April 29, 2010

Ruthless People?

Filed under: Short Sale

HI!

We listed our home for sale July 2009 with one agent with 4 total showings and 3 open houses with ZERO attendees. (lovely, eh…). We re-listed with her as of Feb 1, 2010==but as I learned two weeks ago she did NOT receive the paperwork (what the?…..) and has NOT listed the house since Feb 1, 2010.

I called mortgage holder in January-EverHome Mortgage- and asked what to do. Was told that I was NOT a candidate for loss mitigation since I was current on my payments, the only way to get attention is to be late on payments, “Although I’m not telling you NOT to pay your mortgage.”

Right.

So we stopped paying.

Three months behind, foreclosure notice sent with payment four. Paid it, and got the financial package paperwork to move forward with deed in lieu, short sale–something.

Found a new agent last week, signed him and he has shown the property four times in the last week including a possible rental. There is ONE interested family looking to initially offer 250,000 on the home and our mortgage is 277,900.

Ok, so now do we accept the short sale and go through that process with Everhome and take the credit hit, and request the full release from extra debt? Or do we take out a 40,000 personal loan (if we can even get one….) to cover the difference?

Will it STILL show as short sale if we bring the $$ to the table to cover the difference? What if we accept the 250,000 from the buyers and pay the difference?

Sharon (more…)

April 28, 2010

Chase Short Sale Full Release

In addition to Chase accepting a 92.7% discounted payoff, Chase has agreed they “will waive the remaining deficiency balance on the account”.

It’s a beautiful thing – another wonderful day in the world of short sales.

Chase Short Sale with No Deficiency

April 20, 2010

Monica’s Deed in Lieu

Filed under: Deed-in-Lieu

We have just completed a deed in lieu.

In the “agreement” it has a checkmark next to “full satisfaction” and not “partial satisfaction” of loan.

Under “Value of Property” heading it reads:
Borrower and Lender hereby agree that as of the date of this agreement, the fair market value of the property is estimated at approx the amount owed to the lender, and said value shall be used in all closing and settlement statements for the conveyance of the property to lender.”

We had no HUD statement, we had no closing docs other than the deed and misc filings that ever had an actual amount. How do I know how much was forgiven? Is it silly for to think that they did a straight across trade – our house for full satisfacation and we will not get a 1099 or deficiency judgement in the future?

We have just received a “Release and Satisfaction of Mortgage” filed with the beuearu of conveyances from MERS that boilerplates the “full payment and satisfaction”.

I have the feeling that this is just a document that allows them to get free title and doesn’t actually mean we have been “released” of payment and/or forgiven debt and/or deficiency judgement? Am I correct on this?

This was a deed in lieu, not a shortsale or foreclosure – do I still need to worry about what they sold the house for? Will that decide a figure for me?

What in the world am I really looking for in the way of documents that lets me know where I stand with forgiven debt or deficiency judgement? What are the magical words you want to see in this case?

Lot’s of questions… sorry… I can’t seem to find an answer from anyone… including a 300.00 per hour “real estate” attorney who started taking notes from ME! Ugh.

Thank you for your help…

Monica (more…)

April 16, 2010

DLA of the ten derogatory accounts

I’m trying to decide on the best course of action to improve my credit score as quickly as possible.  Like everyone else, right?  Here’s a quick overview of my situation:  There are 14 accounts on my credit report, 10 of which have negative history on them for late payments and serious delinquency.

The good news is that my credit situation has drastically improved, and I have paid all of the account to zero balance except for one.  This same creditor (it was a credit union) has three accounts listed on my report.  I had two accounts with them – an auto loan and a credit line.  I’m not sure why the three accounts, but the one that shows a balance doesn’t even have an account number.  The balance is around $3500.  I should also note the date of last activity was July, 2006.

My question is what is the best advice on how to handle this account that would best affect my score quickly?  They haven’t tried to collect on this in over 4 years.  It doesn’t seem likely that they would start now.  But the balance of the account makes my revolving credit ratio appear to be 100% because all of my other accounts are zero balance and closed.  I have read about pay for delete letters.  Is that possible in this case?  If so, how much should I offer them for settlement?  Are there any better solutions?

As it stands, my credit score is 609.  I’m looking to purchase a house as soon as possible.  I need at least a 620 to get there.  Any thoughts on how long it would take to raise my score to 620?

John (more…)

April 14, 2010

National Enterprise Systems Laundry List of Violations

Filed under: Collections,FDCPA

News Release – Ohio Attorney General Richard Cordray has secured $207,500 in consumer restitution and a comparable amount in payment to the state’s Consumer Protection Enforcement Fund in a settlement with Solon-based National Enterprise Systems, Inc. (NES). In July, Cordray sued the collection agency for harassing consumers when attempting to collect on debt. As a result of the agreed consent judgment filed in the United States District Court for the Northern District of Ohio in Cleveland, NES has agreed to make changes in its debt collection practices as well as the agreed amount of payments.

