The Clerk of the US Bankruptcy Court has announced that more than 1 million consumer bankruptcy cases have been filed this year. This is the first time since the 2005 bankruptcy amendments took effect that consumer filings have exceeded 1,000,000 cases.
The American Bankruptcy Institute, of which I am a member, reported that 1,046,449 cases were filed through the first nine months of the year. That's the most filings for the first three calendar quarters since 2005, when there were 1,350,360 consumer filings through the first nine months of that year.
In September 2009, there were 124,790 consumer filings, a 41 percent increase from the 88,663 consumer filings in September 2008. The September 2009 total also represented a 4 percent increase over the 119,874 filings in August 2009, and it is the fourth highest single month total since the 2005 amendments.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Sunday, October 25, 2009
Tuesday, October 20, 2009
Loan Modification Business Disappearing?
Are lawyers losing mortgage modification business to government supported non-lawyers? Read Cheryl Miller's interesting article below:
"Backers of a new law that bars mortgage modification services from charging up-front fees (pdf) say the rules will put scam artists out of business.
But mortgage lawyers like Paul Molinaro wonder whether the new regulations will really just drive honest attorneys out of the practice.
"I think you're going to see a lot of lawyers not doing this anymore," said Molinaro, a founding partner in the Corona, Calif., firm of Fransen & Molinaro. "It's just not worth it."
Gov. Arnold Schwarzenegger this month signed Senate Bill 94, a response to complaints from desperate homeowners who have paid thousands of dollars in fees to mortgage modification services, only to learn later that the business did little or nothing to save their homes from foreclosure.
The new law, which took effect immediately after Schwarzenegger signed the bill, bars anyone from charging fees for trying to modify a residential loan until that work is completed. It also requires those service providers to tell clients, in writing, that nonprofit groups offer free help for troubled mortgage-holders.
Consumer groups, community organizations and the State Bar endorsed the legislation. Even though many lawyers complained that the ban on up-front fees would make loan modification work impractical, Bar leaders said new rules were justified by shady practices that have led consumers to file hundreds of complaints with the Bar.
In some cases, foreclosure relief consultants, who are not allowed to take advance fees, teamed with lawyers who could collect up-front payments. Attorney General Jerry Brown has sued a handful of attorneys for allegedly working with these consultants but never performing any substantive work to lower consumers' mortgage payments. The Bar also took the unusual step last month of naming 16 attorneys under investigation for misconduct related to loan modifications.
"In my 21 years in attorney discipline, I have not seen a crisis of this magnitude. It is truly unprecedented," Interim Chief Trial Counsel Russell Weiner said in a prepared statement.
But real estate attorneys say the new rules have created a host of unanswered questions. Can a firm accept a litigation retainer and later secure an unanticipated loan modification? Can lawyers place fees in a trust and draw on them when they finish the work?
"There is a lot of discussion and concern regarding the application of SB 94," said Scott Rogers, the past chairman of the Real Estate Property Law Section of the State Bar.
Bar spokeswoman Diane Curtis said Bar attorneys are working on a document that will answer members' questions about the new law. The law calls for violators to face Bar discipline.
SB 94 author Sen. Ronald Calderon, D-Montebello, said his legislation shouldn't drive any legitimate attorney out of business.
"It's just a matter of certain attorneys are used to working a certain way in order to provide cash flow," Calderon said. Attorneys who don't think they can deliver better mortgage terms to their clients "shouldn't take the case," he said.
Calderon is chairman of the powerful Senate Banking, Finance and Insurance Committee. Banks, credit unions and lending industry groups have contributed more than $18,000 in contributions to his 2010 re-election campaign.
Critics say Calderon is being unrealistic. Lenders fight many loan modification efforts, they say, and they employ high-priced lawyers of their own. Nonprofit agencies are overwhelmed by homeowners seeking help, and by the time a client approaches a lawyer they've probably already tried that option and left disappointed, they add.
What's more, tough cases can last months -- even a year or more, real estate attorneys say.
"I'm not willing to wait 15 months for my money, and then have to fight my client for it," Molinaro said.
Molinaro said his firm now provides what he calls mortgage counseling. Clients pay a flat fee up front, which he holds in trust. For that, they get advice on their options, including bankruptcy, tax implications and short sales, and help with applications for a loan modification. If they want more help, say, talking to a lender on the phone, they can come into the office and pay his hourly fee for service.
Molinaro and other attorneys would rather see the Legislature, the Bar and the attorney general go after bad apples with laws already on the books."
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
"Backers of a new law that bars mortgage modification services from charging up-front fees (pdf) say the rules will put scam artists out of business.
But mortgage lawyers like Paul Molinaro wonder whether the new regulations will really just drive honest attorneys out of the practice.
"I think you're going to see a lot of lawyers not doing this anymore," said Molinaro, a founding partner in the Corona, Calif., firm of Fransen & Molinaro. "It's just not worth it."
Gov. Arnold Schwarzenegger this month signed Senate Bill 94, a response to complaints from desperate homeowners who have paid thousands of dollars in fees to mortgage modification services, only to learn later that the business did little or nothing to save their homes from foreclosure.
The new law, which took effect immediately after Schwarzenegger signed the bill, bars anyone from charging fees for trying to modify a residential loan until that work is completed. It also requires those service providers to tell clients, in writing, that nonprofit groups offer free help for troubled mortgage-holders.
Consumer groups, community organizations and the State Bar endorsed the legislation. Even though many lawyers complained that the ban on up-front fees would make loan modification work impractical, Bar leaders said new rules were justified by shady practices that have led consumers to file hundreds of complaints with the Bar.
In some cases, foreclosure relief consultants, who are not allowed to take advance fees, teamed with lawyers who could collect up-front payments. Attorney General Jerry Brown has sued a handful of attorneys for allegedly working with these consultants but never performing any substantive work to lower consumers' mortgage payments. The Bar also took the unusual step last month of naming 16 attorneys under investigation for misconduct related to loan modifications.
"In my 21 years in attorney discipline, I have not seen a crisis of this magnitude. It is truly unprecedented," Interim Chief Trial Counsel Russell Weiner said in a prepared statement.
But real estate attorneys say the new rules have created a host of unanswered questions. Can a firm accept a litigation retainer and later secure an unanticipated loan modification? Can lawyers place fees in a trust and draw on them when they finish the work?
"There is a lot of discussion and concern regarding the application of SB 94," said Scott Rogers, the past chairman of the Real Estate Property Law Section of the State Bar.
Bar spokeswoman Diane Curtis said Bar attorneys are working on a document that will answer members' questions about the new law. The law calls for violators to face Bar discipline.
SB 94 author Sen. Ronald Calderon, D-Montebello, said his legislation shouldn't drive any legitimate attorney out of business.
"It's just a matter of certain attorneys are used to working a certain way in order to provide cash flow," Calderon said. Attorneys who don't think they can deliver better mortgage terms to their clients "shouldn't take the case," he said.
Calderon is chairman of the powerful Senate Banking, Finance and Insurance Committee. Banks, credit unions and lending industry groups have contributed more than $18,000 in contributions to his 2010 re-election campaign.
Critics say Calderon is being unrealistic. Lenders fight many loan modification efforts, they say, and they employ high-priced lawyers of their own. Nonprofit agencies are overwhelmed by homeowners seeking help, and by the time a client approaches a lawyer they've probably already tried that option and left disappointed, they add.
What's more, tough cases can last months -- even a year or more, real estate attorneys say.
"I'm not willing to wait 15 months for my money, and then have to fight my client for it," Molinaro said.
Molinaro said his firm now provides what he calls mortgage counseling. Clients pay a flat fee up front, which he holds in trust. For that, they get advice on their options, including bankruptcy, tax implications and short sales, and help with applications for a loan modification. If they want more help, say, talking to a lender on the phone, they can come into the office and pay his hourly fee for service.
Molinaro and other attorneys would rather see the Legislature, the Bar and the attorney general go after bad apples with laws already on the books."
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Tuesday, October 13, 2009
Bankruptcy Boom Caused by Exploding Debt Load
Wow!!!! If there is ever an article that you must read to understand better the debt crisis that is behind the bankrutpcy boom, then here it is! You must read this fabulous article written by Mitra Kalita that was published in the Wall Street Journal entitled "The 'Democratization of Credit' Is Over -- Now It's Payback Time." Here is the article, please read....
"Karen King owes nearly $36,000, more than she's ever earned in a year.
All day long, bill collectors call. She hunts for a second job, sometimes skips meals, and stays with other family members at a grandfather's crowded apartment, trying to get out of debt and turn her life around.
She largely holds herself at fault. "Years ago, I lived for now. It was so stupid," the 28-year-old says. "It's depressing, but I can't live that life anymore." Now, she says, "I basically want to live for the future."
The recession has forced a financial reckoning for Americans across the income spectrum. The pressure is especially acute for the low-income Americans who relied on borrowing for daily expenses or to gain the trappings of middle-class life. Shifting credit practices over several decades had enabled them to live beyond their means by borrowing nearly as readily as the more affluent.
But the financial crisis and recession have reversed what some economists dubbed the "democratization of credit," forcing a tough adjustment on both low-income families and the businesses that serve them.
"We saw an extension of credit to a much deeper socioeconomic level, and they got access to the same credit instruments as middle-class and mainstream Americans," says Ronald Mann, a Columbia University law professor. Now, "it will be harder for families at the bottom of the income ladder to get credit cards," he says.
The financial crisis has forced lenders to be especially cautious with the riskiest borrowers, a category that low-income families often fall into because their debt tends to be higher relative to income and assets. The ratio of credit-card debt to income is 50% higher for the lowest two-fifths of Americans by income than for the top two-fifths, Federal Reserve data show.
For families with incomes between about $20,500 and $37,000, the ratio of debt to assets rose to 18.5% in 2007 from 14.4% in 1998 -- more sharply than the increase among the overall population -- according to the Fed's Survey of Consumer Finances. In addition, the chances of default and delinquency on home mortgages are higher among lower-income households, according to data from Equifax and Moody's Economy.com.
The democratization of credit began decades ago. Federal legislation in the late 1970s required banks to avoid discriminatory lending and meet the needs of local communities, spawning a wave of home buying and entrepreneurship in lower-income neighborhoods. The rate of homeownership in families with incomes in the bottom two-fifths rose to nearly 49% by 2001 from below 44% in 1989, according to Fed data analyzed by Mr. Mann at Columbia.
Credit-card borrowing took a similar path. One cause was a 1978 Supreme Court decision that let banks charge whatever interest rate was legal in the state where their card operation was headquartered. The ability to charge higher rates made it more profitable to offer cards to risky borrowers. Adding oomph to both credit-card and mortgage lending was the growth of markets where lenders could sell their loans.
By 2007, 35% of Americans in the bottom two-fifths of income had a credit card with a balance, up from just over 21% in 1989. And use of these cards increased. The median balance on the cards, adjusted for inflation, grew 180% over that period for people in the bottom fifth of income and 80% for those in the next higher fifth.
When the recession struck, banks that had eagerly wooed new credit-card customers reversed course. "Rather than keeping accounts that have high loss potential and limited revenue opportunity, the mission becomes to close out those customers' active lines and drive them off the books," said a report from TowerGroup, a research firm. By June 2009, banks were closing credit-card accounts at a rate of 14% or 15% annually, double the rate of a year earlier.
Government policy, in some ways, has reinforced lenders' business imperative to pull back. A new credit-card law limits banks' freedom to raise interest rates without 45 days' notice. Anticipating this and other changes, card companies took aim at delinquent accounts and shed customers deemed most at risk of default, says Chris Stinebert, president and chief executive of the American Financial Services Association, a trade group.
"Banks and credit issuers are looking at their own debt and trying to collect as much as they possibly can," he says.
Backers of the card legislation say one goal is to erect some obstacles to both the lending and the borrowing excesses of recent years. Treasury Secretary Timothy Geithner, testifying before Congress in July, said: "We now know that millions of Americans were...unable to evaluate the risks associated with borrowing to support the purchase of a home, a car or an education."
All this means a new reality for consumers like Ms. King. Most of the credit cards she had were maxed out by 2004. She would sometimes just let the bills pile up and not pay the minimum. "I would start paying it, and then my sister almost got evicted from her old apartment, or my grandfather decided he couldn't pay the rent. They needed help," she says.
Later, the store cut her work hours. As she fell further behind, issuers canceled her credit cards and handed the debts over to collectors. Ms. King's credit score slid to 576, a level that deems her a high-risk borrower.
Last fall, wanting to buy gifts for her mother and sister and clothes for a young niece, she applied for credit and was rejected at Macy's and Dress Barn, finally getting a card with a $250 limit at the Children's Place.
Her biggest chunk of debt, $26,000, stems from student loans to pay for her two-year associate's degree from a community college -- loans now in the hands of collectors. The remaining $10,000 or so includes old credit-card balances, debt to a store that rents furniture, utility bills and back taxes. Another obligation is $400 a month she contributes to the rent on her grandfather's two-bedroom apartment, where her mother, uncle and sister also live.
Ms. King's father died when she was four, and her mother reared her and two siblings. A basketball star in high school, she was the first in the family to pursue higher education. She got her first credit card when she began college and was working at a fast-food restaurant. But, she says, she never learned how to mind a budget.
Legislation passed this year will require that when banks issue a credit card to someone under 21, a parent or guardian must co-sign and have joint liability.
Out of college and working at the shoe store, Ms. King kept up a busy social life, eating out several times a week and going to movies -- even as the collectors called. But she lost the shoe-store job in January, and then learned that a prospective new employer had rejected her after running a credit check. Fearing that her credit record would trip her up again and again, she resolved to fix her financial mess.
