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Fresno Bankruptcy Blog
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Fresno Bankruptcy & Credit Blog
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Information about bankruptcy and credit in Fresno. Provided by www.fresnobklaw.com.
Note: This is general information and should not be construed as legal advice.
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New Bankruptcy Judges' Bill Proposes New E.D. Cal Judgeships - HR 4506
Congress is considering H.R. 4506, a bill to add new bankruptcy judgeships. The bill passed the house nearly unanimously and is expected to pass the Senate. Under the new "pay-go" standards, the bill must be revenue neutral. It achieves this by increasing the Chapter 7 filing fee by $1 and Chapter 11 by $42.
The bill would add two (2) new bankruptcy judgeships to the Eastern District of California and make permanent the temporary judgeship currently in place, bringing to nine (9) the total number of bankruptcy judgeships in the Eastern District of California.
The Eastern District of California has one of the highest judicial workloads in the country and adding two new bankruptcy judges to the Eastern District would be a significant step toward relieving that workload.
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Proposed FTC Rule Bans Up-Front Fees for Modifications
California law already prohibits upfront fees for loan modification services. Now the Federal Trade Commission has prposed a similar rule.
The Federal Trade Commission has proposed a new rule that would prohibit third parties, including loan modification specialists and loss mitigation attorneys, from collecting payment for foreclosure prevention services until after they obtain a documented offer from a lender or servicer for a modification or other form of mortgage relief.
Interestingly, the rule would apply to attorneys as well, with a limited exception for attorneys representing a consumer in a bankruptcy or other legal proceeding.
“Homeowners facing foreclosure or struggling to make mortgage payments shouldn’t have to contend with fraudulent ‘companies’ that don’t provide what they promise,” FTC Chairman Jon Leibowitz said. “The proposed rule would outlaw up-front fees so companies can’t take the money and run.”
The FTC has brought 28 cases against companies suspected of foreclosure rescue and mortgage modification scams, and state and federal law enforcement partners have brought hundreds more. According to the agency, generally these cases charged that companies do not provide the services they promise and that they misrepresent their affiliation with the government and government housing assistance programs, including the Making Home Affordable program.
Apparently, this has become a big enough problem that the FTC in Washington has heard about it.
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Beware of Southern California Loan Modification Lawyers
This article in the Fresno Bee should give pause to anyone thinking about hiring one of the Southern California loan modification mills. What generally happens is the client sees an internet or other advertisement, calls the number and reaches a call center. They then are asked to put down $1,500 - 5,000 to get a loan modification. Sometimes, a loan modification can be achieved, but oftentimes, the client could have obtained a loan modification without the significant cost incurred. The California State Bar has been actively investigating these cases, providing news releases tracking their progress (See July 15, 2009, August 15, 2009, September 18, 2009, October 21, 2009, and November 10, 2009). The article also notes the following:
The loss to the public from loan-modification cases is in the millions of dollars, State Bar officials say. Most of the attorneys under investigation are from Southern California, but many of the victims live in the central San Joaquin Valley, enticed by loan-modification companies that advertised on the Internet.
I have seen that happen time and time again. I have also seen similar lawyers from Southern California try to represent clients in Bankruptcy Court in Fresno and they almost always make a mess of the case, especially in Chapter 13. If you are thinking about filing a bankruptcy, hire a local lawyer.
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Major Asset Manager Proposes Allowing Mortgage Modifications in Bankruptcy
BlackRock, the world's largest asset manager, has proposed creating a bankruptcy option that allows modification of home loans in bankruptcy. Interestingly, BlackRock is not proposing that it be done in Chapter 13, but rather through some other bankruptcy route that allows all of the unsecured debt to be discharged so that home owners can focus on making the new payment on their mortgage. I think that Chapter 13 is still the best place for allowing loan modifications, especially in districts where there is no set minimum that has to be paid to unsecured creditors. Chapter 13 trustees, debtors' attorneys, creditors' attorneys and bankruptcy judges are the best-equipped people to handle these types of modifications, because they do it every day with every other type of collateral.
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The Real Message of the Massachusetts Senate Election
Everyone is trying to figure out the meaning behind Republican Scott Brown's mind-numbing 5-point victory to fill Teddy Kennedy's seat in the U.S. Senate. Most people think it has something to do with the health care legislation, and I would agree with that. I think people don't believe that government can actually keep health care costs down. But I think the real issue is that people are so upset the health care bill has taken up almost a year of legislative work, when the big issue is the economy and legislative action on the economy has been either non-existent or completely ineffectual. Instead of wasting all this time on health care, why don't you put your heads together to come up with some economic reforms, voters are saying.