“Our lawsuit outlined a laundry list of clear violations of consumers’ rights,” said Cordray. “With today’s settlement, not only will consumers receive restitution but the company will implement new policies and procedures to prevent this from happening again. Ohioans deserve a fighting chance to pay back debt without being demeaned, deceived or harassed.”

Cordray’s lawsuit charged NES with engaging in practices that violated Ohio’s Consumer Sales Practices Act (CSPA) and the federal Fair Debt Collection Practices Act (FDCPA). Some of the practices alleged included calling and harassing consumers’ coworkers and family members, calling before 8 a.m. and after 9 p.m., using abusive language, attempting to collect debts consumers did not owe, failing to verify debts and making unauthorized withdrawals from consumers’ bank accounts.

Cordray’s office has more than 390 complaints on record against NES. Consumers who filed complaints prior to the agreement may be eligible to receive $200 or more in restitution and will receive notification through the mail.

In addition to restitution, NES has agreed to the following provisions to improve its business practices:

  • Train employees to comply with applicable state and federal law.
  • Send written communication within five days of first contact and include the amount of debt, the name of the creditor, a notice that the consumer has 30 days to dispute debt, how to dispute the debt and how to ask for validation of the debt.
  • Include in settlement agreements the total amount due, settlement amount, monthly payment amount and approval of creditor.
  • Add a disclosure on all written collection communication stating that Ohio law requires fair treatment of consumers and that consumers can write a letter to prevent a debt collector from contacting them. Additionally, the communication will provide the Ohio Attorney General office’s contact information for consumers to file concerns.

Cordray said today that his office will continue to monitor NES and all debt collection agencies with Ohio accounts. He encourages Ohioans who have been the subject of overly aggressive debt collection practices to contact his office by calling (800) 282-0515 or SpeakOutOhio.gov.

To read the agreed consent judgment in full, click here.

April 12, 2010

HAFA is a lot of press about nothing…

HousingWire – There is a fundamental flaw to the Making Home Affordable Foreclosure Alternatives (HAFA) program that will keep the program from reaching its full potential, panelists told the audience today in Dallas at the Source Media Mortgage Servicing Conference.

That flaw is that the program requires the borrower exhaust the Making Home Affordable Modification Program (HAMP) before proceeding to a HAFA short sale. That strategy takes borrowers who are committed to staying in their homes and transfers the loss mitigation strategies from a workout plan to vacancy, said Robert Hunter, a vice president of Amherst Securities.

“I think HAFA is a lot of press about nothing at the end of the day,” he said.

Average borrowers trying to save their homes aren’t going to call a real estate agent the day after they’re told no. They’re going to try to wait it out, especially if they’re unemployed and trying to get a new job, said Bryan Bolton, senior vice president of loss mitigation at the mortgage division of Citigroup (C [1]: 4.62 +1.54%).

HAMP is seeing some success in helping borrowers, Bolton told the audience, adding it’s made the public more aware of alternatives to foreclosure.

“HAMP gets a bad rap,” Bolton said, adding at a high level, the program works because it puts some standardization on modifications for the industry.

The panel session, titled “How to Stop the Bleeding — Or What to do About Defaults” also covered the topic of principle forgiveness. Barbara Peterson, assistant vice president and assistant manager of default servicing at M&I Corp. (MI [2]: 9.06 +1.68%), is vehemently opposed to principle forgiveness, especially for borrowers who are underwater on their mortgages, but can still afford their monthly payments.

“Loss of equity is not a hardship. It’s unfortunate, but it’s not a hardship,” Peterson said. “You’re just going to have to ride it out. You can afford the payment.”

M&I does not participate in HAMP, and as such, will not participate in HAFA. The bank instead uses its own in-house modification program for borrowers with true, documented hardships. So far, the program’s resulted in a recidivism rate that’s less than 20%. That rate includes not just owner-occupied properties, but also rental homes and pieces of undeveloped land, as long as the borrower has a hardship the bank can verify.

For those looking for a modification with the threat of strategic default, Peterson has no sympathy.

“If you want to default and ruin your credit, there’s nothing I can do to stop you, but if you don’t have a hardship, I can’t help you,” she said.

A change in the modification environment is the source of borrower hardship. Previously, borrowers with exotic mortgage products were the first wave to default, now lenders are seeing more borrowers that are unemployed looking for mortgage assistance.

That said, the panel’s moderator, Diane Pendley, a Fitch Ratings managing director, presented data that showed prime mortgage defaults seem to have capped at 10%. In addition, the most recent data shows that subprime defaults are also down 0.5%.

