Los Angeles Bankruptcy Law Monitor : Los Angeles Bankruptcy Lawyer & Attorney : Christine Wilton Law Firm : Southern California Chapter 13 & Chapter 7 Bankruptcy, Foreclosure

Tune in to AM830 this Sunday morning from 10 a.m. to 11 a.m. when my partner John Greifendorff and myself, Christine Wilton guest on Real Estate Radio-Southern California with our host, Ron Siegel!

Ron Siegel is host of "Real Estate Radio - Southern California" on ESPN Radio AM 830 KLAA Sunday's from 10-11AM. Every Sunday, Ron discusses current events, real estate, and various other financial topics.  Mr. Siegel runs the Real Estate and Mortgage Resource Center at Stearns Lending and his radio show explores this topic from every angle.

The Real Estate Radio Network, hosted by Ron Siegel, is designed to help Consumers in Southern California understand the HOW and the WHY in our incredible Real Estate Market. Southern California is a unique place to live and an incredible place to invest. If you don’t own a piece of Southern California yet, make sure you tune in and gain all the knowledge you need to make an educated decision about when to enter the market. If you already own a home, listening to the Show will help you understand when it’s a good time to sell or refinance. Either way, the show is for you and we hope you’ll join us this Sunday at 10am on ESPN Radio AM 830 KLAA!

This Sunday morning from 10 a.m. to 11 a.m. we will answer questions that will effectively assist southern California homeowners deal powerfully and effectively with their lenders through bankruptcy.  Bankruptcy is a powerful tool for homeowners and is often overlooked and considered a last resort, yet the injunction that is the automatic stay is enforceable from the moment a bankruptcy case is filed, and Stops foreclosure dead in its tracks.  No other remedy is as effective or as economical to the homeowner.  Send us your questions and we'll do our best to get them all answered.  Thanks for listening!

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The sub-servicers of the mortgage industry are in the business of foreclosure, not loan workouts; in case you were wondering. GMAC has dressed up in sheep's clothing by changing its name to Ally Bank; owned by GMAC, LLC.  Now, GMAC has even California Attorney General Jerry Brown halting their foreclosures after a deposition of one of GMAC's employees was leaked to the press.  So what's all the fuss about? 

GMAC Mortgage is only one of the many loan servicers nationwide, including J.P. Chase, and Bank of America among others to have banks of employees with alleged limited signing authority as Vice Presidents, Assistant Secretaries of Mortgage Electronic Registration Systems, Inc. that assigned your deed of trust in order to correct the record after your home has been foreclosed.  We call them "Robo-Signers" because that's all they do all day long is sign documents they have no idea as to what the documents are or the consequences of their actions.

How does knowing all this help the homeowner who hasn't yet lost their American Dream?  Have your loan documents reviewed by an attorney who understands the securitization process and whether your home is worth fighting for and whether you can afford to keep it.  You need to do this before the home is foreclosed; before any sale date is set. Consider filing under Chapter 13 and dispute the ownership of the Note and the accounting, if your mortgage has been securitized.

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Last week, Yves Smith caused a stir with this post, "Fannie and Freddie Continue to Rely on Foreclosure Mills Despite Evidence of Fraud."  The 64 comments are worth a read, if anything to ferret out the boys from the men in terms of skill level in dealing with the legal issues.  Smith gives acknowledgment to O. Max Gardner, who is the nation's go-to bankruptcy litigation attorney and, I am proud to say that, I am a Lieutenant in his army.  So, what's all the scuttle butt about? 

Smith's post referred to another piece published by Mother Jones, "Fannie and Freddie's Foreclosure Barons," which provides a peek inside the shady document fabrication operations to cover up past mistakes in the mortgage industry and post foreclosure clean-up.  What a mess.

Looking at the securitization issues from a California standpoint, we have both federal and state law to contend with.  From a bankruptcy position, here in the Central District we have the In re Foreclosure cases , In re Hwang, In re Walker, and In re Vargas.  Since the mortgage follows the note, we need a complete, and unbroken chain of custody of the note and adherence to the California Commercial Code.  We are arguing the Creditor has no standing and even if they did, there are major computation errors in their claims. The fight goes on for now.  Results may vary in California.  Side effects include general frustration; nausea; possible foreclosure; and guilt for not paying your mortgage. 

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The mortgage meltdown and ensuing global financial crisis, in the fall of 2008, still reverberates today.  The New York Times reported on the essentials of the credit crisis and pointed out the breadth and depth origins of this crisis and likened these times to the Great Depression. 

I have previously reported on the financial crisis in The Economy of Bankruptcy ; while The National Association of Consumer Bankruptcy Attorneys [NACBA] has been following SB61 since its inception.  SB61 essentially will allow bankruptcy judges to modify the terms of a mortgage.  Recently, NACBA Director, John Rao testified on the matter in October, before the Senate Judiciary Committee’s Subcommittee on Administrative Oversight and the Courts.

As posted in the New York Times, House Passes Far Reaching Bill Tightening Financial Rules.  Unfortunately, the banking industry struck a win when the House voted to reject the proposed amendment, known as "mortgage cramdown," which is the measure that would allow bankruptcy judges to change the terms of mortgages for distressed homeowners.  This vote reversed the House's passage in March of a cramdown measure that subsequently died in the Senate.

