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Tag Archives: Puyallup bankruptcy attorney

Bankruptcy or home price rebound: What will save the day?

Morgan Brennan of Forbes.com runs a fantastic commentary and blog upon economic issues.  I have read a recent post she made and I refer to it because I think it is so important.

Many people are “holding on” to houses that are way under-water e.g., much more is owed against the home than it is worth.  These hopefull folks want the good old days of the early 2000s – they hope that housing prices will rebound and that they can perhaps sell their home or borrow against new-found equity in order to pay off medical bills, credit card debts and other obligations.

But Ms. Brennan thinks otherwise – she doubts that there is really any true national “recovery” in housing set to take off anytime soon.  She provides lots of good explanations and reasons why.  She also discusses with clarity something I have long sought to express – that houses are not necessarily “investments”, but rather a localy based asset that has utility for household needs – like a washing machine, fridge or station wagon.

Here is what Ms. Brennan has to say:

_______________________

“The Foreclosure Crisis Isn’t Over Just Yet”, December 1, 2012, by Ms. Morgan Brennan of Forbes.com

 

‘As we move into the last month of 2012, real estate pundits have been eagerly pouncing on the notion of a recovery in housing.

Looking at the national numbers, they are somewhat right to do so. Pending home sales hit a five year high in October, according to the National Association of Realtors, and the brisk pace of existing home sales is 11% higher than a year ago.  Just this week the S&P/Case-Shiller Home Price Index reported that September home prices were up for the sixth consecutive month. Even in terms of economic growth, housing has provided a so-called bright spot, contributing 0.3% to gross domestic product in the third quarter, according to the Commerce Department.

Looking at these relatively rosy statistics, it’s easy to see why the word “recovery” is getting tossed around and why many housing-sector stocks have been teetering in over-bought territory. Now, the positive numbers even have media outlets like Bloomberg.com asserting that the

It’s a gutsy assertion — and one that I’m prone to disagree with.

A major reason the housing crisis was not staved off when the first warning signs manifested in the mid-2000s was the fact that Wall Street, Washington and even Main Street America had stopped assessing housing as what it truly is: a locally-based asset class, not a national one.  Housing is local and as we have been relearning since the downturn, market health — including foreclosures — breaks down by state, city, neighborhood and in some places, even street. The wave of foreclosures has been manifesting at these more local levels — even while national-level data reflects a recovery.

Since 2007, the foreclosure crisis, which has claimed nearly four million homes, has played out very differently across the U.S. After the robo-signing scandal of late 2010, lenders, flush with defaulted mortgage notes, delayed their processing of foreclosures, most notably in judicial states, where filings circulate through a  court system. That delay created an artificial decrease in the rate: 830,000 homes were foreclosed upon in 2011, a 24% decrease from the year before, according to CoreLogic, a Santa Ana, Calif.-based data firm. With the advent of the $25 billion mortgage relief plan in February, real estate experts projected a notable pick-up in activity since lenders sitting on delayed filings would hopefully process them more quickly.

This expected uptick has been referred to as a so-called second wave of foreclosures. It’s this second wave — which is technically distressed inventory overhang from the bursting of the housing bubble — that Bloomberg is asserting has been averted.

Nationally the number of foreclosure filings in October was down 19% from a year earlier, according to Irvine, Calif.-based data firm RealtyTrac. And lenders are finally instituting better foreclosure-prevention policies like loan modifications and short sales that keep homes from hitting their books as REOs. But it comes back location. Dig into the more local data and the wave is evident. You’ll find it playing out in the states where the foreclosure process has been taking the longest and backlogs have built up.

“There’s been a pronounced shift in foreclosures from the Sand States to the East Coast, in particular the judicial foreclosure law states with the longest time lines like Florida, New York and New Jersey,” says Mark Fleming, chief economist for CoreLogic. According to CoreLogic, Florida, as of October, now leads the country in terms of foreclosures with an 11% rate. New Jersey is second with an 8% rate and New York has a 5% rate. (In general, 1% is considered a healthy rate in a healthy market.)

