DOES THE PROPOSED NEW MORTGAGE LENDING RULES HELP CONSUMERS?

In this edition of Abbasi & Associates' Legal Blog, we will discuss about the continued financial troubles involving residential mortgages and foreclosures.

In the wake of the worst financial crisis since the 1930's, Congress passed Dodd-Frank. This so-called "historic" bill was supposed to help us avoid another crisis and to provide us with reasonable regulation of Wall Street to avoid another meltdown. Last month finally the federal government proposed "new rules" to give homeowners more ways to avoid foreclosure and get an accurate accounting of their monthly mortgage payments. After President Obama's failed HAMP & mortgage modification program, one must ask if these new "rules" will be as advertised i.e. real consumer rights and benefits.

These new rules are being setup by the Consumer Financial Protection Bureau (setup under Dodd-Frank) and require mortgage servicers to give all borrowers standardized monthly statements and warn borrowers about interest rate or insurance change. In reality, this means a new thick booklet is coming your way which is just as useful as the "disclosure" one receivers from the Banks re: bank fees for a checking account. Basically, nothing. 

These new rules require mortgage servicers to make "good-faith efforts" (whatever that means) to contact borrowers at risk of foreclosure and give them "options" (what options??? HAMP.....) to avoid losing their homes. There are also stipulations for "improving" record-keeping and providing foreclosure "counseling" to those who need it (but not actual help). Finally, these rules have only been "proposed" and  the Consumer Financial Protection Bureau is set to finalize them by January 2013.  

Overall, these new rules are toothless and seek to literally paper over the failure of Congress to regulate an industry that has brought America to its knees. One can only look at the speed in which TARP was rushed through congress (about a month) compared to 4 years it took Congress to write Dodd-Frank much less actually put this act into effect. It does not take a genius to figure out who runs Congress (Wall Street) and who is getting shortchanged (consumers). In February, the nation's five largest mortgage lenders agreed to overhaul their mortgage servicing practices and pay $25 billion to U.S. states to help those who lost their homes or face foreclosure. No one has seen a penny of this money and no one will probably see any of it either as this settlement was just another gimmick by Democrats and Republicans to show the voters that they are "doing something" while in reality they are all standing in line for campaign donations!  

The facts are clear. As it stands, nearly 8 million Americans have faced foreclosure since the housing bubble burst in late 2006. As a result, nearly 1.5 million people filed for Bankruptcy in 2011 alone. Many homeowners have lost their home to dirty bank tactics such as "robo-signing" of documents to approve foreclosures and outright fraud emanating from the Banks' loan modification programs. 

In sum, the Consumer Financial Protection Bureau is a good idea on paper as it is setup to supervise U.S. payday lenders, mortgage companies and private student lenders. It also can write rules to supervise big lending companies. However, as with everything else, the key to success is action and so far the Consumer Financial Protection Bureau has not lived up to the hype. 

If you are facing a foreclosure, contact our office for a Free Consultation on how to avoid the pitfalls of the foreclosure process. If you are considering Bankruptcy, contact our office for a Free Consultation we provide Chapter 7, Chapter 13 and Chapter 11 Bankruptcy services. We at Abbasi& Associates have a great deal of practical legal experience in Bankruptcy and Civil Litigation and help you navigate the uncertainties of today.  

Municipal bankruptcies are a sign of further economical problems

In this edition of Abbasi & Associates' Legal Blog, we will discuss about the continued financial troubles in the state of California. When the city of Stockton, California announced last month it would skip some bond payments and enter talks with its creditors, the municipal debt world shuddered. The economical and fiscal situation has gotten so bad that even major cities are facing bankruptcy. 

Overall, the word out of bond markets is that if Stockton were to go bankrupt so could others and that is a truly real fear now. The reality is if Stockton were to go through Bankruptcy (which it will) it would be the largest U.S. city ever to do so. It could also create a virtual domino effect as they could show others how they can successfully "restructure" their bonds like the Greeks just did in Europe! But a close look at the situation across California suggests mass bankruptcies are unlikely as the damage is much worse than the benefits. 

In order to avoid bankruptcy, most troubled local governments in the state have taken drastic steps to cut spending, with city managers asserting they have their arms around the problems. Further, a new state-mandated mediation process may also help municipalities avoid the worst - though it could force bondholders to accept losses outside the bankruptcy process.

