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NEW KINGZPRESS BOOKS & UPDATES Fees & Ethics In Consumer Bankruptcy Cases Legal Guide to Offers-in-Compromse Guide to Practice Under Bankruptcy Reform Discharging Taxes Under Bankruptcy Reform Fundamentals of Consumer Bkrtcy Practice The 3-Vol. Morgan King Bankruptcy Library IN THE WORKS: King's Guide to The Mortgage Bankruptcy Reform Act King's Avoiding and Handling Liens in Consumer Bankruptcy Cases King's Guide to The Means Test in Consumer Bankruptcy Cases
FREE: King's Bankruptcy Dictionary Marketing a Consumer Bankruptcy Practice Digest of BAPCPA Cases 2008 #3 BAPCPA: 29 Traps For The Unwary
DVD 7 Cheap Ways to Jumpstart Practice 
MORTGAGE MODIFICATION & LEGISLATION HOTSHEET
Edited by Morgan King OTHER ECONOMIC NEWS MORTGAGE NEWS LIBRARY MORTGAGE NEWS Dec. 19 2008 This press release was sent out today by NACBA. Maureen
Thompson Near Half of Homeowners in "Loan Modification? Programs Face Higher Monthly Payments; Failure of Voluntary Industry Efforts Hikes Pressure on Incoming Obama Administration, New Congress to Clear Way for Court-Supervised Modifications WASHINGTON, D.C. December 19, 2008 Much hyped "foreclosure prevention programs? relying on voluntary loan modifications are failing to reach a significant number of troubled homeowners and are often backfiring when they do so, according to newly updated research released today by the National Association of Consumer Bankruptcy Attorneys (NACBA). The across-the-board failure of these much ballyhooed "fixes? for the foreclosure crisis are expected to result in the new President and Congress facing considerable new pressure to clear the way for court-supervised loan modifications that will prove more beneficial for homeowners. MORTGAGE MODIFICATION & LEGISLATION HOTSHEET The findings released today by NACBA come on the heels of a dire new projection from Credit Suisse that "over 8 million foreclosures (are now) expected? over the next four years in the U.S. That astounding level accounts for 16 percent of all mortgages -- including 59 percent of all subprime mortgages and more than 11 percent of all other mortgages, including Alt-A, options ARMS and even those in the prime category. This new forecast from Credit Suisse is up sharply from the two to six million foreclosure range cited in previous estimates from industry sources. The new data presented today from Professor Alan White, Valparaiso University School of Law, Valparaiso, IN, is updated through November 2008 (http://www.hastingsgroup.com/Whiteupdate.pdf) and shows that: Less than 10 percent of the time do the voluntary programs result in a reduced principal loan balance with more than half of modifications capitalizing unpaid interest and fees into larger and more drawn out debt on the back end of the mortgage; and Only about a third (35 percent) of voluntary mortgage modifications reduce monthly payment burdens for homeowners, with nearly half (45 percent) actually saddling distressed homeowners with increased payments under the modifications. Just how badly are the voluntary modification programs flopping? To answer that question NACBA reviewed the publicly available data about the reach to date of the much-hyped programs. In one prominent case - the Hope for Homeowners Act FHA refinancing program passed by Congress with much fanfare earlier this year on the strength of forecasts that 400,000 homeowners would be aided - there have been only 312 applications to date -- and no mortgage modifications whatsoever have taken place. This is consistent with the most recent estimates from the National Association of Attorneys General that "nearly 8 out of 10 seriously delinquent homeowners are not on track for any loss mitigation outcome ... up from 7 in 10 in previous reports.? Henry Sommer, president, National Association of Consumer Bankruptcy Attorneys, Philadelphia PA., said: "Court-supervised loan modification is urgently needed to deal with this problem. We call on the incoming Obama administration and the new Congress to adopt this solution without delay. The American home mortgage foreclosure crisis has gone from the danger zone to the full-blown crisis stage. The number of foreclosures is growing rapidly and is reaching well beyond the subprime world to the American middle class. Despite a proliferation of voluntary programs, we are not seeing evidence of a meaningful number of sustainable loan modifications? Professor Alan White, Valparaiso University School of Law, Valparaiso, IN, said: "American homeowners are carrying 10.5 trillion dollars in mortgage debt, a number that has risen by 250 percent in the past decade. While banks have written down more than half a trillion in mortgages and mortgage-related securities, homeowners have gotten little or no relief. A broad range of economists from Nouriel Roubini to Ben Bernanke to Martin Feldstein have recognized the need to deleverage the American homeowner. The excess mortgage debt is depressing home prices and consumer spending, and acting as a drag on the broader economy. Empirical evidence from mortgage servicer reports to investors shows that for the most part, the necessary deleveraging of homeowners is not happening.? Alys Cohen, staff attorney, National Consumer Law