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Buying foreclosures? – Beware of what you buy – heed the story of Todd Phelps and Paul Whitehead – NY Times October 16, 2010

NY Times Financial Reporter Ron Lieber, on October 16, 2010 reported on the sad story of Todd and Paul: They purchased a Riverside, Calif. home at a foreclosure sale, only to learn that they had bid at the foreclosure of the second mortgage – and the house still remained subject to the lien/mortgage of the first mortgage company.

Todd and Paul paid $137,000 of their hard-earned cash – and faced not getting one penny back. (This story eventually has a happy ending – it appears the foreclosing bank from whom Todd and Paul purchased the property felt them to be such hayseeds that the bank relented and took the property back and returned the $137,000.

Mr. Lieber reports: "The auction process: Foreclosure auctions can be a dangerous place for people who don’t know what they’re doing or are relying on help from people who are sloppy or negligent. … Take your time. Assemble a panel of experts and apprentice yourself to them. And watch listings carefully. For better or for worse, foreclosed properties are going to be available for a very, very long time."

http://www.nytimes.com/2010/10/16/your-money/mortgages/16money.html?scp=1&sq=Buyers+Beware+Foreclosures+&st=nyt

Financial planning in reverse: Convincing yourself to turn $14 million into $-0-, two pending home foreclosures and a marital separation – avoid this fate with my 10-step plan

The first part of this blog will be a bit random – but stick with me! It will all tie together in the end. TRUST ME – STICK WITH ME!

I am fond of asking people: "Who is the easiest person in the world to convince?" Rarely do people get the correct answer. The answer is "Yourself."

My Thanksgiving Day/Black Friday thought is that I am glad I know this lesson. Do I always follow and honor the wisdom – not exactly – but knowing this axiom makes it easier to temper and put the brakes on my behavior.

There are so many cool things upon which to convince yourself that you must spend your money. There are home and landscaping improvements, 65-inch 3-D plasma screen televisions, cool cars, trips to Disneyworld, Bose surround sound systems, boats, private school tuition, $1,000 Facconable suits, $300 Juicy sweatsuits and of course diamonds. Then there are products and goods to "purchase" security, such as life/disability insurance and even 401k plans & stocks/bonds. Some people convince themselves that they need $395,000 European cars, $173,000 horses and $5.3 million home renovations. Some people convince themselves that keeping up with their relatives and friends is the best way to spend their money.

I invest plenty of time (and money) into my business of helping others. I keep up this blog and then try to read extensively about topics that will help me assist my clients. I attend far-away seminars of the highest quality, such as those given by the National Association of Consumer Bankruptcy Attorneys and the American Bankruptcy Institute. I could probably do "less" but I enjoy the prestige and and trust of my clients – the clients hold me in esteem for these "extra" things done which may reveal knowledge that I can use to the client’s benefit – and I receive the esteem of my clients in exchange.

I work hard to earn the esteem of my clients. I have very little time, but I invest what I have into my business of helping others in times of need. Over the Thanksgiving Day holiday, as of 8:05 a.m. on "Black Friday", I have thus far completed 102 pages of the 258 page book "Foreclosure Prevention Counseling" a 2009 publication put out by the National Consumer Law Center. The publication is actually 405 pages in length, but pages 259-405 are appendix, glossary, sample forms and other supplementary materials. Time I should perhaps spend at the gymnasium or recreating with my wife and family is frequently siphoned off to build my blog, websites and to increase my knowledge of consumer law and bankruptcy issues.

I do not have a functional TV (I find TV largely a waste of time and I do not want to model TV watching to my children) so I try to read as much as I can. This week I have have read two editions (Wednesday’s and Friday’s) of the New York Times – I adore the NY Times and throughout the financial crisis of the past two years, it has provided plenty of information for my blog. I try to read the NY Times at least twice weekly – you should think about it too, it is available for $2.00 at most any Starbucks or Tully’s coffee house.

Ok, here is where I tie it all together.

On this day after Thanksgiving (Black Friday 11/26/10), I am reflecting on how pleased and grateful to be working with my clients – and how much I learn in exchange from my clients about the frailty of finances and how elusive is the Nirvana of financial security.
http://www.nytimes.com/2010/11/26/business/26fall.html

The Friday 11/26/2010 "Black Friday" edition of the NY Times has an article entitled: "A Windfall, Blown Away". http://www.nytimes.com/2010/11/26/business/26fall.html

This is the story of Nick and Kate Martin, who in 1998 received $14 million from the sale of their shares of a family advertising business. Other relatives received more, but the Martins received a tidy sum of $10 million after taxes. They blew it all. All of it. It is all gone.

