, however.  First, the insurance company took out the higher amount in September.  Secondarily, they decided, probably for profitability reasons, to unilaterally change the debit date to the 16th of the month.

These issues arise constantly for most people.  It use to be that banks would take this into account with their good customers and waive these fees if asked.  Bank of America, for one, as been reported as directing its staff not to do this any longer.

The problem with this being a profit machine for the banks and credit unions, is that they manipulate the system to bankrupt many who have these types of events happen.  For example, since it is programmable, when it comes to tallying the fees, some banks post debits from the highest amount to the lowest, rather than chronologically, or the lowest to the highest, so a $4 purchase at 10 a.m. at Starbucks, for example, is posted to the account after a $68 dinner bill that created a negative balance, making each subject to a fee.

Now, it has been reported by Law.Com that Wachovia, Bank of America, and Citibank have been sued over "bad-faith" overdraft fees, and probably for good reason. It is such a problem that regulators and legislators are trying to beat back after years of failed attempts. The Federal Reserve is considering new rules, and Representative Carolyn Maloney (D-N.Y.) introduced a bill in March that calls for consumers to be alerted every time a debit card purchase would overdraw an account. Senator Chris Dodd (D-Conn.) is expected to introduce similar legislation.  Only because of this, banks such as Bank of America, JPMorgan Chase and Wells Fargo announced changes to their overdraft programs. One such move: finally allowing customers to opt out of the service.

A recent survey of 679 adults by Consumers Union, the nonprofit publisher of Consumer Reports, found that two-thirds of bank customers said they preferred to expressly authorize overdraft transactions.  And, do not think about getting out of this by buying prepaid debit cards.  Now, The New York Times is reporting that banks hide enormous fees within the terms of these cards. 

What is amazing to me about his is that the so-called co-ops known as the credit unions, that were invented and are chartered to lower the costs of banking and keep the big banks honest, are not only not doing this job, but are conspiring along with the banks to rip off their customers.  So much for an alternative to a public option in anything we do.

The bottom line is that the wealthy, with their banking partners, gamble the economy into near oblivion, and then their lower income customers are taxed in a devious way to bail out the banks and credit unions.

It's wrong.  It is important for us here because overdraft fees tend to follow people into bankruptcy as well.  First, it removes the banks and credit union as an honest broker on which the debtor can rely when they file bankruptcy.  Most have to move their accounts, and now cannot open new accounts because these fees are owed.  Second, the fees are often represent the nails in the coffin that place the debtors over the edge in an already bad situation.

Another Customer Tries To Reach Bank Of America Using YouTube As A Last Resort

This is an interesting phenomena when you think about it.  Here, Darren Bryant of Pensacola, Florida cannot manage the "phone maze" to find someone of a high enough position to assist him in keeping his home in a way that would seem beneficial to he, Bank of America and the country.  He needs a home loan modification.  After trying everything, he resorts to a YouTube video in the hope that someone at Bank of America will see it and contact him.

It is, I think, the biggest problem facing bankruptcy practitioners as well.  When an automatic stay violation occurs, or any problem related to a loan arises, even bankruptcy attorneys find in nearly impossible to manage either the "phone maze" or the address maze to get a resolution with Bank of America, and other large national lenders, of the problem or difficulty.  The call center staff reached cannot generally handle issues effectively that fall outside of the normal matrix of problems programed on their computers.  And, even when this is not the case, the lead time or lag time to reach someone in control and have them respond exceeds all boundaries of timeliness or decency.

For example, when bankruptcy attorneys ask me should they send a letter or fax to Bank of America or other large lenders, demanding they stop violating the automatic stay, I always tell them yes.  Why?  Because I think it helps with any mitigation issues that arise because big financial institutions like to pretend that somehow, in hindsight, a simple letter or phone call would have helped.  But, inevitably, it is not going to matter.  The action is not going to stop, or it will be stopped months later after more harm is done.

Large financial institutions have long ago quit trying to work with customers, as they cannot seem to manage this.  They have resorted to riding rough shot over their customers, as communications and contracts are not a two-way street.  They operate by automated demand and not by any sort of mutual communication.

Typically, litigation is the only language with which these large financial institutions can deal.  Very frequently only the bank's attorney can locate someone that has the authority or even the interest in dealing with an issue of any size.  Yet still, I hear everyday from creditor attorneys that complain of the problems they have in making these contacts and corrections.

Are we all now to communicate to Bank of America and other lenders via video?

It is an interesting tactic and raises interesting questions.

Revolving Defaults On Home Loan Modifications

Of course you could look at a 50% recidivism rate as a bad thing, or you could look at it as 50% of all home loan modifications work.  That is a good thing.  Much like asking yourself if the glass is half full or half empty, it pretty much depends on whether you are drinking or pouring.  A 50% success rate in home loan modifications is good or bad depending on whether you are actually trying to save the American dream for everyone you can, or you are trying to bail out banks.  Are you looking at it as working to solve an individual crises or as a statistic?

