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17

Oct 2010

Loan mod papers lost for the third time? Don't take it personally.

Posted by / in Weekly Posts / 1 comment

As a Virginia bankruptcy lawyer, I’ve talked to three hundred people who’ve gotten loan modifications.    (Most before they filed bankruptcy, but more and more after.)

Only one of them had his loan mod approved the first time he sent it in.  I met that person yesterday!

Why?  There’s a clue in this article I saw in Wednesday’s New York Times.  It says the people in Chase loan servicing department are known by the rest of the bank as the “Burger King kids.”  The joke is that everybody doing loan mods now was working a year ago at Burger King.

So if it seems like the loan mod people don’t know what they are doing, you’ve got that right.

This is the fault of the banks, not the people.

The banks never expected to need to do this many mods.

Before about February 2008, the banks pretty much never modified mortgages at all.  Even when it would make sense for them, they didn’t.  They didn’t want anyone to to think they would ever modify a mortgage.  “Pay us what we want or we take your house.”  That was their rule.

It was February 2008 that I started to see smaller Virginia banks reaching out to people in bankruptcy, offering to work with them to keep their homes.

Newspapers had been reporting the foreclosure flood since the summer of 2007.  But took until mid 2008 for the light to dawn on the bigger banks.  They finally began to realize that they already had too many foreclosed houses and not enough people making payments.  Over the last two years, that problem has only gotten worse.

(Government sponsored programs like HAMP give incentives to banks to make loan mods.  But the real reason they do it is they’d rather reduce your payment a little than take over another house they can’t sell for half what you owe them.)

The banks hired people into loan modification too slowly to handle the flood.  Even when everyone else saw it coming, the banks didn’t.

The other problem is that loan servicing–working on existing loans and collecting payments–is not how banks made money.

The banks spent “billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide.”  They never gave much thought to how they were going to handle those loans, because they had already made their money.

It’s a lot more work to figure out how to handle a loan that’s gone bad, than it was to make the loan in the first place.  And there’s a lot less money to be made out of it.  So that’s not where the ambitious people in the bank have gone.

My bankruptcy clients report another problem when they try to get loan modifications.   They get conflicting stories from the loan mod and pre-foreclosure departments at the same bank.   The loan mod people say, be patient, we’ll get to you soon.  But the bank is also saying, your house is three weeks from foreclosure.

(There’s rampant confusion in the foreclosure department, too–staffed, according to today’s Washington Post, by “hair stylists, Wal-Mart clerks, assembly-line workers . . . without formal training.”)

So, if you are taking my advice–before or after bankruptcy–of trying to get a loan modification, expect delays, confusion, and lost paperwork.

All my bankruptcy clients tell the same story.  (Except for this one guy I talked to yesterday, who said for him it worked the first try.)

Don’t take it personally and–if you want to keep your house–don’t give up.

PS  That guy, the one who got a loan mod on the first try, is filing bankruptcy anyway.   The second mortgage wouldn’t work with him.  And the small business he started in 2006 is near collapse.    He decided to rent for a few years, and save money, while he builds up a new business.

PPS  In my first paragraph, I quoted the New York Times dumping on Chase.  I don’t think they are worse than other banks.  In fact, they may be better.  Chase has opened up Home Ownership Centers around the country to help people with the loan mod process.  They have two convenient to Northern Virginia.  One in Loudoun County Virginia and one in DC.   No other bank I know of has any.

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14

Oct 2010

Filing bankruptcy in Virginia gets harder November 1

Posted by / in Weekly Posts / 1 comment

You can thank the bank lobbyists who wrote the 2005 bankruptcy law for this cute trick.   When times get tough, filing bankruptcy gets harder and more expensive.

How’s that?  Eligibility to file bankruptcy is much harder for people who are over the median (average) income in each state.  When times get tough, the average income falls.   That makes eligiblity harder.

Check out these numbers, just released today.  Right now, a family of two in Virginia making less than $64,890 has automatic income eligibility to file Chapter 7 bankruptcy.   November 1, that drops to $62,686.    It’s the same for a family of three.  Right now a three person family making less than $73,887 has income eligibility.  On November 1, that drops to $72,078.

The unfairness to people with big families gets worse.  Right now a family of four is allowed to make $37,443 more than a single person with no kids.  Starting November 1, that drops to $36,102.  The law thinks taking care of kids should get cheaper in a recession.

When I look at that, I get mad all over again at the supposedly pro-family values political party that gave us this law in 2005.

While incomes are falling for average families across Virginia, the banks are doing great.  Earlier this week, JP Morgan Chase announced third quarter profits jumped 23%.

Here’s the complete chart, from the Office of the United States Trustee.  This chart shows how incomes are falling in Virginia for families of two, three, and four people.  Making it harder for people to get their bankruptcies approved.

Family size    Now      Nov 1

1            $48,190  $49,484

2            $64,890  $62,686

3            $73,887  $72,078

4            $85,633  $85,586


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06

Sep 2010

Paying for help with loan mods

Posted by / in Weekly Posts / 3 comments

Generally I don’t recommend paying for help with loan mods.  Two reasons.  I think people can do pretty well on their own.  And the professional loan mod business is filled with scams.  (Here’s an article about how Florida is trying to shut down scams.)

(When I say do pretty well on your own, that does not mean you will be approved the first time you apply, or the process goes without a hitch.   I probably know two hundred people who got loan mods, finally.  I don’t think any of them didn’t have all their paperwork lost at least once.)

Still some people ask me for a recommendation.   Here are two people you can talk to.

I believe these are honest people.  What does that mean?  I’m aware that both of these people, have told at least some people, “we can’t help you” and turned money away.  That’s different from the scammers who claim “100% success rate” and say “we guarantee you’ll get approved.”

So, I’m not in a position to say these people are always get results.  But I do believe they are honest.

The first is Compliance Counsel, headed by Dena Roudybush.   Ms. Roudybush is a lawyer.  In fact she was a lawyer for a large local mortgage broker–a company that I noticed was an unusually honest mortgage broker.

She did interview on News Channel 8 talking about who hard it is to try to compete with the scams.

Her number is (703) 261-7097.

The second is Fred Lear.  He operates as Vantage Negotiation Services.  Lear is a former loan officer.   His phone number is 703-447-8571.   He told me that he gets only a down payment of his fee upfront, and collects the rest when the loan mod is approved.

Again, I’m not in a position to judge how well these people do.  But I think they are both honest and do their best.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES