I have not been blogging much, first because of snow days and Holidays, and then January began. There is a new note of desperation in the voices of the calls that are coming in. Clearly, fear is setting in for many people struggling with debt. The overwhelmingly bad economic news is not helping, either. And it seems obvious to us all that it is not likely to get better any time soon.

There is also hope in the air, as we count the days to the new administration taking office. But we all know that nothing can change overnight.

We have been trying to help our clients get mortgage modifications, but we are finding it to be virtually impossible. Almost every call we make results in a different answer after holding and waiting for a very long time. As far as I know, our office has not had one successful loan modification yet.

For that reason, I am hoping that the new Congress will quickly enact bankruptcy legislation that will allow people to modify their mortgages upon bankruptcy court order in a Chapter 13. Here in Seattle, we have great bankruptcy court judges who have the skill and the sense to help us get through these problems. And so, we wait and we hope, and we try to help our clients and prospective clients stay calm in the meantime.

Labels: bankruptcy, consumer, politics

Two news stories in the last few days provide a stark illustration of the different treatment afforded the rich and the struggling middle class. The New York Times reported on the huge bonuses taken by brokers and traders at Merrill Lynch related to the sales of mortgage-backed securities. The story, which you can read in full here,details the hundreds of millions of dollars in bonuses and compensation paid out in the last few years for arranging investments in mortgages that are now in foreclosure. As I have been saying for some time now, all these home loans were being packaged up and sold for huge profits -- and the rich keep getting richer. No one was really attending to the fundamental question of whether the borrowers had the ability to repay these loans; to the contrary, mortgage brokers had incentives to put people in larger, riskier loans because they earned a larger fee if they did! Then, their bosses and their bosses' bosses repackaged and resold these same mortgages, each taking their cut along the way. All that money got taken out of the system and put into the pockets of investment bankers on Wall Street, and it's not coming back. One of the people in the story is now advising firms who are dealing with troubled mortgage lenders -- wonder what he charges for his services?

On the other end of the spectrum, Bush's government solution to help homeowners, the Hope for Homeowners program sponsored through HUD, has received a grand total of 312 applications. Even the government admits the program is a failure, as the Washington Post reports today, here. I have never really trusted that our government was going to do anything that would really help borrowers who are in trouble, and the more time goes on, the more cynical I become. I am really starting to wonder if they are purposefully introducing programs they know won't work to stall for time while the financial services industry tries to get a strategy together. For instance, all this talk about a 4.5% mortgage program, designed for first time home buyers to buy distressed real estate -- how does that help the struggling home owner who is facing a foreclosure? It doesn't! It helps banks and mortgage lenders by providing a new class of potential customers, and the profits that they might generate, albeit at smaller margins. The argument that this will keep home prices up doesn't help troubled borrowers either. They need a way to pay a mortgage they can afford, and higher home prices will not give them that.

The bright spot is that the more government proposals that fail, the greater the likelihood that Congress will have to relent and reform the bankruptcy code to permit loan modification. President-elect Obama advocated for just such a change on the campaign trail. Let's hope that he's true to his word.

Labels: bankruptcy, consumer, mortgages, Obama, politics

It was a momentous election, and I am frankly jubilant at the result. But while our joy is without reservation, our hope that the election will bring true transformation of the disparaties between the have's and have-not's is tempered. Too often, we have seen political realities vanquish idealistic visions, and so we are not unduly optimistic that Barack Obama will be able to rescue us from the terrible mess we are in.

The election was long and hard, but the hardest work is clearly ahead. Our economy has been virtually destroyed by the unregulated growth of toxic mortgages and their subsequent demise. We hope that our new administration will act quickly and decisively to improve the environment for borrowers, and thereby strengthen this faltering economy for all of us.

At the recent annual Consumer Rights Litigation Conference, the following suggestions for change were offered.

*Create mandatory federal standards for loan products secured by a primary residence.
*Standardize loan products, and enact regulations to ensure that most loan are 30-year fixed mortgages, except in special circumstances.
*Re-enact usery laws, with a floating rate tied to some appropriate measure.
*Provide incentives to encourage best pricing and affordability of home mortgages, including underwriting based only on the payment stream of the loan.
*Require that loans be affordable, i.e., 38 percent or less of the home owner's household income.
*Enact legislation ensuring full assignee liability for all purchasers of home mortgages.
*Amend the tax code to provide less incentive to add mortgage debt to primary homes.
*Clarify the duty owed by servicers to the borrower, and improve RESPA.
*Prohibit foreclosures without first offering a loan modification.
*Prohibit loans with a loan to value ratio greater than 90 percent.
*Amend the bankruptcy code to permit modification of home mortgages, even over the objections of the lender but subject to the oversight of the court.

