Archive | Washington State Bankruptcy

Surviving Debt: Eight Credit Card Tips from the National Consumer Law Center

I have mentioned it before – but you really need to buy this book, "Guide to Surviving Debt" 2010 edition, available from the National Consumer Law Center at www.consumerlaw.org for about $20 bucks.

From the "Guide’s" chapter 5 – "Credit Cards", here are eight tips:

(1) Do not use credit cards to finance an unaffordable lifestyle.

(2) Try to avoid making financial trouble worse – avoid the trap to use credit cards to make ends meet.

(3) Don’t get hooked on minimum paymnents (sometimes set at only 2.0% or 4.0% of the balance) – it could take 25 years to pay off the card at that rate, and nothing requires the credit card company to keep that advertised minimum payment AND it could be raised at any time

(4) Temporary teaser’s – don’t run up the balance in reliance on a temporary promotional interest rate.

(5) Make all credit card payments on time.

(6) AVOID the "special services", programs, and goods taht credit card lenders offer to bill to their cards, such as credit card fraud protection plans, credit record protection, travel clubs, life insurance, and other similar offers – most are bad deals and if you reall want that stuff, you can buy it much cheaper elsewhere in the economy.

(7) Beware of unsolicited allowable balance increases. Don’t be fooled into thinking that you can really afford more credit.

(8) Don’t max out credit cards – it’s then easy to get socked and soaked with high over-limit fees. You can also then get hit with a "penalty rate" because having when having maxed out credit cards leads to a drop in your credit score.

Home mortgage interest deduction to end? Fannie Mae/Freddie Mac/FHA guarantees to end?

President Obama has proposed small cuts in the mortgage home interest deduction for top earners in the past. The current deduction allows taxpayers to deduct interest paid on mortgages up to $1 million for first and second homes, and up to $100,000 in additional home-equity borrowings.

Early in December 2010, the president’s deficit reduction commission proposed reducing the mortgage interest deduction.

According to the Wall Street Journal’s S. Mitra Kalita and Nick Timiraos (Thursday, December 16, 2010, Page A7, “Homeowner Perks Under Fire”), mortgage deductions will reduce tax revenue in 2012 by $131 billion.

President Obama’s deficit panel seeks to replace the current system with a flat 12% tax credit for interest on mortgages up to $500,000 for first homes.

Another growing debate is whether the government should reduce its role in backing mortgages, as at present, 90% of new mortgages are government backed.

Kalita and Timiraos report that Michael Farrell (Chairman of Annaly Capital Management, a NY-based, mortgage bond investor) believes that if the government stopped guaranteeing mortgages through organizations like the Federal Housing Administration, Fannie Mae and Freddie Mac, that interest rates could be at least two to three percentage points higher.

Back to the subject of possible changes to the home mortgage interest deduction. Kalita and Timiraos report that a Wednesday, December 15, 2010 WSJ/NBC News poll found that 60% of Americans found it totally or mostly acceptable to eliminate the mortgage deduction on second homes, home-equity loans and any portion of a mortgage over $500,000 – consistent with the recommendations of the presidential deficit reduction commission.

Ideas for Action:

If the ability to deduct home mortgage interest from federal income taxes is in question, and inflationary pressures are on the rise in the economy, then refinancing your mortgage to the lowest rate that you qualify for is one of the most prudent defensive measures that you can take.

If the recession hasn’t nuked you, here is an “off-topic” post on how to survive a real nuking

I warned earlier of two “off topic” posts. The earlier was a post about the historical origin of the Lady Justice Figure (you know, the sword, blindfold, and balance scale figure). This is the second “off topic” post for those of us old enough to remember any Soviet leader prior to Gorbachev.

The New York Times reported on how to survive a nuclear terrorist attack or other true meltdown.

First, if you are in a concrete underground parking garage – stay put! You will be generally well sheltered from radioactive fallout.

Second, if you are in a home, head for the basement, if you have one.

Third, if you are in a car and can’t readily and very quickly leave it to move to an underground location, stay put.

Fourth, don’t flee – get inside.

This is all wisdom quite to the contrary of advice of an earlier time to flee the area.

The second or lower level of an underground concrete parking garage is the best place to take refuge and strangely enough, the core of a large office building about three stories off of the ground takes a second place.

Even staying put for a few hours after the “blast” in such an underground location will make a huge difference in long-term survival rates.