Center (NCLC), Washington, DC, said: "Sadly, the magnitude of the foreclosure crisis dwarfs the response to date from the financial services industry, regulators and lawmakers. The lack of aggressive and meaningful solutions from federal policymakers is baffling, particularly given that most economists, including the Chairman of the Federal Reserve Board and the Chair of the FDIC, have recognized that the financial crisis can be resolved by only by dealing with its root cause - the escalating millions of mortgage foreclosures ... The foreclosure crisis will not be resolved through voluntary efforts on the part of the financial services industry alone. Despite widespread efforts to encourage voluntary loan modifications, it is clear that the financial services industry has failed to implement a loan modification strategy on a scale that matches the urgent crisis we are facing. Bankruptcy courts must be empowered to implement economically rational loan modifications where the parties are unwilling or unable to do so on their own. Loan modifications through the bankruptcy courts can help accomplish this on a sufficient scale and timeframe to have a meaningful impact. Congress should lift the ban on judicial modification of primary residence mortgages, as part of the solution to stemming the tide of avoidable foreclosures and stabilizing the housing market and the broader economy. The need is urgent. The time for action is now.? When NACBA, NCLC, Consumer Federation of America (CFA) and the Center for Responsible Lending (CRL) called on Congress in April 2007 to move aggressively to stem the growing flood of home foreclosures, it was estimated that some 2 million homeowners were at risk of foreclosure. And, at the time, the financial services industry accused the organizations of being overly pessimistic about the likely toll of foreclosures. However, it turns out we were low-balling quite significantly the number of foreclosures. As of September 2008, a full 1.2 million homeowners with subprime loans already had lost their homes to foreclosure. Another 1.7 million families with subprime loans are seriously delinquent and at risk of losing their homes in the very near future. Credit Suisse ("Foreclosure Update: Over 8 million foreclosures expected,? December 2008) now estimates that 8.1 million mortgages will be in foreclosure over the next four years, representing 16 percent of all mortgages. Disturbingly, Credit Suisse finds that the problem has spread from subprime loans to option ARMs, and even prime loans. FAILURE OF "FORECLOSURE PREVENTION PROGRAMS? Bowing to the demands of the financial services industry that created the foreclosure crisis in the first place, every program put in place to prevent foreclosures has relied on the voluntary cooperation of mortgage servicers who handle the mortgages that, in most cases, are owned by securitized trusts that have issued bonds to investors. It is painfully obvious that these voluntary programs have failed to stem the tide of foreclosures. The few successful attempts at mortgage modification, such as the FDIC efforts with IndyMac, have largely dealt with those rare mortgages that are still owned by a single lender, rather than securitized loans. Voluntary programs are failing for a variety of reasons that cannot be changed without action by the Obama Administration and new Congress: Multiple owners make voluntary modification impossible. Many borrowers and even their servicers simply cannot locate the holders of the mortgage to negotiate with, or there are multiple owners all of whom would have to agree to modification; the loans have been sliced and diced so many times that all of the owners cannot be found and brought into the process. Fear of investor lawsuits blocks voluntary modifications. The servicer has obligations to the investors who have purchased the mortgage-backed securities through pooling and servicing contracts, and the interests of these investors conflict. Servicers are hesitant to modify the loans because they are concerned that it will impact different tranches of the security differently, and thereby raise the risk of investor lawsuits when one or more tranche loses potential income. At least one servicer has already been sued. Under the current system, the legally safest course for the servicer clearly is foreclosure. Piggyback seconds block voluntary modifications. Perhaps the most intractable problem is the fact that a third to a half of all 2006 subprime borrowers took out piggyback second mortgages on their homes at the same time they took out their first mortgages. In these cases, the holders of the first mortgages have no incentive to provide modifications that would free up borrower resources to make payments on the second mortgages. At the same time, the holders of the second mortgages have no incentive to support effective modifications by waiving their rights, which would likely cause them to face a 100 percent loss. The holders of the second mortgages are better off waiting to see if a borrower can make a few payments before foreclosure. Overwhelmed servicers are not set up to negotiate modifications. Hundreds of thousands of borrowers are asking for relief from organizations that traditionally have had a "collections? mentality