Keep Home Your Own : New York Real Estate Lawyers & Attorneys : Rubin & Licatesi Law Firm : NY Loan Modification, Foreclosure : New Jersey, Long Island

The past several days have shown repeated sightings of pending Board approvals for chiefs at some of our major lending and banking institutions.  One such article stated that James Gorman, the chief executive at Morgan Stanley is in line for an $8.11 million dollar deferred stock bonus for his work and efforts in 2009.  Bonuses, it seems, are being taken for granted.  It is merely a question of how much. 

I would like take this moment to reflect upon the enormous devotion of time and analyses that must have been spent in order to present this bonus package to the Board for approval.  And maybe the time spent in such reflection allows a bit of a respite for us all, as my days are not ordinarily spent pondering such concerns. 

For most of us, the realities of the current economic crisis are quite a bit less pleasant than Mr. Gorman’s. Yesterday I met with a very humble client, a person who could so easily live right next door to any of us, a client who is responsible to her family and children and also responsible to a very large and respected corporation to show up for work every day, at exceptionally inglorious hours. 

 My client initially visited me the day before our country celebrated Independence Day, in the midst of an incredible summer rainstorm.  My impression was that she had a most serious issue to deal with. She most certainly must have been motivated to make such a drive, especially the night before a holiday weekend. She shared with me a notice she received earlier that week, stating, quite simply, that her house was going to be auctioned to the highest bidder in several weeks.  Her family had become an "endangered species".  

Our conversation explored the history of her ownership, and several interim departures and returns to the residence. But her family's commitment to stay in their house remained the consistent thread of our conversation.   We discussed short sales, refinancing, loan modification, considering all the possible solutions. Unfortunately, time was not on their side.  Now, some seven months later, the signs of her loss are once again apparent.  Cold trails of short sale contracts, mortgage loan applications, credit reports, mortgage consultants and court appearances may have held her hopes hostage for the last time. 

New clients also call with similar and dangerous experiences with process servers, foreclosure consultants and loan modification experts.  The reactions of these clients are quite typical.  Disbelief, anger and frustration head the list of emotions surrounding homeownership problems.  Each family that enters our doors has had their dreams of backyard barbecues, gatherings and holidays evaporate before their eyes. None expected it when they bought their homes.  I have yet to meet the borrower who entered the closing room planning foreclosure several years hence.   

This New Year provides the opportunity for relief.   Our state legislature has enacted stronger laws for our courts and judges which may hold off the foreclosure process and provide means of settlement and modification.  Changes can be immediate for those who find a foreclosure summons in their mail.  We know today that there are routes to travel and that the only shame is to do nothing. 

Monday morning I will be starting my day with a client who received a trial loan modification offer in the mail, after submitting reams of documents, pay stubs and bank statements over the past 5 months.  His unhappiness was capped by the suffering of his family and friends in Haiti.  Nevertheless, he will make his way to my office and when he leaves, more than likely, he will have one less problem on his plate, at least for the next several months. 

No one knows why he received a loan modification, although we can speculate on such success. For that matter, no one knows why the file next to his has been denied or not yet acted upon.   What we can definitely state is that there are sufficient and recognized methods that can be utilized to defer and perhaps overcome the foreclosure process.   It requires commitment on the part of the homeowner and a desire to change; a need to keep an open mind on the potential outcome; and a deep seated belief that reinstatement may be an achievable goal.  

True, I do not plan for million dollar bonus proposals and the lobster dinners this year were few and far between, but this is a time for resolutions and challenges to the silent majority of homeowners facing chaos and losing a little more sleep each night.  These are not illusions and the nervous worries are reality striking hard. 

These very same insecurities can become assets if turned into action.  Going to visit an attorney, bar association or foreclosure counseling center is no big deal.   This may seem obvious, but for so many, paralysis is the natural reaction.   If there is one thing that I can guarantee, it is that amazing results can happen with the synergy of programs and legislation now in place.   