Here is the latest thinking from Brooke Buddemeier, a Livermore health scientist, as quoted in the NY Times Article of Thursday, December 16, 2010, as reported by William J. Broad:

“The big surprise was how taking shelter for as little as several hours made a huge difference in survival rates. ‘This has been a game changer,’ Brooke Buddemeier, a Livermore health physicist, told a Los Angeles conference. He showed a slide labeled ‘How Many Lives Can Sheltering Save?’ If people in Los Angeles a mile or more from ground zero of an attack took no shelter, Mr. Buddemeier said, there would be 285,000 casualties from fallout in that region. Taking shelter in place with minimal protection, like a car, would cut that figure to 125,000 deaths or injuries, he said. A shallow basement would further reduce it to 45,000 casualties. And the core of a big office building or an underground garage would provide the best shelter of all. ‘We’d have no significant exposures,’ Mr. Buddemeier told the conference, and thus virtually no casualties from fallout.”

Part of the “don’t flee” idea came from the expectation that the initial flash would blind many drivers on the road, resulting in so many accidents that the road infrastructure would become impassable.

HAMP modifications 7 of 7: HAMP Modifications – Documents and info normally including in your HAMP request.

How do I apply for a modification under HAMP?

If you meet the general eligibility criteria for a modification under HAMP, you should gather the financial documentation that your servicer will need to determine if you qualify (See “What information and forms will I need in order to be considered for HAMP?”). Once you have this information, you should contact your servicer and ask to be considered for a modification under HAMP. The servicer’s phone number and email address is on your monthly mortgage bill or coupon book. Please be patient yet persistent. Your servicer may be handling a large volume of inquiries about the program and it may take some time before your servicer is able to process your application.

If you would like to speak to a housing counselor, call 888-995-HOPE (4673). HUD-approved housing counselors can help you evaluate your income and expenses and understand your options, and apply to your servicer for HAMP. This counseling is FREE.

If you have already missed one or more mortgage payments and have not yet spoken to your servicer, call your servicer immediately.

What information and forms will I need in order to be considered for HAMP?

Recently, Treasury announced a more streamlined homeowner evaluation process. Now, in order to apply for a Home Affordable Modification, homeowners can submit proof of income (See “What proof of income will I be required to provide with my HAMP application?”) plus the following two forms:

The MHA Request for Modification and Affidavit Form (RMA). This Form captures information on borrower income, expenses, subordinate liens on the property, and liquid assets. It includes a Hardship Affidavit, fraud notice, and information about the Trial Period Plan.

The Internal Revenue Service (IRS) Form 4506T-EZ (Short Form Request for Individual Tax Return Transcript). This form gives permission for your mortgage servicer to request a copy of the most recent tax return you have filed with the IRS. After you have completed the form, print two copies—one for your records and one to send to your mortgage servicer.

Visit the “Request a Modification” section of MakingHomeAfordable.gov for more detailed information.

What proof of income will I be required to provide with my HAMP application?

Be prepared to submit a copy of your two most recent pay stubs that show year-to-date earnings. If you are self-employed, you must provide your most recent quarterly or year-to-date profit/loss statement. Visit the “Request a Modification” section of MakingHomeAfordable.gov for more detailed information. If you cannot find the required documentation, or have questions about the paperwork required, please call 888-995 HOPE (4673) and ask for “MHA HELP.”

I’m self-employed. How do I get a copy of my most recent quarterly or year-to-date Profit and Loss Statement?

Contact your CPA (Certified Public Accountant) or the licensed tax professional who assisted you in completing your tax documentation.

What types of documentation would be considered reliable enough to validate “Other Earned Income” for HAMP?

148B

Other earned income (bonus, commission, fee, housing allowances, tips, overtime) must be documented by your employer in either your paystubs or other employment paperwork/contracts. Homeowners are encouraged to work with their employers to gather this information to describe the nature of the income and the continuity of the income.

51.

57BHow do I get evidence of benefit income (e.g., social security, disability, death benefits, pension, public assistance, adoption assistance)?

149B

You can provide a copy of benefit letters/statements, disability policy, or receipt of payments such as copies of two most recent bank statements showing electronic deposit of benefits. For additional information regarding social security, disability or death benefit income, contact Social Security directly toll-free at 1-800-772-1213 or visit their website at www.socialsecurity.gov. For all other benefits, you must contact the provider directly for additional information.

