Saturday, January 8, 2011

More ammunition for the homeowner in the foreclosure crunch.

A recent ruling in Massachusetts has given homeowners some relief against lenders who have purchased mortgages.  With the high rate of transfer of the loans, many banks cannot provide the proper documentations that the bank owns the loan.  If the bank cannot prove they own the loan, then it has no right to foreclose.  This is an important lesson to anyone facing foreclosure proceedings.  The bank must prove that it is in fact the holder of the note that your mortgage secures.  While experts are hailing this ruling as "groundbreaking" and "far-reaching", this fact has been well established in Kentucky for many years.  In fact, one of my first cases was an appeal for a homeowner where the bank had failed to produce the assignments showing it was the holder of the note.  The homeowner won when the bank failed to produce the documents.  Now it seems other jurisdictions plan to follow that precedent.

Experts predict less bankruptcies in 2011

Two sources are predicting fewer bankruptcies in 2011.  The Seattle Times says that filings were down in December 2010 from the same period a year ago.  The Wall Street Journal's Real Time Economics  Blog state that filings are at a five-year high but are expected to be lower in 2011 because consumers are carrying less debt.

Are business bankruptcies falling?

According to the Wall Street Journal and the Dow Jones Daily Bankruptcy Review, the number of Chapter 11 filings for businesses is on the decline.  According to the article, this is the first decline since 2005.  Is this a sign that the economy is turning around?

Which states saw higher bankruptcy filings?

This article in the Huffington Post  discusses states that have seen spikes in bankruptcy filings.  It looks like there is trouble in paradise.

Law School Problems

I remember being told of the value of a good education as I grew up. I was fortunate in going to law school and having a practice that I enjoy. However, these financial times have made the value of education questionable according to this article in the New York Times.

Friday, September 24, 2010

More Problems with Foreclosure System

In recent years, foreclosures across the nation have garnered much attention due to the "sub-prime" loan crisis and the slow economy. For example, according to data provided by the Jefferson County, Kentucky, Master Commissioner's office, foreclosure sales in that county increased from 554 in 1997 to an estimated 5200 in 2010. While the concern over people losing their homes is great, the methods which many national lenders are using in their foreclosures may be even more concerning.

I have had several clients come in with horror stories in dealing with national lenders when they have gotten behind on their loan. Most deal with the supposed modification programs that lenders now offer. Clients send in the modification requests and wait months for responses, while interest is still accumulating, only to be told that the applications are deficient and they have to start over or that they never really qualified anyway. Even some clients have found private buyers for their properties, but the contracts will not be accepted because they did not use a realtor, despite the fact that the commission saved will be a financial benefit to the lender.

Two other cases that have been recently arisen have been much worse. One client negotiated a reaffirmation agreement with her lender through her bankruptcy. The lender initially demanded a lump sum payment to get the client caught up, but the lump sum was beyond the financial means of the client. The client informed the lender that the lump sum would be impossible. A reaffirmation agreement was then sent with modified terms, but no lump sum. It was signed by the client and by the lender and filed with the bankruptcy court. The client began making payments, which were accepted at first, but then returned because the lump sum was not paid. The lender then proceeded to have a judicial sale of the client's home rescheduled, without notice to the client. We found this out the day before the sale, and had it stopped. The bankruptcy court has said that that was improper and that the lump sum was not enforceable since it was not in the agreement. Even though the client has continued to send her payments under the agreement monthly, the lender continues to fight this issue in court.

A second case that has recently arisen is even more alarming. In representing an estate, the personal representative of the estate calls and says that a company has placed locks on the doors prohibiting her from entering the residence of the decedent. When the company is contacted, they say they effectively have repossessed the home for a national lender since the loan is in default and to contact the lender. Even though no suit has been filed and this repossession is illegal in the first place, the problem for the company and the lender is that they have no mortgage on the property they have seized. There is even some suspicion that the company has removed personal property from the residence. When the lender was contacted, the automated phone system effectively prohibited the client from speaking with someone to fix the problem because no one could tell her which department was responsible for the mix-up.