After the City of Vallejo filed for bankruptcy in 2008, new legislation was passed which requires Stockton to try to mediate with its major bondholders, bond insurers, city employees and retirees into for up to 90 days to find a "solution." If a "solution" cannot be found, onto Bankruptcy.  

As in other troubled cities around the state, the depth of Stockton's problems relates to the collapse of the real estate market, mass-foreclosures and general economic decline. According to online foreclosure marketplace RealtyTrac Inc, Stockton last year had the second-highest foreclosure rate of all large U.S. metro areas, with 5.43 percent of its housing units receiving foreclosure filings. Las Vegas had the highest rate: 7.38 percent, compared with a nationwide 1.45 percent.

As it stands, Stockton faces a deficit of as much as $38 million on its general fund budget of $165 million. With unemployment at 10.9 percent across California - and above 16 percent in hard-hit places such as Stockton and Fresno - raising revenue with new taxes and fees is difficult. State law also puts firm limits on property tax increases and the various proposition enacted by voters makes any type of tax rise difficult. Overall, it will be very difficult to see a way forward for Stockton without Bankruptcy which will further degrade public services and the rest because many of the bondholders in the state are pension funds, union funds, ect.  In the end, there are no easy answers out there for Stockton or for any business or average person facing the worst real estate market in a generation. 

If you are facing a foreclosure, contact our office for a Free Consultation on how to avoid the pitfalls of the foreclosure process. If you are considering Bankruptcy, contact our office for a Free Consultation we provide Chapter 7, Chapter 13 and Chapter 11 Bankruptcy services. We at Abbasi & Associates have a great deal of practical legal experience in Bankruptcy and Civil Litigation and help you navigate the uncertainties of today.  

Is the Grand Bargain between 40 states and the Banks good for consumers?

In this inaugural addition of Abbasi & Associates' Legal Blog, we will discuss all the buzz surrounding the recent settlement between the nation’s biggest banks and the attorney generals of 40 states, including California. As per this grand settlement, the big banks have agreed to a $26 billion settlement to "provide relief to nearly two million current and former American homeowners harmed by the bursting of the housing bubble, state and federal". This settlement is being hailed by President Obama and Wall Street as a much needed step forward. 

However, is this really good for the US consumer? 

Is this really another Washington deal with Wall Street for the benefit of the politicians and Wall Street? 

The reality is no one really knows right now if this was the right deal or not. The proof will be in the wording of the agreement, the scope of the relief provided to current and former homeowners, and above all the implementation of this agreement.  As is, what little we know about this settlement is not good and one can only hope that this accord will fare better than HAMP and the President's other prior attempts at stemming our foreclosure crises. 

As it stands, it seems that despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. For instance, based on what we know, under this settlement 750,000 people who lost their homes to foreclosure from September 2008 to the end of 2011 will receive checks for about $2,000.00. The aid is to be distributed over three years. This is really peanuts in terms of the relief ($2000 over 3 years!) and it covers less than a million consumers effected by the shady tactics of the banks in the loan boom days. This obviously does not sound very impressive!

Still, the agreement is also the broadest effort yet to help borrowers owing more than their houses are worth, with roughly one million expected to have their mortgage debt reduced by lenders or able to refinance their homes at lower rates. 

The two biggest holdouts, California and New York, now plan to sign on, according to the officials with knowledge of the matter who did not want to be identified because the negotiations were not completed. The deal grew out of an investigation into mortgage servicing by all 50 state attorneys general that was introduced in the fall of 2010 amid an uproar over revelations that banks evicted people with false or incomplete documentation. 

The five mortgage servicers in the settlement are some of the biggest offender (Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial) in the national mortgage and foreclosure crises that have ravaged the entire nation. While the $26 billion figure has been cited, federal officials said they "hope" the eventual value for homeowners reaches up to $39 billion. It appears that the federal government still believes that the big banks can be fair and generous to homeowners! 

The settlement excludes all mortgages owned by the government’s housing finance agencies, Fannie Mae and Freddie Mac. This means that basically 50% of the current mortgages are not covered by this deal.  Again, this obviously does not sound very impressive!