52. How do I get evidence of unemployment benefits?

Evidence of unemployment income may currently be obtained through the Department of Labor UI benefit tool, which is available at http://www.ows.doleta.gov/unemploy/ben_entitle.asp. After the Home Affordable Unemployment Program (UP) becomes effective on July 1, 2010, unemployment benefits and severance pay will no longer be acceptable sources of income for HAMP consideration. (See “Home Affordable Unemployment Program (UP)” for more information about help for unemployed homeowners.)

My rental income was not reported on last year’s tax returns because the property was vacant. What documentation do I need to validate rental income?

In such cases where a property has recently been rented, a signed Rental Agreement contract must be provided to show: the property address, date of contract, lessees name and address, rental amount and rental period. The contract must be signed by all parties (lessor, lessee, rental agents etc.)

How do I get a copy of my Divorce Decree, Separation Agreement or other legal written agreements filed with a court (e.g., alimony or child support)?

Gather the information listed below and contact the Office of Vital Statistics in the state where your divorce occurred. The homepage of the state’s website will provide a link/information on how to contact the office of Vital Statistics. Generally, the documentation needed may include, but is not limited to, the following:

Date of your divorce

Full name of spouse

Your driver’s license number

Purpose for which record is needed

Your name and address, together with a self-addressed, stamped envelope

See the June 8, 2010, government publication re: info relevant to this post: http://makinghomeaffordable.gov/docs/BORROWER%20FAQs_6-8-10.pdf

Symbol of Lady Justice: Where did the lady with the blindfold, sword, and scales come from?

This post is a bit off topic for this blog, but I thought you might find something a bit out of the ordinary refreshing.

The lady with the balance scales, sword, and blindfold comes from ancient history. This symbol is used in American jurisprudence as a representation of judicial justice.

She was known as Maat in ancient Egypt – the goddess of harmony and order. She is depicted in the Book of the Dead as weighing a human heart against a feather to determine a soul’s fate in the afterlife.

She evolved in ancient Grecian lore to become Themis, sister, wife and counselor to Zeus.

Roman mythology rolled Themis and her sister Dike together to form Justitia, the only one of the cardinal virtues to have a signature look in ancient art, reports Randy Kennedy in the New York Times, Thursday, December 16, 2010 edition.

Mr. Kennedy cites a recent book/treatise by Yale Law School professors Judith Resnik and Dennis Curtis. Resnik and Curtis recite that Lady Justice’s familiar blindfold did not become her fashion accessory until late in the 17th century (the 1600s).

Resnik and Curtis recite that medieval and Renaissance people did not view blindfolds favorably. Up into the 1600s sight was considered a virtue, and thus a blindfold carried a very negative connotation. Resnik/Curtis recite that a medieval/Renaissance term for a blindfold was a “hoodwink” – a noun – which today means to trick or deceive someone with an accompanying very negative connotation.

One interesting thing is that the image of Lady Justice seems to be something almost approaching universal although the exact look varies from culture to region. The Lady Justice figure can be found in courts from a statue at the Supreme Cout of Canada in Ottawa to one presideing over a constitutional court in Azerbaijan. The image can be found in courts of Zambia, Iraq, Brazil and Japan, according to Resnik/Curtis as reported by Randy Kennedy.

A man with a future? Ohio Attorney General Richard Cordray avenges foreclosures with populist tradition.

A grandstanding, self-serving and undisciplined avenger seeking local political status or a national law enforcer seeking to hold the rich and powerful to account? Ohio’s next Senator or Congressman? Opinions differ widely on Ohio Attorney General Richard Cordray.

See the NY Times October 12, 2010, article of Michael Powell: "The States vs. Wall Street – Crusaders for the Public’s Purse, in Ohio and Elsewhere".

http://www.nytimes.com/2010/10/12/business/12avenge.html?scp=1&sq=The+states+vs.+Wall+Street&st=nyt

Richard Cordray AG for Ohio, joins with Martha Coakly (AG for Mass.) Lisa Madigan (AG for Illinois) Roy Cooper (AG for North Carolina) and Tom Miller (AG for Iowa) – they are "cut from a mold like that of Eliot Spitzer, and give full throat to popular outrage." – Michael Powell, NY Times.

