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World’s largest law firm files for bankruptcy

3 Harvard law school graduates founded the firm in 1909, and in 2007 it came to be known as Dewey and LeBoeuf.  On February 27, 2013, a New York Federal Bankruptcy Judge formally dissolved the firm, putting an end to 103 years of business.  The well   known Dewey and LeBoeuf has ceased to exist.  It is dead.

There are two important things to learn from the Dewey & LeBoeuf bankruptcy filing.

First, if 1,200 of the world’s smartest and highest paid lawyers (many of whom were bankruptcy, restructuring and workout experts!) cannot figure out how to avoid bankruptcy, then you should not denigrate yourself emotionally for being unable to avoid bankruptcy filing.

Second, you should not repay friends and relatives right before you file for bankruptcy – more on this later in the article – and this is perhaps the most important practical teaching from Dewey and LeBoeuf.

Dewey and LeBoeuf reported 2011 gross revenue of $935 million for its approximate 1,200 lawyers.  The firm had a large bankruptcy and restructurings department with bankruptcy/restructuring experience dating back to the 1920s, yet the firm could not seem to save itself, despite its all-star lineup of Ivy League law school graduate partners and associates.

Even worse, a number of firm team leaders are now under criminal investigation for allegedly hiding the troubled finances of the firm.  Steven H. Davis, the firm’s former chairman and Stephen DiCarmine, the firm’s former executive director, both face criminal probes and Mr. Davis has retained a defense lawyer, says the NY Times.

Sadly, the Dewey lawyers could not seem to work together to save their law firm – when the going looked rough in 2011 and early 2012, some 200 of the 300 equity partners jumped ship to other law firms.  Perhaps even worse, one important law firm member, Martin J. Bienenstock (the former head of Dewey’s bankruptcy practice)  was accused by two former partners Elizabeth B. Sandza and Andrew J. Fawbush of devising a scheme and plan to pay himself $6 million from Dewey funds in 2010 while the rank-and-file partners saw their 2010 pay deferred and then ultimately “clawed back” by the bankruptcy court for repayment to creditors.

What does “clawed back” mean?  Well, in this context it might mean that Sandza and Fawbush (and other partners) had to refund their 2010 paychecks back to the law firm for whom they worked upon the filing of the bankruptcy, meaning much of their 2010 work may end up having been done for free and perhaps was ultimately not compensated.

How did Sandza and Fawbush end up having to refund some or all of their 2010 paychecks/compensation, along with a number of other partners?

While the news accounts I can readily find are sparse and I rely mostly on one NY Times article referenced below, here is my hunch:  When Sandza and Fawbush agreed to defer some of their 2010 pay to be received later than when it was normally due to them, their ultimate receipt of pay fell into a “preference period” pre-bankruptcy, wherein in the year or so leading up to the bankruptcy, funds they received as compensation were deemed returnable to the bankruptcy court for distribution to creditors as what is known as a “preference” or “preferential transfer”.  The concept might be that Sandza and Fawbush as equity partners and thus are presumed to have known what was going on with the law firm’s finances yet took pay out anyway in a time period that was too close to the bankruptcy, presumably knowing that the pay should have gone to reimburse and pay law firm creditors instead of going to pay Sandza and Fawbush their partnership share.

Why would Sandza and Fawbush be upset with Bienenstock – as Bienenstock seems not to have had his 2010 pay “clawed back” into the bankruptcy?  (Beinenstock, according to the New York Times, may have been paid earlier than were Sandza and Fawbush, who saw their 2010 compensation payments deferred)   Well, one can only speculate that if Bienenstock  saw the trouble on the horizon he might have pushed for being paid sooner than others because he knew that if he didn’t get paid quickly and ahead of others that his $6 million payment could fall into the “preference period” prior to the eventual May 2012 bankruptcy filing.  Since he was an expert on bankruptcy issues, perhaps Sandza and Fawbush believe that Bienenstock might have taken advantage of that expertise to push for his $6 million in pay sooner so that it would not fall into the suspected “preference period” and be subject to a “clawback” into the bankruptcy court for distribution to creditors.