Mr. Martin is now 59 years old, and is thankful that he did find a job, paying about $51,000 per year. His wife Kate helps out at a school, earning $14,000 per year. Mr. Martin found a job in Kansas, and he lives there with the parties’ 13 year old son. Mrs. Martin to date refuses to leave New York, where she lives on the parties’ remaining property (soon likely to be foreclosed) with the couple’s 9 year old daughter. Given the article, it doesn’t sound like Mrs. Martin is in any hurry to live with her husband in Kansas. The article subtly presents a family perhaps irremediably ripped apart by the disappointment of vanished wealth.

The story of Mr. and Mrs. Martin served as a "wake-up" call for me. As my law practice has grown and an ever increasing number of people see the value of what I am able to offer and appreciate the care and concern with which my staff and I approach their cases, I have been rewarded with increasing revenues – and the accompanying and sometimes difficult responsibility to use such new resources wisely.

The "hook" in the article is towards the end – Mrs. Martin tries to explain why the couple moved from California (where they lived before the $14 million windfall) to England, and then on to Vermont and finally New York, where they plowed millions into building an Adirondacks (upstate New York) "family compound" residence. They tried to sell the Adirondacks property for $4.9 million, but the best offer to date has been about $1.25 million. The Martin’s have stopped making payments on the $1.1 million Adirondack’s mortgage, and $51,000 annual property taxes on the Adirondack’s property. They have also stopped making payments on the Vermont property’s mortgage and property taxes, which also has not sold.

The parties estimate that they poured $5.3 million into refurbishing the Adirondack property (acquired for $250,000) and an additional $600,000 into the Vermont property(acquired for $650,000). The Vermont property was listed in 2007 – and there have not been any offers.

The couple sold a $395,000 Aston Martin vehicle, and a horse for which they had paid $173,000, and drained their final $91,000 retirement account.

Ms. Geraldine Fabrikant of the NY Times reports as follows: "Mrs. Martin says she believes the move from California was motivated in part because he [Mr. Martin] resented his brother and brother-in-law’s bigger role in the community. [in California, where the family business that had been sold was based] She [Mrs. Martin] also speculates that the Adirondacks estate was alluring partly as a way of keeping up. ‘I think he wanted to show his brother and brother-in-law that he had a big home, too’, she said over dinner recently in Saratoga Springs, N.Y. Mr. Martin disagreed. ‘We are Irish Catholics, and we thought it would be a compound for our family over generations,’ he said. After the cramped rooms at their house in England, he liked the big rooms, he said. ‘Sometimes, things don’t work out.’

Mr. and Mrs. Martin convinced themselves that they needed a $5.3 million lakeside "family compound" in the Adirondacks for the benefit of their family.

I easily convince myself that I need to acquire additional investments/insurances, additional consumer goods and additional "all sorts of stuff" for the safety, enjoyment/recreation and security of my family. But here is the painful question – is all this work and all of this effort at success perhaps more weighted towards "all about me"? – am I not just perhaps searching for greater self-esteem through the drive to acquire greater financial security, more awesome toys and greater displays of success? Are the benefits of greater safety, security and enjoyment/recreation for my family just the side-effects and the collateral results of a personal drive to be recognized as a rarely rivaled and extremely accomplished leader in my field – with the security, financial success and toys to "prove" to myself that I am such a cutting edge leader?

Mr. and Mrs. Martin seem completely lacking in maturity and insight. Obviously, I am not THAT stupid or dimwitted. However, it begs the question, how much less stupid am I than the Martins? The Martins’ situation also asks you the same questions.

If you are considering bankruptcy for a "fresh start" to recover from past hard luck or perhaps past indiscretions (or maybe a combination of a little of both) remember well that there are creditors out there who wish to ruin your fresh start. The creditors want to "reward" you with new credit cards, financing for cars, boats, ATVs, bigger houses, RVs, vacations, time shares, sofas/furniture and you-name-it.