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NBC's Today show's Ann Curry discusses the mortgage melt-down with Barbara Corcoran, & Financial Editor Jean Chatzky. They offer advice for homeowners still experiencing difficulties

Visit msnbc.com for breaking news, world news, and news about the economy

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With families, friends, neighbors and business colleagues enduring painful decisions on who to pay and how much to pay, our challenged budgets now look at one of the most time honored American debts as another minefield to cross.  It is reported that despite the rising stock market indexes, the economic recovery is steeped in rising unemployment on a monthly basis.  Some statistics now report that nationwide we may be looking at a 10% unemployment rate.  Washington experts, the same faces, people and opinions who so openly rallied around the Obama plan of home loan modifications, must now face squarely the singular dismissal of any notion that we are witnessing success on that front. 

Roger Lowenstein's article in this Sunday's NY Times Magazine section, entitled "Just Walk Away" clearly and vividly engages the morality issues which plague our neighbors who may have to consider such situations.  Says Lowenstein, "Such voluntary defaults are a new phenomenon.  Time was, Americans would do anything to pay their mortgage-forego a new car or a vacation, even put a younger family member to work.  But the housing collapse left 10.7 million families owing more than their homes are worth.  So some of them are making a calculated decision to hang onto their money and let their homes go. Is this irresponsible?"  

Mr. Lowenstein brilliantly places the default decision under a microscope and continues to soothe his readers who experience these crippling bottoms in his comparison to our business leaders who have made such choices without hesitation.  "Morgan Stanley recently decided to stop making payments of five San Francisco office buildings.” Says Lowenstein. “Nobody has said Morgan Stanley is immoral.” 

But our biggest financial houses and national institutions may not be entitled to this same "pass" that family and friends may so rightfully deserve under the loan modification and Treasury Department guidelines.   Federal and State mandates, regulations and guidelines have been enacted to govern the conduct of mortgage lenders and servicers when faced with a defaulted principal residence homeowner.   It is obvious from the many cases which I have participated in, and the hundreds, if not thousands, of phone calls and conversations in our office, this default was not planned. 

Nobody talks about their planning their default, and how things worked out just as they anticipated.  No one has come in and said that several years ago they decided to "speculate" on a home which they knew was overvalued at the time and then pay for a few years with the strategy to watch their equity and hopes evaporate.  

On the contrary.   The story is quite similar, time after time, that our clients, customers and friends in fact did not speculate on their homes, but rather, bought at a time when the economy was in strong, upward growth and their businesses were solid and their income was wonderful.  These are the stories I see. For the people I come into contact with, their intention was never to walk away from their homes.

 

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Some light reading to pass along this month comes from the Treasury Department ¹.  The Executive Summary of the report clarifies what some may assume to be common knowledge, but for the rest of us, let me quote:  “Overall, mortgage performance continued to decline as a result of continuing adverse economic conditions including rising unemployment and loss in home values……Seriously delinquent mortgages – rose………….Foreclosures in process increased……….delinquencies continued to climb.  The percentage of prime mortgages…was….up more than double the percentage of a year ago.”.  

Take a look at this report on line and view the graphs, well written summaries, mathematical analyzes, tables and indexes and let’s see if we can leave the report on our coffee table as a new item to show our neighbors and customers. 

However, others really don’t think this is necessary.  Martin Andelman writes in The Niche Report, December 2009 a most telling and courageous article and discussion on the Treasury’s Assistant Secretary for Financial Institutions, Mr. Michael S. Barr. It reports (again) that “fewer than 2,000 of the 500,000 trial loan modifications in the works had become permanent under Barr’s “Making Homes Affordable” program, according to a congressional oversight panel.”  

Mr. Andelman then says in his closing remarks (which are so on point) to Mr Barr: ”Step down, Mr. Barr.  Your services are no longer required.  And you can leave today, as far as I’m concerned.  No need to wait until your replacement is found, because having no one in your position, as compared with having (you) in the seat……….there’s no chance you’ll be missed, and leave it at that”. 

