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

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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News stories about the economy have indicated recently that the worst recession since the Great Depression of ’29 is getting better. I can say in a word that for millions of homeowners in America who face foreclosure, (and yes, there are many more on the verge) it’s far from over. And banks continue to deny qualified borrowers the relief granted by President Obama.
The United States Congress has in place legislation requiring banks to grant loan modification if borrowers meet certain requirements. But banks don’t want to cooperate. One reason is they obviously don’t want to lose money on their loan assets. Another reason is that lenders rack up huge fees on the accounts of homeowners in foreclosure, fees that make it more profitable to delay than foreclose. So they drag their feet. In an article published by the New York Times Nov 28th, Peter Goodman states that the government will push lenders to reduce more loan payments. However, even when borrowers can get banks to consider their modification, the lenders are uncooperative. Federal law requires mandatory conferences in court regarding subprime mortgages before a foreclosure sale can be scheduled. (A new law is on the horizon extending this protection to prime mortgage homeowners as well, by the way). In an article published by Bob Tedeshi Nov 27th in the New York Times "Foreclosure Protection For All" he writes about the nearly 20 measures in the legislation. Mediation could provide the most relief for struggling borrowers, and it will require mandatory attendance in court by lenders' representatives, who are instructed to “come and be prepared.”
Unfortunately today, many of these conferences are worthless to the homeowners, who enter court with a hope that their loan modification submissions may actually be heard. The reason is that the law requires no accountability of the banks. When a lender's representative arrives in court with no information, or who shows no interest in making loan modification efforts, there is little recourse.
But finally, some borrowers are doing something about it. These few have spoken up, writing to their state and federal government saying, “If you believe in ‘no more foreclosures’, then do something about it, and do it now!”
Remarkably, government listened. And not only have our Albany officials heard our pleas, but our judges and class action lawyers are also in the fight. We are following a class action complaint where several homeowners are suing their mortgage servicer and several Government officials. This lawsuit seeks judicial development of remedies because these families have been denied loan modifications even though they meet the eligibility provisions of the Obama plans. It is claimed that over 500,000 loans are similar in nature and representative of inadequate attention to loan modification laws.
It gets even better! (Sit down for this next highlight,...please.) A Suffolk County Supreme Court ruling recently canceled a mortgage originated with IndyMac, now OneWest Bank, for reasons including the lender's continuing failure and refusal to cooperate and that it did not consider any loan modification proposals. If you are an IndyMac borrower, take a deep breath because this has to get their attention.
Our houses and neighborhoods can be saved by appropriate and well considered lawsuits and many of our judges are listening and ruling that the foreclosures must be addressed. Loan modification laws are on the books right now and can be effectively used to solve a foreclosure action. These laws and court rulings are tools that will be raised in defending a foreclosure action and actively engaged in our legislatures and courthouses.
Throughout these past several years we have witnessed the foreclosure actions pouncing on our neighbors and friends. People are on the edge of default, using credit cards to pay debt and supplement income, are struggling to save their homes and families through loan modifications. Finally, more attention is now being given to strengthening our laws and the courts are listening.
 

