If you are currently in a chapter 13 can you qualify for an FHA mortgage? 

The chapter 13 plan was approved but with the debtor surrendering the 2 properties that have NOT been offically foreclosed.

Can the trustee help the debtor by not letting the mortgage company pursue foreclosure since the properties are surrendered and the mortgage companies did not object to the confirmation plan?

Also there was a pending lawsuit that made it difficult beyond the debtor’s control to hold the properties thus surrendering and moved toward confirmation of debtor’s plan.

FHA guidelines stupilate that you can’t have any foreclose property for 3 years but will consider if the foreclosure happened beyond the debtor control. The debtors original filings have all been to pay back 100% to creditors but couldn’t due to lawsuit.  The debtor has strong employment and hasn’t missed any payments to chpter 13. 

Any advise????

Ana (more…)

Hi Paul!

In your response to Breath Inside the House–the Qualified Written Request, you stated that rescission in bankruptcy would only net the lender 10cents on the dollar. Can you explain how that happens?

Do you know of any cases where this was done?

Jeramiah

This is gonna take me a minute  I got divorced in 2005, and there was a house with a mortgage involved.  In the divorce papers, my ex-husband was supposed to sell the house, but guess what – he didn’t.  The home mortgage was a “rural development/USDA backed” loan…. So it took a while for the foreclosure process to happen, and I was in the dark meanwhile – and then the stimulus checks came out in 2008.  I didn’t get mine and I’m thinking “WHY NOT?!?!”  So I start calling around and find out that my stimulus check had been offset because of this house that was supposed to have been sold and now I owe 37,000 on it!!  ahh!! 

Well I filed bankruptcy in October of 2008, and my lawyer advised me that my tax refunds…etc shouldn’t be offset anymore.  So I got my final discharge papers and I figured it was safe to go ahead and file my 2008 taxes.  I waited until the date it was supposed to be deposited into my account, and guess what– another stinkin offset!!! 

So here it is, end of March, and I have called every one-eight-hundred number KNOWN TO MAN trying to find my money.  I’ve hit a dead end and don’t know who to contact now, and my lawyer and his paralegal say they are working on it, but I’ve been doing some reading on the internet and it almost seems as if USDA  backed loans aren’t eligible for discharge in bankruptcy…am I wrong in thinking this??  If that is the case, then I wasted a TON of money filing bankruptcy AND…..ruined my credit for what 10 years AKA FOREVER!!  anyway, any help you could offer would be greatly appreciated!! 

Thanks,
Deidre (more…)

I filed a chapter 7 bankruptcy and in 2005(under old laws). I did not reaffirm my mortgage and I have been struggling every since to keep up with the payments. I have decided to let it go and be foreclosed on. Since I did not reaffirm, will the foreclosure be listed under the time I filed in 2005 or will it show on my report for 2009. I would like to be able to purchase a much cheaper home, since the prices have dropped dramitically. Just wondering how this will affect me at this time. Do I have to wait another three years before I can try to obtain a mortgage? I have maintained my current credit every since 2005, The only debt I have is my mortgage. I have also had the same job for ten years. I really want to obtain a mortgage and have to do the land contract route>  thanks for any help you can give. I live in Michigan…RF

Ronda (more…)

Homeowner Affordability and Stability Plan

Executive Summary

The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country.

· Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance at lower mortgage rates.

· Millions of workers have lost their jobs or had their hours cut back, are now struggling to stay current on their mortgage payments – with nearly 6 million households facing possible foreclosure.

· Neighborhoods are struggling, as each foreclosed home reduces nearby property values by as much as 9 percent.

1. Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affortdable

2. A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners

3. Supporting Low Mortgage Rages by Strengthening Confidence in Fannie Mae and Freddie Mac.

The Homeowner Affordability and Stability Plan is part of the President’s broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. The key components of the Homeowner Affordability and Stability Plan are:

1. Affordability: Provide Access to Low-Cost Refinancing for Responsible Homeowners Suffering From Falling Home Prices

· Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.