of trying to foreclose as quickly as possible. They know how to foreclose, and the foreclosure process has been increasingly automated to maximize the fees the servicers receive. Many receive no extra compensation for working on modifications. These servicers are not disposed to postponing foreclosure or equipped to handle case-by-case negotiations. Many also have monetary incentives to foreclose rather than modify. In practice, these roadblocks - all of which were warned of months ago by NACBA and other groups - have resulted in gridlock in the voluntary modification programs. Consider these examples: Hope for Homeowners Act --This law, passed with much fanfare last spring, provides an FHA refinancing if the servicer agrees to accept slightly less than the value of the home in satisfaction of the debt. The thought was that servicers would agree to accept less than 100% payment if that payment was guaranteed by the government. It was expected that the program would help 400,000 homeowners but since it opened in October, fewer than 312 people have applied for the program and no loans have been modified. The result? As Credit Suisse notes in its December 2008 report: "While loan modifications and similar interventions (such as the Hope for Homeowners FHA refinancing program) could help to reduce the march of foreclosures, the proliferation of generally timid loan mod programs with confusing loan features raises significant doubt as to whether the current loan mod momentum is sufficient to reduce foreclosures materially ... modified loans remain a small percentage of delinquent loans and loans in foreclosure, even though servicers have ramped up their efforts in recent months.? Hope Now -- This voluntary effort by the industry, promoted by the Administration, has produced more public relations than real results. Homeowners have great difficulties getting answers because the services do not have adequate staff to deal with requests. When some accommodation is reached, servicers virtually never reduce loan principal and often enter into repayment agreements that do not even reduce loan payments. Studies have shown that most of the workouts negotiated through Hope Now provide at best temporary short-term relief from foreclosure, and in a large percentage of cases, the homeowner cannot keep up with payments because the agreement does not adequately modify the loan. As of September 2008, Hope Now worked out loan modifications resulting in lower monthly payments for 266,087 homeowners; loan modifications with the same or HIGHER monthly payments for 226,667 families; and 780,000 short term repayment plans. FDIC/IndyMac - This effort covers 65,000 borrowers who are more than two months delinquent on their mortgage, but doesn't reduce the outstanding debt in any meaningful way and therefore has not attracted much interest. So far, 7,200 homeowners have modified their loans under this program. And, after a two-month moratorium on foreclosures pending the modification program, IndyMac foreclosures in November skyrocketed 242 percent from October, according to Mark Hanson of the Field Check Group. Most recently, FDIC Chairwoman Bair has proposed a program that would, like Hope for Homeowners, provide government guarantees as a carrot to entice servicers to make modifications of interest rates and defer principal payments under a formula based on the debtor's ability to pay. If the payments are modified by at least 10 percent, (but only for five years) the government would guarantee 50 percent of the loan losses. The Treasury Department noted that this program could actually give servicers an incentive to make minimal modifications and then foreclose to collect the guarantees. While NACBA applauds FDIC Chair Bair's commitment to homeowners, it fears that, other than in cases where a planned foreclosure would be more lucrative for the servicer, this program also would have few takers. It is likely that, for all the same reasons plaguing existing programs, servicers would be unwilling to make meaningful modifications of most loans voluntarily. Moreover, the program does nothing to deal with the problem of piggyback second mortgages, often the riskiest loans given by the most irresponsible lenders. Holders of second mortgages can block the modification of the first mortgage, even though the second mortgage typically would be wiped out in a foreclosure sale. Absent reductions in principal, the program will neither sufficiently reduce payments nor prevent later foreclosures when homeowners need to move or cannot refinance to resolve a financial problem. As even Federal Reserve Board Chairman Bernanke has noted, "With low or negative equity ... a stressed borrower has less ability (because there is no home equity to tap) and less financial incentive to try to remain in the home.? At best, the Bair proposal would help only a small number of homeowners and, in most cases, only postpone the foreclosure problem - at considerable expense to taxpayers.ABOUT NACBA The National Association of Consumer Bankruptcy Attorneys (http://www.nacba.org) is the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA now has more than 3200 members located in all 50 states and Puerto Rico. CONTACT: Patrick Mitchell, (703) 