I think Congress thought they had done somethink like that with the stimulus and loan modification program passed early in the year. But neither of those programs have done anything to put a dent in the economic situation. The stimulus is a pork-laden and bureacratically-entangled mess, which is incredibly inefficient at getting money back into the economy. And the loan modification program has proven a collosal failure. Only a small percentage of the estimated loan modifications have taken place. President Obama indicated he wanted to use a carrot and stick approach to loan modifications. Well, Mr. President, we have tried the carrot and it has not worked. Its time for the stick.
It is time to look again at...
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The Problem of Loan Modification Assistance Providers
Clients and acquaintances often ask me if I can refer them to someone who can help get a loan modification. Unfortunately, I can't. I don't know of anyone who is going to do any better of a job than the client could do working directly with the lender. So I usually suggest that clients try to negotiate directly with the lender to obtain a loan modification. Almost all loan modifications now are done through the HAMP program, so I put together an article on the HAMP program that gives a basic framework of how that program works.
Recently, I noticed a press release from the State Bar identifying various loan modifications that were under investigation. (The release is dated 9/18/09.) I don't know what the current status of this investigation is, but I would highly suggest that individuals in California considering using a loan modification law firm contact the California State Bar to see if there have been any complaints regarding the firm they propose to use.
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Personal Bankruptcy Filings Rising Fast - WSJ.com
This is an interesting article from the Wall Street Journal entitled, "Personal Bankruptcy Filings Rising Fast." The article states that in 2009 there was a 32% rise in bankruptcies over 2008. The question is, will this trend continue in 2010? Only time will tell, but I am inclined to think that it will level off a little bit in 2010. In the article, they state that bankruptcies had peaked, which is probably accurate. But I would not be surprised if they stayed close to that peak for quite some time to come.
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Citi decides not to play Scrooge for the holidays, but in January all bets are off
Trying to repair an image that is pretty bad right now, Citi has decided not to pursue foreclosures for the Christmas holidays. But, because life does go on, they will start back up again in January. Citi estimates this will benefit about 2,000 homeowners, albeit temporarily. What if Citi got some real Christmas cheer and looked seriously at some of the 100,000 loan modification requests they have received? That would be something. Unfortunately, Citi has only modified 270 of those loans. Think about that--a 2.7% loan modification rate. That is pretty bad and brings us back to the point discussed on this blog many times: the only way lenders will make serious changes to their loan modification process is if Congress allows mortgages to be modified in Chapter 13 bankruptcy. Will it happen? Only time will tell.
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AB 1046 Signed by Governor - $25,000 Increased Homestead Exemption
The Governor signed AB 1046 (click here for history) on October 11. The bill increases the homestead exemption by $25,000. The full bill can be found here. The homestead exemption is increased to $75,000 for an individual debtor, $100,000 for debtor who is member of a family unit, and $175,000 for debtors 65 and over and disabled debtors. The bill takes effect on January 1, 2010.
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COP: HAMP Not Enough; Chapter 13 Mortgage Modification Needed
The Congressional Oversight Panel appointed to oversee the Home Affordability Modification Program (HAMP) has put out a very interesting 6-month report on the effectiveness of HAMP. The report first analyzes the current market and what has happened to date.
The report notes that the crisis has come in waves. The first was driven by speculators abandoning homes when the prices started falling. This drove the prices even lower and brought about the second wave with Option ARMs and other exotic mortgages resetting, homeowners were unable to refinance and faced the choice of whether or not to let the house go because they could not refinance to an affordable payment.
The next wave has been a little more subtle but has continued to grow unabated and is now the dominant factor in the residential market: negative equity. Life changes sometimes force relocation and debtors do not have the option of staying in a particular house. If the house has positive equity, it is easy to sell the house. But, if the house has no equity, it must either be foreclosed upon or sold at a short sale. Foreclosures and short sales almost always result in lower sales prices than market sales. Thus, market values have been driven lower and lower forcing more and more people into the negative equity situation and the cycle perpetuates itself. In California, approximately 35% of all homeowners have no equity in their home. In Nevada, approximately 60% of all homeowners have...
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Bankruptcy News 