Sounds a bit harsh and I have even toned down the choice of his words in my quote of his article, but take this to heart-    when it hits you, or your family, or your neighbors, or your friends answer the door at 7am to meet a stranger who hands you a foreclosure summons, well then, maybe Mr. Andelman hit it right on the head.  

And then what do you do?    What are you supposed to do? Who do you share this news with and how soon do you have to do something about it?  These are the families and clients that I see and talk with.  This is an unheard of fix to be in.  No one walks away from their home.   Our neighborhoods are filled with children, seniors, friends and people from all walks of life who are in love with their homes, backyards, garages and basements. 

But, after an early morning surprise visit from a process server with a foreclosure summons, all of a sudden and in that split second as you walk back into your front door and look around at the familiar settings, many love affairs end.  Short, sweet and to the point.   Those are the bullet points of discussion, amidst the tissues and tears.  The personal stories, the special rooms, the antique heirlooms, all seem to lose their significance as clients and families begin to face the harsh reality of foreclosure.  

No longer are the conversations around the dinner table about home equity, college payments for the children or retirement dreams.   Now we face more pressing issues of forensic loan audits, defenses to your promises to pay these obligations and the moral dilemmas of credit reports, job losses and “Will my neighbors find out I’m in foreclosure?”   Our lenders have not created this chaos nor are they blind to the loan modification procedure.  In varying degrees, our mortgage servicers and lending institutions are participating in loan modifications with different degrees of success.

 With continued urging and oversight, the loan modification principles and regulations can benefit those who struggle through the process.  It requires patience, phone calls, more patience and more phone calls.   Many families visit their attorneys and receive counsel and guidance in these procedures.  

The economic crisis we face does not get solved by walking away from our homes.   There are long term issues that may affect a homeowner, even after a court ordered sale of the home, in terms of deficiency judgments and other related debt issues.  When faced with a foreclosure action or as you see the arrears begin to increase, it does not have to be a case of “falling out of love” with your home, your lender and your debts.   Homeowners have options and there are roads to recovery that can be evaluated, when discussed in face to face talks with attorneys who are interested in these areas. 

1. Office of Thrift Supervision, US Department of the Treasury, Comptroller of the Currency, Administrator of National Banks, in the OCC and OTS Mortgage Metrics Report, Disclosure of National Bank and Federal Thrift Mortgage Loan Data, Third Quarter 2009, December 2009

 

 

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The statistics are reported everywhere we turn - 3.3 million loans which may qualify for loan modification have actually resulted in an incredibly meager number of modifications, helping only some 31,000 families. You do the math on that one, and don't spend too long looking for a calculator that can handle 15 digits. Off the top of my head, it sounds like the White House HAMP program to date has failed miserably for the millions of families who qualify but remain underwater.

Under the Obama plan, borrowers who meet the standards, rules and regulations enacted by the United States Treasury Department in 2009 should be able to modify the loans which they refinanced and purchased in 2005 and thereafter, during the "boom times." You can do the math on that one too, but I would say that considering the declining property values, destroyed credit ratings and uncontrolled unemployment, the Obama process just doesn't seem like it is working.

Richard Wilner, in last Sunday’s NY Post's article "Options to Keep Home Yours" announced that a new, untouched, unexplored and unreported crisis is the multi-billions of dollars that banks are carrying on their books for second mortgages. "Bank of America is exposed to $154.2 billion dollars; Wells Fargo is exposed to $127billion; JP Morgan Chase $124.8 billion; Citigroup $59 billion.” If banks do give the mortgage a serious rate cut to keep a family in place, then the value of the second lien on the home - which the banks carry on their books- could be wiped out. And that could be enough to make several banks insolvent. Perhaps that is why B.Of A. has concluded just 98 permanent modifications. The same is true of every major bank." Do the math on that one and I don't even have to comment.