276-3266, or pmitchell@hastingsgroup.com. EDITOR'S NOTE: A streaming audio replay of this news event will be available on the Web athttp://www.nacba.org as of 6 p.m. ET on December 18, 2008. _____________ Dec. 14 2008 On-again off-again efforts to adopt legislation giving bankruptcy judges the power to alter mortgage terms in bankruptcy cases is on again. Several versions of the legislation have been introduced, including S. 2636 (Foreclosure Prevention Act of 2008)), H.R. 7307 (Homeowner Assistance and Taxpayer Protectioon Act), and a related bill, H.R. 7267 (Mortgage Credit Repair Act of 2008). The most recent version (H.R. 7307) was introduced Nov. 20, 2008 and referred to the Committee on Financial Services and the Committee on the Judiciary. The preamble to the bill states "To help struggling families stay in their homes and to ensure that taxpayers are protected when the Secretary of the Treasury purchases equity shares in financial institutions." The Act would amend the Tax Code in certain respects that appear to make it more feasible for financial institutions, changes to the Emergency Economic Stabilization Act of 2008, and the United States Bankruptcy Code. In a nutshell, the legislation would amend Title 11 to provide a waiver of the credit counseling requirement in cases where the home is in foreclosure, establish a minimum homestead exemption of $75,000 for homeowners over 55 years of age, and provide the bankruptcy court in chapter 13 cases the power to modify a secured claim secured by the principal residence if the debtor's income is insufficient to retain possession by curing a default and maintaining payments, and other minor changes. PLAN TO HELP TROUBLED HOMEOWNERS MAKES HEADWAY National Assn. of Home Builders is now open to letting bankruptcy judges cut borrowers' loan payments and reduce their principal. By Peter Y. Hong December 11, 2008 Bankruptcy judges would be able to reduce payments and principal for homeowners with troubled mortgages under a proposal that appeared to be gaining momentum Wednesday. The plan to allow the courts to order lenders to modify upside-down home mortgages appeared all but dead on Capitol Hill just several weeks ago, when it was struck from the federal financial bailout bill. But on Wednesday, Rep. John Conyers Jr. (D-Mich.) introduced a new version of the bankruptcy expansion proposal in the House of Representatives, just a day after a key lobbying group withdrew its opposition.
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SEE ALSO SERVICES See
selections at left Basic Bankruptcy Law For Paralegals Bankruptcy Litigation & Practice 2 vols.
THOMPSON / WEST Bankruptcy For The General Practitioner
NCLC
CEB California
Bankruptcy
Practice
Bankruptcy Courts & Procedures Bankruptcy Insolvency & Accounting 6th Ed.
THOMPSON / RIA Federal Tax Collection, Liens, & Levies Corporate Bankruptcy, Tools, &, Strategies
LRP Understanding Bankruptcy Reform 2005 Bankruptcy Crimes Law & Procedure Guide to Consumer Bankruptcy Law Collier Bankruptcy Exemption Guide Collier Consumer Bankruptcy Practice Guide Collier Family Law & The Bankruptcy Code
NORTON INSTITUTE
THE RUTTER GROUP California Bankruptcy Practice Guide ARGYLE PUBLISHING
CCH Bennett's A-Z Guide to Bankruptcy: A Professional's Handbook Bennett on Bankruptcy, 11th edition LEGALPUB 2008 United States Bankruptcy Code & Rules
 January 8 to 12, 2009 Max Gardner's
Bankruptcy Bootcamp Jan 23 to 25, 2009 Pete Barry &
Max Gardner) February 20-22, 2009 March 27-29, 2009 May 29-30 2009 NACBA Oct. 18-21 2009 NCBJ April
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MORTGAGE MODIFICATION LEGISLATION NEWS
California bankruptcies up a staggering 81%! Written
by Bill Rochelle Bankruptcy filings in the U.S. have almost topped 1 million this year, with one month to go. Another 91,355 companies and individuals sought court protection from creditors in November, according to data compiled by Automated Access to Court Electronic Records, a service of Jupiter ESources LLC in Oklahoma City. A similar number in December would push the total for 2008 to around 1.1 million, up 33 percent from last year. Daily filings climbed 2.6 percent last month from October, and ``exceeded 5,000 per day for the first time since the 2005 changes to the bankruptcy law,'' Mike Bickford, AACER's president, said in an e-mail. He expects a total of more than 1.1 million filings for the year. Bankruptcy filings have increased as the economy slows and lenders tighten credit standards. This year's forecast total will still trail the record 2.1 million filings in 2005, when 630,000 Americans filed in the two weeks before revisions to federal bankruptcy laws that October made it more difficult for individuals to erase debts. This year's increase has been led by companies. Through the first 11 months of 2008, almost 9,000 filed for reorganization or liquidation in Chapter 11, already 43 percent more than for all of 2007. Including businesses that filed to liquidate in Chapter 7, commercial filings in the first 11 months have surpassed last year's total by 35 percent. California is seeing the biggest increase, with bankruptcy filings up 81 percent this year from 2007. Arizona ranks second with a 78 percent gain and Delaware is third at 74 percent.