It could be simply the modifications are starting to happening, or income tax returns showing up and being used for payments, she said. “It’s definitely a good sign and we’ll take it.”

April 8, 2010

HAFA Initial Reports

Filed under: Short Sale

DSNews – The administration’s Home Affordable Foreclosure Alternatives (HAFA) program hasn’t even been in effect for a full week, and positive feedback is already coming in.

Loan Resolution Corporation (LRC), a Scottsdale, Arizona-based pre-foreclosure asset manager that acts as a vendor for banks implementing HAFA, said it expects a tremendous surge in short sales to accompany the recent implementation of this new program.

“We found that a lot of short sale offers were being withheld from our clients so that they could be submitted to us under the new HAFA rules,” said Travis Hamel Olsen, COO of LRC. “There is definitely substantial interest from the public about this program—this gives them a graceful way to exit the property.”

HAFA, which officially went into effect on Monday, aims to help at-risk homeowners through the use of short sales or deeds-in-lieu. The government implemented this program in an effort to reduce foreclosures and “prop up” the national ailing real estate market, Loan Resolution Corporation said.

To encourage involvement in HAFA, the Treasury Department recently increased financial incentives for participants. Under the program, qualified homeowners are now eligible for $3,000 in relocation assistance, and servicers will receive $1,500 to cover administrative and processing costs for a short sale or deed-in-lieu completed under the program. In addition, subordinate lien holders may receive up to $6,000 in contributions.

“In speaking with junior lien holders, they have been very positive about the subordinate lien contribution increase from $3,000 to $6,000—a lot more short sales will get approved because of this,” Olsen said. “We are working with multiple top-five banks to assist them in reducing the blight of foreclosures in our neighborhoods across America.”

LRC offers a variety of default services, with short sales being at its core competency. The company says it pioneered the proactive approach to short sales and offers HAFA and other pre-approved short sale programs to help mortgage servicers reduce costs and increase resolutions.

April 2, 2010

Pay Garnishments on the Rise

Filed under: Wage Garnishment

NYTimes – When the bank sued Leann Weaver for not paying her credit card balance, her reaction was typical for someone in that situation. Personal and financial setbacks weighed her down, and she knew she owed the $2,470. So she never went to court to defend herself.

She was startled by what happened next. When she swiped her debit card at the grocery store, it was declined. It turned out Capital One Bank had taken $224.25 from her paycheck, a quarter of her wages for two weeks of work at a retail chain, and her bank account was overdrawn.

“They’re kicking somebody who’s already in the dirt,” she said.

One of the worst economic downturns of modern history has produced a big increase in the number of delinquent borrowers, and creditors are suing them by the millions. Concern is mounting in government and among consumer advocates that the debtors are not always getting a fair shake in these cases.

Most consumers never offer a defense, and creditors win their lawsuits without having to offer proof of the debts, much less justify to a judge the huge interest charges and penalties they often tack on.

After winning, creditors can secure a court order to seize part of the debtor’s paycheck or the funds in a bank account, a procedure called garnishment. No national statistics are kept, but the pay seizures are rising fast in some areas — up 121 percent in the Phoenix area since 2005, and 55 percent in the Atlanta area since 2004. In Cleveland, garnishments jumped 30 percent between 2008 and 2009 alone.

Debt collectors say they are being forced into the action by combative debtors who dodge attempts to settle. “I think there’s a lack of accountability among debtors, and a lack of interest in reaching out to their creditors to resolve things amicably,” said Fred N. Blitt, president of the National Association of Retail Collection Attorneys.

Bankruptcy can clear away most debts. Yet sweeping changes to federal law in 2005 — pushed by the banking lobby — complicated that process and more than doubled the average cost of filing, to more than $2,000. Many low-income debtors must save for months before they can afford to go broke.

In some states, courts allow creditors to charge high interest rates for years after a lawsuit is decided in their favor. In others, creditors can win lawsuits by default and seize wages and bank accounts without a case ever appearing before a judge.

Lack of participation is the most fundamental problem. Some consumers do not even know they are being sued; the people who are supposed to serve them with formal notice have sometimes been caught skipping that step and doctoring the paperwork.

In far more cases, consumers are served but still do not offer a defense. Few can afford lawyers; others are intimidated or confused. In their absence, judges can offer little relief.

In the rare event that a consumer battles back, creditors frequently lack the documentation to prove their claim, and cases are dropped. That is because many past-due debts are owned not by the banks that issued them, but by debt collectors who bought, for cents on the dollar, a list of names and amounts due.

“If the consumers were armed with more education about how to defend against these debts, they’d be successful,” said Jeffrey Lipman, a civil magistrate in Des Moines.