It gets even better. Open the financial pages, go do your shopping on the internet and call your mortgage brokers. You’ll hear that mortgage rates in the United States have dropped to their lowest rates in the past 70 years. It’s just another well intentioned plan with fantastic mathematical possibilities down the drain. Borrow at lowest ever levels, yet deny access to these historically low interest rates. Like the old, yet trusted expression, it’s like giving away ice in the winter.

For any of those of you who have looked into the possibilities of re-financing or purchasing, you have personally witnessed some of the most expansive and intrusive questioning into your personal and professional lives. Refinancing could save you hundreds and thousands of dollars but yet this traditional source of credit is scarce and difficult to find, even for the very best and elite, much less the first time homebuyers or middle class families.

Taking this another step, Mr. Wilner extends a well pointed finger.."In an ironic twist, the only thing worse than HAMP's failure would have been the absolute success of HAMP. Can you image saddling the banks with 2 percent 40 year mortgages should there be inflation? If you think the banks are bad at lending money now, they would never lend money under those circumstance."

The rumor mill is working overtime. Neighbors are sitting at their kitchen tables and wondering if the little signs of disrepair in their neighborhoods are signs of foreclosure and arrears. When our friends are unemployed and tales are told in our elementary schools and upper grades of their moms and dads unemployment, it's a sign of the times. The super growth of mortgage arrears have created huge rubbernecks and tie ups for our major lenders to handle, even during their unprecedented struggles to remain viable and productive.

Go past the math and statistical reports. Look around and witness the unparalleled demise of the American home ownership program as we know it. My advice for Realtors, bankers, buyers, sellers, landlords and tenants, or anyone with a keen interest in the economy and a sharply honed desire to strike it rich is-----buy Kleenex. Simply stated, until we get the math working and producing loan modifications, we will all see a steadily growing demand for tissues to wipe away the tears.

As a post closing note to those of you following Judge Spinner's "Horoski Dismissal Case,” Carl MacGowan in Saturday's Long Island Newsday, reports that OneWest, the parent company of IndyMac Mortgage Services, admitted that it erred in sending the family a demand letter even after the judge dismissed the case." This case will be followed closely as it winds it way thru post judgment and appellate practice. Keep this one right on your radar screen because it may prove to be our modern day version of David v. Goliath.
 

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This past week witnessed the testimony of Douglas W. Roeder, Senior Deputy Comptroller for Large Bank Supervision, Office of the Comptroller of the Currency, before the Committee on Financial Services, before the United States House of Representatives. (Just try to imagine all that went on before this testimony happened; what went on during the testimony and what will go on in the future.) Without placing this thought into one of our pending time management departments, we’ll try to keep our summary of the Senior Deputy as simple as possible.

The Federal government, and now with increased legislation, state governments as well, have decided that banks and servicers have insufficient personnel to handle the number of pending mortgage modification submissions, regardless of whether the present program guidelines are met by the homeowners. To that end, our Washington representatives, whether elected or somehow federally employed, have created an untold number of departments, sub-departments, secretaries, senior deputy positions and perhaps even some clerks, to follow the much heralded foreclosure and delinquent mortgage problems in just about every State in our nation.

It’s about time. Homeowners' equity has evaporated; credit scores are at their lowest ever; banks will not provide refinancing to "at risk" customers and our homeowners who have applied for modification receive temporary solutions that solve nothing. Unemployment puts this whole process on the verge of total collapse, yet the Department of Treasury has mandated banks and servicers to modify. We have added regulations, laws, testimonials, mortgage metric data and now new accountability standards.

Bob Tedeschi, in a recent Sunday NY Times article  December 11th, "Short Sales, Long Process", adds still another rung to this ladder leading nowhere. "Homeowners can continue to expect a painfully slow process that sometimes fails, and can ultimately lead them back to foreclosure". Adding this short sale practice into the mix of loss mitigation efforts, he states " further strains the bank's ability to handle them in a timely manner".