Your bankruptcy case may well result in the most unbelievable plethora of new credit opportunities. Consider making a plan – convince yourself to do it. The Martins obviously lacked any sort of plan (or if they had one, it was fueled by whimsy and "lets-do-this-for-now" reasoning of self-deceit).

Resist the creditors who want to ruin your post-bankruptcy fresh start. Convince yourself to follow this 10-step plan:

-Step one: I will max out my 401k contributions.
-Step two: Of my remaining income, I will save 10% until I have at least four months’ worth of net-pay saved up.
-Step three: I will acquire disability insurance paying about 75% of my current net pay.
-Step four: After having saved 3 months’ worth of net pay, I will set up 529 educational plans for my children and/or grandchildren contributing no less than $100 monthly per child, regardless of the child’s age.
-Step five: In addition to the minimum monthly payment, I will pay an extra 50% of the minimum monthly payment towards my student loan debt.
-Step six: In addition to my minimum monthly mortgage payment(s), I will pay at least an extra 10% to pay down the mortgage(s).
-Step seven: I will chat with my boss to see if he/she will considering establishing performance goals for myself, and attempt to negotiate the raises that I may achieve for reaching certain performance goals.
-Step eight: I will set up a "vehicle fund" into which I will deposit $125 monthly towards the acquisition of a replacement vehicle. -Step nine: Until I am "on track" and living on a budget that enables me to maintain all of the above goals #1-7, I will not seek any new debt in any form.
-Step ten: I will avoid refund anticipation loans, payday loans, rent-to-own, pawning and any other sort of short-term lending. I will not refinance unsecured debt into secured debt, such as paying off credit cards with a home equity line of credit (HELOC).

The nirvana of financial security is elusive…you may never have the chance presented to the Martins to be fully financially secure (the Martins blew it, of course). But you CAN do something. Consider steps #1-10 above.

Convince yourself. Its so easy to convince yourself.

Public sector layoffs slow down recovery – private hiring slows – Nat’l official unemployment set at 9.6%

Companies added just 64,000 jobs in September 2010, down from 93,000 jobs in August and 117,000 in July 2010. Overall, though, the picture was more bleak for September 2010. The economy overall lost 95,000 non-farm jobs because there was a decline of 159,000 government positions.

"We need to wake up to the fact that the end of the stimulus has really hit hard on local governments," said Andrew Stettner, deputy diredctor of the National Employment Law Project. "There is much more of a slide in the job market than what we really need to clearly turn around."

With the waning of the $787 billion Recovery Act passed in 2009 and credited with increasing employment by millions of jobs, finding new policies potent enough to speed up the recovery has proved difficult, reports Catherine Rampell of the NY Times on October 9, 2010.

"We’re looking for companies to get more confident in the pace of recoery and start to hire around 150,000 jobs a month, which is what we need just to keep the unemployment rate flat," said John Ryding, chief economist at RDQ Economics. "But I just don’t see that happening between now and the end of the year."

Catherine Rampell reports: "Flat hourly wages, now at an average of $22.67, also threaten what fragile confidence American families may have in their household budgets. [] Government jobs have been disappearing the last few months as the census winds down. [ ](September), 77,000 Census Bureau employees were let go. But local governmetns cut 76,000 positions as well. State governments shed 7,000 workers."

For the 14.8 million people out of work, the picture is not brightening. The average duration of unemployment continues to hover at record highs. In september, the typical unemployed worker had been searching for a job for 33.3 weeks, reports Ms. Rampell.

See Ms. Rampell’s article at: http://www.nytimes.com/2010/10/09/business/economy/09jobs.html?scp=1&sq=Public+jobs+drop+amid+slowdown+in+private+hiring&st=nyt

“Trade School” Student Loans – Beware – High default rates, no collection statute of limitations, you can lose your professional license and yes, they will keep at it forever, even garnishing your old age social security

My friends, I really, really want you to think twice about student loans – especially those taken out at proprietary vocational trade schools. Here is why: An August 2009 U.S. Government GAO report noted a disturbing trend. (U.S. Gov’t Accountability Office, GAO-09-600, Proprietary Schools: Stronger Deparment of Education Oversight Needed to Help Ensure Only Eligible Students Receive Federal Student Aid (August 2009))

According to the GAO, four years into repayment, a whopping 23.3% of students at proprietary schools were defaulting upon federal loans, a higher rate than students at either public colleges, where 9.5% were defaulting, or private ones, where 6.5% were in default.