The average time for a mortgaged home to transition from default to bank reposession in each of these three states has been over two years. Now those backlogged filings are pushing through the system at robust rates — in a wave of activity, if you will. New Jersey experienced 140% increase in filings in October year-over-year and New York nearly a 123% increase, according to RealtyTrac. Florida’s rate has been high for years, and while other hard-hit Sun Belt states like California and Arizona have seen activity decrease dramatically by about 35%, Florida’s rate has not.

“There are a set of states that are not improving year-over-year like the others,” adds Tim Martin, group vice predisent of U.S. housing at TransUnion, which tracks mortgage delinquencies of 60 days or more. That set includes New Jersey, Arkansas, Washington, New York, New Mexico, Connecticut, Maine, Maryland and Washington, D.C.  Martin says most of these locales still have incredibly high rates of mortgage delinquencies. In New Jersey for example, 8.3% of mortgage borrowers have missed two or more payments. Once those borrowers miss third payments, their homes officially fall into default and foreclosure filings eventually follow.

 

Here is a link to Ms. Brennan’s excellent article:  http://www.forbes.com/sites/morganbrennan/2012/12/01/the-foreclosure-crisis-isnt-over-just-yet/

A look at FHFA home price data for the third quarter indirectly reflects the renewed wave of foreclosures in these states also. The states posting the largest home price drops this year are many of the same states where the foreclosure rate has increased this year, including New York, New Jersey, Illinois and Maryland. Foreclosures add downward pressure to overall home prices.

Still, there’s good news on the horizon even in these markets. New borrowers aren’t significantly adding to the default pile and TransUnion projects that the fourth quarter will register a decrease in delinquencies. CoreLogic and others believe the worst of the foreclosure crisis has passed. But in the states where foreclosures are finally pushing through the system, it won’t necessarily feel that way for some time. Thanks to the ‘wave’.

“The housing market is like a large ocean vessel that when heading one direction, takes a while to turn around” explains Fleming. “So it will take time in terms of clearing out all of these foreclosures.”’

 

Again, this is a great article.  Here is a link to it: http://www.forbes.com/sites/morganbrennan/2012/12/01/the-foreclosure-crisis-isnt-over-just-yet/

 

-What to do with your underwater home?

– What to do with a first and second mortgage?

-What to do about a pile of medical bills, credit cards and car loans?

Come in to consult with James H. MaGee, Washington Bankruptcy Attorney in order to gain some fresh perspective as you organize your game plan.  We have offices in Bremerton, Chehalis, Olympia, Puyallup, Renton and Tacoma where you can meet for a private and confidential consult with Mr. MaGee  Just give us a call 253-383-1001!

1959 Cadillac tail fins, chrome and post-war exhuberance – GM designer Chuck Jordan dies at 83

In this dark and ongoing recession, or lukewarm recovery (whatever you want to call it) perhaps a revisit of 1959 would be a welcome diversion.

1959 marked the huge tail-fins of the Cadillac. Chuck Jordan was the designer. He just passed at his home in Rancho Santa Fe, California.

Alfred P. Sloan, Jr., the General Motors patriarch, had hired the first design director of General Motors in 1927, Harley Earl. Mr. Earl was a confidant of movie stars and like his close friend Cecil B. DeMille, favored Jodhpurs.

Mr. Jordan was the third successor to Mr. Earl as G.M.’s vice president of design, and his boldness echoed that of Mr. Earl. The tail fins on the 1959 Cadillac El Dorado was “letting the tiger out of the cage” in the words of Mr. Jordan.

Mr. Jordan also designed the “wide track” Pontiac, the baby boomers’ cherished muscle cars. Other designs included the 1963 Buick Riviera, the 1967 Cadillac Eldorado, and the 1973 Chevrolet Monte Carlo. His vision was that of longer, lower, wider–and intended to excite.

At age 30, Mr. Jordan was named to one of G.M.’s most prestigious posts, chief designer for Cadillac.