· Reducing Monthly Payments: For many families, a low-cost refinancing could reduce mortgage payments by thousands of dollars per year:

o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has about $200,000 remaining on their mortgage, but the value of that home has fallen 15 percent to $221,000 – making them ineligible for today’s low interest rates that now generally require the borrower to have 20 percent home equity. Under this refinancing plan, that family could refinance to a rate near 5.16% – reducing their annual payments by over $2,300.

2. Stability: Create A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4 Million At-Risk Homeowners

· Helping Hard-Pressed Homeowners Stay in their Homes: This initiative is intended to reach millions of responsible homeowners who are struggling to afford their mortgage payments because of the current recession, yet cannot sell their homes because prices have fallen so significantly. Millions of hard-working families have seen their mortgage payments rise to 40 or even 50 percent of their monthly income – particularly those who received subprime and exotic loans with exploding terms and hidden fees. The Homeowner Stability Initiative helps those who commit to make reasonable monthly mortgage payments to stay in their homes – providing families with security and neighborhoods with stability.

· No Aid for Speculators: This initiative will go solely to helping homeowners who commit to make payments to stay in their home – it will not aid speculators or house flippers.

· Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.

· Providing Support for Responsible Homeowners: Because loan modifications are more likely to succeed if they are made before a borrower misses a payment, the plan will include households at risk of imminent default despite being current on their mortgage payments.

· Providing Loan Modifications to Bring Monthly Payments to Sustainable Levels: The Homeowner Stability Initiative has a simple goal: reduce the amount homeowners owe per month to sustainable levels. Using money allocated under the Financial Stability Plan and the full strength of Fannie Mae and Freddie Mac, this program has several key components:

§ A Shared Effort to Reduce Monthly Payments: For a sample household with payments adding up to 43 percent of his monthly income, the lender would first be responsible for bringing down interest rates so that the borrower’s monthly mortgage payment is no more than 38 percent of his or her income. Next, the initiative would match further reductions in interest payments dollar-for-dollar with the lender to bring that ratio down to 31 percent. If that borrower had a $220,000 mortgage, that could mean a reduction in monthly payments by over $400. That lower interest rate must be kept in place for five years, after which it could gradually be stepped up to the conforming loan rate in place at the time of the modification. Lenders will also be able to bring down monthly payments by reducing the principal owed on the mortgage, with Treasury sharing in the costs.

§ “Pay for Success” Incentives to Servicers: Servicers will receive an up-front fee of $1,000 for each eligible modification meeting guidelines established under this initiative. They will also receive “pay for success” fees – awarded monthly as long as the borrower stays current on the loan – of up to $1,000 each year for three years.

§ Incentives to Help Borrowers Stay Current: To provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as a borrower stays current on his or her loan, he or she can get up to $1,000 each year for five years.

§ Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, an incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind.

§ Home Price Decline Reserve Payments: To encourage lenders to modify more mortgages and enable more families to keep their homes, the Administration — together with the FDIC — has developed an innovative partial guarantee initiative. The insurance fund – to be created by the Treasury Department at a size of up to $10 billion – will be designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall even further later on. Holders of mortgages modified under the program would be provided with an additional insurance payment on each modified loan, linked to declines in the home price index.

· Institute Clear and Consistent Guidelines for Loan Modifications: Treasury will develop uniform guidance for loan modifications across the mortgage industry, working closely with the bank agencies and building on the FDIC’s pioneering work. The Guidelines will be used for the Administration’s new foreclosure prevention plan. Moreover, all financial institutions receiving Financial Stability Plan financial assistance going forward will be required to implement loan modification plans consistent with Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines for loans that they own or guarantee, and the Administration will work with regulators and other federal and state agencies to implement these guidelines across the entire mortgage market. The agencies will seek to apply these guidelines when permissible and appropriate to all loans owned or guaranteed by the federal government, including those owned or guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury, the Federal Reserve, the FDIC, Veterans’ Affairs and the Department of Agriculture.