Overall, in this agreement’s expected final form, the releases are mostly limited to the foreclosure process, like the eviction of homeowners after only a cursory examination of documents, a practice known as robo-signing. The prosecutors and regulators still have the right to investigate other elements that contributed to the housing bubble, like the assembly of risky mortgages into securities that were sold to investors and later soured, as well as insurance and tax fraud. Officials will also be able to pursue any allegations of criminal wrongdoing.

In sum, the jury is still out on this agreement. However, one thing is for certain and that is the fact that 2012 seems to be the year of foreclosures. This agreement and other efforts are going to unclog the foreclosure backlog of the past few years which in turn will force more consumers to file for Bankruptcy and other lawsuits to protect their interest. 

If you are facing a foreclosure or need legal representation, contact our office for a Free Consultation. We at Abbasi & Associates have a great deal of practical legal experience in Bankruptcy and Civil Litigation and help you navigate the uncertainties of today. 

California's One Action Rule

In this week's edition of ANH Legal Group Bankruptcy Blog, we will second home mortgages and the lender's enforcement of the same. In the past few months, we have received many calls lately from California homeowners (and even some commercial business owners) asking us if their lender can hold them liable for their second mortgage in California.  And if so, can they sue them on the note without first seeking the foreclosure route.  

At issue, California's One Action / Security First Rule of California Code of Civil Procedure Section 726(a) and its interpretation. In most cases, a junior lien is not going to foreclose on mortgage that is underwater either judicially or non-judicially. The reality behind the above is that the junior lien holder gets paid after the first mortgage holder (the senior lien holder)  is pain in Non-Judicial Trustee sale or following the Court ordered sale of the property in a Judicial Foreclosure.  In the current declining property market, most second mortgage holders are not often left holding a lot of “security” for the loans they gave to borrowers.  As such, the junior lien holders have very little recourse if their lien has no value. 

Solutions:

In a Chapter 13 Bankruptcy case, a homeowner is able to avoid the junior lien on his/her property if the lien is no longer secured by the property because of devaluation. 

Solutions:

In order to avoid foreclosures, a homeowner can enter into an agreement with his/her lender to turn over the deed of the property to the bank and walk away. This is call Deed in Lieu of Foreclosure. 

Solutions:

In order to avoid foreclosures, a homeowner can enter into an agreement with his/her bank to short sale the property and walk away. 

We at ANH Legal Group have a great deal of practical legal experience in handling foreclosure. We are also able to provide with you with you full spectrum of Bankruptcy options under Chapter 7, Chapter 11 and Chapter 13 of the Bankruptcy Code. Please contact us for a free Bankruptcy Consultation! 

New Action Against the Illegal Foreclosure Tactics of the Banks

In this week's edition of ANH Legal Group Bankruptcy Blog, we will discuss the status of the global "settlement" that is being "negotiated" on behalf of the American consumer by the Attorney Generals of several states. As we all know, foreclosures are at and all time high with many more to come. As we all also know, the Banks have not been playing fair with the way they are foreclosing on homes, handling loan modifications, and have generally failed to abide by the foreclosure laws of various states. 

This week we learned that the discussions on the Global "Settlement" with the Banks are not going well at all. After nearly a year of negotiations, it appears that the discussions will not yield a deal which is good news for the American consumer. As it stands, the banks have modified very few loans and have shifted their focus from loans to new sources of revenues i.e. FEES.  In sum, this global "Settlement" would just allow these greedy banks to walk-away from all the harm they have caused! 

The negotiations were jolted this week when the Attorney General of Massachusetts filed a lawsuit against Bank of America, JP-Morgan Chase, Citigroup, Wells Fargo and GMAC Mortgage to stop the "unfair and deceptive business practices" of these banks in their foreclosure processes. Coakley is seeking damages for borrowers who were hurt by these banks foreclosure practices, which range from filing fraudulent legal paperwork to the use of so-called "robo-signers" and refusing to follow lending laws.

"Whether those institutions believe they are too big too fail, they certainly have demonstrated they believe they are too big to care about the impact of their actions. We believe they are not too big to have to obey the law," Coakley said.

Overall, many had believed the banks would have reached this overarching "settlement" with all the states, rather than see it go to litigation. The banks are self-servingly arguing if there is an out-of-court settlement soon, it would be better for homeowners than lengthy litigation. The "settlement" would include, presumably, some sort of immediate compensation to homeowners across the country but in reality this settlement would be pennies on the dollar! 