Why blog about the failed mega-law firm Dewey & LeBoeuf?  How are Sandza, Fawbush and Bienenstock relevant to a consumer mom and pop bankruptcy filing?  Good questions – there are two answers:

First, I meet with so many people who are down on themselves for having to file for bankruptcy, even though they had perfectly good reasons for falling into financial hardship.  These reasons include job loss, illness, falling home values, large family size and crazy home loans with “exploding arm” sudden interest rate increases.  So I ask this important question:  If one of the biggest law firms in the world  which was chock-full of Harvard and other Ivy League law school graduates could not figure out how to pay the bills and stay solvent, then how on earth are my well-meaning clients supposed to do much better?  Remember, these brainiac lawyers went through a bankruptcy filing and went on to live their lives and care for their families – why should my clients not grant themselves the same emotional luxury?  Think about it:  Dewey and LeBoeuf had a 103 year track record and were EXPERTS at keeping businesses out of bankruptcy and helping businesses who ran into financial trouble – yet these 1,200 experts could not muster a plan of action to save themselves, despite enjoying some of the highest pay and billings in the entire legal world.  The world was their oyster – and they still couldn’t figure out how to make ends meet.

Second, the “preference” and “claw back” issues.  There is a lesson here for everyone considering a bankruptcy filing.  If you are facing trouble and think you may need to file for bankruptcy relief, then DO NOT, I repeat DO NOT repay friends and relative or transfer assets or property to friends or relatives right before the bankruptcy filing until after you have secured competent legal advice from a knowledgeable bankruptcy lawyer and asked the question about how much you should pay back or what you should transfer to mom.  For if you repay mom that $10,000 right before the bankruptcy, then mom might find herself being sued by the bankruptcy court trustee in your bankruptcy case with a demand to pay into the bankruptcy court some or all of the $10,000.  Better to just wait until after the bankruptcy is over and then voluntarily repay mother that $10,000.  Plenty of people mess this one up – don’t you be one of them.

Now, there may be some times that you would want to pay mother right before bankruptcy or transfer something to a friend or relative, but these are few and far between, so before you decide to repay mom or transfer an asset to a friend or relative, make sure you consult with a competent bankruptcy lawyer before making the repayment if you think that you could potentially be facing a bankruptcy filing in the future – even the distant future.

How about repaying other creditors other than friends or family right before a bankruptcy?  This blog post is already too long, so I will just say that before you make any such payments you should first consult with competent, experienced and qualified bankruptcy counsel to make sure you do not run afoul – and end up like Sandza and Fawbush.  Sandza and Fawbush would essentially argue that Bienenstock knew what he was doing and that he executed it well – The result:  Bienenstock will probably get to keep his $6 million, Sandza and Fawbush get nothing.    Knowledge is king, my friend!

As a footnote, the NY Times reports that, all in all, about 450 Dewey partners and former partners will end up returning about $450 million to the law firm in return for insulating themselves from future lawsuits connected to Dewey’s demise.

Many thanks to Peter Lattman of the New York Times, who provided information contained herein, including details on the Sandza, Fawbush & Bienenstock dispute in his article “With a Judge’s Decision, Dewey is Officially Dissolved”, NY Times, page B5, February 28, 2013.

Can You Reach The Max Part 2

Should I file for chapter 13 bankruptcy to save my house from foreclosure or my car from repossession or should I cash out my 401k to get the money to pay the mortgage or car payment? People ask me this question all the time.  Here is my answer: With few exceptions, I strongly recommend a chapter 13 bankruptcy reorganization over cashing out a 401k account with the purpose of staving off a foreclosure or preventing a vehicle repossession.

Here are the next five Forbes.com steps to help you boost your 401k:

  • 5.  Taking loans out of you 401k is hard because many times you have to pay the money back.  But hardship withdrawals can be allowed.  If you are behind on payments such as your mortgage that would be a loan you would have to pay back but if your house was foreclosing you could be able to take out a hardship withdrawal.  Not everything is a hardship though so just make sure you know the rules.
  • 4.  Many times if you make a lot of money you can only contribute a certain amount to your 401k as to prevent discrimination.  If your spouse has access to a 401k, they should be saving as much as they can as well.  If you or your spouse have access to saving for a 401k, take advantage of that especially if one of you has limitations on your savings part.
  • 3.  If you have an old 401k account, you should combine the two in most cases.  Add the old account to the new; it is much easier to keep track of one account.
  • 2. When you first sign up for a 401k you pick investments and many times don’t get around to changing, or revising it to make the best choice for your savings.  For example don’t just choose company stock because it’s there, don’t forget to revise your 401k and choose your best options.
  • 1.Don’t cash out your 401k as soon as it is available to you.  Leave it as long as it is still invested in good options.  Just because it reaches the penalty free mark or you retire, doesn’t mean that’s the best time to cash out for you.