He also worked on the 1990s design team for the Chevrolet Camaros and Pontiac Firebirds.

He did have one dog…or rather “whale”…which was the 1991 Chevrolet Caprice, which was derided as “Shamu the Whale”.

So long, Mr. Jordan. Thank you for something so wonderfully American. Thank you for the tail fins.

Lukewarm recovery will continue; no significant decreases in unemployment for 2011 or 2012.

[categories: Washington Bankruptcy Attorney]

The Seattle Times, Kristi Keim, page A13, January 14, 2011:

The U.S. is expected to chip away at unemployment only very slowly reports Michael Dueker, Russell Investments’ head economist for North America.

Usually, a recession is followed by a fast snap back to growth, as happened in the early 1980s. The economy grew 7.0% annually for the next year and one-half. This is not happening, says Mr. Dueker, and it will take all of 2011 to get the unemployment rate reduced by a mere 1/2 percentage point.

In contrast to slow U.S. growth, the world economy is expected to grow at 4.0% to 5.0% this year.

Ken Goldstein, an economist with The Conference Board, notes that the U.S. will grow only 2.5% this year and 2.6% in 2012. Confidence in the economy is a major problem, according to Ken Goldstein.

Foreclosures are likely to peak in 2011, but can be stopped by a bankruptcy filing

Foreclosure woes for Washington homeowners are far from over, and bankruptcy filings may be the next step.

According to an article by Janna Herron of the Associated Press that was published in the Seattle Times, January 14, 2011, on page A13, the last three years of foreclosures in Western Washington:

Year 2008  2009  2010

King 2,052 4,190 6,063

Snohomish 911 1,968 3,240

Pierce 2,258 3,782 3,773

Kitsap 430 671 652

Total 8,802 16,017 20,749

One in every 45 U.S. households received a foreclosure filing last year, a record 2.9 million of them, and these lead to bankruptcy filings everywhere in order to stop foreclosure in Tacoma and also other jurisdictions. That’s up 1.67% from 2009. About 5 million borrowers are at least two months behind on their mortgages.

The firm Realty-Trac predicts 1.2 million homes will be repossessed this year 2011.

In Washinton, the housing crisis started later than the rest of the country and also appears to be peaking later; total foreclosure filings were up 24 percent from 2009. Foreclosure filings in King County rose 29%; there were also increases of 32% in Snohomish and 8% in Pierce County.

Nevada posted the highest foreclosure rate in 2010 for the fourth straight year. Washington state ranked 18th, with Snohomish County seeing the top foreclosure rate. Pierce County, Clark, Grays Harbor, and Cowlitz counties rounded out the top five.

The Law Offices of James H. MaGee can answer your questions about bankruptcy and foreclosure anywhere in the State of Washington. Contact us at our offices in Tacoma, Renton, Puyallup, Olympia, Chehalis, and Bremerton to learn more about your options. We strive to answer your questions in a courteous, confidential, and caring manner.

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.

“Business” bankruptcy is often a waste of time for mom & pop businesses–just file a personal bankruptcy case and move on, says Wall Street Journal columnist

Here is the link to a short but helpful article about small business bankruptcies in The Wall Street Journal. I am pleased that what I have suggested for many years finds favor with a Wall Street Journal columnist.

With most of my small service-based business customers, including businesses as varied as residential construction and restaurants, it usually makes sense to look at a Chapter 7 Bankruptcy case filed as a personal case. I recommend this approach because in most cases, the small business’ debt is personally guaranteed by the business owners, whether the debt consists of Small Business Administration guaranteed loans, vehicle title loans or credit cards. Frequently, the business can keep right on operating, but of course you should consult with a qualified attorney before launching off into any sort of bankruptcy filing.

Ideas for Action: how do you find a qualified bankruptcy attorney? I suggest three ways.