· Other Comprehensive Measures to Reduce Foreclosure and Strengthen Communities
§ Require Strong Oversight, Reporting and Quarterly Meetings with Treasury, the FDIC, the Federal Reserve and HUD to Monitor Performance

§ Allow Judicial Modifications of Home Mortgages During Bankruptcy for Borrowers Who Have Run Out of Options

§ Provide $1.5 Billion in Relocation and Other Forms of Assistance to Renters Displaced by Foreclosure and $2 Billion in Neighborhood Stabilization Funds

§ Improve the Flexibility of Hope for Homeowners and Other FHA Programs to Modify and Refinance At-Risk Borrowers

3. Supporting Low Mortgage Rates By Strengthening Confidence in Fannie Mae and Freddie Mac:

· Ensuring Strength and Security of the Mortgage Market: Today, using funds already authorized in 2008 by Congress for this purpose, the Treasury Department is increasing its funding commitment to Fannie Mae and Freddie Mac to ensure the strength and security of the mortgage market and to help maintain mortgage affordability.

o Provide Forward-Looking Confidence: The increased funding will enable Fannie Mae and Freddie Mac to carry out ambitious efforts to ensure mortgage affordability for responsible homeowners, and provide forward-looking confidence in the mortgage market.

o Treasury is increasing its Preferred Stock Purchase Agreements to $200 billion each from their original level of $100 billion each.

· Promoting Stability and Liquidity: In addition, the Treasury Department will continue to purchase Fannie Mae and Freddie Mac mortgage-backed securities to promote stability and liquidity in the marketplace.

· Increasing The Size of Mortgage Portfolios: To ensure that Fannie Mae and Freddie Mac can continue to provide assistance in addressing problems in the housing market, Treasury will also be increasing the size of the GSEs’ retained mortgage portfolios allowed under the agreements – by $50 billion to $900 billion – along with corresponding increases in the allowable debt outstanding.

· Support State Housing Finance Agencies: The Administration will work with Fannie Mae and Freddie Mac to support state housing finance agencies in serving homebuyers.

· No EESA or Financial Stability Plan Money: The $200 billion in funding commitments are being made under the Housing and Economic Recovery Act and do not use any money from the Financial Stability Plan or Emergency Economic Stabilization Act/TARP.

Source – The Wall Street Journal

Hi Paul,

My cosigner for my Toyota filed bankruptcy.  Toyota Financial Services said that the entire account goes into bankruptcy and my credit will be affected even though I have made EVERY payment on time.  They said that it will show on my credit account bankruptcy. 

If my cosigner signs the reaffirmation agreement then after 90 days it will say my account is no longer in bankruptcy.  How will this effect my credit? 

Her lawyer won’t sign off on the reaffirmation agreement.  He told her that Toyota can’t do anything to hurt my credit.  Toyota said their policy is that the account goes into bankruptcy status and it effects everyone on the account. 

Who is right on this one? 

I have worked very hard to not mess up my credit anymore.

Melinda (more…)

I can no longer handle my mortgage payment, I talked to my lender and all they would do is freeze my current (too high) payment. I have made up my mind to foreclose and start anew.  I can handle my other bills, someone was telling me that a bankruptcy would be better than a foreclosure in the long run down the road to credit repair.  I did not think so, can u shed some light onn my situation and let me know if my credit score will be completely wiped out and how can I start repairing my credit.

thank U,

D (more…)

“In this case, Debtors sent a valid notice of rescission to the Defendants during the extended rescission period afforded them by the Defendants’ failure to provide each of them with two copies of the NOR.  As such, the Defendant’s security interest is void and they hold nothing more than an unsecured claim which will receive the same dividend as other unsecured claims under the Debtor’s Chapter 13 plan.  Moreover, the Debtors are only liable for the principal of the loan, minus the $16,143.32 which the parties stipulated was given by the Debtors in connection with the Refinancing as they are no longer liable for any finance or other charges…

In light of my findings with respect to the Debtors’ CCCDA claims, the Objection is sustained.  I find that Option One holds a unsecured claim in the amount of $142,806.68.”(emphasis added)

Jaaskelainen v. Wells Fargo Bank, N.A. (In re Jaaskelainen), 391 B.R. 627 (Bankr. D. Mass. 2008)

Here In re Hwang, 393 B.R. 701, 2008 Bankr. LEXIS 2460 ( Bankr. C.D. Cal., 2008) we have an interesting variation of negotiable instruments gone wild. 

Mortgageit, Inc. originated a mortgage loan on a Las Vegas, NV property and then Mortgageit transfers the loan to IndyMac Bank.  IndyMac subsequently gets taken over by the FDIC. 