Gone are dinners at Red Lobster and Olive Garden and purchases like new basketball shoes. She has a part-time job as a tour-bus driver that pays $13 an hour plus tips. She held a second part-time job, in telemarketing, for several months, but it was on suburban Long Island, and getting there, using both the subway and a commuter train, finally became too much. She now is looking for a second part-time job closer by.
One day, when the subway to her tour-bus job was rerouted, she had to take a taxi. She watched the meter anxiously the whole way, groaning when she had to hand over a $12 fare.
With the aid of a financial counselor provided by a nonprofit, Ms. King is applying triage to her debts. "First, I want to take care of all the little things," she says, "and then the student loans."
When a utility to which she owed $300 offered to settle for less, Ms. King says, she declined, because she was told an overdue bill takes longer to come off a person's credit report when it is settled for a partial payment.
She rejected any idea of a bankruptcy filing for the same reason. "It takes forever to come off" the credit report, she says.
To help people like her, several American cities have added financial-counseling centers. In New York, their clients' average debt is $18,000, and half have incomes under $10,000. Counselors work with families to follow a budget, imposing choices they may not have had to make in years.
On a warm day, Ms. King ducked into a bodega, H&M Madison Express. She allowed herself a bottle of water, skipping a snack, unlike in the old days.
Decisions like that add up, said the bodega's manager, Hekmat Mustafa. Until 11 months ago, he accepted credit cards, but with fewer customers using them he stopped, to avoid a monthly fee and small fixed fee on each tiny purchase.
"The rise I see now is in food stamps, even from teenagers," Mr. Mustafa said. The number of food-stamp recipients was up 22% in June from a year earlier.
As he spoke, two customers walked in, both to buy individual cigarettes for 50 cents. Not long ago, he said, they would have bought a pack, for $9.
At the other end of the retailing spectrum, Sears Holdings Corp. last year began promoting its layaway program to enable credit-deprived families to continue to shop.
In Ms. King's world, she says, "all of my friends are going through the same thing I am."
It looked that way at a cookout she held in late summer -- potluck, to save costs. Her younger sister, Janice, said she was also awash in debt, from medical expenses and a bad shopping habit. She has a part-time job at a supermarket. Their mother, also named Janice, left her apartment amid mounting utility bills and moved in with her father and daughters. She is trying to pay off $5,000 of debt so she can rebuild her credit and get an apartment of her own.
A 22-year-old friend, Norman Broggin, lost his job at the same shoe store as Ms. King in the spring. He said he had no money to socialize anymore. Looking around at the laughing group, he said it was the first time they had been together in a long while. Before, "we would hang out every weekend," he said. "Get a drink at a nice bar, eat dinner at a nice restaurant. We don't do anything anymore."
Some are turning to wherever they can for credit. A publicly traded pawnshop chain, EZCorp., reported a 37% rise in revenue in the second quarter. "With credit limited and other options disappearing, there are people looking for somewhere they can get emergency cash," said David Crume, president of the National Pawnbrokers Association.
Cash-strapped workers have long obtained advances through "payday loans," available at storefront lenders for fees that equate to high annual interest rates. Even that move is not so easy now.
"More customers are walking in the door, but turndowns are up," said Steven Schlein, a spokesman for the payday-loan industry's trade group, the Community Financial Services Association of America.
Federal Reserve data show that the use of credit cards has been eclipsed by use of debit cards, which don't entail a loan. A counselor advised Ms. King to use her debit card for purchases as she tries to rebuild her credit score.
Sometimes, in spare moments between work and commuting and budget calculations, Ms. King flips through a photo album that records her old life: house parties, birthdays, pro-basketball games.
"I was a social person. I had interest in a lot of things," she says. "I had dreams. Now I'm just paying off the past.""
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
"Karen King owes nearly $36,000, more than she's ever earned in a year.
All day long, bill collectors call. She hunts for a second job, sometimes skips meals, and stays with other family members at a grandfather's crowded apartment, trying to get out of debt and turn her life around.
She largely holds herself at fault. "Years ago, I lived for now. It was so stupid," the 28-year-old says. "It's depressing, but I can't live that life anymore." Now, she says, "I basically want to live for the future."
The recession has forced a financial reckoning for Americans across the income spectrum. The pressure is especially acute for the low-income Americans who relied on borrowing for daily expenses or to gain the trappings of middle-class life. Shifting credit practices over several decades had enabled them to live beyond their means by borrowing nearly as readily as the more affluent.
But the financial crisis and recession have reversed what some economists dubbed the "democratization of credit," forcing a tough adjustment on both low-income families and the businesses that serve them.
"We saw an extension of credit to a much deeper socioeconomic level, and they got access to the same credit instruments as middle-class and mainstream Americans," says Ronald Mann, a Columbia University law professor. Now, "it will be harder for families at the bottom of the income ladder to get credit cards," he says.
The financial crisis has forced lenders to be especially cautious with the riskiest borrowers, a category that low-income families often fall into because their debt tends to be higher relative to income and assets. The ratio of credit-card debt to income is 50% higher for the lowest two-fifths of Americans by income than for the top two-fifths, Federal Reserve data show.
For families with incomes between about $20,500 and $37,000, the ratio of debt to assets rose to 18.5% in 2007 from 14.4% in 1998 -- more sharply than the increase among the overall population -- according to the Fed's Survey of Consumer Finances. In addition, the chances of default and delinquency on home mortgages are higher among lower-income households, according to data from Equifax and Moody's Economy.com.
The democratization of credit began decades ago. Federal legislation in the late 1970s required banks to avoid discriminatory lending and meet the needs of local communities, spawning a wave of home buying and entrepreneurship in lower-income neighborhoods. The rate of homeownership in families with incomes in the bottom two-fifths rose to nearly 49% by 2001 from below 44% in 1989, according to Fed data analyzed by Mr. Mann at Columbia.
Credit-card borrowing took a similar path. One cause was a 1978 Supreme Court decision that let banks charge whatever interest rate was legal in the state where their card operation was headquartered. The ability to charge higher rates made it more profitable to offer cards to risky borrowers. Adding oomph to both credit-card and mortgage lending was the growth of markets where lenders could sell their loans.
By 2007, 35% of Americans in the bottom two-fifths of income had a credit card with a balance, up from just over 21% in 1989. And use of these cards increased. The median balance on the cards, adjusted for inflation, grew 180% over that period for people in the bottom fifth of income and 80% for those in the next higher fifth.
When the recession struck, banks that had eagerly wooed new credit-card customers reversed course. "Rather than keeping accounts that have high loss potential and limited revenue opportunity, the mission becomes to close out those customers' active lines and drive them off the books," said a report from TowerGroup, a research firm. By June 2009, banks were closing credit-card accounts at a rate of 14% or 15% annually, double the rate of a year earlier.
Government policy, in some ways, has reinforced lenders' business imperative to pull back. A new credit-card law limits banks' freedom to raise interest rates without 45 days' notice. Anticipating this and other changes, card companies took aim at delinquent accounts and shed customers deemed most at risk of default, says Chris Stinebert, president and chief executive of the American Financial Services Association, a trade group.
"Banks and credit issuers are looking at their own debt and trying to collect as much as they possibly can," he says.
Backers of the card legislation say one goal is to erect some obstacles to both the lending and the borrowing excesses of recent years. Treasury Secretary Timothy Geithner, testifying before Congress in July, said: "We now know that millions of Americans were...unable to evaluate the risks associated with borrowing to support the purchase of a home, a car or an education."
All this means a new reality for consumers like Ms. King. Most of the credit cards she had were maxed out by 2004. She would sometimes just let the bills pile up and not pay the minimum. "I would start paying it, and then my sister almost got evicted from her old apartment, or my grandfather decided he couldn't pay the rent. They needed help," she says.
Later, the store cut her work hours. As she fell further behind, issuers canceled her credit cards and handed the debts over to collectors. Ms. King's credit score slid to 576, a level that deems her a high-risk borrower.
Last fall, wanting to buy gifts for her mother and sister and clothes for a young niece, she applied for credit and was rejected at Macy's and Dress Barn, finally getting a card with a $250 limit at the Children's Place.
Her biggest chunk of debt, $26,000, stems from student loans to pay for her two-year associate's degree from a community college -- loans now in the hands of collectors. The remaining $10,000 or so includes old credit-card balances, debt to a store that rents furniture, utility bills and back taxes. Another obligation is $400 a month she contributes to the rent on her grandfather's two-bedroom apartment, where her mother, uncle and sister also live.
Ms. King's father died when she was four, and her mother reared her and two siblings. A basketball star in high school, she was the first in the family to pursue higher education. She got her first credit card when she began college and was working at a fast-food restaurant. But, she says, she never learned how to mind a budget.
Legislation passed this year will require that when banks issue a credit card to someone under 21, a parent or guardian must co-sign and have joint liability.
Out of college and working at the shoe store, Ms. King kept up a busy social life, eating out several times a week and going to movies -- even as the collectors called. But she lost the shoe-store job in January, and then learned that a prospective new employer had rejected her after running a credit check. Fearing that her credit record would trip her up again and again, she resolved to fix her financial mess.
Gone are dinners at Red Lobster and Olive Garden and purchases like new basketball shoes. She has a part-time job as a tour-bus driver that pays $13 an hour plus tips. She held a second part-time job, in telemarketing, for several months, but it was on suburban Long Island, and getting there, using both the subway and a commuter train, finally became too much. She now is looking for a second part-time job closer by.
One day, when the subway to her tour-bus job was rerouted, she had to take a taxi. She watched the meter anxiously the whole way, groaning when she had to hand over a $12 fare.
With the aid of a financial counselor provided by a nonprofit, Ms. King is applying triage to her debts. "First, I want to take care of all the little things," she says, "and then the student loans."
When a utility to which she owed $300 offered to settle for less, Ms. King says, she declined, because she was told an overdue bill takes longer to come off a person's credit report when it is settled for a partial payment.
She rejected any idea of a bankruptcy filing for the same reason. "It takes forever to come off" the credit report, she says.
To help people like her, several American cities have added financial-counseling centers. In New York, their clients' average debt is $18,000, and half have incomes under $10,000. Counselors work with families to follow a budget, imposing choices they may not have had to make in years.
On a warm day, Ms. King ducked into a bodega, H&M Madison Express. She allowed herself a bottle of water, skipping a snack, unlike in the old days.
Decisions like that add up, said the bodega's manager, Hekmat Mustafa. Until 11 months ago, he accepted credit cards, but with fewer customers using them he stopped, to avoid a monthly fee and small fixed fee on each tiny purchase.
"The rise I see now is in food stamps, even from teenagers," Mr. Mustafa said. The number of food-stamp recipients was up 22% in June from a year earlier.
As he spoke, two customers walked in, both to buy individual cigarettes for 50 cents. Not long ago, he said, they would have bought a pack, for $9.
At the other end of the retailing spectrum, Sears Holdings Corp. last year began promoting its layaway program to enable credit-deprived families to continue to shop.
In Ms. King's world, she says, "all of my friends are going through the same thing I am."
It looked that way at a cookout she held in late summer -- potluck, to save costs. Her younger sister, Janice, said she was also awash in debt, from medical expenses and a bad shopping habit. She has a part-time job at a supermarket. Their mother, also named Janice, left her apartment amid mounting utility bills and moved in with her father and daughters. She is trying to pay off $5,000 of debt so she can rebuild her credit and get an apartment of her own.
A 22-year-old friend, Norman Broggin, lost his job at the same shoe store as Ms. King in the spring. He said he had no money to socialize anymore. Looking around at the laughing group, he said it was the first time they had been together in a long while. Before, "we would hang out every weekend," he said. "Get a drink at a nice bar, eat dinner at a nice restaurant. We don't do anything anymore."
Some are turning to wherever they can for credit. A publicly traded pawnshop chain, EZCorp., reported a 37% rise in revenue in the second quarter. "With credit limited and other options disappearing, there are people looking for somewhere they can get emergency cash," said David Crume, president of the National Pawnbrokers Association.
Cash-strapped workers have long obtained advances through "payday loans," available at storefront lenders for fees that equate to high annual interest rates. Even that move is not so easy now.
"More customers are walking in the door, but turndowns are up," said Steven Schlein, a spokesman for the payday-loan industry's trade group, the Community Financial Services Association of America.
Federal Reserve data show that the use of credit cards has been eclipsed by use of debit cards, which don't entail a loan. A counselor advised Ms. King to use her debit card for purchases as she tries to rebuild her credit score.
Sometimes, in spare moments between work and commuting and budget calculations, Ms. King flips through a photo album that records her old life: house parties, birthdays, pro-basketball games.
"I was a social person. I had interest in a lot of things," she says. "I had dreams. Now I'm just paying off the past.""
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Avoiding Foreclosure By Filing Bankruptcy
Avoiding foreclosure is on the mind of nearly every homeowner who fears eviction. Many of these homeowners in foreclosure have attempted to modify their mortgage loans with the Obama plan called the Making Home Affordable program. Some of these homeowners have found the modification process frustrating and have turned to chapter 13 bankruptcies to stop a sheriff sale.
Below is an interesting article written by Renae Merle of the Washington Post entitled "Racing the Clock to Avoid Foreclosures: Bank of America Scrambles to Modify Loans Ahead of Government Deadline." The article discusses the efforts of certain banks to meet Obama's deadline regarding loan modification. The article concludes that some democratic senators have threatened new legislation to change the bankruptcy laws by allowing homeowners to modify loans in bankruptcy if the Obama plan does not work. Here's the article:
"Bank of America employees are reminded every day of how far they still have to go. Just outside the elevators of their vast third-floor command center, attached to the wall, is a cardboard thermometer that shows them inching toward their goal of signing up 125,000 struggling borrowers for a federal program to modify their mortgages.