Dec. 14 2008 PLAN TO HELP TROUBLED HOMEOWNERS MAKES HEADWAY National Assn. of Home Builders is now open to letting bankruptcy judges cut borrowers' loan payments and reduce their principal. By Peter Y. Hong December 11, 2008 Bankruptcy judges would be able to reduce payments and principal for homeowners with troubled mortgages under a proposal that appeared to be gaining momentum Wednesday. The plan to allow the courts to order lenders to modify upside-down home mortgages appeared all but dead on Capitol Hill just several weeks ago, when it was struck from the federal financial bailout bill. But on Wednesday, Rep. John Conyers Jr. (D-Mich.) introduced a new version of the bankruptcy expansion proposal in the House of Representatives, just a day after a key lobbying group withdrew its opposition.
FED COULD REMAKE CREDIT CARD REGULATIONS New Rules Would Ban Retroactive Rate Hikes By Nancy Trejos Washington
Post Staff Writer The Federal Reserve on Thursday will vote on sweeping reform of the credit card industry that would ban practices such as retroactively increasing interest rates at will and charging late fees when consumers are not given a reasonable amount of time to make payments. The Fed, which has been considering the proposed changes since May, declined this week to release details of the final draft regulations. But banking officials and consumer advocates said that they do not expect substantial changes before the vote, especially since members of Congress have pressured the Fed not to water down the rules. 12/04/08 CLASS-ACTION SUIT FOR ABUSIVE DEBT COLLECTION MAY GO FORWARD California Court Approves Class-Action Lawsuit Against Debt Collector Accused of Abusive Tactics Suit Says American Corrective Counseling Services Wrongly Threatened Consumers With Criminal Prosecution WASHINGTON, D.C. &endash; A California court has ruled that almost a million consumers who were victims of an overly aggressive debt collector are eligible to participate in a class-action lawsuit against the company.
As the nation's economic woes mount, one-fourth of all American workers (24%) are worried about losing their job in the near future. That figure includes 37% of manufacturing workers and 31% of IT workers.  These findings are from the Rasmussen Employment Index, a monthly measure of U.S. worker confidence in the employment market. The Employment Index fell four points in November to 68.1 after falling a staggering sixteen points in October.
CREDIT CARD DELINQUENCIES RISE The percentage of people who were delinquent on their credit card payments rose in the third quarter from the same time last year, while average debt per borrower jumped 7.7 percent, according to credit reporting agency TransUnion. For the quarter ended September 30, 1.09 percent of credit card holders were delinquent at least 90 days on one or more of their cards. That compares with 1.03 percent for the third quarter of 2007, and an increase from 1.04 percent in the second quarter of 2008. The rise in delinquencies in the third quarter reflects cyclical trends that show late payments tend to rise in the late summer months, according to Ezra Becker, principal consultant in TransUnion's financial services group. |
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HERE. Dec. 26 2008 Virtual Bankruptcy Assistants: How Can They Help? The BAPCPA has made filing bankruptcy a more tedious and wearing process, not only for clients, but also for the bankruptcy attorney. The mandatory "reasonable investigation" of client's claims, or Due Diligence, is time consuming and a job within itself. With so many obstacles imposed by the new law, Is there a way bankruptcy attorneys can stay on tract and continue to provide quality service to their clients while still running a profitable practice? YES THERE IS! Bankruptcy attorneys can find relief in the services of a Virtual Bankruptcy Assistant! What exactly is a "Virtual Bankruptcy Assistant"? A Virtual Bankruptcy Assistant is a bankruptcy assistant or paralegal who provides legal support to bankruptcy attorneys, such services being supplied with the use of technology such as the Internet, email, fax and remote access systems. The Virtual Bankruptcy Assistant is retained on an as-needed basis. She or he is not an employee of the law firm. Rather, a Virtual Bankruptcy Assistant is retained as an independent contractor and is paid a flat fee for each bankruptcy petition completed. Such an arrangement saves the attorneys the costs that are incurred when hiring in-house employees, (i.e., benefits, vacation pay, taxes). For
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by Kathleen P. March, Esq. and Judge Alan M. Ahart. 2009 This comprehensive practice guide is a four-volume alternative to the "big sets." Expert step-by-step guidance for each major Chapter under the Bankruptcy Code as amended by BAPCPA. Authoritative answers from bankruptcy experts; cites and explains key cases, statutes rules and policies; includes unique "practice pointers" for effective representation of debtors and creditors in bankruptcy court. For more information click on "Rutter Group" under "PUBLISHERS" to left
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