First, ask the attorney how many cases he or she filed in the calendar year January 1, 2006 to December 31, 2006; the attorney can easily consult the computer program used to prepare the documents to find out how many cases were filed each year, and if fewer than 70 or so cases were filed by the attorney in 2006, then I say beware. You may have an attorney who just started out after the 2005 law change took effect but didn’t attend any of the important 2006 era seminars when the best education about the new 2005 law was then available.

Second, ensure that the attorney is “connected” professionally via memberships in both the American Bankruptcy Institute as well as NACBA, the National Association of Consumer Bankruptcy Attorney.

Third, ensure that over the past five years, the attorney has attended no fewer than five seminars for a total of no fewer than 50 hours of bankruptcy education since 2005.

These three suggested standards should help you ensure that you have engaged an experienced, professional attorney.

Mortgage modifications well below target: Americans need more help says NY Times 300,000 foreclosure filings for third month in a row — 92,858 homes repossessed in July, 2010

“As repossessed homes are put up for sale, house prices are likely to fall further. As prices fall, more borrowers end up “underwater”–they owe more on their mortgages than their homes are worth. That’s a big risk factor for default.

Moody’s Economy.com estimates that 1.9 million homes will be lost this year, down only slightly from 2 million in 2009.

So far only 398,198 loans have been permanently modified, and only $321 million of the $30.1 billion allocated to the home modification program has thus far been spent.

Part of the problem is poor administration. Homeowners, who apply to their bank or mortgage service company, complain about confusing procedures and lost paperwork. Banks have complained of frequent rule changes from the government.

Another big problem is that many lenders, whose participation in the program is voluntary, have been reluctant to aggressively rework bad loans. Reducing a loan’s principal balance–rather than lowering interest levels or extending pay out periods–is often the chance of keeping underwater borrowers in their homes. Banks have been loath to accept the bigger losses that come with lowering principal. Fearing that banks will drop out of the program altogether, the Treasury has not pushed them hard enough.”

The August 20, 2010 NY Times OpEd piece proposes that the use of the states to give money directly to temporarily unemployed or under-employed individual homeowners to make mortgage payments through the Hardest Hit program (part of HAMP, which is part of TARP), through about which 4.1 billion has thus far been disbursed, may be a better route than the loan modification programs emphasized thus far to date.

Ideas for Action: Don’t expect to modify yourself out of a bad situation. You will never see a mortgage loan principal balance deduction. If you don’t mind a temporarily lower payment but still remaining underwater on your home, then I suppose a mortgage modification is not so bad. You might want to consider a “lien strip” through Chapter 13 bankruptcy if you have a second mortgage and if the value of the home is less than the amount owed on the first mortgage.

10 Cents on the Dollar: How to pay off your home equity line of credit

NY Times columnist David Streitfeld’s article entitled, “Debts Rise, and Go Unpaid, as Bust Erodes Home Equity”, published in The New York Times on August 12, 2010, asserts that most investors expect less than 10 cents on the dollar for defaulted home equity lines of credit such as second mortgages.

“Lenders wrote off as uncollectible $11.1 billion in home equity loans and $19.9 billion in home equity lines of credit in 2009, more than they wrote of on primary mortgages, government data shows. So far this year, the trend is the same, with combined write-offs of $7.88 billion in the first quarter. Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar. ‘People got 90 cents for free,’ Mr. Combs said. ‘It rewards immorality to some extent.'” Mr. Combs is a realty lawyer in Phoenix, AZ, who tries to negotiate deals with home equity line of credit HELOC loans.

Utah Loan Servicing chief executive Clark Terry buys defaulted home equity loans from lenders, and reports that he does not pay more than $500 for any one loan, regardless of how big it is, “Anything over $15,000 to $20,000 is not collectible. Americans believe that anything they can get away with is O.K.”

The delinquency rate on home equity loans was an astonishing 4.12% in the first quarter of 2010, down slightly from the fourth quarter of 2009, when it was the highest in 26 years of such record keeping, according to Mr. Streitfeld.