I might also add that under most circumstances you should not take a 401k loan or cash out a 401k or IRA to pay off federal income tax debt because you can almost always pay back the federal income tax debt interest and penalty fee though Chapter 13 bankruptcy reorganization, or often enter into a very reasonable tax repayment plan with the IRS.

If you have already taken out a big 401k loan or cashed out an IRA (or taken a large withdrawal or fully or partially cashed out a 401k) you really need to begin to rebuild.


Dating, Marriage and Credit Scores: A New Twist in the Road To A Happy Life

He was tall, religious, well employed in finance and had great teeth.  Even better, he came from a nice family background, and was brought up similarly to her.   She was attractive, peppy and fully employed as a flight attendant.

But Chicago’s Jessica LaShawn was dumped after a first date when somewhere between salad and dessert Jessica truthfully answered a question about her credit score.  Jessica’s FICO score was subprime (below 660), as she had paid late on some bills and had some lingering unresolved debts.  A couple of days later, Jessica received an apologetic text message from her potential prince charming – no second date –  it wasn’t Jessica, it was Jessica’s credit score which caused him to decline a second date with her.  Good bye prince charming.  Good bye, white picket fence…

Credit Scores are newly becoming a relationship metric, as many people are deciding who to consider and who not to consider for marriage based in part upon credit scores.  Dating site executives report that they are receiving more inquiries and interest about when and how to bring up the issue of credit scores when deciding whether to date or pursue a relationship with a potential suitor.

Similarly, many marriage counselors relate that improving credit scores is a frequent topic of discussion with marital and relationship counseling clients.  Dissimilar levels of concerns about maintaining an acceptable credit score can lead to significant friction in a long term relationship.
So how does bankruptcy fit into the universe of dating, marriage and credit scores?
Credit scores affect us all.  Credit scores are kept on about 200 million Americans by FICO.  More than 34% of these Americans (68.6 million) tracked by FICO have subprime credit scores of less than 660.  FICO is short for Fair Isaac Corporation.
About 18.5% of Americans (37 million) enjoy the highest credit score range of 850-900, another 19.0% (38 million) enjoy very good credit scores of 750-800.  About 16.0% of Americans (32 million) enjoy “good” credit scores of 700 – 750 and 12.2% of Americans (24.4 million) have borderline FICO credit scores of 650-700.

If unpaid bills, high credit card balances, lingering tax debts, old foreclosures and unresolved vehicle repossession deficiency obligations are keeping you in the “below 700” catagory with respect to FICO scores, what can you do?

How about a bankruptcy?  What? Doesn’t bankruptcy ruin your credit, you ask?

Well, sometimes you have to go down before you can go up.

Many experts recite that a bankruptcy will temporarily dump your credit score down to 550, but then in many circumatances you will automatically start a very steady and sure climb back to a level of 700 (good), 750 (very good) or maybe even higher.

The New York Time (April 12, 2012) reports that the car loan or credit card for which you were unable to qualify right before bankruptcy can very likely immediately be yours right after a bankruptcy filing.  This might suprise you, but after bankruptcy, many creditors will actively and very aggressively again solicit your business.  This sounds very counterintuitive and maybe even a bit crazy, but strangely it is true.
After almost 19 years, I keep thinking that some day I will have seen it all when it comes to Creditors.  However, the Creditors keep suprising me with new ideas and schemes, and these are often to your benefit, so check out this new shocking twist:  I have had a few Chapter 7 clients show up at Court bearing letters that recite in essece the following:
“Dear Newly Bankrupt Potentially Valued Client: We have reviewed that you have a vehicle financed with another lender.  We want you talk to your lawyer at court about giving up that old financed car in a voluntary repossession, thus giving the car back to your lender.  If you do this, then on your way home from bankruptcy court just stop by our car lot and secure quick financing for a newer and better car.”