Anyway, that is my overall thought about the subject.

As reported by HuffPo and other sources, a report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision reports that more than 50% of homeowners with loans modified earlier had missed at least two months of payments a year later.

Very telling in the report, however, was that among those who had their payments reduced by 20% or more, 60% of those had not defaulted again.

What the report says to me is that the program works substantially well, but that nothing works as well as when the all of the underlying difficulties that cased the homeowner's crises in the first place are not effectively addressed.  You can end the predatory lending and modify the loan, but if the payments are too high, if the person is still unemployed or under employed, of if the market conditions around the home, the loan of which was modified, have tanked so there is no exit strategy when needed, nothing is going to help that is not more comprehensive in scope.

This is the reason that Congress should have placed bankruptcy judges in charge of this crises.  Boots on the ground, as such, that can evaluate the matter up close and personally.  Also, bankruptcy represents a program that is already designed to deal more effectively with the comprehensive issues a person faces.

Typically, the home loan is only one of the problems.  If the homeowner has large medical bills, credit card bills, payday loans or other unsecured debt in a state where wage garnishment is likely, no amount of effort to restructure the home loan is going to be that helpful in the long run.

As for values and cramdowns, I think it is just silly to suggest financial institutions and the government are going to have to take back these houses at great expense, and then sell them for a highly discounted price, depressing the rest of the housing market for everyone else, and then suggesting that it is somehow not okay for distressed homeowners to keep their homes for its actual value.  Why does it make sense that investors and rich homeowners and agribusiness can do this, but that ordinary people cannot.  A former investment banker can cramdown a ocean front vacation home, but a middle class working stiff cannot.  It just offends the fundamental sense of justice, but ultimately this is what the Blue Dogs and nearly all of the Republicans think is right.

The question, ultimately, is whether ordinary people in financial trouble can reorganize and keep their homes at no further detriment for the financial institutions holding the note than what the financial institutions already face?  It is simply wrong to suggest that this should not be the case.  And, to the extent that we have revolving defaults is because we have assistance that does not even begin to address the comprehensive problem that homeowners are facing.

I understand that there are some Democrats in the House and Senate that intend to bring up the cramdown provisions again this Fall.  Let us all hope they do better this next time.  The real fate of too many real, salt of the earth, God-fearing people depend on it to save their way of life.

The YouTube Debtor Revolt Continues

Bearing Witness To The Tragedy That Is Debt Collection And Foreclosure From The Perspective Of Ordinary People

When oh when will we stop looking at foreclosures and debt and debt collection in some kind of clinical, dispassionate, scientific or unemotional way?  These are not numbers, or percentages, or stock price declines.  When it is called a "crises" it is so because we are to understand, not that it is problem for banks and insurance companies, but because we should not be neutral, inert, or relaxed about it.  Because we need to be subjective, and passionate and sensitive, understanding the pain and agony and confusion and upheaval actual people and families are going through.

If we understand this, if we understand the trauma and suffering real people are fighting to avoid in filing bankruptcy, if we can just come to somehow appreciate and acknowledge how disparaging such a world is that it must be avoided, then we would better understand the emotional damage that is done when creditors and others willfully violate the automatic stay and discharge injunctions issued in bankruptcy cases.

An HuffPo article recently brought some of this to light when it wrote about the heart-breaking wreckage that junk removers find when vacating foreclosed homes.

In the article they talk about finding the report cards of elementary school children still stuck to the refrigerators, the parents obviously proud of the As and Bs obtain.  The elderly that are locked in because they cannot escape, what seems to many of us, the insignificant level of debt.  The unemployed that cannot seem to get any traction in extracting themselves from the hell they find themselves.

It is all so real.  It has to be understood in a non-academic and personal way.  It needs to be internalized.

"Show Me The Note" Defense

There is one thing that the law requires in almost any real estate action, at least in those states or in bankruptcy court, where there is a judicial action concerning foreclosure.  That is the requirement to produce the actual real estate note, or at least a reasonable copy of it.

One would think that a lender, wishing to litigate on its note, or wishing to foreclose, would not have that much difficulty producing the darn thing.  But, that appears to be wrong.

According to an article in HuffPo, and other media outlets, a small homeowner rebellion called "show me the note" or "produce the note" is taking off with some degree of success.

The truth of the matter, in this  computer day and age, as these mortgages have been sliced up and transferred with great regularity, it just seems impossible for many creditors to produce the original mortgage note, as they must do if challenged.  This has provided an opportunity for lawyers to get foreclosures stopped and get modifications negotiated.

As quoted in the article, "You wouldn't imagine that the lenders would be that slovenly that they would not be able to produce adequate documentation of the debt," said House Financial Services Committee member Rep. Brad Miller (D-N.C.). "But apparently a lot of times they really have been unable to."