Mr. Streitfeld reports that during the “great boom” homeowners nationwide borrowed a trillion dollars from banks, using the soaring value of their homes as loan security. With the money now spent, some homeowners cannot pay. Surprisingly, it seems that delinquencies on this type of debt is greater than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard. Mr. Streitfeld cites info from the American Bankers Association on this point.

Ideas for Action: Is it time to contact your second mortgage company and negotiate–offering 5 to 10 cents on the dollar?

Financial Reform: Will the Dodd-Frank Financial Reform Law destroy the private mortgage industry and lead to risky government lending?

Banks lend money (a mortgage) against your house. The banks then put 1,000 mortgages or so together and sell the package of mortgages to an investor in a “pooled mortgage”. Some pooled mortgages have held a government guarantee of performance through FHA (Federal Housing Administration), Fannie Mae, or Freddie Mac, other pools were not insured because they were supposedly riskier loans, as the borrowers did not qualify under loan risk guidelines established for Fannie Mae or Freddie Mac.

Under the new rules contained in Dodd-Frank, the original lender must retain 5% of the risk in the pool if it is not a federally guaranteed (e.g. FHA, Fannie Mae or Freddie Mac) loan pool.

CNBC.com editor John Carney writes that exempting FHA, Fannie Mae and Freddie Mac from the 5.0% risk retention requirement will destroy the private mortgage industry and make the US government the unintentional backer of all mortgages:

“…a little-noticed provision of the Dodd-Frank act threatens to undermine efforts at rebuilding an innovative and healthy private sector for mortgages. Under Dodd-Frank, financial firms that securitize mortgages are required to retain 5.0% of the risk of those securities. The goal, a laudable one, is to encourage companies to more closely monitor the quality of the mortgages they securitize (sell off in pooled bundles). But it is also likely to increase the cost of affected mortgages, because banks will seek to pass on the costs of the risk to home buyers. Mortgages guaranteed by the F.H.A., however, are exempt from the 5 percent risk-retention requirement. This means that lenders will find that it costs far more, and involves more risk, to offer mortgages they back themselves than those covered with a guarantee from the agency. There’s little doubt this will lead to a huge increase int he volume of business done by the F.H.A., as banks creating securities will seek out mortgages on which they don’t have to cover the risk. Purely private mortgages will quickly be pushed out of the market.”

The complete article by Mr. Carney was published in the NY Times on August 12, 2010.

Is there a “flexible mortgage” in your future? – new thoughts and trends in mortgages – article by UCLA Law Professor Katherine V.W. Stone

Professor Katherine V.W. Stone, of UCLA law school writes that in the “old economy”, periods of joblessness were a clear sign of an unreliable borrower, but not any more, as we are in a “new economy”. Professor Stone’s article is entitled “The 30 Year Prison”, and appears in the August 12, 2010 edition of The NY Times.

Professor Stone calls for a major changes to mortgages–a “flexible” mortgage with the borrower having an option to request a two-year period of “interest only” payments. She suggests that the Federal Housing Administration require that any mortgages it insures be set up to mandate that borrowers who are involuntarily out of work be allowed to convert to an interest-only loan for up to two years. She points out that since the FHA insures almost one-third of the mortgage housing market, in short order the mortgage industry would very likely follow suit, and that this practice would become the norm for all mortgages.

Professor stone writes: “It’s not as if the 30-year self-amortizing mortgage has been around forever. In fact, it is a fairly recent invention. Before the 1930s, homes were financed by three-to-five-year balloon loans. Homeowners made interest-only payments for the duration of the loan, then typically rolled them over into new loans when they came due. During the Great Depression, however, many borrowers were unemployed when their loans came due; banks were reluctant to offer new loans, and owners had not accumulated enough money to pay off their loans. The result was a wave of foreclosures. In response the Home Owners’ Loan Corporation, created as part o the New Deal, developed a new kind of loan: instead of a few years of small payments followed by a very large one, homeowners would make regular payments of interest and principal for 30 years. In the old economy, periods of joblessness were a clear sign of an unreliable borrower. Today, they are simply a function of the job market, which flexible mortgages would take into account.”