How does that grab you?  Stop by the car lot on the way home from bankruptcy court and pick up a new car?  Strange, but often true.
If your marriage relationship is suffering the stress of not meeting financial and mateiral goals due to chronically low credit scores, then consider a bankruptcy filing to charge up the material needs which, face it, are an important part of living with some contentedness in a long term relationship.
We all like to say that love is enough, but we all know that every marriage has material needs and material aspirations.  Even if such material goals are modest, such as replacing that aging car, starting to save for retirement or college, moving up to a more suitably sized home, getting on a cell phone data plan instead of being stuck with an expensive “prepaid phone”  or maybe even renting a little nicer place to live – we all have needs and aspirations.  Chronically low credit scores can take away some of the material comforts that we look forward to enjoying with our mate in a long term relationship, and these disappointments can take a little of the joy out of your daily walk of relationship and marriage.
And in Jessica’s LaShawn’s date with Mr. Right, he had her at hello…but it was quickly goodbye due to Jessica’s chronically low credit score.  If Jessica had filed for bankruptcy well before her dream date appeared and had thus already started the amazingly quick post-bankruptcy credit score recovery process, she would probably have received that offer of a second date.  But she was not proactive and did not file for bankruptcy.  Jessica just ignored her declining credit situation because it was too uncomfortable to face.  The result?  Sadly, for Jessica the story is “white picket fence postponed”.
Get on with your life and start living now: Consider bankruptcy as a strategic tool for your long term dating, relationship and marital hapiness. You will be shocked at how quickly your creditworthiness is restored post-bankruptcy.
And while you are at it, spread the good news that there is hope for the future through bankruptcy- people need to know, and if you won’t tell them, they will never learn.
[Special thanks to Jessica Silver-Greenberg, for writing “Perfect 10? Never Mind That.  Ask Her for Her Credit Score.” NY Times, Page A1, Wednesday, December 26, 2012.]
Considering the need for a bankruptcy filing to get your credit back on track?  Contact us at 253-383-1001 for an appointment in Tacoma, Puyallup, Olympia, Chehalis, Renton or Bremerton.

Retirement But Not Totally Overview

The economy has had a great impact upon those people facing retirement.  Many have lost jobs, or been forced to take jobs paying much less then pre-recession employment.  In addition, many people have lost homes due to foreclosure, feeling compelled to walk away because of mortgages balances which greatly exceed their home’s value.  Bankruptcy filings in the pre-retirement demographic are skyrocketing, and have been high for many years.

With rising medical costs, rising food costs and expensive gasoline, many people are worried whether social security and perhaps a small pension will provide a comfortable retirement.

One way to improve the quality of life in retirement is to continue to work, and some places in the country offer better working opportunities for retirement age people than do other locations.

Is retirement on the horizon for you?  Are you worried whether your retirement income will stretch to provide a quality lifestyle?  If these are concerns for you, consider relocating to one of these 25 havens for retirees who might wish to continue to work past retirement age.

Forbes magazine compiled a list of places to where a retiree or a person facing retirement might want to consider relocating if there is a need or desire to work past retirement age.  Below is the “James Magee short list” of the top three places for a quality retirement.

  •  1.  Iowa City, Iowa: With Iowa Medical School in its midst, Iowa City’s doctor count is six times above the national average.  Also unemployment is at 3.8% and job opportunities are growing.
  • 2.  Corvallis, Oregon: Corvallis is a college town which helps the strong economy, this city has a 5.8% unemployment rate and room for even more economic growth.  There’s no state sales tax, and has plenty of doctors and a low violent crime rate.
  • 3.  Pittsburg, Pennsylvania: Unemployment is at 6.6%.  Although the winters here are extremely cold, the cost of living is 6% below the national average and homes are going for $121,000. Also the doctors per capita ranks at one of the nations highest.