Quite a wish list, I realize. But without significant and courageous action, our mortgage troubles are only beginning. Let's hope our new government can do better.

Labels: consumer, meltdown, mortgages, politics

The Seattle Times reports today on the increasing rate of foreclosures, and notes that foreclosures in the Seattle area are up 64 percent from last year at this time. The article correctly points out that the best way to deal with a lender is to start talking early, but it fails to tell homeowners what to do to get a lender's attention. So many of our callers report that when they call the mortgage company, they are told that no one will help them unless they are already behind!

Housing counselors are a great resource for people facing foreclosure, but they are already swamped and some programs can only help people who are low income. Unfortunately, sometimes filing bankruptcy is the only option to avoid a foreclosure.

In a Chapter 13 case, the foreclosure sale is automatically stopped and the borrower is given an opportunity to propose a plan based on their income and expenses. Not all homeowners can afford the necessary payments under a Chapter 13, but if they can, the mortgage company is required to accept them. In addition, if there are problems or questions about the amount of the loan or about irregularities in how the loan was obtained, we can look at that in the course of the bankruptcy case too.

On our website, we have lots of additional information about Chapter 13 and how it works. Start here, and then also review the FAQ's. We are happy to meet with you for a free consultation about whether Chapter 13 bankruptcy is the best option for you to avoid a foreclosure and save your home.

Labels: bankruptcy, consumer, mortgages

60 Minutes did a great story this evening explaining Credit Default Swaps. You can see the video here. Essentially, the story pointed out that "credit swaps" are insurance for mortgage-backed securities. They are not called insurance, because if they were, they would be regulated. One of the biggest problems causing the latest financial disaster is that the companies issuing the credit swaps are defaulting on them, or could default on them in the future.

A great many people made a lot of money designing, issuing, and selling credit swaps. So much so that there are now approximately $63 TRILLION in credit swap obligations outstanding. Compare that to the total deposit accounts for the entire world, which stands at approximately $40 trillion, and you can see that we are out of balance!

At Resolve Legal, we have seen an increasing use of what we call an 80/20 mortgage. In other words, a borrower takes two loans -- one for 80% and a second position mortgage for the remaining 20%. It used to be that until you had 20% equity in your home, you would pay an insurance premium each month for private mortgage insurance. Well, the ever-creative mortgage industry came up with a way to avoid that insurance payment -- one which home buyers were only too eager to adopt as it gave them more cash to make a larger monthly payment. Now, when the mortgage is foreclosed, it is not insured, and rarely does the second position get paid in the foreclosure process. Thus, the borrower remains on the hook to pay that debt.

On both the macro and micro scales, the system has been failing. We will all be paying for that failure for a long time to come.

Labels: consumer, insurance, meltdown, mortgages

We took a break from blogging, trying to squeeze in a little summer during this very busy, chaotic time. This difficult economy is resulting in lots of new cases at Resolve Legal. So many people are struggling, and we are working hard to help as many of them as we can.

The news is overwhelming for those of us trying to keep up with the meltdown in our economy. We spend time every day studying to understand what is happening in the housing market, the credit markets, and the overall economic environment. One thing is clear -- our government has not reacted quickly or decisively to stem the crisis. Now that they have begun to take action in Washington, it seems that while the investment banks and insurance companies can get bail out money from the government, middle class homeowners and working people are not going to get any such assistance.

There are ways to get help. At Resolve Legal, we can sort through your options with you and provide you with information about how to improve your financial outlook. Some resources are on our web site, and information can also be found at the National Consumer Law Center, the Center for Responsible Lending, and other great websites. Please call us if you would like to talk to a lawyer. And keep reading -- we're back for fall and eager to hear from you.