We at ANH Legal Group have a great deal of practical legal experience in handling foreclosure and repossession matters. We are advocates for the little guy! Please contact us for a free Bankruptcy Consultation! 

Mass Tort Litigation the Answer? The Jury is still out!

In this edition of ANH Legal's Bankruptcy Blog, we will talk about the various recently filed Class Action, Mass Tort Lawsuits and other lawsuits to stop foreclosures and/or force modifications and/or principal reductions. In the past year, we have received numerous calls from small business owners, property investors, and single family homeowners about these "other" options. However, we have consistently refused to endorse any of these lawsuits because we cannot really say that they work or do not work. The truth is these lawsuits are heavily contested and unproven. Furthermore, the law is usually against you in these types lawsuits as it issues involve a security note which is attached to real property. 

For instance, as discussed in our prior blogs, no one is entitled to a loan mod. The Court's have conclusively held in recent rulings that there is no private right to action (i.e. right to file and enforce) to enforce HAMP (loan modification legislation) or to punish the banks for their loan modification practices. Unfortunately, our politicians drafted HAMP without any enforcement mechanism. In response to the dirty tactics of the banks, these "other" options were born. 

Overall, the following is the basic difference between these two kinds of lawsuits:

A class action lawsuit is a complaint filed by one party on behalf of everyone in a similar situation. Such lawsuits look at the big picture and are useful, for example, to force a company to take a legal action.

A mass tort lawsuit is different. Like class action lawsuit, a mass tort combines many legal cases into a single trial, but unlike a class action each plaintiff is treated as an individual with their own individual lawsuit.

In theory (or as the sales pitch goes), the difference between a Mass Tort and a Class Action is that in a mass tort lawsuit many similar cases are argued together saving time and money that can be better spent preparing to make the best legal case for you. However, the reality is far more ambiguous. Class Action lawsuits are well established and effective if they are properly pled and prosecuted. However, mass tort litigation is a relatively new process with little to no established (an verifiable) track-record of success. As such, the jury is still out as to Mass Tort Litigation.

Overall, the cost of most of these lawsuits is far more than the cost of filing Chapter 7, Chapter 13 or even aChapter 11 Bankruptcy. Furthermore, Bankruptcy is all about a "Fresh Start" and it delivers for most persons as it a based on a well established legal process. However, just like with everything else, Bankruptcy is not a cure to all financial ills and you need the advice of our professional staff to see how Bankruptcy helps you or doesn't!

We at ANH Legal Group have a great deal of practical legal experience in business bankruptcies and personal bankruptcies. Please contact us for a free Bankruptcy Consultation!  

Business Bankruptcy and its Effect on its Owners

In this edition of ANH Legal Group's Bankruptcy Blog, we will discuss Business Bankruptcy filings and its effects on its owners and officers (personally). In the past year, we have seen many family owned small to midsized companies succumbed to the current recession by filing for Chapter 7  Bankruptcy. Some of these companies try to file for Chapter 11 Bankruptcy for Reorganization at first but in the end they all head to liquidation under Chapter 7 of the Code. In virtually every filing, our clients' biggest concern relates to personal liability for corporate debts and obligations.

Overall, very few small to mid-sized corporations have sufficient corporate credit to avoid the required personal guarantees for office leases, loans, vendor contracts, supplier contracts, and other business related obligations. Furthermore, in most family owned small to midsized companies, the owners of the company tend to commingle personal funds/debts with company funds. For instance, the owners of many family owned small to midsized companies have credit cards in the name of the business but these cards are all personally guaranteed. In such instances, if the corporation declares for Bankruptcy its credit card debt would shift to the personal guarantee. If the owner declares for Bankruptcy, the credit card debt would shift to the corporation. In sum, (unfortunately) usually there is no way to untangle the owner from the Company legally in Bankruptcy when company funds/obligations are commingled with personal ones. As such, the owners of most family owned small to midsized companies usually have to declare Bankruptcy along with their corporation to truly get a fresh start.

We at ANH Legal Group have a great deal of practical legal experience in business bankruptcies. If you need help restructuring your business, please do not hesitate to contact us.