Michael Powell reports: "[Mr. Cordray] is no Wiliam Jennings Bryan inveighing against the evils of monopoly capital…he is, however, tapping a populist tradition in Ohio. THis is where politicians mounted challenges to the Standard Oil monopoly of John Rockefeller and where Senator John Sherman led a late 19th-century campaign to pass the Sherman Antitrust Act, which was the first law to require the federal government to investigate companies suspected of running cartels and monopolies…’the notion that banks will just get things right over time is perhaps true..but over that time period, and at what terrible cost to the individual American?’" Mr. Powell quotes Mr. Cordray.

Mr. Cordray has recently sued Bank of America in a "first of its kind" lawsuit in October 2009, accusing B of A oficials of concealing critical facts in the acquisition of Merrill Lynch, even as that firm careened towards insolvency. Top bankers, he said, had not come remotely clean about the extent of the losses at Merrill and its bonuses.

in the first week of October 2010, Mr. Cordray sued GMAC Mortgage over the "foreclosuregate" practices of allegedly filing thousands of false affidavits in Ohio foreclosures.

Mr. Cordray has wrung money out of lawsuits before (critics recite that the wealth banks just pay the settlements and then move on- calling it a "cost of doing business" – thus rarely amending their ways0 hitting Merrill Lynch for $475 million, $400 million from Marsh & McLennan and $725 from American International Group.

Is Richard Cordray out to help…or is he just out to grandstand for his own political gain? Keep an eye on Ohio Attorney General Richard Cordray – he may burst upon the national political scene – for better or for worse.

Attacks on foreclosure attorneys – a newer industry gathers steam with “robosigners” and “foreclosuregate” despite forecast of 2 million foreclosures per year.

"Foreclosuregate" and "robo-signers" seem to be words fading from the public lexicon, although in September and October 2010, such words dominated business media.

"Robosigners" were individuals who signed vast numbers of foreclosure related documents (usually, affidavits for those states requiring bank affidavits in the processing of a foreclosure). The vast number of documents signed per month by such individuals begged the question of whether such individuals were truly signing and reviewing the foreclosure related documents and affidavits.

"Foreclosuregate" was the general name given to foreclosures that may have been flawed – either because the foreclosure was done with "robosigner" documents or was subject of some other technical mis-procedure.

Banks, their employees and their outsourced employees rushing "robosigned" documents through a foreclosure court (in those few states requiring a judge’s signature or judicial proceeding to foreclose – Washington state is not one of these states) may be undesirable, but perhaps understandable. Over 2.25 million foreclosures are expected in 2010, and 2 million more expected in each of 2011 and 2012. Many of these homes are abandoned – and many more involve owners who could not afford any mortgage payment whatsoever, so for that subgroup, even a modification is not plausible.

Perhaps three questions should be considered before the cheers grow to burn the foreclosure lawyers and the banks at the stake: First, did or did not the homeowner borrow funds to purchase a home? Second, did or did not the homeowner fail to make the payments? Third, what is to be gained by giving someone a "free house" by alleging technical procedural problems in a foreclosure?

Perhaps the most widley recognized consumer advocate attorney pursuing banks is O. Max Gardner, III, a Shelby, N.C. attorney. Mr. Gardner offers a "bootcamp" to lawyers to teach bankruptcy litigation techniques. Mr. Gardner is referenced the the October 16, 2010, NY Times article of Barry Meier – see link below:

http://www.nytimes.com/2010/10/16/business/16legal.html?_r=1&scp=1&sq=foreclosure%20mess%20draws%20in%20the%20filing%20lawyers,%20too&st=cse

Round Two: Countrywide/Bank of America now attacks those from whom it purchased loans. See my earlier post: “Round One: Bank of America under attack for selling lousy mortgages to investors Pimco Bonds and Black Rock”

First off, many kudos to Joe Nocera of the NY Times, the source of much of the info and inspiration in this post in his 11/27/2010 article:

"Liar Loans" a/k/a "stated income" loans were the forte of Countrywide, which may come to represent the dirtiest of all the subrime lenders. However, other companies also made stated income loans, in all fairness, and stated income loans have been around in one form or another since the 1980s.

However, Countrywide went around looking to purchase the "stated income" loans made by other companies, banks and lenders.