Labels: bankruptcy, consumer, politics

The news has been full of scary stories in the last couple days about IndyMac Bank, Fannie Mae, and Freddie Mac. If you are a homeowner with a late mortgage, or worse, a defaulted loan, what impact does all this have on you? Maybe none, but maybe it will make the situation that much worse.
Fannie Mae and Freddie Mac are directly involved with about half of all mortgages in the United States, usually conventional, prime mortgages. Long before private funds started buying large blocks of mortgage loans, Fannie Mae and Freddie Mac were in the business of buying loans from banks on the secondary market, and thereby creating liquidity for those banks to make more mortgage loans. Unfortunately, as has been widely reported in the last few days, these insitutions were a little bit out of control for many years now, bloated and arrogant, and making far too much money for far too many people who were not really all that concerned with their borrowers.
If Fannie Mae and Freddie Mac are not able to raise capital, either through stock sales or borrowing money themselves, mortgage loans will definitely become more difficult to obtain. If you are in the process of trying to refinance to avoid a foreclosure, this could have a serious impact. Moreover, the much-vaunted housing legislation that has been winding its way through Congress depends on Fannie Mae and Freddie Mac to refinance troubled loans. Hard to say at this point what effect all this turmoil might have on their ability to perform that role.
The failure of IndyMac Bank at the same time seems to have created a great deal of fear, almost panic. Most depositors will be insured by FDIC, and so their accounts will be covered. But if you are a borrower of a loan held by IndyMac, its demise might make it much more difficult to obtain any assistance with your loan or to reach some accomodation with them. Worse yet, if you have a claim against IndyMac for predatory lending or other consumer rights violations, those claims could potentially be cut off by the government takeover.
In Seattle, mortgage foreclosures have only recently started to pick up, and relatively few homeowners have sought bankruptcy protection or assistance from their lender. If you are facing foreclosure, bankruptcy may be an option. There are other possibilities as well, such as refinancing your loan, going through a loss mitigation program with your lender, or investigating whether you have consumer rights claims that could mitigate your losses.
In light of all the bad news over the last few days, it does not seem that the problems of homeowners in distress are likely to go away any time soon.

Labels: bankruptcy, consumer, mortgages

Memorial Day weekend is coming to an end and summer is unofficially beginning. Shoppers seemed to be out in droves today, but I was surprised how it seemed that everywhere I went today, there were more items on sale than at regular price. People are shopping, but maybe we are not spending as much. Gasoline was over $4.00 all weekend, and I had to put gas in my car. I couldn't bear to fill it up, hoping the price will go down a little when the holiday is over. I went to buy tomatoes today, along with some other vegetable starts and some seeds, and I went to a discount store instead of my favorite specialty nursery. I wonder how many of you made similar choices in the last few weeks or months.



For some, making spending adjustments will be enough to ride out this difficult economic period. But many of you are beyond that point already, and the bills are really becoming unbearable. Home mortgages are resetting rates at a rapidly increasing pace which is scheduled to peak in 2009, and some of you are probably facing the reality of a mortgage you simply cannot afford. At Resolve Legal, we are seeing people every day facing these problems, and summer sun is unlikely to shine down on any improvement anytime soon.

Labels: bankruptcy, consumer, mortgages

Resolve Legal website is an ongoing project. Originally, it started out as a substitute for a brochure, and we have continued to add features and content to help individuals in financial distress who are looking for legal help. Many years ago, we determined that Google was going to take the place of the Yellow Pages, and that we wanted to be associated with the former and not the latter. We've always been turned off by Yellow Pages ads and their bigger-is-better look and feel. And we've always had too much to say to prospective clients to fit inside a box on the printed page.

If you've come to this blog, you probably are experiencing some sort of financial distress (or you may be a colleague or professional in the field - and we welcome your participation too!). Perhaps you have scrolled through the web pages and are looking for something more specific, or perhaps you are looking for recent news related to consumer bankruptcy, predatory lending, the mortgage crisis, or other consumer rights issues. We started this blog to get involved in the national conversation underway on these issues, as well as discussions about consumerism and sustainability, the general economy, and the role of politics in our financial lives.

You'll find that we have lots of opinions, and we hope that doesn't offend you. As attorneys, we certainly understand the role we play as advocates of our clients' positions, and we are able to put our own personal opinions aside to represent our clients' interests, so long as it doesn't directly contravene our core principles. Some of those principles are as follows:

We believe that individual consumer clients deserve the best possible legal representation from lawyers with impeccable credentials. We believe that quality counts, even in smaller cases and even for individual clients, not just corporations. We believe that consumers deserve a fresh start. We believe that sometimes people simply are unable to pay their debts, and that they need a chance to start over. We believe we can help.

Please join the conversation, let us know what you think, ask questions, tell us where we go wrong. Welcome to the Resolve Legal blog!

Labels: bankruptcy, consumer, welcome