The company faces many of the same challenges as other major lenders addressing the foreclosure crisis. But with weeks remaining to meet the November deadline set by the Obama administration, Bank of America is trailing well behind the other large banks, according to Treasury Department data.
The company's effort has been hamstrung by a staff shortage and by adapting its computer systems and even fax machines to the scale of the program, which began in March. The company was also slow out of the box because it initially took a more conservative approach than some other banks, requiring that borrowers document their income and complete other paperwork before granting preliminary approval for a modification. In August, Bank of America softened the requirement and began authorizing some modifications without getting all the documents first.
Adding to borrowers' difficulties was a letter sent this summer by Bank of America that mistakenly informed some of them that they did not qualify for the administration's foreclosure-prevention program because their loans were not backed by Fannie Mae or Freddie Mac, the government-controlled mortgage giants. "Bank of America is not actively participating in this program," the bank wrote to some borrowers, according to a copy of the letter obtained by The Washington Post.
After a reporter asked the company about the letter, Bank of America stopped sending it out. A company spokeswoman said the bank reviewed the cases of borrowers who received it, adding that she did not know how many there were.
Even as the administration urges lenders to do more to help homeowners, some Bank of America employees continue to express skepticism about whether all of those seeking assistance really need it. "There's a difference between hardship and entitlement," said Jerry Durham, Bank of America's vice president of home retention.
Stacking Up the Banks
Under the Making Home Affordable program, lenders are paid with taxpayer funds to reduce borrowers' mortgage payments by lowering their interest rates, for example, or by extending the terms of their loans
A progress report released last week by the Treasury Department showed that only 11 percent (about 95,000) of Bank of America's delinquent borrowers who were potentially eligible for the program had been given a loan modification. That compares with 27 percent, or 117,000, for J.P. Morgan Chase, and 33 percent, or 68,000, at Citigroup, the Treasury reported. The figure for Saxon Mortgage Services, which is owned by Morgan Stanley, is 41 percent, or 32,000.
"We're sure working hard," Ken Scheller, senior vice president for home retention at Bank of America, said when asked about his company's low ranking. "We don't want to be down there." He added that the bank had modified 215,000 mortgages outside the federal program this year, including some under the terms of a settlement reached with state attorneys general related to subprime loans issued by Countrywide Financial, which Bank of America bought last year.
Many of the 62 other mortgage lenders participating in the government program have also ramped up, industry officials said. Wells Fargo reported that call volume tripled after the program was announced in February, prompting the company to hire an additional 5,800 employees to address loan modifications this year. Citigroup increased its loss-mitigation department from 450 employees in early 2008 to more than 4,000. J.P. Morgan Chase switched from a paper fax system to an electronic one to handle the volume of documents being submitted by borrowers.
"I remember two years ago sitting at a table with lenders and asking, 'Are you guys staffed up for this?' And they were like, 'Yeah, we're prepared,' " said Mark A. Calabria, an expert in financial regulation at the Cato Institute. "This was a much bigger wave than the lending industry was expecting."
The problems are especially acute at Bank of America, partly because its mortgage portfolio more than doubled with the acquisition of Countrywide, analysts said. Countrywide had a loan portfolio heavy with risky mortgages and delinquent borrowers. Especially now, Bank of America is "like a big oil tanker, and it takes time for them to shift focus," said Guy Cecala, publisher of Inside Mortgage Finance.
Even after top Treasury officials called in industry leaders for a series of meetings on the program in July, chastising them for their poor progress, the foreclosure crisis continues to worsen. Borrowers are becoming delinquent on their mortgages at record rates, and rising unemployment rates are exacerbating the problem, economists say. Already, 4.4 million borrowers have lost their home since the mortgage crisis began in 2007, and another 2 million will this year, according to Moody's Economy.com.
On the Front Lines
Bank of America's complex of office towers on the outskirts of Dallas is at the center of its efforts to address the crisis. At a rectangular control center in the middle of an open floor, employees monitor computer screens reporting how long callers from around the country have to wait to talk to a representative. Overhead, large screens record in red when calls have been on hold for more than two minutes.
In a surrounding sea of cubicles, other employees dubbed home-retention specialists -- some completely new to the business -- tackle 40 to 50 calls a day. Clusters of work stations are demarcated with streamers, identifying teams that compete to help the most distressed borrowers and collect the most in delinquent payments. Executives say both are high priorities.
The telephone conversations illustrate the challenge that the government has set for Bank of America in identifying borrowers whose troubles are serious enough to qualify for the program.
On a recent morning, Tiffany Palmer was on the line with a frustrated borrower looking for help with his mortgage. He was $6,000 behind in his payments.
"Do you have a 401(k) or savings -- liquid assets that can be quickly converted into cash?" she asked him. He was going to have to come up with money for the mortgage. Because his monthly mortgage payments represented less than 31 percent of his income, he made too much to qualify for a modified mortgage under the federal initiative. "You will not be eligible for the program," she said.
The next caller was out of work. Palmer suspected that even with unemployment benefits, the borrower would not make enough to qualify for a loan modification.
"Do you have any job prospects, interviews lined up?" Palmer asked her.
Could she generate more income by renting out a room in her home? What about a garage sale? Could she skip her credit card payments, about $400 a month?
"I am only giving them suggestions, not telling them what to do," said Palmer, who previously provided telephone technical assistance for T-Mobile customers last year before being laid off and then hired by Bank of America.
A Fast-Paced Scramble
The number of employees handling loan modifications for Bank of America has doubled this year to 11,000, and the bank still has 240 openings. It plans to open another facility in Fort Worth by the end of the year staffed with 300 more employees, and then it would add yet another 300 by the middle of 2010.
Executives say frequent changes in the program required nearly constant retraining of employees. "It is a challenge to find folks and get them up to speed as quickly as we're moving," Scheller said.
There have also been technological challenges. The bank is developing software to help identify eligible borrowers faster. "You are dealing with such volumes, you have to have computers to do the decisioning," Durham said. "We had to build a machine to handle 14 million loans."
Even the fax machines have been an issue. Housing counselors and homeowners have complained that they are often forced to resubmit documents multiple times after being told the paperwork has been misplaced or never received.
Kevin McFarland, a former Marine Corps sergeant, said he has repeatedly submitted his documents since late last year when he began pressing for a mortgage modification. Several times, McFarland said, he was told the documents were nowhere to be found. After submitting the documents in August for a fifth time, McFarland is still waiting for a ruling.
Bank of America said it is still reviewing McFarland's case and has acknowledged problems with its faxing system.
Last month, the company added a bigger server for its digital fax machine and more employees to sort the documents.
Even as Bank of America triages thousands of loans, it is facing pressure from groups that own the mortgages the bank services on their behalf -- meaning it collects monthly mortgage payments for these investors. Most investors have agreed to allow Bank of America to modify mortgages in line with the administration program, but about 5 percent have refused and another 15 percent require the bank to get their approval on a case-by-case basis.
Meanwhile, in another setback, a federal judge this summer rejected Bank of America's argument that it was protected against lawsuits by mortgage investors unhappy with the modified terms given to borrowers.
Bank of America and other lenders have a lot riding on the foreclosure prevention program. The company stands to collect about $6 billion -- some of which will be passed on to investors -- of the $75 billion the administration has set aside for the Making Home Affordable program.
At the same time, the banking industry faces a threat from senior Democrats in Congress who may revive legislation allowing bankruptcy judges to modify mortgages if more is not done to help borrowers. Last week, Sen. Jack Reed (D-R.I.) introduced a bill allowing a borrower to fight a foreclosure in court by arguing that the lender did not offer a loan modification."
Some ask when will Congress determine that the voluntary program isn't working for millions of homeowners? While others ask when will Congress pass bankruptcy reform to allow homeowners to modify mortgages inside a Chapter 13 repayment plan? These questions have yet to be answered?
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Below is an interesting article written by Renae Merle of the Washington Post entitled "Racing the Clock to Avoid Foreclosures: Bank of America Scrambles to Modify Loans Ahead of Government Deadline." The article discusses the efforts of certain banks to meet Obama's deadline regarding loan modification. The article concludes that some democratic senators have threatened new legislation to change the bankruptcy laws by allowing homeowners to modify loans in bankruptcy if the Obama plan does not work. Here's the article:
"Bank of America employees are reminded every day of how far they still have to go. Just outside the elevators of their vast third-floor command center, attached to the wall, is a cardboard thermometer that shows them inching toward their goal of signing up 125,000 struggling borrowers for a federal program to modify their mortgages.
The company faces many of the same challenges as other major lenders addressing the foreclosure crisis. But with weeks remaining to meet the November deadline set by the Obama administration, Bank of America is trailing well behind the other large banks, according to Treasury Department data.
The company's effort has been hamstrung by a staff shortage and by adapting its computer systems and even fax machines to the scale of the program, which began in March. The company was also slow out of the box because it initially took a more conservative approach than some other banks, requiring that borrowers document their income and complete other paperwork before granting preliminary approval for a modification. In August, Bank of America softened the requirement and began authorizing some modifications without getting all the documents first.
Adding to borrowers' difficulties was a letter sent this summer by Bank of America that mistakenly informed some of them that they did not qualify for the administration's foreclosure-prevention program because their loans were not backed by Fannie Mae or Freddie Mac, the government-controlled mortgage giants. "Bank of America is not actively participating in this program," the bank wrote to some borrowers, according to a copy of the letter obtained by The Washington Post.
After a reporter asked the company about the letter, Bank of America stopped sending it out. A company spokeswoman said the bank reviewed the cases of borrowers who received it, adding that she did not know how many there were.
Even as the administration urges lenders to do more to help homeowners, some Bank of America employees continue to express skepticism about whether all of those seeking assistance really need it. "There's a difference between hardship and entitlement," said Jerry Durham, Bank of America's vice president of home retention.
Stacking Up the Banks
Under the Making Home Affordable program, lenders are paid with taxpayer funds to reduce borrowers' mortgage payments by lowering their interest rates, for example, or by extending the terms of their loans
A progress report released last week by the Treasury Department showed that only 11 percent (about 95,000) of Bank of America's delinquent borrowers who were potentially eligible for the program had been given a loan modification. That compares with 27 percent, or 117,000, for J.P. Morgan Chase, and 33 percent, or 68,000, at Citigroup, the Treasury reported. The figure for Saxon Mortgage Services, which is owned by Morgan Stanley, is 41 percent, or 32,000.
"We're sure working hard," Ken Scheller, senior vice president for home retention at Bank of America, said when asked about his company's low ranking. "We don't want to be down there." He added that the bank had modified 215,000 mortgages outside the federal program this year, including some under the terms of a settlement reached with state attorneys general related to subprime loans issued by Countrywide Financial, which Bank of America bought last year.
Many of the 62 other mortgage lenders participating in the government program have also ramped up, industry officials said. Wells Fargo reported that call volume tripled after the program was announced in February, prompting the company to hire an additional 5,800 employees to address loan modifications this year. Citigroup increased its loss-mitigation department from 450 employees in early 2008 to more than 4,000. J.P. Morgan Chase switched from a paper fax system to an electronic one to handle the volume of documents being submitted by borrowers.
"I remember two years ago sitting at a table with lenders and asking, 'Are you guys staffed up for this?' And they were like, 'Yeah, we're prepared,' " said Mark A. Calabria, an expert in financial regulation at the Cato Institute. "This was a much bigger wave than the lending industry was expecting."
The problems are especially acute at Bank of America, partly because its mortgage portfolio more than doubled with the acquisition of Countrywide, analysts said. Countrywide had a loan portfolio heavy with risky mortgages and delinquent borrowers. Especially now, Bank of America is "like a big oil tanker, and it takes time for them to shift focus," said Guy Cecala, publisher of Inside Mortgage Finance.
Even after top Treasury officials called in industry leaders for a series of meetings on the program in July, chastising them for their poor progress, the foreclosure crisis continues to worsen. Borrowers are becoming delinquent on their mortgages at record rates, and rising unemployment rates are exacerbating the problem, economists say. Already, 4.4 million borrowers have lost their home since the mortgage crisis began in 2007, and another 2 million will this year, according to Moody's Economy.com.
On the Front Lines
Bank of America's complex of office towers on the outskirts of Dallas is at the center of its efforts to address the crisis. At a rectangular control center in the middle of an open floor, employees monitor computer screens reporting how long callers from around the country have to wait to talk to a representative. Overhead, large screens record in red when calls have been on hold for more than two minutes.
In a surrounding sea of cubicles, other employees dubbed home-retention specialists -- some completely new to the business -- tackle 40 to 50 calls a day. Clusters of work stations are demarcated with streamers, identifying teams that compete to help the most distressed borrowers and collect the most in delinquent payments. Executives say both are high priorities.
The telephone conversations illustrate the challenge that the government has set for Bank of America in identifying borrowers whose troubles are serious enough to qualify for the program.
On a recent morning, Tiffany Palmer was on the line with a frustrated borrower looking for help with his mortgage. He was $6,000 behind in his payments.
"Do you have a 401(k) or savings -- liquid assets that can be quickly converted into cash?" she asked him. He was going to have to come up with money for the mortgage. Because his monthly mortgage payments represented less than 31 percent of his income, he made too much to qualify for a modified mortgage under the federal initiative. "You will not be eligible for the program," she said.