To help you understand this "behind the scense" squabbling between the banks and government, I quote from Stephanie Strom’s November 27, 2010, NY Times article:

"Take, for instance, that litigation between Countrywide and the Mortgage Guaranty Insurance Corporation (Ginnie Mae). For some time now, the mortgage insurer has refused to pay claims on thousands of stated-income loans it insured, on the unsuprising grounds that the loans were fraudulent at their inception and thus violated the terms under which the company insured them. In December, Bank of America (Countrywide) filed suit on behalf of its Countrywide unit, arguing, in effect that it doesn’t matter whether the loans were fraudulent. Since the insurer never asked for income verification – and accepted the fact they were stated income loans – it has to pay up. (Nearly a year later the litigation is just getting started.)

Now contrast that stance with Countrywide’s (B of A’s) effort to force smaller mortgage originators to buy back loans it had purchased. In these cases Countywide makes the exact opposite argument: because the loans were made fraudulently, the smaller companies have an obligation to buy them back. [ ]

Thus, when it serves Countrywide’s purposes (now owned by B of A) to argue that everyone knew the loans were fraudulent, it happily makes that case. But when it is better served by arguing that it is shocked – shocked! – to discover gambling in the casino, it makes that opposing argument wtih similar ease. Isn’t that the dictionary definition of hypocrisy?"

See "The Give and Take of Liar Loans", by Joe Nocera, NY Times Saturday, November 27, 2010.

http://www.nytimes.com/2010/11/27/business/27nocera.html

Many Kudos to Joe Nocera – a nicely written article!

Round One: Bank of America under attack for selling lousy mortgages to investors Pimco Bonds and Black Rock

Investors are mad, hopping mad, and Bank of America (and others) are in the crosshairs. Between 2004 and 2008 B of A assembled some $2 trillion in mortgage securities, and sold many of them off to investors, including Pimco and Black Rock, large money management companies.

These angry investors want to shove the cruddy mortgages down Bank of America’s throat.

This Nelson D. Schwartz October 20, 2010 NY Times Article is telling:

http://www.nytimes.com/2010/10/20/business/20bond.html

"But while the human toll of the foreclosure crisis has grabbed the headlines, the fight over how these loans were created in the first place could last much longer and ultimately cost the banks much, much more. And it is setting the stage for a huge battle between mortgage holders like the government (Fannie Mae, Freddie Mac and Ginnie Mae), hedge funds and other institutional investors on one side and teh big banks on the other. ‘It’s very serious said Glenn Schorr, an analyst with Nomura Securities. ‘The numbers are all over the map’ If the Fed and the investors succeed, it could cost Bank of America billions of dollars. On Wall STreet and in bank boardrooms,the question of whether investors can force banks to buy back, or "put back" bad mortgages to the banks that sold them is dominating the debate and worrying analysts, money managers and banking executives."

"The danger posed by angry – or opportunistic – investors ‘putting-back’ mortgages to the banks is hardly limited to Bank of America. Other giants like Citigroup and JPMorgan Chase face similar claims, and [on approximately October 14, 2010] JPMorgan set aside $1.3 billion just for the legal costs, including put-backs"

Countrywide magnate pays $67 million – Angelo R. Mozilo former CEO pays to settle civil fraud case brought by SEC

Gretchen Morgenson of the NY Times reports on October 16, 2010:

"…the settlement by Mr. Mozilo is the fist time that a prominent executive has been penalized personally for financial excesses linked to a mortgage boom that, when it went bust, threatened to topple the economy and led to an unprescedented wave of foreclosures."

"Earlier this year, Goldman Sachs paid a $550 million fine to setle securities fraud charges. Securities regulators are also investigating former senior executives at Merrill Lynch for possible securities fraud."

The SEC sued Mr. Mozilo alleging that he improperly generated profits on insider stock sales, and that he allowed "toxic" loan products to move forward, knowing them to be toxic.

Countrywide (acquired by Bank of America) is to pay $20 million of Mr. Mozilo’s settlement. Mr. Mozilo has also agreed to never again serve in a public company. (Note: Big fat deal – he is 71 years old and recorded gains on stock sales of over $140 million on Countrywide stock and for years was among the highest-paid executives in America – and was known as an audacious and flamboyant financier)

The settlement was reached four days before the scheduled beginning of a jury trial in Los Angeles.

Other Countrywide employees sued by the SEC (and whom settled) were David Sambol (former Countrywide president, paying 5.52 million) and Eric Sieracki (former Countrywide chief financial officer, paying $130,000).

http://www.nytimes.com/2010/10/16/business/16countrywide.html?scp=1&sq=Lending+Magnate+Settles+Charges+for+%2467+million&st=nyt

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