American homeowners need a real solution and based on what I read over at The National Bankruptcy forum, our Bankruptcy Courts may not be equipped to handle the tsunami of bankruptcy cases that would result in the passage of such legislation.  To date, few mortgages are being permanently modified, as reported by the LA Times.  

My solution is for every American to obtain independent financial freedom by paying off their debts outside of bankruptcy, if possible. For those Americans struggling to pay their bills, consider either a chapter 7 or 13 bankruptcy and never look back.  The rules of bankruptcy do not require that you spend down all of your savings and lose your assets in order to file for bankruptcy protection.  The goal here is financial freedom and independence from the banking industry FOREVER.  The new paradigm as Dave Ramsey so eloquently puts it, DEBT IS DUMB AND CASH IS KING!

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The gulf states must contend with hurricanes.  The northeast has their bitter cold.  Here in California, we must always be prepared for "The Big One," earthquakes that is.  As our economy limps along, virtually lifeless, and looking more like a depression rather than the politically correct "recession," we must be prepared for the onslaught of more potential foreclosures.

If you, or someone you know is facing or potentially facing a foreclosure, an attorney who is familiar with this area of law can explain your options so you can choose the course of action that is best for your individual needs, goals and desired outcome.

The five (5) ways to stop a foreclosure are:

1. Modification
2. Short Sale
3. Deed in Lieu
4. Bankruptcy
5. Injunction

Of the methods listed above, only a bankruptcy and a court ordered injunction will legally stop a foreclosure and even those methods may be temporary.  Most of the time, the lender may suspend their foreclosure proceedings in order to entertain the workout options of a modification, short sale or deed in lieu of foreclosure, but they are not legally required to do so. 

Recent court rulings in Massachusetts to invalidate thousands of foreclosure proceedings because the chain of title had not included all of the assignments that had taken place prior to foreclosure.  Unfortunately, a homeowner is not likely to invalidate a foreclosure in California after the sale date, especially where a bonified purchaser is involved and the property has been transferred.

A Chapter 13 bankruptcy is still the most economical and effective way to temporarily stop a foreclosure because of the automatic stay.  This allows the homeowner time to make up all past due payments.  This also allows the attorney to file any adversary proceedings necessary to invalidate the foreclosure proceedings and possibly sue the lender under TILA and RESPA violations; potentially recouping damages on behalf of their clients.

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In the Central District of California, year-to-date bankruptcy filings are up 70% over last year.  Chapter 7 filings make up 77% of the total filings year to date. Why? Because California’s unemployment rate is at an all time high and holding at 12.1% according to the Bureau of Labor Statistics.   EDD says we’re at 11.9%

Let’s just pour salt upon the open wound and admit that California was also the sub-prime loan mecca all the way into the crash in 2008. These option arm loans were sold here in California well into late 2007 and the "teaser" or introductory rates on these loans sold were 5, 7, and 10 year terms. This means that we have yet to see the end of the foreclosure crisis here in California because these loans have not yet adjusted upward.

With a surplus of uninhabited homes on their hands, banks are left holding the bag in the foreclosure game. Unfortunately, many homeowners could have saved their homes, had they contacted an attorney, who would have determined any legal claims to stop the foreclosure, like Truth in Lending Act (TILA), predatory lending (Fraud), or Real Estate Settlement Procedures Act (RESPA) violations.  However, this is not as easy as it sounds and requires litigation.  A  chapter 13 bankruptcy has been the forum of choice to stop foreclosures and save homes.  Unfortunately, SB 61, has not passed, but is still being discussed.  SB 61 would allow bankruptcy courts to modify mortgages and reduce principal loan balances in bankrutpcy.

We are all in this together and this market affects us all.  At no other time has it become more apparent that we join together for the solution.

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I just finished reading Battle on the Homefront  by Steven Seidenberg, in the latest issue of ABA Journal. With the rejection of Senate Bill 61 back in April, homeowners are left with trying to work out deals with the same parties that essentially helped create the foreclosure problems. Steven did a great job in outlining the current state of the foreclosure crisis and covers the problems in bankruptcy that homeowners are facing. I agree. We need to do more for homeowners in trouble and Bankruptcy Court can provide the neutral forum.

I’ve been watching the news and wrote my Senator to vote in favor of SB61 to no avail. I hear from clients, “If we could just write down some of our principal, we could afford the payments.” The federal government’s Home Affordable Plan doesn’t appear to be working and the lender’s aren’t moving fast enough to help homeowners in trouble.

In California, our problems are overwhelming because many of us have taken out jumbo loans during the housing boom and subsequently we have seen some of the nation’s greatest home price declines, creating substantial negative equity. The original Obama Plan excluded many California mortgages because the plan does not deal with mortgages that substantially exceed the value of the home. Recent changes to the plan have included homes with substantial negative equity, while the high value homes remain excluded from the program.

Ultimately, we need to show the lenders some value in the modification process. What this means, is that if modifying the mortgage will provide a lesser loss than the foreclosure, the lender is more likely to accept the modification proposal.
 

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