The next caller was out of work. Palmer suspected that even with unemployment benefits, the borrower would not make enough to qualify for a loan modification.
"Do you have any job prospects, interviews lined up?" Palmer asked her.
Could she generate more income by renting out a room in her home? What about a garage sale? Could she skip her credit card payments, about $400 a month?
"I am only giving them suggestions, not telling them what to do," said Palmer, who previously provided telephone technical assistance for T-Mobile customers last year before being laid off and then hired by Bank of America.
A Fast-Paced Scramble
The number of employees handling loan modifications for Bank of America has doubled this year to 11,000, and the bank still has 240 openings. It plans to open another facility in Fort Worth by the end of the year staffed with 300 more employees, and then it would add yet another 300 by the middle of 2010.
Executives say frequent changes in the program required nearly constant retraining of employees. "It is a challenge to find folks and get them up to speed as quickly as we're moving," Scheller said.
There have also been technological challenges. The bank is developing software to help identify eligible borrowers faster. "You are dealing with such volumes, you have to have computers to do the decisioning," Durham said. "We had to build a machine to handle 14 million loans."
Even the fax machines have been an issue. Housing counselors and homeowners have complained that they are often forced to resubmit documents multiple times after being told the paperwork has been misplaced or never received.
Kevin McFarland, a former Marine Corps sergeant, said he has repeatedly submitted his documents since late last year when he began pressing for a mortgage modification. Several times, McFarland said, he was told the documents were nowhere to be found. After submitting the documents in August for a fifth time, McFarland is still waiting for a ruling.
Bank of America said it is still reviewing McFarland's case and has acknowledged problems with its faxing system.
Last month, the company added a bigger server for its digital fax machine and more employees to sort the documents.
Even as Bank of America triages thousands of loans, it is facing pressure from groups that own the mortgages the bank services on their behalf -- meaning it collects monthly mortgage payments for these investors. Most investors have agreed to allow Bank of America to modify mortgages in line with the administration program, but about 5 percent have refused and another 15 percent require the bank to get their approval on a case-by-case basis.
Meanwhile, in another setback, a federal judge this summer rejected Bank of America's argument that it was protected against lawsuits by mortgage investors unhappy with the modified terms given to borrowers.
Bank of America and other lenders have a lot riding on the foreclosure prevention program. The company stands to collect about $6 billion -- some of which will be passed on to investors -- of the $75 billion the administration has set aside for the Making Home Affordable program.
At the same time, the banking industry faces a threat from senior Democrats in Congress who may revive legislation allowing bankruptcy judges to modify mortgages if more is not done to help borrowers. Last week, Sen. Jack Reed (D-R.I.) introduced a bill allowing a borrower to fight a foreclosure in court by arguing that the lender did not offer a loan modification."
Some ask when will Congress determine that the voluntary program isn't working for millions of homeowners? While others ask when will Congress pass bankruptcy reform to allow homeowners to modify mortgages inside a Chapter 13 repayment plan? These questions have yet to be answered?
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Friday, October 9, 2009
Bankruptcy Attorneys Battling Loan Modification Lawyers
For some time now, bankruptcy attorneys and loan modification lawyers have been battling over the same turf. The bankruptcy attorneys believe a chapter 13 bankruptcy is the best way to help homeowners suffering with foreclosure. On the other hand, loan modification lawyers believe bankruptcy is the last option and loan modification attempts should be made first.
The problem with loan modifications, says the bankruptcy attorneys, is that that the modification process is long, time-consuming, and uncertain. The lender is under no obligation to approve a loan modification. Plus, some lenders seem to benefit by intentionally dragging their feet "reviewing" a loan modification while at the same time following an aggressive strategy of foreclosure through the state foreclosure courts. The homeowners think everything is okay because the lender has accepted the loan modification application; many of these homeowners don't realize that the lenders are typically also simultaneously trying to foreclose on the homeowner’s ownership rights in court.
Reporter Peter Goodman of the New York Times has written an interesting article about loan modifications. Below is his article:
Treasury Hails Milestone in Home Loan Modifications
By PETER S. GOODMAN
For months, troubled homeowners seeking to lower their mortgage payments under a federal plan have complained about bureaucratic bungling, ceaseless frustration and confusion. On Thursday, the Obama administration declared that the $75 billion program is finally providing broad relief after it pressured mortgage companies to move faster to modify more loans.
Five hundred thousand troubled homeowners have had their loan payments lowered on a trial basis under the Making Home Affordable Program, said Treasury Secretary Timothy F. Geithner in a morning telephone briefing with reporters. Mortgage payments are now being lowered faster than homes are being sold in foreclosure proceedings, he added, and roughly 40 percent of the 1.2 million homeowners deemed eligible have been helped.
“That’s an important shift,” Mr. Geithner said. “Half a million families are participating in loan modifications that are substantially decreasing their housing costs.”
But economists said the program was still not big enough to prevent many millions of Americans from losing their homes before the books are closed on the Great Recession and its painful aftermath.
“It’s a help on the margin,” said Mark Zandi, chief economist at Moody’s Economy.com. “But it’s not going to end the foreclosure crisis.”
By Mr. Zandi’s reckoning, from this year to next, more than four million households will surrender homes to foreclosure or through so-called short sales, where the property is sold for less than the bank is owed.
The half-million mortgages that have been adjusted to create lower payments for borrowers have been modified only on a trial basis.
After three months of successfully making new payments — no sure thing — borrowers must then submit additional paperwork to turn the trial terms into a permanent modification, creating more room for bureaucratic stumbles.
Administration officials shed no light on what experts say is a crucial determinant of the ultimate success of the program: They said they did not know how many of the mortgage modifications had actually lowered the loan principal, as opposed to merely stretching out the life of the loan through lower payments.
Experts say homeowners whose principal balances are reduced are much less likely to fall back into delinquency. Reducing the principal is particularly important for those who are underwater, meaning they owe more than their home is worth.
“When people are underwater, they have a much higher re-default rate,” said Diane Thompson, a lawyer for the National Consumer Law Center. “If some subsequent life event happens, if there’s a storm and they need money for repairs, if they lose their job, or they have to move and they need to sell the house, they are absolutely stuck.”
Even as the Obama administration reports progress, many homeowners continue to express deep frustration with the program.
In Hampton, Ga., Maxine Yancy and Michael A. Blaino say they were already approved for a loan modification from their mortgage company, GMAC, only to be informed that their agreement was mysteriously canceled, with the lender still threatening to foreclose on their home.
Far from the free-spending, exuberant borrowers commonly associated with the foreclosure crisis, Ms. Yancy and Mr. Blaino, her son, typify the fastest-growing source of trouble: Those who have fallen into danger because of a lost job.
Ms. Yancy, 73, is a retired schoolteacher whose income is about $2,200 a month — roughly half from Social Security, the rest from a part-time job teaching at a community college. She and her son together bought a three-bedroom ranch six years ago, paying just under $123,000. They have a 30-year fixed-rate mortgage at an interest rate of a little more than 8 percent, requiring payments of $1,089 a month.
The payments were manageable until June 2008, when Mr. Blaino lost his job in the reservations office of a local hotel. When the mother and son heard about the Obama administration’s plan for loan modifications in February, they contacted their lender right away.
When they sent in the paperwork, they were twice told that their file was incomplete. After sending in their paperwork a third time, GMAC responded with a “temporary workout plan” and invited them to pay $785 for the next three months.
Ms. Yancy says she promptly mailed in a check only to have it returned with a letter saying they were delinquent. When she called customer service for an explanation, GMAC explained that a certified check was required, though this condition had not been disclosed.
She sent in a money order for her July payment, then more for August and September. But when Ms. Yancy called GMAC last month to see about the status of their application for a permanent loan modification, she was told that the workout plan had been canceled and their house would soon be sold in foreclosure, she recalled.
Horrified and confused, she pressed for an explanation, and was told that they had failed to pay the agreed-upon lower payment of $1,088.
“That totally doesn’t make sense, because that was our original loan payment,” Ms. Yancy said. “It’s crazy.”
In the last two weeks, she and her son say they have left repeated messages with GMAC seeking a supervisor who can get to the bottom of the matter. “This morning I woke up with hard pain in my chest right where my heart is,” Ms. Yancy said. “I know that this is probably from the stress of dealing with GMAC.”
A GMAC spokeswoman declined to discuss the case, citing its privacy policy, but said generally that the lender has been eagerly processing loan modifications. The office that handles loan modifications has expanded its staff by 30 percent since January, and servicing teams have been working extra hours and on weekends, she said.
According to a report released by Treasury on Thursday, GMAC had modified 26 percent of eligible loans that were at least two months’ delinquent in September, making it one of the better performers. Bank of America, by contrast, had modified only 11 percent of such loans, according to the report.
Some mortgage companies tell customers they cannot modify loans because they merely send out the monthly bills, while the mortgages are actually owned by investors. Yet industry insiders say many mortgage companies can profit by delaying the process and keeping homeowners in long-term delinquency, extracting myriad fees.
Administration officials said they would continue to press mortgage companies for improvements in their handling of applications. On Thursday afternoon, Treasury and the Department of Housing and Urban Development summoned representatives from major mortgage companies to Washington for further discussions.
“We’ve put significant pressure on the servicers to ramp up production,” said Shaun Donovan, secretary of the Department of Housing and Urban Development, in Thursday’s briefing. “We are keeping that pressure on.”
Treasury first announced its foreclosure relief program in February. Under the plan, the government pays mortgage companies $1,000 for each loan they modify, and $1,000 a year for up to three years. The plan was advanced with the promise that it would eventually spare up to four million households from foreclosure. At the end of June, only 143,000 trial modifications had been begun, the Treasury Department now estimates.
In July, frustrated by the slow pace and irritated by homeowner complaints, the Treasury Department summoned major mortgage companies to Washington for what was subsequently described by officials as a dressing down. The mortgage companies promised to improve their staffing and training. The administration soon set a target of 500,000 trial loan modifications by the end of this month, reaching that goal three weeks early.
Still, officials said much work remained. “Unacceptably large numbers of families across the country are still at risk of losing homes,” said Mr. Geithner.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
The problem with loan modifications, says the bankruptcy attorneys, is that that the modification process is long, time-consuming, and uncertain. The lender is under no obligation to approve a loan modification. Plus, some lenders seem to benefit by intentionally dragging their feet "reviewing" a loan modification while at the same time following an aggressive strategy of foreclosure through the state foreclosure courts. The homeowners think everything is okay because the lender has accepted the loan modification application; many of these homeowners don't realize that the lenders are typically also simultaneously trying to foreclose on the homeowner’s ownership rights in court.
Reporter Peter Goodman of the New York Times has written an interesting article about loan modifications. Below is his article:
Treasury Hails Milestone in Home Loan Modifications
By PETER S. GOODMAN
For months, troubled homeowners seeking to lower their mortgage payments under a federal plan have complained about bureaucratic bungling, ceaseless frustration and confusion. On Thursday, the Obama administration declared that the $75 billion program is finally providing broad relief after it pressured mortgage companies to move faster to modify more loans.
Five hundred thousand troubled homeowners have had their loan payments lowered on a trial basis under the Making Home Affordable Program, said Treasury Secretary Timothy F. Geithner in a morning telephone briefing with reporters. Mortgage payments are now being lowered faster than homes are being sold in foreclosure proceedings, he added, and roughly 40 percent of the 1.2 million homeowners deemed eligible have been helped.
“That’s an important shift,” Mr. Geithner said. “Half a million families are participating in loan modifications that are substantially decreasing their housing costs.”
But economists said the program was still not big enough to prevent many millions of Americans from losing their homes before the books are closed on the Great Recession and its painful aftermath.
“It’s a help on the margin,” said Mark Zandi, chief economist at Moody’s Economy.com. “But it’s not going to end the foreclosure crisis.”
By Mr. Zandi’s reckoning, from this year to next, more than four million households will surrender homes to foreclosure or through so-called short sales, where the property is sold for less than the bank is owed.
The half-million mortgages that have been adjusted to create lower payments for borrowers have been modified only on a trial basis.
After three months of successfully making new payments — no sure thing — borrowers must then submit additional paperwork to turn the trial terms into a permanent modification, creating more room for bureaucratic stumbles.
Administration officials shed no light on what experts say is a crucial determinant of the ultimate success of the program: They said they did not know how many of the mortgage modifications had actually lowered the loan principal, as opposed to merely stretching out the life of the loan through lower payments.
Experts say homeowners whose principal balances are reduced are much less likely to fall back into delinquency. Reducing the principal is particularly important for those who are underwater, meaning they owe more than their home is worth.
“When people are underwater, they have a much higher re-default rate,” said Diane Thompson, a lawyer for the National Consumer Law Center. “If some subsequent life event happens, if there’s a storm and they need money for repairs, if they lose their job, or they have to move and they need to sell the house, they are absolutely stuck.”
Even as the Obama administration reports progress, many homeowners continue to express deep frustration with the program.
In Hampton, Ga., Maxine Yancy and Michael A. Blaino say they were already approved for a loan modification from their mortgage company, GMAC, only to be informed that their agreement was mysteriously canceled, with the lender still threatening to foreclose on their home.
Far from the free-spending, exuberant borrowers commonly associated with the foreclosure crisis, Ms. Yancy and Mr. Blaino, her son, typify the fastest-growing source of trouble: Those who have fallen into danger because of a lost job.
Ms. Yancy, 73, is a retired schoolteacher whose income is about $2,200 a month — roughly half from Social Security, the rest from a part-time job teaching at a community college. She and her son together bought a three-bedroom ranch six years ago, paying just under $123,000. They have a 30-year fixed-rate mortgage at an interest rate of a little more than 8 percent, requiring payments of $1,089 a month.