When involving North Carolina's legal assistance to homeowners facing foreclosure, roughly one of every three mortgages has been found to have some substantial legal discrepancy.

During the securitization boom, millions of mortgages were sold and packaged into bonds -- often many times over, metastasizing into esoteric financial instruments -- for sale to investors. Each time, the paperwork should have been changing hands and the homeowner should have been notified that someone new held the note. But just as deciphering the true holder of the mortgage has become more and more difficult for homeowners -- Is it the servicer? Investor? Trustee? Original lender? -- the paperwork has also become difficult to track.

This also comes on top of the trend with the legal aid attorney in Florida, requiring proof as to actually owned the debt.  Now they are filing quiet title actions attempting to get title to the client's home.

In dismissing 14 foreclosure cases in 2007 based on a lack of proper documentation, a federal judge in Ohio admonished the lenders, stating their argument that "'Judge, you just don't understand how things work'...reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process."

Attorneys General Say Debt Collectors Inspire The Most Complaints

Now of course that is not surprising.  Especially in states like Texas where garnishment is difficult or impossible, I would assume that debt collectors are the motivation for most people filing bankruptcy.  Not for the fact that debt is owed and unpaid, but because of the harsh and repeated tactics the debtors are trying to avoid.

According to HuffPo's reporting, according to the National Association of Attorneys General (NAAG), more complaints were filed last year against debt collectors than any other industry.  This was unchanged from the same survey conducted in 2007.  Further, "Debt collectors generate more complaints than any other industry," according to the Federal Trade Commission's Web site.  In a February report on the industry, the FTC cited "major problems" and "recognized that certain debt collection litigation and arbitration practices appear to raise substantial consumer protection issues."

It should be no secret that most debt collectors serve no real purpose other than that of harassment.  Sometimes it is subtle but, as indicated in this article, much of the time it is not.  More importantly, from a bankruptcy standpoint, debt collectors do not know how, or do not care, to shut down the machine of collect activity just because a bankruptcy is filed.  You see this all of the time.  The bankruptcy is filed, the case and the existence of the stay is noticed out, but the inappropriate actions continue.  Often these inappropriate actions continue even when placed on notice to stop violating the stay by the bankruptcy attorneys.

Why is this so?

Most likely for the same reason that debt collectors represent the largest number of complaints to the various AGs and the FTC.  They do not make money if they are not stepping over the line.

Another way to look at it is that these are generally large organizations with people working in undesirable jobs.  It takes a lot of effort and manpower to get the collection machine moving.  And, as collectors will argue, all they hear are hard luck stories or reasons why they should not be calling.  So, they are trained to ignore these issues and continue on.  This often gets them in trouble both inside and outside of the bankruptcy context.

Woman And Her Belongings Removed From Her Home After WAMU Mistakenly Auctioned

Nobody but nobody likes their mortgage servicing company.  The stories of bureaucratic SNAFUs, rude people who will not listen when told they are making a mistake, and complete arrogance that they can darn well do what they want leads often to some horrific mistakes.  This occurs both inside and outside bankruptcy.

NBC Miami reports of such an incident involving a Anna Ramirez when Washington Mutual (which is now part of Chase) auctioned off her $260,000.00 home for $87,000.00 and then, without any warning whatsoever, showed up with Miami-Dade police officers and removed her, her husband, her daughter, her grandchildren and tossed of their belongings from the house on the front yard.  The family was given just three hours to get themselves out of the house, and their belongings off the front lawn.

The problem with the auction and the eviction?

Anna Ramirez was not behind on her house payments, the house was not in foreclosure, the house was not for sale, there was no foreclosure letter, no entry and detainer notice, or nothing else to warn them.

The mortgage company obviously blames the Miami-Dade Clerk's office for the mistake, which was eventually reversed by a Miami-Dade judge who allowed the family to return to their home,  But, it is hard to see how the matter should have been placed with the Miami-Dade authorities by WAMU in the first place.

The Ramirez family had lived in their home for three years and only recently refinanced the home with the bank.

This situation actually occurs all of the time in a Chapter 13 context.  A foreclosure is posted, a bankruptcy is then filed, notice goes out, and whether notice is ignored, not received or some other mishap occurs, the foreclosure process does not stop.

Most of the time the mishap does not escalate to this level as only the foreclosure has to be reversed.  But, the situation is illustrative of fear that is associated when mortgage companies are allowed to run rampant irregardless of the bankruptcy filing.  Maybe the homeowners are not evicted as we have in the case at hand, in the long run, but the fear still exists.  This results in mental anguish.

And, it is also important to note that my firm has handled a number of stay violations in which, by the time the case is referred, the debtors have already been evicted and their belonging removed to the front yard.

Bankruptcy attorneys and debtors need to remember to always be vigilant, proactive and timely as to bankruptcy notice.  Maybe it does not stop the willful conduct, but it at least gives the debtor a cause of action and possibility of recovery for a willful violation of the stay when it does occur.