Student loans can be really, really damaging. The damage can extend forever. Keep checking/searching this blog for frequently updated student loan related posts.

Here are a few things you should know about student loan collections:

Most defaulted student loan garnishments are quite a bit different than say "normal" medical bill lawsuit garnishments – for starters, most student loan garnishments are limited to 15% of disposable income, which is more liberal than either a child support garnishment or a 25% normal creditor garnishment. While the differences between student loan garnishments and normal garnishments are too vast to fully explain here, I leave you with a few important points.

First, under the Higher Education Act and the Debt Collection Improvement Act of 1996, most student loans can be garnished without a normal lawsuit, judgment and writ/court order. This is a big difference – there is little chance for you to go to court to contest entry of the judgment on your defaulted student loan collection. The student loan garnishment just starts unexpectedly out-of-the blue.

Second, the exemption on the garnishable portion of wages is more liberal with student loan garnishments than with "normal" creditor garnishments. With federal student loan garnishments, the exemption amount is thirty times the minimum wage so you only lose the LESSER amount by which your income exceeds 30 times the current minimum wage or 15%. For example, if you have weekly disposable pay of $300.00, then you definitely get to keep $217.50 (30 times the current minimum wage of $7.25/hour, $300 – $217.50 = $82.50), but you don’t have to pay $82.50 weekly BECAUSE you get a “bonus” – since 15% of $300 is only $45 (.15 x 300 = $45), you only are garnished $45 instead of $82.50. What a deal!

Third, a 15% student loan garnishment will not freeze out other creditors, so if the Department of Education or some student loan guarantee agency or its collector is garnishing 15%, then at the same time Ford Motor Credit shows up with a repo-ed vehicle deficiency judgment garnishment, then 15% goes to the Department of Education and 10% of your net wage goes to Ford Motor Credit, up to a total of 25% garnished from your net pay.

Fourth, while a bankruptcy will usually not eliminate student loans (but note that you can seek a “hardship” discharge of student loans while in bankruptcy) you can usually temporarily eliminate student loan garnishments while in a Chapter 13 plan.

Fifth, student loans are awful – student loans can even garnish (offset) your social security benefits when you are old and retired (and perhaps even when disabled) and living on a fixed income.

Sixth, Washington law is very unfriendly with defaulted student loans. Even though you are being garnished 15% for the defaulted student loan, you can still lose your job/occupation license if you owe defaulted student loans – your professional license may be revoked for defaulted and unpaid student loans in occupations including but not limited to the following jobs: lawyers, accountants, architects, auctioneers, cosmetologists, barbers , manicurists, boarding homes, contractors, embalmers, funeral directors, engineers, land surveyors, escrow agents, birthing centers, poison center directors, poison center specialists, real estate brokers, real estate salespersons, landscape architects, water well contractors, plumbers, health professionals, real estate appraisers, fire system sprinkler contractors, private investigators, security guards, and bail bond agents.

Obama “pocket veto’s” robo-signer foreclosure bill – Interstate Recognition of Notarizations Act of 2009

According to the Wall Street Journal on October 8, 2010, Damian Paletta reporting: "The vetoed bill, written by Rep. Robert Aderholt (R., Ala.), moved through Congress without attracting much attention and appears aimed at a much broader target than the foreclosure process. It would have required state and federal courts to accept documents of many different kinds that are notarized by people or computers in other states. The House passed the bill in April 2010 by "voice vote" and the Senate passed it unanimously Sept. 27. The bill caught the attention of Ohio Secretary of State Jennifer Brunner, a Democrat who has battled banks in her state over foreclosure procedures. She raised concerns with the White House earlier this week, she said in an interview, and sent an email to supporters asking for help getting the White House to block it."

"The morgage-servicing process is a regulatory gray area in which dozens of state and federal agencies play a small rule but over which no one agency has primary responsibility. The new Bureau of Consumer Financial Protection, created by the financial industry overhaul law in July 2010, would have powers to act in this area, but it doesn’t ahve its full authority until next summer of 2011."

"The bill raised difficult policy decisions for government officials. Some argued it ought to be easier for banks and others to process documents electronically to help reduce the backlog of foreclosrues and aid the housing market’s recovery."