The payments were manageable until June 2008, when Mr. Blaino lost his job in the reservations office of a local hotel. When the mother and son heard about the Obama administration’s plan for loan modifications in February, they contacted their lender right away.
When they sent in the paperwork, they were twice told that their file was incomplete. After sending in their paperwork a third time, GMAC responded with a “temporary workout plan” and invited them to pay $785 for the next three months.
Ms. Yancy says she promptly mailed in a check only to have it returned with a letter saying they were delinquent. When she called customer service for an explanation, GMAC explained that a certified check was required, though this condition had not been disclosed.
She sent in a money order for her July payment, then more for August and September. But when Ms. Yancy called GMAC last month to see about the status of their application for a permanent loan modification, she was told that the workout plan had been canceled and their house would soon be sold in foreclosure, she recalled.
Horrified and confused, she pressed for an explanation, and was told that they had failed to pay the agreed-upon lower payment of $1,088.
“That totally doesn’t make sense, because that was our original loan payment,” Ms. Yancy said. “It’s crazy.”
In the last two weeks, she and her son say they have left repeated messages with GMAC seeking a supervisor who can get to the bottom of the matter. “This morning I woke up with hard pain in my chest right where my heart is,” Ms. Yancy said. “I know that this is probably from the stress of dealing with GMAC.”
A GMAC spokeswoman declined to discuss the case, citing its privacy policy, but said generally that the lender has been eagerly processing loan modifications. The office that handles loan modifications has expanded its staff by 30 percent since January, and servicing teams have been working extra hours and on weekends, she said.
According to a report released by Treasury on Thursday, GMAC had modified 26 percent of eligible loans that were at least two months’ delinquent in September, making it one of the better performers. Bank of America, by contrast, had modified only 11 percent of such loans, according to the report.
Some mortgage companies tell customers they cannot modify loans because they merely send out the monthly bills, while the mortgages are actually owned by investors. Yet industry insiders say many mortgage companies can profit by delaying the process and keeping homeowners in long-term delinquency, extracting myriad fees.
Administration officials said they would continue to press mortgage companies for improvements in their handling of applications. On Thursday afternoon, Treasury and the Department of Housing and Urban Development summoned representatives from major mortgage companies to Washington for further discussions.
“We’ve put significant pressure on the servicers to ramp up production,” said Shaun Donovan, secretary of the Department of Housing and Urban Development, in Thursday’s briefing. “We are keeping that pressure on.”
Treasury first announced its foreclosure relief program in February. Under the plan, the government pays mortgage companies $1,000 for each loan they modify, and $1,000 a year for up to three years. The plan was advanced with the promise that it would eventually spare up to four million households from foreclosure. At the end of June, only 143,000 trial modifications had been begun, the Treasury Department now estimates.
In July, frustrated by the slow pace and irritated by homeowner complaints, the Treasury Department summoned major mortgage companies to Washington for what was subsequently described by officials as a dressing down. The mortgage companies promised to improve their staffing and training. The administration soon set a target of 500,000 trial loan modifications by the end of this month, reaching that goal three weeks early.
Still, officials said much work remained. “Unacceptably large numbers of families across the country are still at risk of losing homes,” said Mr. Geithner.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Bankruptcy Laywers Could be Very Busy in 2010
Greetings Bloggers:
Here a great article that could offer insight into the bankruptcy market for 2010. The article is written by Jessical Holzer of The Wall Street Journal. This article focuses on the future wave of defaults anticipated in the pay-option adjustable-rate mortgages. If a remedy isn't founds, then many of these mortgagors could be seeking bankruptcy protection. Thus, bankrutpcy lawyers could be in big demand in 2010.
Here is the article:
Lenders Seek Ways to Head Off New Mortgage-Default Wave
By JESSICA HOLZER
WASHINGTON -- Lenders and government officials are searching for ways to head off a wave of defaults on pay-option adjustable-rate mortgages, which are threatening to become the next storm to hit the U.S. housing market.
Option ARMs aren't easy to modify because of the risky features of the loans and their concentration in states where property values have plummeted the most. Once the rage in Florida and Nevada, the loans catered to creditworthy borrowers who had to stretch a great deal to buy a home in an overheated market.
Administration officials have been talking to mortgage investors and servicers about ways to help option ARM borrowers avoid foreclosure, but the parties don't appear close to a solution. A major sticking point: whether lenders need to forgive loan principal to help the borrowers stay in their homes.
"All sides are talking," said Laurie Goodman, a senior managing director of broker/dealer Amherst Securities Group. "The servicers and investors have different solutions to the problem. Servicers are more reluctant than investors to forgive principal."
Mortgage investors contend that forgiving loan principal is crucial because so many option ARM borrowers are underwater, owing much more than their homes are worth. Meanwhile, servicers favor taking other measures before writing off any loan principal. The government risks a backlash from borrowers who are paying off their loans in full if it takes steps to encourage principal forgiveness.
A Treasury Department spokeswoman declined to comment.
The major mortgage servicers -- J.P. Morgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. -- also hold large portfolios of option ARMs acquired through purchases of other banks. Investors suspect that they are reluctant to forgive principal on option ARMs in their servicing portfolios because that could trigger write downs of the banks' option ARM holdings.
Delinquencies and foreclosures of option ARMs are climbing and the problem is expected to get worse. In the second quarter, 15.2% of option ARMs were at least 60 days past due, compared with a 5.3% delinquency rate for all mortgages, the Office of the Comptroller of the Currency said in a report analyzing 34 million U.S. mortgages. Meanwhile, 10% of option ARMs were in the process of foreclosure, more than triple the 2.9% rate for all mortgages, the OCC said.
The poor performance partly reflects the loans' heavy concentration in the four states that have seen the sharpest price drops. Option ARMs represent nearly 40% of loans at least 60 days past due in Florida and in Nevada and 28% of such loans in California, according to First American CoreLogic. One in five delinquent mortgages in Arizona is an option ARM.
Making matters worse, more than a million option ARMs are due to reset over the next four years, according to First American CoreLogic. When that happens, borrowers who were making partial interest payments will have to make fully amortizing payments reflecting a larger loan balance.
Option ARMs aren't good candidates for the government's loan-modification program. Borrowers with such loans are often already struggling to make already very low payments, leaving little room to cut the payments further.
Some borrowers are so deeply underwater that lenders would have to write off or defer huge amounts of loan principal to achieve a sustainable modification. That could trigger a failure of the net present value test required to complete a modification under the government's program.
Mortgage servicers are seeking changes to the program to make it work better for option ARMS. They propose forgiving deferred interest, converting the loan to one with an interest-only period and increasing the loan term before any principal is written off. By contrast, investors favor refinancing borrowers who qualify into a Federal Housing Administration-backed mortgage after the loan principal has been cut.
Wells Fargo, which values the Pick-A-Pay loans it acquired when it bought Wachovia Corp. at $90.45 billion, says it has been successful in modifying them on its own or through the government's program.
"We continue to work with the administration on industrywide solutions that address the unique nature of option ARM and negative-amortizing loans," Wells Fargo spokesman Kevin Waetke said.
Investors argue that slashing monthly payments or forbearing principal -- when portions of the loan balance is deferred -- won't help many option ARM borrowers because they are so upside down on their mortgages.
The concern with principal forbearance is that people may still owe much more than their house is worth, said Michael Henriques of Magnetar Capital, a mortgage investor. "There's no material incentive to maintain or take care of it," he said. That deterioration drags down the property values of the neighboring houses as well, prolonging the housing recovery, Mr. Henriques said.
Spokesmen for Bank of America and J.P. Morgan declined to comment.
Bank of America valued the pay-option loans it acquired when it bought Countrywide Financial Corp. at $23.2 billion as of December 31, 2008. Meanwhile, J.P. Morgan holds nearly $40 billion of option ARMs from its acquisition of Washington Mutual last year.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Here a great article that could offer insight into the bankruptcy market for 2010. The article is written by Jessical Holzer of The Wall Street Journal. This article focuses on the future wave of defaults anticipated in the pay-option adjustable-rate mortgages. If a remedy isn't founds, then many of these mortgagors could be seeking bankruptcy protection. Thus, bankrutpcy lawyers could be in big demand in 2010.
Here is the article:
Lenders Seek Ways to Head Off New Mortgage-Default Wave
By JESSICA HOLZER
WASHINGTON -- Lenders and government officials are searching for ways to head off a wave of defaults on pay-option adjustable-rate mortgages, which are threatening to become the next storm to hit the U.S. housing market.
Option ARMs aren't easy to modify because of the risky features of the loans and their concentration in states where property values have plummeted the most. Once the rage in Florida and Nevada, the loans catered to creditworthy borrowers who had to stretch a great deal to buy a home in an overheated market.
Administration officials have been talking to mortgage investors and servicers about ways to help option ARM borrowers avoid foreclosure, but the parties don't appear close to a solution. A major sticking point: whether lenders need to forgive loan principal to help the borrowers stay in their homes.
"All sides are talking," said Laurie Goodman, a senior managing director of broker/dealer Amherst Securities Group. "The servicers and investors have different solutions to the problem. Servicers are more reluctant than investors to forgive principal."
Mortgage investors contend that forgiving loan principal is crucial because so many option ARM borrowers are underwater, owing much more than their homes are worth. Meanwhile, servicers favor taking other measures before writing off any loan principal. The government risks a backlash from borrowers who are paying off their loans in full if it takes steps to encourage principal forgiveness.
A Treasury Department spokeswoman declined to comment.
The major mortgage servicers -- J.P. Morgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. -- also hold large portfolios of option ARMs acquired through purchases of other banks. Investors suspect that they are reluctant to forgive principal on option ARMs in their servicing portfolios because that could trigger write downs of the banks' option ARM holdings.
Delinquencies and foreclosures of option ARMs are climbing and the problem is expected to get worse. In the second quarter, 15.2% of option ARMs were at least 60 days past due, compared with a 5.3% delinquency rate for all mortgages, the Office of the Comptroller of the Currency said in a report analyzing 34 million U.S. mortgages. Meanwhile, 10% of option ARMs were in the process of foreclosure, more than triple the 2.9% rate for all mortgages, the OCC said.
The poor performance partly reflects the loans' heavy concentration in the four states that have seen the sharpest price drops. Option ARMs represent nearly 40% of loans at least 60 days past due in Florida and in Nevada and 28% of such loans in California, according to First American CoreLogic. One in five delinquent mortgages in Arizona is an option ARM.
Making matters worse, more than a million option ARMs are due to reset over the next four years, according to First American CoreLogic. When that happens, borrowers who were making partial interest payments will have to make fully amortizing payments reflecting a larger loan balance.
Option ARMs aren't good candidates for the government's loan-modification program. Borrowers with such loans are often already struggling to make already very low payments, leaving little room to cut the payments further.
Some borrowers are so deeply underwater that lenders would have to write off or defer huge amounts of loan principal to achieve a sustainable modification. That could trigger a failure of the net present value test required to complete a modification under the government's program.
Mortgage servicers are seeking changes to the program to make it work better for option ARMS. They propose forgiving deferred interest, converting the loan to one with an interest-only period and increasing the loan term before any principal is written off. By contrast, investors favor refinancing borrowers who qualify into a Federal Housing Administration-backed mortgage after the loan principal has been cut.
Wells Fargo, which values the Pick-A-Pay loans it acquired when it bought Wachovia Corp. at $90.45 billion, says it has been successful in modifying them on its own or through the government's program.
"We continue to work with the administration on industrywide solutions that address the unique nature of option ARM and negative-amortizing loans," Wells Fargo spokesman Kevin Waetke said.
Investors argue that slashing monthly payments or forbearing principal -- when portions of the loan balance is deferred -- won't help many option ARM borrowers because they are so upside down on their mortgages.
The concern with principal forbearance is that people may still owe much more than their house is worth, said Michael Henriques of Magnetar Capital, a mortgage investor. "There's no material incentive to maintain or take care of it," he said. That deterioration drags down the property values of the neighboring houses as well, prolonging the housing recovery, Mr. Henriques said.
Spokesmen for Bank of America and J.P. Morgan declined to comment.
Bank of America valued the pay-option loans it acquired when it bought Countrywide Financial Corp. at $23.2 billion as of December 31, 2008. Meanwhile, J.P. Morgan holds nearly $40 billion of option ARMs from its acquisition of Washington Mutual last year.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
US Supreme Court to Consider Bankruptcy Attorney and Legal Advice Rules
The U.S. Supreme Court will be considering a bankruptcy case that has wide implications for practicing bankruptcy attonreys. The issue was summarized nicely by reporter Thomas Scheffey in the following article.
Thomas B. Scheffey
The Connecticut Law Tribune
10-09-2009
Robert Milavetz, the founder of an 11-lawyer bankruptcy firm in the suburbs of Minneapolis, wasn't pleased when Congress started telling bankruptcy lawyers what they could and could not say to clients.
Specifically, he -- along with attorneys from Connecticut and elsewhere -- didn't like a 2005 law that seemed to forbid lawyers from advising bankruptcy clients to incur any more debt. Another part of the new law apparently required bankruptcy lawyers to include in their advertisements that "we are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code."
Milavetz made a federal case of it, seeking declaratory relief in a Minnesota federal court.
The U.S. government argued that Congress' orders were not a violation of the First Amendment right to free speech, or commercial free speech law.
The 8th U.S. Circuit Court of Appeals rendered a split decision, holding that the directive to not advise taking on debt was unconstitutional, but that the advertising requirement had a rational basis in a legitimate governmental purpose.