Overall, it seems quite clear that all indicators point to rapidly increasing homeowner defaults, bank and servicer personnel challenged to account for their responsibilities and rising homeowner complaints with no effective way to curtail these failures. The directives, laws, court opinions and public outrage have all been heard over the past two years seeking to manage homeowner assistance. But none have resulted in even the slightest meaningful success ratios.

Consideration of these failures may lead some to the inescapable solution that without mandated "teeth in the process" we will continue to report on foreclosure statistics, boarded-ups homes and devastated neighborhoods of shame. Perhaps we have had enough thought given to rules, regulations and hearings and we should return to the old fashioned way of doing business and getting business done. We need our federal government to send a meaningful economic directive to our servicers and lenders to pay the piper for failure. Denials of modifications where they should be granted must become an actionable basis to avoid foreclosure. With all due respect to our Senior Deputies and Chairmen and Senators, enough is enough.

Return to our local courts and governing bodies as Justice Spinner has done and bring the parties to Court, one by one, when the existing laws have not been followed. Spinner’s much discussed opinion of canceling a mortgage in Suffolk County has now resulted in his Order to the parties to return to Court and explain why the bank took further action despite his ruling.

Sometimes less is more. We do not need additional laws to restore home ownership goals. We have the tools we need, and there are those who will see that we can all add to the core qualities of our lives without more.
 

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This past week, the Obama Administration reported new efforts to spearhead a national drive to help borrowers in arrears to modify their mortgages. In fact, the new Chief of the U.S. Department of Treasury’s Homeownership Preservation Office, Phyllis Caldwell, was quoted “We are encouraged by the pace at which trial modifications are now being made to provide immediate savings to struggling homeowner’s and will lead the campaign to convert the trial modifications to permanent ones. This Treasury Announcement contains continued representations of the government’s Herculean efforts to serve the nation and ensure that all who come forward can use these trusted resources. But is it really a case of “seek and ye shall find??”

Let’s run through some of the articles which we’ve been cutting out and saving in our desk drawers over the past year. Local Newsday articles, going as far back as February of this year, quoted housing experts, presidents of real estate associations, community leaders, and even Pres. Obama, all expressing confidence in these policies, announcing opportunities galore to save our homes from foreclosure. The U.S.Treasury “doubling its $200 billion capital commitment to Fannie Mae and Freddie Mac” directed to keep our homeowners in their homes. Fast forward, 10 months later to the Sunday NY Times article by Gretchen Morgenson. “After months of playing pretend, the Treasury Department conceded last week that the Home Affordable Modification Program, its plan to aid troubled homeowners by changing the terms of their mortgages, was a dud”.

So what happened? Where did the $75billion dollars go? Where did the $200 billion dollars go? Was it ever there, or did our neighbors, colleagues and friends, all who are desperately in need of help, just decide to forget about it? Did our citizens forget about the chaos in their families, marriages, businesses and jobs and bury their heads in the sand as their homes and communities fell into foreclosure?

Ms. Morgenson provides fascinating statistics and the dire consequences of this enormous Federal failure to secure modifications and solve the problem. It doesn’t even stop there. As Ms. Morgenson pointed out, “You (also) have to address the second liens.” Many experts agree that this expanded and troubling issue has not yet entered the national discussion.

Imagine if these positive “Plan B’s” were focused upon by our national leaders who are committed to nothing less than success. The monetary penalties and sanctions against the servicers are included as a part of the recent Treasury accountability bullet points. Those active and concerned in the modification field rarely hear from the borrowers a demand for such action. They don’t seek punishment, embarrassment or penalties against their lenders and servicers. They are desperately seeking solutions to what they perceive to be a “till death do us part” mortgage vow at their closings. Our neighbors do not want foreclosures and board-ups and forced short sales. They are seeking that “Plan B” as called for by Ms. Morgenson. The federal dollars have been committed; that’s what we are told. Unfortunately, it is not getting done and is failing despite submissions for loan modifications. Maybe it takes the Court decisions of voiding mortgages or other sanctions to “solutionize” the process for loan modifications. This ultimate “divorce” is not what I see and hear. I see and hear the concerns for settlement and modification, for counseling rather than divorce, and in essence, for these families and neighbors to return to their closing vows.
 