Insurable on parents’ health care policies until age 26? – Patient Protection and Affordable Care Act – Check with your insurance agent!

Harvard Law Professor and consumer advocate Elizabeth Warren has estimated that some 40%+ of family bankruptcies have a nexus with medical losses.

If you have young adult children struggling to make their way in the world, there may be a break for you and them.

The new health laws may enable to you add children to your policies up until they reach 26 years of age. Do not assume that such children are now "automatically" added – there is likely some paperwork that you will need to complete in order to ensure that your older children are on the policy. The older children may be eligible to be added immediately, but there may be a premium increase, so research the situation and be prepared.

This would end the policy of many insurers of booting children off of the policy once they reach 23 years of age.

Again, check with your insurance agent – the coverage may not be self-executing nor automatic – you probably have to affirmatively move in writing to extend or re-establish coverage for such adult children who have previously aged-out of coverage, but remain under age 26.

For more information, see the September 23, 2010, NY Times article by Jacob S. Hacker and Carl DeTorres, Jacob S. Hacker is a professor of political science at Yale University. http://www.nytimes.com/interactive/2010/09/23/opinion/20100923_opart.html?scp=1&sq=The%20Health%20of%20Reform%20Jacob%20S.%20Hacker&st=cse

See Also Kevin Sack’s NY Times Article of the same September 23, 2010: http://www.nytimes.com/2010/09/23/health/policy/23careintro.html?_r=1&scp=1&sq=For%20Many%20Families,%20Health%20CAre%20Relief%20Begins%20Today&st=cse

See Also Kevin Sack’s further articles – covers three "real life" stories about (1) the chronically ill, (2) lifetime healthcare caps and (3) insuring adult children to age 26 on parents’ policies: http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/health_care_reform/index.html?scp=2&sq=For%20Many%20Families,%20Health%20CAre%20Relief%20Begins%20Today&st=cse

Underemployment rate 18.1% – much more telling than “official unemployment” Washington statistic of 9.1%

Nearly one in five Washington workers are unemployed. Their plight is like that of Seattle administrative assistant Lorilee Lines, who applied for more than 200 jobs before landing a meagre 30 hour per week job. This statistic was provided by Sanjay Bhatt of the Seattle Times, November 18, 2009, for the 12 months ending September 2010, in a page one article.

The national unemployment stood at 9.6% and the U.S. Bureau of Labor Statistics placed the "underemployed" statistic at 16.8%, but this is regarded as a very restrictive interpretation of underemployed.

Underemployment rates capture part timers, but they still leave out those working in full time jobs for which they are overqualified.

Through approximately October 2010, Washington has seen a net gain of only about 6,000 jobs. Overall, about 10,200 jobs were added in the private sector, but these were offset by a loss of some 4,200 government and public sector jobs.

Contrary to national trends, jobs continue to contract in Washington. Washington had 8,500 fewer jobs in October 2010 than it had in October 2009 – a decline of 0.3%. By contrast, there was a 0.6% increase in jobs nationwide over the same period. As reported in the Seattle Times, November 18, 2010.

JPMorgan owned Mortgage Electronic Registrations System – Do you get a free house because the mortgage securitization industry didn’t want to pay county fees?

The October 19, 2010, NY Times Article of Floyd Norris ("HIgh & Low Finance) seeks to explain the controversy swirling around Mortgage Electronic Registrations System, the private company designed to "hold" your mortgage.

According to the University of Utah’s Christopher L. Peterson and Adam Levitin of Georgetown University, one cannot park a mortgage with MERS, but then transfer the note from investor to investor. United States District Court Judge Garr M. King of Oregon, ruled recently that the use of MERS had invalidated the mortgage, and that Bank of America could not foreclose. Mr. Peterson recites an 1879 Supreme Court decision reciting that "the assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity."

Other explanations I have heard is that the mortgage investors did not want to pay a re-recording fee to the counties where the mortgages were based every time the mortgage loan obligation changed hands, so they sought to "park" the mortgages with MERS. This could prove to be penny wise and dollar foolish if Professors Peterson and Levitin are correct.

Interesting.

Most judges seem to be holding "No free houses in my Court."

We will see how this plays out.