I cannot find a link to the article, but I recently read that this "wrongful" foreclosure is a growing trend nationally. Lenders are foreclosing on loans that are not actually in default due to poor record keeping or misreading files. There are other reports, similar to the client above, where the lender foreclosed on an home for which they had no lien. In jurisdictions where the repossession without foreclosure or eviction is permitted, this wrongful foreclosure has led to extensive property damage, which has led several property owners being left homeless through no fault of their own.

I have attached two links to this post that show that the problems now seem to go from merely negligent to intentional and fraudulent. Forged documents and improper reviews of accounts to determine their deficiency have now come to light.

With all of this in mind, we have to be very careful in how we advise our clients in a situations involving loans. Even though foreclosures have gotten more common, the more problems render them far less routine. It has gotten to the point that I tell clients to ignore the advertising of cheaper rates and only go with local lenders. It is much easier to walk into a branch office to talk to someone you know if you are having financial problems that to speak with someone in another state that will transfer you to someone in another department in some other state that has no idea what the client is dealing with. With this level of personal service, I feel that lender are more likely to review the client's situation carefully and clients are less likely to have the problems that I have describe above.

ABA JOURNAL: Foreclosure System Is Riddled with Faked Documents

ABA JOURNAL: "Robo-Signer" Halting Foreclosures

Friday, January 29, 2010

The President and Jury Duty

I intended to write this post earlier in the week when I first heard about President Obama's selection for jury duty in his home state of Illinois. I understand that jury duty is an important civic function; however, I tend to think that leader of the free world would definitely be one responsibility more important than jury duty.

I reflected back to a family member's call to me this past summer. He was concerned that he had just been called to serve a term as a juror in his hometown. The first question was what he could do the "get out" of serving. My response was not much these days. The next question was, "what will I have to do?" That got me thinking that despite the importance of juries to our legal system, the legal system does a poor job in expressing or explaining that importance to the public.

The jury system, as we know it, stems from the Magna Carta in the 13th Century, which allowed for a trial by your peers. Prior to that time, the King and he alone made the decision. The shortcoming of the Magna Carta was that this right seemingly still only applied to the nobility. Nevertheless, our Constitution established a right to jury trial in criminal and civil cases in the 6th and 7th Amendments. From that point forward we had the right to have our peers settle disputes and establish penalties rather than depending solely upon the "establishment" to protect our life, liberty and property.

One of the only pictures I have seen of my grandfather was taken while he was serving on a jury. Several years ago, in simpler times, court days and jury service were social events for the community. Folks went to watch and were interested in what happened in the courts. Finding jurors was not as problematic. Since that time, however, our lives have gotten "busier" and service has gone from an honor to a burden. Another factor is a lack of respect for the court system (and I admit lawyers have some of the blame for this), but that is the subject for another post.

Pulaski County has been fortunate to have many wonderful citizens whom have served on jury duty in the last few yeas that I have been practicing here. Included in those number have been workers whom have come from late night shifts to early morning service. The have been old and young alike. We have had doctors. We have had lawyers. We have even had a couple of judges and the County Attorney serve on jury duty. No one is immune from service.

If you are called to serve, please remember the case you are there for is just as important to the participants as your time is to you. The matter would not be resolved without you. Most of the cases that I try are mental health disability trials. To me, these cases particularly outline the importance of jury service. These matters are for individuals who are no longer able to make informed decisions about their own welfare. If they have failed to plan for this, there is only one way to get help. Someone must petition to become their guardian and have the person declared disable. In Kentucky, the only way to do this is with a trial by jury. Without jury service, these individuals would not be able to take care of their personal, medical and financial affairs on their own and there would be no one to help them. Further, there is a jury of their peers to make the determination if the person is disabled and should lose their decision making powers rather than leaving this decision to a lawyers and medical personnel to make that decision for them. This is truly an important and unique safeguard that would not be possible without jury service.

To those that have served on a term on the jury panel, the legal system owes you thanks. For those of you who wonder why you have to serve, I hope this can explain some of the history and importance of jury service. We couldn't do it without you.