Both the government and Milavetz wanted to go to the U.S. Supreme Court and appeal the parts they lost. To handle the petition for certiorari, Milavetz sought out bankruptcy scholar D. Eric Brunstad, a partner in the Hartford, Conn., office of Dechert and a veteran of more than 40 U.S. Supreme Court cases, including 10 oral arguments.
Both the Justice Department and Brunstad beat steep odds and won their petitions for certiorari, and the combined cases have a total of six issues. Arguments are set for December.
For Brunstad, arguing a First Amendment case on lawyers' rights to advertise truthfully and to advise clients freely and honestly is a dream case.
"You know, when you go to law school, and you study constitutional law, the thing that always gripped me was the First Amendment," he said. "These noble and meaningful concepts about freedom of speech and expression and how we protect them."
Many of Brunstad's earlier Supreme Court arguments involved arcane and abstruse details of the Bankruptcy Code, far removed from the broad First Amendment questions of this case. He's unabashedly excited about this First Amendment assignment.
"[T]o actually be involved in one, and be writing about it and arguing about it, is just absolutely thrilling," he said. It's like arguing, he said, for "truth, justice and the American way."
ENCOURAGING DEBT?
Congress clearly didn't want people digging themselves into a deeper financial hole when it wrote that bankruptcy counselors must not encourage clients to incur additional debt.
In the petition by the Justice Department seeking certiorari, Solicitor General Elena Kagan said that both sides agree on the basic problem being addressed by the new code sections: "misleading lawyer advertising that touts debt relief without making it clear that a bankruptcy filing would be involved."
Kagan disputes the idea that the problem would be better handled by state law changes. "Bankruptcy is a subject of particular federal concern," the Justice Department argued. "Congress has the power to address attorney misconduct that specifically affects the bankruptcy area." It urged upholding the 8th Circuit conclusion that there was a reasonable relationship between Congress's remedy and the underlying problem.
So why is it necessary -- or a good idea in some cases -- to counsel a bankrupt client to take on new debt?
Brunstad explained: "Lawyers have to be able to give unfettered, candid advice to their clients. This sort of restriction is really overbroad. It prohibits things such as counseling debtors about incurring debt, or paying attorneys in a way that's entirely beneficial" to all involved.
He gives the example of a client whose circumstances make it advisable to sell a house and rent an apartment. Under the new code restriction, Brunstad said, "the lawyer can't advise [you to] sell your house and rent an apartment, because renting an apartment means incurring lease debt... . The statute sort of muzzles the lawyer from giving even that sort of helpful advice, that doesn't hurt anyone -- so that can't be right."
At the Edina, Minn., offices of Milavetz, Gallop & Milavetz, associate Chad W. Schulze, who worked on the Supreme Court brief with Brunstad, explained why his firm bridled at the idea of having to use Congress's disclosure language about it being a "debt relief agency."
"It deceives the public, and it's compelled speech. Our advertising is not supposed to be misleading, ethically," he said. If a bankruptcy shop primarily advises creditors, the mandated advertising tagline gives a mistaken impression, Schulze said.
So-called debt relief agencies are given some leeway to change the wording, but they might do so at their peril, he said. Congress has instituted fraud penalties under the Bankruptcy Code so that a practitioner can be liable for "abuse" of the code. If a rewrite of the advertising was considered abuse of the code, a lawyer could be liable for penalties that include all of a client's debts that were not discharged in bankruptcy, Schulze said.
Hartford lawyer Myles Alderman, of the bankruptcy firm Alderman & Alderman, said he was "deeply troubled by the restrictions of attorney-client speech," that Brunstad will be challenging at the Supreme Court.
"The idea that a bankruptcy law would prohibit bankruptcy lawyers from honestly advising their clients about what they can and cannot legally do is abhorrent to the attorney-client relationship," said Alderman, a member of the professional discipline committee of the Connecticut Bar Association. The ultimate losers, if lawyers can't offer advice they think is best, "are not the lawyers -- it's the clients themselves," he said.
Brunstad has worked to streamline what might otherwise be an unwieldy case. Technically, both the U.S. and the Milavetz firm are petitioners, because each side is appealing its losses at the 8th Circuit. To simplify matters, Brunstad and the Justice Department lawyers agreed that the Milavetz side would be considered petitioners, and only one round of briefs would be necessary.
Simplification is part of Brunstad's strategizing to win the ultimate argument, as well. He doesn't need the high court to rule that Congress was enacting unconstitutional law that flies in the face of the First Amendment. Instead, he's asking the court to use the doctrine of Constitutional Avoidance to keep the matter from becoming a First Amendment showdown.
As he put it: "Congress's definition of debt relief agency does not include attorney, expressly, and there are lot of reasons why it doesn't and it shouldn't. Where there's room for doubt, the court will apply the canon of constitutional avoidance and avoid the constitutional question if it possibly can, and I think that should apply here."
In addition, he said he likes the argument against forcing "compelled speech" in the advertising language. As for the provision against not advising a client to incur any debt, a First Amendment prohibition-of-speech argument is also compelling, Brunstad said. "Lawyers have to be able to give unfettered, candid advice to their clients," he noted.
And in the end, Brunstad will be arguing to nine lawyers -- almost preaching to the choir on the topic of lawyers having the freedom to advise their clients as they see fit.
Brunstad concluded: "It sounds a bit Orwellian to say let's muzzle all the lawyers."
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Thomas B. Scheffey
The Connecticut Law Tribune
10-09-2009
Robert Milavetz, the founder of an 11-lawyer bankruptcy firm in the suburbs of Minneapolis, wasn't pleased when Congress started telling bankruptcy lawyers what they could and could not say to clients.
Specifically, he -- along with attorneys from Connecticut and elsewhere -- didn't like a 2005 law that seemed to forbid lawyers from advising bankruptcy clients to incur any more debt. Another part of the new law apparently required bankruptcy lawyers to include in their advertisements that "we are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code."
Milavetz made a federal case of it, seeking declaratory relief in a Minnesota federal court.
The U.S. government argued that Congress' orders were not a violation of the First Amendment right to free speech, or commercial free speech law.
The 8th U.S. Circuit Court of Appeals rendered a split decision, holding that the directive to not advise taking on debt was unconstitutional, but that the advertising requirement had a rational basis in a legitimate governmental purpose.
Both the government and Milavetz wanted to go to the U.S. Supreme Court and appeal the parts they lost. To handle the petition for certiorari, Milavetz sought out bankruptcy scholar D. Eric Brunstad, a partner in the Hartford, Conn., office of Dechert and a veteran of more than 40 U.S. Supreme Court cases, including 10 oral arguments.
Both the Justice Department and Brunstad beat steep odds and won their petitions for certiorari, and the combined cases have a total of six issues. Arguments are set for December.
For Brunstad, arguing a First Amendment case on lawyers' rights to advertise truthfully and to advise clients freely and honestly is a dream case.
"You know, when you go to law school, and you study constitutional law, the thing that always gripped me was the First Amendment," he said. "These noble and meaningful concepts about freedom of speech and expression and how we protect them."
Many of Brunstad's earlier Supreme Court arguments involved arcane and abstruse details of the Bankruptcy Code, far removed from the broad First Amendment questions of this case. He's unabashedly excited about this First Amendment assignment.
"[T]o actually be involved in one, and be writing about it and arguing about it, is just absolutely thrilling," he said. It's like arguing, he said, for "truth, justice and the American way."
ENCOURAGING DEBT?
Congress clearly didn't want people digging themselves into a deeper financial hole when it wrote that bankruptcy counselors must not encourage clients to incur additional debt.
In the petition by the Justice Department seeking certiorari, Solicitor General Elena Kagan said that both sides agree on the basic problem being addressed by the new code sections: "misleading lawyer advertising that touts debt relief without making it clear that a bankruptcy filing would be involved."
Kagan disputes the idea that the problem would be better handled by state law changes. "Bankruptcy is a subject of particular federal concern," the Justice Department argued. "Congress has the power to address attorney misconduct that specifically affects the bankruptcy area." It urged upholding the 8th Circuit conclusion that there was a reasonable relationship between Congress's remedy and the underlying problem.
So why is it necessary -- or a good idea in some cases -- to counsel a bankrupt client to take on new debt?
Brunstad explained: "Lawyers have to be able to give unfettered, candid advice to their clients. This sort of restriction is really overbroad. It prohibits things such as counseling debtors about incurring debt, or paying attorneys in a way that's entirely beneficial" to all involved.
He gives the example of a client whose circumstances make it advisable to sell a house and rent an apartment. Under the new code restriction, Brunstad said, "the lawyer can't advise [you to] sell your house and rent an apartment, because renting an apartment means incurring lease debt... . The statute sort of muzzles the lawyer from giving even that sort of helpful advice, that doesn't hurt anyone -- so that can't be right."
At the Edina, Minn., offices of Milavetz, Gallop & Milavetz, associate Chad W. Schulze, who worked on the Supreme Court brief with Brunstad, explained why his firm bridled at the idea of having to use Congress's disclosure language about it being a "debt relief agency."
"It deceives the public, and it's compelled speech. Our advertising is not supposed to be misleading, ethically," he said. If a bankruptcy shop primarily advises creditors, the mandated advertising tagline gives a mistaken impression, Schulze said.
So-called debt relief agencies are given some leeway to change the wording, but they might do so at their peril, he said. Congress has instituted fraud penalties under the Bankruptcy Code so that a practitioner can be liable for "abuse" of the code. If a rewrite of the advertising was considered abuse of the code, a lawyer could be liable for penalties that include all of a client's debts that were not discharged in bankruptcy, Schulze said.
Hartford lawyer Myles Alderman, of the bankruptcy firm Alderman & Alderman, said he was "deeply troubled by the restrictions of attorney-client speech," that Brunstad will be challenging at the Supreme Court.
"The idea that a bankruptcy law would prohibit bankruptcy lawyers from honestly advising their clients about what they can and cannot legally do is abhorrent to the attorney-client relationship," said Alderman, a member of the professional discipline committee of the Connecticut Bar Association. The ultimate losers, if lawyers can't offer advice they think is best, "are not the lawyers -- it's the clients themselves," he said.
Brunstad has worked to streamline what might otherwise be an unwieldy case. Technically, both the U.S. and the Milavetz firm are petitioners, because each side is appealing its losses at the 8th Circuit. To simplify matters, Brunstad and the Justice Department lawyers agreed that the Milavetz side would be considered petitioners, and only one round of briefs would be necessary.
Simplification is part of Brunstad's strategizing to win the ultimate argument, as well. He doesn't need the high court to rule that Congress was enacting unconstitutional law that flies in the face of the First Amendment. Instead, he's asking the court to use the doctrine of Constitutional Avoidance to keep the matter from becoming a First Amendment showdown.
As he put it: "Congress's definition of debt relief agency does not include attorney, expressly, and there are lot of reasons why it doesn't and it shouldn't. Where there's room for doubt, the court will apply the canon of constitutional avoidance and avoid the constitutional question if it possibly can, and I think that should apply here."
In addition, he said he likes the argument against forcing "compelled speech" in the advertising language. As for the provision against not advising a client to incur any debt, a First Amendment prohibition-of-speech argument is also compelling, Brunstad said. "Lawyers have to be able to give unfettered, candid advice to their clients," he noted.
And in the end, Brunstad will be arguing to nine lawyers -- almost preaching to the choir on the topic of lawyers having the freedom to advise their clients as they see fit.
Brunstad concluded: "It sounds a bit Orwellian to say let's muzzle all the lawyers."
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Wednesday, October 7, 2009
Foreclosure Court Objects to Trial Court Staying Sheriff Sale
Reporter Susannah Nesmith reports as follows:
"'Benevolence and compassion' have no place when it comes to setting foreclosure sales, a Florida state appellate court ruled in a stern order.
The 3rd District Court of Appeal judges said they "thoroughly disapprove" of a decision by Miami-Dade Circuit Judge Valerie Manno Schurr to give an extra month to a couple trying to sell their home before a foreclosure sale, Senior Judge Alan R. Schwartz wrote for the panel last week.
Manno Schurr declined to comment on the decision, citing judicial rules that prohibit her from talking about specific cases. But in court, she made her position clear.
"People are having a hard time now. They are having a difficult time. Everybody knows it. Businesses are failing. People are losing money in the stock market. You know, unemployment is high," Manno Schurr said. "Everybody knows that we are in a bad time right now, and I hate to see anybody lose their home."
The appellate court found her reasoning flawed and said her decision granting extra time was "an abuse of discretion in the most basic sense of that term" because the bank had a right to the sale.
Several attorneys expressed outrage over the opinion but declined to go on the record, saying it could potentially be detrimental to them to openly criticize the judge or the court.
Mike Christiansen of Mastriana & Christiansen, a Fort Lauderdale attorney who has practiced real estate law for more than 30 years, was surprised by the tone of Schwartz's remarks.
"It's astounding to me, in the extraordinary times in which we find ourselves, that the court did not assert strong leadership and support the simple notion of compassion in cases where people and families are losing their homes," he said.
"Compassion is what distinguishes a robotic application of the law from real justice. And justice is what we should -- and do -- expect from judges."
Barry Simons of the Law Office of Barry L. Simons in Miami, attorney for Joseph and Blanca Doyle, declined to comment on the ruling against his clients.
Charles M. Rosenberg, attorney for Republic Federal Bank, said his client decided to appeal Manno Schurr's decision in part because the bank felt Miami-Dade trial judges "needed some guidance."
"With all of the foreclosures being filed in this county, we thought that the trial judges needed some guidance from the court of appeal on under what circumstances they could grant extensions because it's very common for people to run into court at the last minute asking for extensions," he said.