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How long does it take to get a loan modification? Of course, the answer is that there is no sure-fire answer.

Loan modifications rely on several factors; responsiveness and policies of the lender, the effectiveness of the mitigation company, preferably a well versed attorney, and of course, the commitment of the homeowner. There are many parts that sometimes come together for a quick solution (less than 60 days), but usually take much longer. Let’s look at the issues that effect how long a loan modification can take.

The Mitigation Company

Lenders are strict and have rigorous requirements, an effective mitigator is important to moving the process along quickly.

In the beginning, there is a lot of preparation work that includes compiling financial information and other pertinent information to your case. An effective law practice will have a proven process and will ensure that you are providing the necessary information in a timely manner.

Once your file is at the lender, your attorney will ensure that the inevitable requests for updated documentation are relayed to you and processed quickly. Valuable time is often lost if responses are not met immediately

Responsiveness and Policies of the Lender

This is by far the most variable and important issue to the modification duration. It is usual to take around 4 months, but can be highly variable. In some cases the process may take six months or even a year depending on the complexity and commitment of all the parties.

Some lenders are committed to the modification process and are organized in such a way that they can move quickly. However, it’s more common to see lenders taking their time and dragging out the process.

If you attempt to do a loan modification on your own, expect to get the run-around. Lenders are often looking for reasons to deny a loan modification. You probably won’t find them too responsive to your requests for immediacy. In many cases, they are understaffed, but often, their policy dictates a long, drawn out process.

Commitment of the Homeowner

If you do decide to use an attorney your commitment is vital to the process. There are established methods of doing things and the process can move quickly, but without your cooperation, it does not work. If a homeowner does not comply with documentation update requests, it kills the process and can result in setbacks in the case. Always respond quickly to any requests whether they are from an attorney you hire or the lender itself.

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A New York judge’s ruling to deny mortgage foreclosure sends a message to banks and bureaucrats. In a recent blog Felix Salmon of Reuters outlines the  judgment  Indymac v Yano-Hiroski making Judge Jeffrey Spinner of Suffolk county The Hero of the Day.

“If wishes were horses, beggars would ride.” Harsh sentiments indeed, but that statement describes nicely how federally mandated orders for banks to modify loans and reduce foreclosures have been ignored. Recent headlines screamed to readers that the United States Treasury Department's Assistant Secretary for Financial Institutions has now concluded, "The banks are not doing a good enough job" and that “some of the firms ought to be embarrassed, and they will be."

The statistics and reporting data bear out the good secretary’s accusations. Out of 500,000 loan modifications, less than 2000 have secured "permanent" status under the Obama Administration loan modification policies and regulations. Based on those odds of success, about one in 250, many people would see a greater chance of success in Atlantic City or Vegas.

But why should we be so pessimistic? After all, White House dignitaries, Secretary's of our Federal Government and chief financial officers and economists are all in agreement that these results are not acceptable. Now that we have this consensus and agreement, where is the written order to modify and stop foreclosure? Look no further than your own backyard.

New York Judge Jeffrey Spinner's decision in the Suffolk County Supreme Court on November 19, 2009, reciting standards reported more than 100 years ago, denied access to foreclose to a lender. This ruling is not a 3 month trial plan; not a trail of unanswered phone calls nor nameless lender representatives taking our calls. This ruling says, without question, “Come into our court with knowledge of the families and clients you have permitted to borrow money against their homes and in each and every case, you must work in "good conscience and justice." Can you imagine if only our elected officials in the highest offices throughout our land read this decision. Maybe this wish will be granted and we should all learn to ride.

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