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We didn’t expect to be in this economic fix. We followed the lessons taught in our school. We took the advice of our parents. We followed the suggestions of our bankers and mortgage lenders. Our life patterns and ever increasing responsibilities allowed us to embrace the core values that we believed would make us succeed. But as the expression goes, "look at the mess we’ve gotten ourselves into now".
Trillions of dollars have been lost in home market values. Millions of families owe more on their homes than they are worth. Thousands of foreclosures actions have been filed. And the most telling statistic of all: each classroom in every school in America may hold at least one student whose family will lose their home.
As the number of new clients seeking help from attorneys grows, we see the ravaging effects of economic chaos: sleepless nights, family break downs, business closings, lost jobs and savings. Simply stated, many of our neighbors no longer have the ability to pay their bills and are losing their homes. Should so many of our citizens have known better? Can so many people be wrong at the same time?
Without hesitation, loan modification and defending against foreclosure actions must be identified by our homeowners, lenders and elected officials as alternatives to a foreclosure sale. We see some signs of our economy "bottoming out" or even on a path to recovery. The reduction of debt and monthly payments loan modification brings allows families the ability to pay and remain in their house. The lender's asset remains protected and intact. Our neighborhoods and localities are preserved and continue to benefit from the avoidance of a foreclosure sale.
The courts provide special parts and rules for settlement conferences in foreclosure actions. When a summons and complaint is served, mortgage holders should not throw up their hands in surrender as if all is lost. There are counseling agencies available, and attorneys who will provide guidance to help save their client’s home.
Clearly, it’s not a case of "we should have known better.” We purchased our homes and refinanced to better our lives. Now we face these challenging financial times and we do know better. We know there are solutions with loan modifications and defending the foreclosure action.
These solutions do not happen automatically but require borrowers to work towards these goals. If you are in foreclosure or in financial distress that may lead to foreclosure action, find an attorney to help you work through your situation, preferably sooner rather than later. You can find alternatives to your dilemma, and when you do, you’ll sleep a lot better.

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Here in New York and indeed nationwide, many homeowners that once prided themselves on securing their dream "to own" and felt safe and sound in their homes, now find their lives roughed up and fraying along the edges. It could be with your principal residence or you could be experiencing serious difficulties with your vacation home or rental properties.

We are all living in the "perfect storm". Homeowners across our nation borrowed and bought, and are now faced with the common dilemma that they cannot refinance their home mortgage. On November 12th, 2009 the New York Times editorial "More Foreclosures to Come" predicted that even by conservative estimates, another 2.4 million homes will be lost in 2010, while prices will fall another 10 percent or so.

Negative equity, job loss, valuation - all problems which have emerged since 2006 when the real estate market began to shake and rattle, now prevents homeowners from curing their defaults or lowering their interest rates. The mortgage loan process has evicted its previous "precious" customers and no longer functions for our neighbors, family and friends. So what now that we look at the winter season with" holes in our boots" and we can't get a new pair?

The appeal of loan modifications and defending against foreclosure actions must broaden. President's Obama's speeches of two years ago have faded to a shallow gray along with our hopes and homeownership dreams. Federal and State programs plus initiatives to help our mortgage defaults have fallen short of even our lowest expectations. If we had received even the slightest commitment and achieved our lowest goals, we would have seen huge success in the revitalization of our neighborhoods.

Modifications have tremendous benefits and show a striking return of balance to those families who have toiled to obtain a loan modification or defend a foreclosure action in the courts. The promising signs for homeowners from Washington and the frenzy of hope have taken a distant place in the race for economic recovery. Many can debate whether the screaming needs to restore our neighborhoods should be quieted by other national pressures.

But one lesson is simple - we need "new boots" and without loan modifications and defending foreclosure actions, there just aren't any other boots to buy.

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We have just concluded a successful negotiation of office space for a small Long Island law firm. Lease signed in 3 days of intense back and forth; mostly because everything always waits for last minute, backing one lease offer of "freebies" against another until its last man standing, and who gives up first to get the tenant. Even with it signed, tenant realizes it wants more, and then what to do? We resolve that and then off to court on a foreclosure conference.

Afternoon session in Riverhead; another 50 families lined up to see their fate. We see some daylight in our case so it gets adjourned. Now only 49 families hopeless!! Some approach me to take their case. I decline.....very old superstition--bad luck to pick up cases in courthouses!! Pretty stupid superstition yet it has always held true for me....

Then 70 mile drive to Brooklyn to meet two new clients---one needing a loan mod--2years they haven't paid their mortgage and another family up to their neck in over leveraged investment property!! Good intentions gone bad-- tenants not paying, lost jobs, bad judgments etc. Followed by a client looking to buy an investment.

9pm. Still placating our new tenant who needs further concessions. That's one more wonderful day.

Nobody has a better job than me. 14 hours of helping families & clients.

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