If you are interested, here is the link to the October 19, 2010 NY Times article of Mr. Norris:

http://www.nytimes.com/2010/10/19/business/19norris.html?scp=1&sq=some%20sand%20in%20the%20gears%20of%20securitizing&st=cse

Homeless shelters see 20% increases in need – 550,000 receive aid from Federal Homeless Prevention and Rapid Re-Housing Program

[categories: Washington bankruptcy attorney]

The NY Times’ Michael Luo reported upon the extreme toll the recession has taken upon young families. See NY Times "National" Section, Pages 19 & 28, September 12, 2010.

The Federal Government knows of the problem as well. The Feds have allocated $1.5 billion to be made available to homeless prevention causes over the ensuing three years as part of the stimulus package, known as the Homeless Prevention and Rapid Re-Housing Program.

This article is striking and heartbreaking. It follows the story of Mr. and Ms. Griffith (aged 40 and 26) and their two children aged 3 and 16 months. Mr. Griffith was a hard working gentleman working two jobs. His primary $25/hour job as a waiter at a Florida Applebee’s restaurant ended when the restaurant closed. The family could not find work and returned to Providence, Rhode Island after a three day bus ride from Florida.

I was shocked at the story; living in a homeless shelter with an infant and a toddler is no freeloader’s picnic; I don’t know that I personally could survive the Griffith’s daily life. There are many, many rules at the shelter, and after three infractions of the rules the entire family is evicted – no exceptions.

The rules are easy to violate, and include rules against being found in your living quarters between 10:00 a.m. and 4:30 p.m. There is a rule against congregating around outside seating benches. If you are caught watching news programming on the TV in the common area, it is also an infraction.

The Crossroads shelter in Providence, Rhode Island (the shelter where the Griffiths reside) has seen a 20% increase in demand and occupancy for June, July and August 2010, over the same time period in 2009. Similarly, an Ohio Y.W.C.A. shelter in Columbus, Ohio, has seen similar increases in occupancy.

Homeless families jumped from 131,000 to 170,000 between 2007 and 2009.

6% Drop In Mortgage Delinquencies – only 13.52% of Households now Behind (but 1 out of 7 Remain Delinquent!)

[categories: Washington bankruptcy attorney]

The NY Time’s David Streitfeld reported on Friday, November 19, 2010, that mortgage delinquencies dipped from 14.42% of households to 13.52% of households. This works out to about a 6.0% reduction in mortgage delinquencies from Q2 2010 to Q3 2010, according to the Mortgage Bankers Association. http://www.nytimes.com/2010/11/19/business/19delinquent.html?

Likewise, seriously delinquent mortgages (in excess of 90-days) fell from 9.11% of mortgages to 8.7% of mortgages, a drop of some 4.5% overall.

Federal Reserve Bank governor Elizabeth A. Duke testified before Congress this week – the Federal Reserve expects 2.25 million foreclosure filings for each of 2010 and 2011. 2 million foreclosures are expected for 2012.

David Streitfeld reported: "…foreclosures are no longer being caused by bad [subprime] loans, which was the case for much of the recession. Now most foreclosures occur with prime loans, which are harder for banks to modify than subprime [loans]. Prime fixed-rate loans, the safest kind of loans, represented 36 percent of all new foreclosures in the third quarter, up from 30 percent in the third quarter of 2009. Meanwhile, the percentage of new foreclosures generated by the worst kind of loans, adjustedable subprime, fell sharply.

CHECK THIS OUT – MODIFICATIONS LARGELY A SHAM! – D. Streitfeld reported: "…only 24,000 hoseholds had gotten permanent new loans during October. It was the lowest number since the government’s Making Home Affordable Program was getting started last year. [ ] ..483,000 homeowners ahve gotten permanent new loans through the program; 719,000 enrolled in a trial but were either foreclosed or got a modification without government oversight.

I personall feel that banks seem to seek avoidance of the guidelines of the HAMP program, which recite a modification must meet certain criteria – so the banks seem to make up their own modification programs so as to avoid the strictures of the HAMP program. Accordingly, "Bank of America said that it modified 25,000 loans in October, up from 16,500 in September. Relatiely few were done through the government program." recites the NY Times’ David Streitfeld, in his 11/19 article.

D. Streitfeld quotes Michael Fratantoni of the Mortgage Bankers’ Association: The post-modification re-default rate of modified loans can be as high as 50% after the first year, another reason foreclosures are unlikely to decline significantly.