With the foreclosure sale of the Doyle home scheduled for the day after the opinion was published, the appellate court's ruling had little practical impact other than to chastise the judge and provide some guidance.
"Although we thus thoroughly disapprove of the order, in view of the fact that the postponed sale is due to take place within a short time of this decision, no useful purpose will be served by formally quashing the order or ordering the sale to take place on an earlier date with all the procedural complications which would then result," Schwartz wrote, stressing, "There are to be no further postponements of the sale."
Judges David Gersten and Barbara Lagoa concurred.
More than 100,000 open foreclosure cases are in Miami-Dade, according to Clerk of the Courts Harvey Ruvin. Many are taking years to resolve.
In the Doyles' case, the bank filed suit to foreclose on their 8,300-square-foot home in Pine-crest in January 2008 and got a $2.5 million foreclosure judgment in November, according to records.
The case was delayed when the Doyles filed for bankruptcy, but a federal judge tossed their case as frivolous. The Doyles were barred from filing another bankruptcy case for six months, and the extension Manno Schurr granted got them past that date.
"The immediate reason we filed was because of their abuse of the bankruptcy system," said Rosenberg, a Carlton Fields shareholder in Miami. "We understand that the court should have discretion to grant extensions, but there has to be some reason for doing it."
The Doyles did not file a second bankruptcy petition, and the house sold at auction Thursday. Rosenberg's firm submitted a $1.3 million bid on property with an assessed value of $2.64 million.
Foreclosure attorneys were predictably divided on the opinion. Attorneys specializing in defending homeowners were concerned that it takes away judicial discretion and leaves homeowners already in financial straits even more vulnerable to the whims of lenders. Those who represent banks said it would help them deal with homeowners who are abusing the process.
Peter Ariz, a South Miami solo practitioner who represents homeowners, said extensions often are necessary because the banks he deals with won't negotiate mortgage modifications quickly.
"The judges here have really been the only ones defending the consumers because they've allowed the borrowers the time to negotiate," he said. "There's a lack of compassion on the other end when it comes to the lenders."
"I deal with banks that delay the modification process for months before finally offering a modification that actually raises the homeowner's payments," he said. "And then they file a foreclosure while they're negotiating the modification. That's just unconscionable."
On the other hand, lender attorney Zoe Krikorian of Weisenfield & Associates in Miami hopes the ruling will speed Miami-Dade foreclosure cases.
"If there are legitimate reasons -- people really trying to modify the loan, or they have a valid contract for a short sale -- that's one thing," she said. "But many times, it's just a delay tactic so people can stay in their houses longer without paying."
She said the earliest sale date she could get for foreclosure judgments issued now is next April. And it often takes months to get a judgment after a case is filed. Plus, lenders usually wait for several months of missed payments before filing foreclosure suits.
"When we reset a sale, think about it. They've already had as long as two years since they stopped paying," she said.
Miami-Dade civil judges "are each carrying dockets of three to four thousand foreclosure cases," chief civil administrative Judge Jennifer Bailey said by e-mail.
"As a result of the explosion of foreclosures, judges are routinely confronted by emergency motions, and each judge tries to do justice in the case before him or her according to the law and equity." "
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
"'Benevolence and compassion' have no place when it comes to setting foreclosure sales, a Florida state appellate court ruled in a stern order.
The 3rd District Court of Appeal judges said they "thoroughly disapprove" of a decision by Miami-Dade Circuit Judge Valerie Manno Schurr to give an extra month to a couple trying to sell their home before a foreclosure sale, Senior Judge Alan R. Schwartz wrote for the panel last week.
Manno Schurr declined to comment on the decision, citing judicial rules that prohibit her from talking about specific cases. But in court, she made her position clear.
"People are having a hard time now. They are having a difficult time. Everybody knows it. Businesses are failing. People are losing money in the stock market. You know, unemployment is high," Manno Schurr said. "Everybody knows that we are in a bad time right now, and I hate to see anybody lose their home."
The appellate court found her reasoning flawed and said her decision granting extra time was "an abuse of discretion in the most basic sense of that term" because the bank had a right to the sale.
Several attorneys expressed outrage over the opinion but declined to go on the record, saying it could potentially be detrimental to them to openly criticize the judge or the court.
Mike Christiansen of Mastriana & Christiansen, a Fort Lauderdale attorney who has practiced real estate law for more than 30 years, was surprised by the tone of Schwartz's remarks.
"It's astounding to me, in the extraordinary times in which we find ourselves, that the court did not assert strong leadership and support the simple notion of compassion in cases where people and families are losing their homes," he said.
"Compassion is what distinguishes a robotic application of the law from real justice. And justice is what we should -- and do -- expect from judges."
Barry Simons of the Law Office of Barry L. Simons in Miami, attorney for Joseph and Blanca Doyle, declined to comment on the ruling against his clients.
Charles M. Rosenberg, attorney for Republic Federal Bank, said his client decided to appeal Manno Schurr's decision in part because the bank felt Miami-Dade trial judges "needed some guidance."
"With all of the foreclosures being filed in this county, we thought that the trial judges needed some guidance from the court of appeal on under what circumstances they could grant extensions because it's very common for people to run into court at the last minute asking for extensions," he said.
With the foreclosure sale of the Doyle home scheduled for the day after the opinion was published, the appellate court's ruling had little practical impact other than to chastise the judge and provide some guidance.
"Although we thus thoroughly disapprove of the order, in view of the fact that the postponed sale is due to take place within a short time of this decision, no useful purpose will be served by formally quashing the order or ordering the sale to take place on an earlier date with all the procedural complications which would then result," Schwartz wrote, stressing, "There are to be no further postponements of the sale."
Judges David Gersten and Barbara Lagoa concurred.
More than 100,000 open foreclosure cases are in Miami-Dade, according to Clerk of the Courts Harvey Ruvin. Many are taking years to resolve.
In the Doyles' case, the bank filed suit to foreclose on their 8,300-square-foot home in Pine-crest in January 2008 and got a $2.5 million foreclosure judgment in November, according to records.
The case was delayed when the Doyles filed for bankruptcy, but a federal judge tossed their case as frivolous. The Doyles were barred from filing another bankruptcy case for six months, and the extension Manno Schurr granted got them past that date.
"The immediate reason we filed was because of their abuse of the bankruptcy system," said Rosenberg, a Carlton Fields shareholder in Miami. "We understand that the court should have discretion to grant extensions, but there has to be some reason for doing it."
The Doyles did not file a second bankruptcy petition, and the house sold at auction Thursday. Rosenberg's firm submitted a $1.3 million bid on property with an assessed value of $2.64 million.
Foreclosure attorneys were predictably divided on the opinion. Attorneys specializing in defending homeowners were concerned that it takes away judicial discretion and leaves homeowners already in financial straits even more vulnerable to the whims of lenders. Those who represent banks said it would help them deal with homeowners who are abusing the process.
Peter Ariz, a South Miami solo practitioner who represents homeowners, said extensions often are necessary because the banks he deals with won't negotiate mortgage modifications quickly.
"The judges here have really been the only ones defending the consumers because they've allowed the borrowers the time to negotiate," he said. "There's a lack of compassion on the other end when it comes to the lenders."
"I deal with banks that delay the modification process for months before finally offering a modification that actually raises the homeowner's payments," he said. "And then they file a foreclosure while they're negotiating the modification. That's just unconscionable."
On the other hand, lender attorney Zoe Krikorian of Weisenfield & Associates in Miami hopes the ruling will speed Miami-Dade foreclosure cases.
"If there are legitimate reasons -- people really trying to modify the loan, or they have a valid contract for a short sale -- that's one thing," she said. "But many times, it's just a delay tactic so people can stay in their houses longer without paying."
She said the earliest sale date she could get for foreclosure judgments issued now is next April. And it often takes months to get a judgment after a case is filed. Plus, lenders usually wait for several months of missed payments before filing foreclosure suits.
"When we reset a sale, think about it. They've already had as long as two years since they stopped paying," she said.
Miami-Dade civil judges "are each carrying dockets of three to four thousand foreclosure cases," chief civil administrative Judge Jennifer Bailey said by e-mail.
"As a result of the explosion of foreclosures, judges are routinely confronted by emergency motions, and each judge tries to do justice in the case before him or her according to the law and equity." "
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Monday, October 5, 2009
Law School Student Loan Debt Can Be Crushing
The average law student who graduated from a private university in 2008 borrowed more than $91,500 on the way to earning that degree, reported by Daily Business Review.
Combine that with leftover undergraduate debt and the shrinking job market, and you've got a surefire recipe for postgraduate financial fright. In a sharp departure from recent history -- when students coming out of even mid-tier schools could count on commanding six-figure starting salaries -- law school debt is now a heavy burden.
"Graduating law students have just spent three years working very hard, and suddenly they're out on their own in very uncertain times," says Beth Kobliner, author of "Get a Financial Life: Personal Finance in Your Twenties and Thirties." "It's easy to feel overwhelmed, but the best thing you can do is to educate yourself about your options."
Law school grads may have a particularly heavy burden to bear but, like other borrowers, they have several options that can help them in this regard. For those with debt worries, here are four questions to ask.
WHO OWNS YOUR LOANS?
Debt is often sold on the secondary market, with the debtor as the income stream. One loan can be sold many times, making it tricky to know who owns yours. Joe Russo, director of student financial strategies at the University of Notre Dame Law School, suggests visiting www.nslds.ed.gov. The U.S. Department of Education database has information on all government-backed loans, the vast majority of student debt. It's the best resource for finding out how much you owe -- and to whom.
ARE YOU READY TO STRETCH?
Once you know who's collecting your payments, ask about loan consolidation and extension. Standard terms call for student loans to be repaid in 120 equal monthly installments over 10 years. These days, there are various payment plans, especially for government-backed loans including Stafford, Perkins and PLUS. Those with more than $30,000 in government-backed debt from college, law school or both can combine balances directly with the department and extend the repayment period to 20 or even 30 years. Monthly payments will be lower, but you'll pay more in interest over the life of the loan.
DOES THE NEW RULE APPLY?
Find out if you qualify for income-based repayment. William Hoye, director of financial aid at Duke University Law School, said this new program for government-backed loans is one that every law grad should know about. The program offers especially attractive repayment terms for those who take public interest jobs.
HOW LOW WILL THEY GO?
If you are unemployed and unable to make any payments, ask your lender for a deferment or forbearance. Both delay payments for a defined period of time and are relatively easy to obtain, especially if you're out of work. But Patricia Christel, a spokesman for Sallie Mae, one of the largest student loan servicers, said a deferment or forbearance should be a last resort. Your lender will tell you what the criteria for qualifying are. Beth Kobliner recommends a deferment, if possible, because the federal government will often subsidize the interest payments. With a loan forbearance, interest continues to accrue. Source: Matt Straquadine of the Daily Business Review.
Building a bankruptcy practice and becoming a bankruptcy lawyer may be the best bet for some law school graduates to survive in the current work environment. Bankruptcy attorneys are in huge demand in a hot market.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Combine that with leftover undergraduate debt and the shrinking job market, and you've got a surefire recipe for postgraduate financial fright. In a sharp departure from recent history -- when students coming out of even mid-tier schools could count on commanding six-figure starting salaries -- law school debt is now a heavy burden.
"Graduating law students have just spent three years working very hard, and suddenly they're out on their own in very uncertain times," says Beth Kobliner, author of "Get a Financial Life: Personal Finance in Your Twenties and Thirties." "It's easy to feel overwhelmed, but the best thing you can do is to educate yourself about your options."
Law school grads may have a particularly heavy burden to bear but, like other borrowers, they have several options that can help them in this regard. For those with debt worries, here are four questions to ask.
WHO OWNS YOUR LOANS?
Debt is often sold on the secondary market, with the debtor as the income stream. One loan can be sold many times, making it tricky to know who owns yours. Joe Russo, director of student financial strategies at the University of Notre Dame Law School, suggests visiting www.nslds.ed.gov. The U.S. Department of Education database has information on all government-backed loans, the vast majority of student debt. It's the best resource for finding out how much you owe -- and to whom.
ARE YOU READY TO STRETCH?
Once you know who's collecting your payments, ask about loan consolidation and extension. Standard terms call for student loans to be repaid in 120 equal monthly installments over 10 years. These days, there are various payment plans, especially for government-backed loans including Stafford, Perkins and PLUS. Those with more than $30,000 in government-backed debt from college, law school or both can combine balances directly with the department and extend the repayment period to 20 or even 30 years. Monthly payments will be lower, but you'll pay more in interest over the life of the loan.
DOES THE NEW RULE APPLY?
Find out if you qualify for income-based repayment. William Hoye, director of financial aid at Duke University Law School, said this new program for government-backed loans is one that every law grad should know about. The program offers especially attractive repayment terms for those who take public interest jobs.
HOW LOW WILL THEY GO?
If you are unemployed and unable to make any payments, ask your lender for a deferment or forbearance. Both delay payments for a defined period of time and are relatively easy to obtain, especially if you're out of work. But Patricia Christel, a spokesman for Sallie Mae, one of the largest student loan servicers, said a deferment or forbearance should be a last resort. Your lender will tell you what the criteria for qualifying are. Beth Kobliner recommends a deferment, if possible, because the federal government will often subsidize the interest payments. With a loan forbearance, interest continues to accrue. Source: Matt Straquadine of the Daily Business Review.