Since payments apparently aren’t being made on the loan on time and the homeowner has filed a Chapter 7 bankruptcy, IndyMac seeks a relief from stay to foreclose. 

Here’s where it gets interesting.  The bankruptcy court learns through testimony of an IndyMac employee, that IndyMac no longer owns the note.  And IndyMac doesn’t know exactly who owns it, but they’d like to foreclose anyway as the servicing agent of the (missing) note’s owner.

The Court wasn’t having any of it and gave IndyMac ample time to find the “real party in interest” and join them to then be granted a relief from stay; but, it never happened and so after two months the relief from stay was denied.

The questions In re Hwang cited above were apparently brought not by the defense but by the judge, as I see the legal term of sua sponte which means “of one’s own accord”.  Stepping aside from the instant case In re Hwang for a moment, it makes me think of how many foreclosures are taking place with procedural errors and affirmative defenses and counterclaims that might be available to the homeowner and yet are never raised.  Property gets foreclosed.  End of story.

I found this excerpt from the Court’s order interesting and most likely applicable to thousands upon thousands of loans that were merely pledged to securitization trusts in subprime and Alt-A loan pools:

“[A] person who has an ownership right in an instrument might not be a person entitled to enforce the instrument.  For example, suppose X is the owner and holder of an instrument payable to X.  X sells the instrument to Y but is unable to deliver immediate possession to Y.  Instead, X signs a document conveying all of X’s right, title, and interest in the instrument to Y.  Although the document may be effective to give Y a claim to ownership of the instrument, Y is not a person entitled to enforce the instrument until Y obtains possession of the instrument.  No transfer of the instrument occurs under Section 3203(a) until it is delivered to Y.”

Yeah, I think it probably does apply to hundreds of thousands or even millions of loans out there that were pledged by now defunct mortgage lenders and the promissory notes were not subsequently indorsed to the securitization trusts.  The question is how many borrowers going through foreclosure are going to question it?

This author is not an attorney and this information should not be considered legal advice.  Please consult an attorney for legal advice.

My husband and I filed a bankruptcy that finalized June 4, 08. My car was repossed in August 08.  We were given no warning.  They said that we hadn’t paid in three months.  They worked with us before with late payments.  In May we were up half a payment that month and made the other half payment that month.  With my husband out of a job it was hard to make a full payment.  So the next two months we only made a half payment.  Which put us behind 1 full payment by July. 

We told them that we would be able to make July’s and August’s payment all at once, by the end of August, from the economic stimulus payment we would recieve.  Our payments were $365. So we would owe them $730. Well right before the end of August two men came to repossess our car. 

We called them and they said it hadn’t been paid in three months.  We called Truepay, which removes money from our bank account and places it with the car loan bank account.  They had went out of business!  We had no idea where our payments went.  They sent our account to Speedpay, another middle man.  But they had no idea about the payments either. We told our bank that we would not make payments until it was settled. 

They then told us that our car was repossessed because my husband had told them we weren’t going to make July and August’s payment, when we said we were going to pay in full.  They even said we were late every month because we made our payments on the 5th and 20th and they didn’t accept half payments and even though they said payments were do by the 27th, they told us that the date varied every month!

The guys took our car and it was sold about a month and a half later.  It was sold for half of what we had left on the loan!  Now we can’t get ahold of the bank to make payment arrangements.  Though we can’t afford them since we had to get another vehicle and pay a high interest.  Its not even as good as vehicle as what we had.  We went from 2006 Hundyaii Sonata to a 2003 Chevy Cavalier.

Even though we agreed that payments would stop until the car was sold, the bank still made the new middle man take out the next two payments.  They said we verbally agreed on them taking them out.  We did get those two payments returned and had a stop placed on the bank and on Speedpay.

Can we do anything about the middle man taking out money?  And what about those half payments that were never posted to their bank?  Was the bank with the loan in the wrong? 

I have two children and one on the way.  My husband is getting deployed soon and we need the money. I am afriad that they will garnish his wages.  Or even take our tax return which i need to pay my student loan that has to be paid.  It feels like we were trapped!

Kimberly (more…)