The case of Sidney Jones shows how punishing the system can be. In January 2001, Mr. Jones, 45, a maintenance worker from California Crossroads, Va., took out a $4,097 personal loan from Beneficial Virginia, a subprime lender now owned by HSBC, the big bank.

He fell behind, and Beneficial sued. Mr. Jones did not appear in court. “I just thought they were going to take what I owed,” he said.

By default, Beneficial won a judgment of $4,750, plus $900 in lawyers’ fees, with the debt accruing interest at 27.55 percent until paid in full. The bank started garnishing his wages in March 2003.

Over the next six years, the bank deducted more than $10,000 from Mr. Jones’s paychecks, but he made little headway on his debt. According to a court order secured by Beneficial’s lawyers last spring, he still owed the company $3,965, a sum nearly equal to the original loan amount.

Mr. Jones, who did not graduate from high school, was baffled. “Where did all this money go that I paid them?” he said.

Dale Pittman, a consumer law lawyer in Petersburg, Va. , took Mr. Jones’s case without charge, and found that all but $134 of his payments had gone toward interest, fees and court costs. “It’s a perfectly legal result under Virginia law,” Mr. Pittman said.

HSBC said it ceased collection shortly after Mr. Pittman took the case, but declined further comment. “We are confident we are treating our customers fairly and with integrity,” Kate Durham, a spokeswoman for HSBC North America, said in an e-mail message.

The rare debtors who press their claims, and catch a sympathetic judge, have a shot at a result more to their liking.

Ruth M. Owens, a disabled Cleveland woman, was sued by Discover Bank in 2004 for an unpaid credit card. Ms. Owens offered a defense, sending a handwritten note to the court.

“After paying my monthly utilities, there is no money left except a little food money and sometimes it isn’t enough,” she wrote.

Robert Triozzi, a judge at the time, heard the case. He found that over a period of several years, Ms. Owens had paid nearly $3,500 on an original balance of $1,900. But Discover was suing her for $5,564, mostly for late fees, compound interest, penalties and other charges. He called Discover’s actions “unconscionable” and threw the case out.

Discover defended its actions. “This account was placed with an attorney only after all other efforts to reach the card member were exhausted,” Matthew Towson, a bank spokesman, said in an e-mail message.

Going to court is no guarantee of victory, of course. Consumers who do go are sometimes intercepted by collection lawyers, who press them to sign papers settling without a trial. These settlements may be against the interests of debtors, but they sign anyway.

“We’re signing off on a lot of settlement agreements where we shake our heads and ask, ‘Why is this person settling to this?’ ” Judge Lipman said.

For the working poor, losing a lawsuit can mean disaster. A 1968 federal law exempts 75 percent of a worker’s wages, or 30 times the minimum wage per week, from being taken in garnishment — whichever is less. But increases in the minimum wage have failed to keep up with inflation. As federal law stands now, just $217.50 a week is exempt from seizure. (A few states set higher cutoffs.)

The working poor “have difficulties maintaining payments on life’s necessities with their full paycheck,” said Angela Riccetti, a lawyer with Atlanta Legal Aid who represents indigent clients whose wages are being garnished. “You lose 25 percent of it and everything folds.”

For Leann Weaver, the woman at the grocery store, Capital One’s lawsuit made a bad situation worse. After being evicted from her apartment, she moved in with her grandparents. Without them, she might have ended up on the street or in a shelter, she said.

Capital One declined to comment on Ms. Weaver’s case. “We encourage anyone facing difficulties meeting their financial obligations to contact us right away,” Tatiana Stead, a bank spokeswoman, said in an e-mail message.

Ms. Weaver said she repeatedly asked Capital One for more time to pay her $2,470 debt, but last year the bank filed suit. She failed to show up in court, and a judgment was entered against her, swollen by $1,800 in interest and lawyers’ fees. Then the garnishment began, almost $500 a month, or a quarter of her pay.

“I can’t even look at my paychecks any more,” she said.

April 1, 2010

Short Sale After Bankruptcy

Paul:

I am in a trial modification with CHASE, ending April 2010. Payment in trial mod ok, but not sure about after that.  I am filing Chapter 13 bankruptcy the same month to strip my second mortgage and protect against an investment property that was foreclosed on. 

I would like to know if we can still pursue a short sale after we file, which is of interest to us after reading about the changes supposed to go in effect April 15th.  We are upside down $75000.00 in our house. 

We are trying to minimize the hit to our credit for when we want to buy another home down the road.  Is there any difference in trying to sell, or should we give the house back in the bankruptcy?

Thank you for all the useful information we have found on your site!

Jason (more…)

Back to Broken Credit Blog