Building a bankruptcy practice and becoming a bankruptcy lawyer may be the best bet for some law school graduates to survive in the current work environment. Bankruptcy attorneys are in huge demand in a hot market.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
2,000 Legal Jobs Lost in September; Bankruptcy a Bright Spot
Bankruptcy continues to be a hot jobs market with the number of bankruptcy filings surging to over the 1,000,000 mark. Jobs in bankruptcy are offering a source of hope for unemployed young attorneys. Schools like the National Bankruptcy College are offering retraining programs to attorneys who cannot locate a job or need to transition their job skills from fading practice areas to a surging bankruptcy practice.
In contract, the non-bankruptcy legal market is not doing so well. According to a monthly jobs report released Friday by the US Bureau of Labor Statistics, the nation lost 263,000 jobs in September of 2009 as the unemployment rate reached 9.8 percent, highest in 26 years.
The legal sector wasn't spared. When the data is seasonally adjusted, the sector shed another 2,000 jobs. When not seasonally adjusted, the legal industry lost 13,600 jobs, likely a result of the conclusion of most summer associate programs and the return of students to their law schools.
While layoffs at Am Law firms appear to have tapered off from their brisk pace earlier this year, some firms still are thinning their ranks. Reportedly, Chicago-based Sonnenschein Nath & Rosenthal enacted its third round of cuts of the past 18 months, reducing its ranks by 30 attorneys in September, including 10 income partners.
Signs don't point to any major improvements in the employment stats in the legal field for October.
On Friday, The Recorder reported that Colley Godward Kronish was laying off 58 staffers, with the majority of the cuts coming from the secretarial ranks. The layoffs represent nearly 6 percent of the firm's total staff. Cooley previously cut 52 lawyers and 62 staff in January. Source: Brian Baxter of The Am Law Daily blog.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
In contract, the non-bankruptcy legal market is not doing so well. According to a monthly jobs report released Friday by the US Bureau of Labor Statistics, the nation lost 263,000 jobs in September of 2009 as the unemployment rate reached 9.8 percent, highest in 26 years.
The legal sector wasn't spared. When the data is seasonally adjusted, the sector shed another 2,000 jobs. When not seasonally adjusted, the legal industry lost 13,600 jobs, likely a result of the conclusion of most summer associate programs and the return of students to their law schools.
While layoffs at Am Law firms appear to have tapered off from their brisk pace earlier this year, some firms still are thinning their ranks. Reportedly, Chicago-based Sonnenschein Nath & Rosenthal enacted its third round of cuts of the past 18 months, reducing its ranks by 30 attorneys in September, including 10 income partners.
Signs don't point to any major improvements in the employment stats in the legal field for October.
On Friday, The Recorder reported that Colley Godward Kronish was laying off 58 staffers, with the majority of the cuts coming from the secretarial ranks. The layoffs represent nearly 6 percent of the firm's total staff. Cooley previously cut 52 lawyers and 62 staff in January. Source: Brian Baxter of The Am Law Daily blog.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
Saturday, October 3, 2009
Unemployment Up To 9.8%; Bankruptcies Up Too
The question is not whether more bankruptcy cases will be filed. Rather, the question is how many more bankruptcy cases will be filed. Some experts are anticipating a huge increase in filings. This year is a bumper year for bankruptcies already. The bad jobs report will only add more fuel to the fire.
The New York Times has reported that after several months in which the American economy flashed tentative signs of improvement, a sobering report on the national job market released on Friday amplified worries that a lengthy period of lean times lay ahead.
263,000 jobs in September, and the unemployment rate edged up to 9.8 percent from 9.7 percent in August, according to the Labor Department’s monthly snapshot of the employment picture.
Though the job market worsened, the pace of deterioration remained markedly slower than during the early months of the year, when roughly 700,000 jobs a month were disappearing. That improvement seems consistent with the widespread belief that the recession has given way to economic growth. Yet the report also buttressed fears that economic expansion would be weak and hesitant, with scarce paychecks and economic anxiety remaining prominent features of American life well into next year.
“This is a weak report,” said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “The rate of job loss has tapered off, but we still haven’t reached the point where businesses are willing to hire.”
The Labor Department also made a preliminary revision in its survey of private employers that indicated the job market shrank even more during the recession. The department disclosed that in March this year the economy held 824,000 fewer jobs than previously reported, making an already bleak picture worse.
The endurance of hard times seems likely to increase pressure on the Obama administration and Congress to consider another dose of spending aimed at stimulating the economy, even as the government grapples with deficits projected by some economists to exceed $10 trillion over the next decade.
Despite a $787 billion stimulus package adopted early this year and aimed in part at shoring up state and local coffers, government jobs slipped by 53,000 in September.
“That’s the budget crunch hitting,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “We’re still losing jobs at a very rapid pace. We’re still looking at an economy with a lot of weakness.”
For millions of unemployed people, the latest data merely confirms something they have come to understand intimately, through the discouraging process of seeking work.
“There’s nothing out there,” said Jerry Lamirande, a technology systems engineer in Amarillo, Tex., who has been without a job since April 2008.
During the technology boom of the late 1990s, Mr. Lamirande, 62, worked for IBM, where he drew a salary of about $130,000. After a layoff seven years ago, he has earned about $70,000 a year as a technology consultant working on contract.
Since the spring, he and his wife have lived on her modest salary as a public school teacher and on hardship withdrawals from his retirement account. He has searched nationwide for his next contract, willing to relocate.
“I’ve got to go where the opportunities are,” he said. “The problem is, there aren’t many opportunities.”
The latest jobs report lent credence to that contention. The unemployment rate continued to inch toward double digits, a level last seen in June 1983. The so-called underemployment rate (which includes people whose hours have been cut, and those working part-time for lack of full-time positions, along with the jobless) reached 17 percent, the highest level since the government began tracking it in 1994.
More jobs were lost last month, at 263,000, than were lost in August, as the Labor Department revised the August decline to 201,000 jobs from the 216,000 it initially reported.
Health care remained a rare bright spot, adding 19,000 jobs in September, but construction jobs slipped by 64,000, manufacturing declined by 51,000 and retail lost 39,000 jobs.
Most economists assume the economy expanded at an annual pace of about three percent from July through September. But debate focuses on the vigor and staying power of the recovery.
Optimists anticipate a robust bounce-back from what now stands as the longest recession since the Great Depression. But most economists expect a sustained slog through high rates of joblessness.
The economic improvement in recent months largely stems from businesses cutting inventories at a slower pace. As some companies begin to rebuild stocks, the impact could wash through the economy for a few more months, adding jobs and moderating the overall decline.
Then the underlying weakness of the economy will probably reassert itself, say experts. After years of borrowing against homes and cashing in stock to spend in excess of their incomes, many Americans are tapped out. Austerity and saving have replaced spending and investment in many households, constraining the economy.
As many Americans transition from living on home equity loans to sustaining themselves on paychecks, weekly pay continues to effectively shrink: Over the last year, average hourly earnings for rank-and-file workers — some 80 percent of the labor force — have increased by 2.5 percent. But average weekly earnings have expanded by only 0.7 percent, less than the increase in the cost of living, because employers have slashed working hours.
In September, the average workweek edged down by one-tenth of an hour, to 33 hours.
For those out of work, the job market looks harsher now than at any point in the recession. The number of people who have been jobless for more than six months increased in September by 450,000, reaching 5.4 million.
“We have a truly massive crisis of long-term unemployment,” said Christine L. Owens, executive director of the National Employment Law Project in a statement, adding that nearly 400,000 jobless people had exhausted their unemployment benefits by the end of September. “Today’s employment report is a marching order for Congress to pass unemployment benefit extensions to all states, quickly.”
The first signs of improvement are likely to be seen among temporary workers, say experts, as companies now hunkering down in the face of uncertain prospects take tentative steps to expand.
But temporary help services lost 1,700 jobs in September.
“Companies are extremely cautious,” said Roy G. Krause, chief executive of Spherion, a recruiting and staffing company based in Fort Lauderdale, Fla.
All of which translates into continued apprehension in many households.
“It’s terrifying,” said Stephanie Wheeler, 56, of Elizabeth, N.J., who has drained her savings to $800 in the year since she lost her job at a data-processing company, rendering her ability to pay the rent on her apartment uncertain.
“I’ve been here for eight years,” she said. “I don’t know what’s going to happen. I’m petrified of being set out on the street.” Source: as reported by the The New York Times.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
The New York Times has reported that after several months in which the American economy flashed tentative signs of improvement, a sobering report on the national job market released on Friday amplified worries that a lengthy period of lean times lay ahead.
263,000 jobs in September, and the unemployment rate edged up to 9.8 percent from 9.7 percent in August, according to the Labor Department’s monthly snapshot of the employment picture.
Though the job market worsened, the pace of deterioration remained markedly slower than during the early months of the year, when roughly 700,000 jobs a month were disappearing. That improvement seems consistent with the widespread belief that the recession has given way to economic growth. Yet the report also buttressed fears that economic expansion would be weak and hesitant, with scarce paychecks and economic anxiety remaining prominent features of American life well into next year.
“This is a weak report,” said Stuart G. Hoffman, chief economist at the PNC Financial Services Group in Pittsburgh. “The rate of job loss has tapered off, but we still haven’t reached the point where businesses are willing to hire.”
The Labor Department also made a preliminary revision in its survey of private employers that indicated the job market shrank even more during the recession. The department disclosed that in March this year the economy held 824,000 fewer jobs than previously reported, making an already bleak picture worse.
The endurance of hard times seems likely to increase pressure on the Obama administration and Congress to consider another dose of spending aimed at stimulating the economy, even as the government grapples with deficits projected by some economists to exceed $10 trillion over the next decade.
Despite a $787 billion stimulus package adopted early this year and aimed in part at shoring up state and local coffers, government jobs slipped by 53,000 in September.
“That’s the budget crunch hitting,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “We’re still losing jobs at a very rapid pace. We’re still looking at an economy with a lot of weakness.”
For millions of unemployed people, the latest data merely confirms something they have come to understand intimately, through the discouraging process of seeking work.
“There’s nothing out there,” said Jerry Lamirande, a technology systems engineer in Amarillo, Tex., who has been without a job since April 2008.
During the technology boom of the late 1990s, Mr. Lamirande, 62, worked for IBM, where he drew a salary of about $130,000. After a layoff seven years ago, he has earned about $70,000 a year as a technology consultant working on contract.
Since the spring, he and his wife have lived on her modest salary as a public school teacher and on hardship withdrawals from his retirement account. He has searched nationwide for his next contract, willing to relocate.
“I’ve got to go where the opportunities are,” he said. “The problem is, there aren’t many opportunities.”
The latest jobs report lent credence to that contention. The unemployment rate continued to inch toward double digits, a level last seen in June 1983. The so-called underemployment rate (which includes people whose hours have been cut, and those working part-time for lack of full-time positions, along with the jobless) reached 17 percent, the highest level since the government began tracking it in 1994.
More jobs were lost last month, at 263,000, than were lost in August, as the Labor Department revised the August decline to 201,000 jobs from the 216,000 it initially reported.
Health care remained a rare bright spot, adding 19,000 jobs in September, but construction jobs slipped by 64,000, manufacturing declined by 51,000 and retail lost 39,000 jobs.
Most economists assume the economy expanded at an annual pace of about three percent from July through September. But debate focuses on the vigor and staying power of the recovery.
Optimists anticipate a robust bounce-back from what now stands as the longest recession since the Great Depression. But most economists expect a sustained slog through high rates of joblessness.
The economic improvement in recent months largely stems from businesses cutting inventories at a slower pace. As some companies begin to rebuild stocks, the impact could wash through the economy for a few more months, adding jobs and moderating the overall decline.
Then the underlying weakness of the economy will probably reassert itself, say experts. After years of borrowing against homes and cashing in stock to spend in excess of their incomes, many Americans are tapped out. Austerity and saving have replaced spending and investment in many households, constraining the economy.
As many Americans transition from living on home equity loans to sustaining themselves on paychecks, weekly pay continues to effectively shrink: Over the last year, average hourly earnings for rank-and-file workers — some 80 percent of the labor force — have increased by 2.5 percent. But average weekly earnings have expanded by only 0.7 percent, less than the increase in the cost of living, because employers have slashed working hours.
In September, the average workweek edged down by one-tenth of an hour, to 33 hours.
For those out of work, the job market looks harsher now than at any point in the recession. The number of people who have been jobless for more than six months increased in September by 450,000, reaching 5.4 million.
“We have a truly massive crisis of long-term unemployment,” said Christine L. Owens, executive director of the National Employment Law Project in a statement, adding that nearly 400,000 jobless people had exhausted their unemployment benefits by the end of September. “Today’s employment report is a marching order for Congress to pass unemployment benefit extensions to all states, quickly.”
The first signs of improvement are likely to be seen among temporary workers, say experts, as companies now hunkering down in the face of uncertain prospects take tentative steps to expand.
But temporary help services lost 1,700 jobs in September.
“Companies are extremely cautious,” said Roy G. Krause, chief executive of Spherion, a recruiting and staffing company based in Fort Lauderdale, Fla.
All of which translates into continued apprehension in many households.
“It’s terrifying,” said Stephanie Wheeler, 56, of Elizabeth, N.J., who has drained her savings to $800 in the year since she lost her job at a data-processing company, rendering her ability to pay the rent on her apartment uncertain.
“I’ve been here for eight years,” she said. “I don’t know what’s going to happen. I’m petrified of being set out on the street.” Source: as reported by the The New York Times.
Warmest Regards,
Bob Schaller
Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.
I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.
For information about Chapter 7 bankruptcy Click Here
For information about Chapter 13 bankruptcy Click Here
You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.
NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.
I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.
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