Retirement is a lot different then it was many years ago.  In this country’s current economy, it is much harder to retire and retirement occurs at an older age.  A wonderful alternative is to pursue a working retirement, keeping a job but still enjoying the retired life.  Any of the 25 cities on Forbes.com’s list are wonderful alternative cities to relocate to.  If you are so far in debt but you have bankruptcy as an option, it may be your best option.  Your debt can be taken care of by filing for bankruptcy and once debt free you can easily relocate and start a fresh retirement in one of these cities with low unemployment rates, nice climates and so many other perks.

The Forbes.com article can be found here:


Retirement But Not Totally Part Three

This is t he third installation of Retirement But Not Totally, finishing off the Forbes.com list of top 25 places to retire, here are numbers 8-1.

  • 8. Oklahoma City, Oklahoma: Oklahoma has a top-rated tax climate and an unemployment rate of 5.5%.  Housing prices are an average of $143,000 and cost of living is cheap.
  • 7. Pittsburg, Pennsylvania: Unemployment is 6.6%.  Although the winters here are extremely cold, the cost of living is 6% below the national average and homes are going for $121,000. Also doctors per capita ranks at one of the nations highest.
  • 6.  Provo, Utah:  Cost of living is average with homes going for $210,000 on average.  This town is Brigham Young University’s hometown and has a 5.5% unemployment rate and a favorable tax climate.
  • 5.  Rapid City, South Dakota: So close to Mount Rushmore, Rapid city has an excellent job growth track record and housing prices average $152,000.  Unemployment is down to 4.1%.
  • 4.  Salt Lake City, Utah:  This is Utah’s largest city and enjoys a 5.6% unemployment rate.  Ranking number six on Milkens Institute job and economic growth index, Salt Lake City’s cost of living is 5% below the national average.
  • 3.  San Angelo, Texas: Cost of living is far below the national average as is San Angelo’s unemployment rate.  Home prices average at barely $100,000 and this town’s diverse job base and colorful city make for a satisfying place to reside.
  • 2.  Shreveport, Louisiana:  With a 6% unemployment rate, Shreveport has a high job growth prospect.  Cost of living is below 4% the national average and this city sits close by a medical school ensuring plenty of doctors per capita.
  • 1.State College, Pennsylvania: 4.9% unemployment rate, $210,00 average housing prices and a high prospect for job growth, make this beautiful college town an ideal choice for living and enjoying the excitement and  economic advantages that Penn State provides.

Retirement should not be all about staying at home or going out and going on expensive trips.  With the right move and planning, everyday could be exciting and active.  But with debt holding you back from enjoying your retirement, bankruptcy may be your best option for a fun and fulfilling retirement.

With rising cost on just about everything, it is hard to go out and enjoy life, especially when burdened with debt.  But with bankruptcy, you are able to go back out and enjoy the things you may want to do.


The article can be found at:


Retirement But Not Totally Part Two

The second installation to Retirement But Not Totally cities numbered 17-9, is packed with nine more favorable options for a working retirement.   

  • 17. Fort Collins, Colorado: Cost of living and homes are at a national average in Fort Collins, and with Colorado State close by the economy is flourishing.  The cold winters here are easily bearable with the 6.2% unemployment rate.
  • 16. Great Falls, Montana: With an above average tax climate this small town enjoys many doctors and a small crime rate.  The job and economic growth are outstanding and the unemployment rate is at a below average 5.6%
  • 15.  Harrisonburg, Virginia: Near two colleges, Harrisonburg rank high on the Milken Institute job and economy rating. With and unemployment rate of 5.3% this quaint town has one of the lowest crime rate on the list.
  • 14.  Huntsville, Alabama: Alabama has a very favorable tax climate with an average economy, housing prices and unemployment rate and below average cost of living.
  • 13.  Iowa City, Iowa: With Iowa medical school in its midst, the doctor count is six times above the national average.  Also unemployment is at 3.8% and job opportunities are growing.
  • 12.  Jonesboro, Arkansas: An average home in Jonesboro sells for below $100,00 and the unemployment rate is at 6.4%.  Also cost of living is dirt-cheap and 13% below the national average.
  • 11.  Knoxville, Tennessee:  Knoxville has plenty of doctors, an unemployment rate of 6.6%, wonderful economic growth. And best of all the Smoky Mountains provide a pretty scenic aspect to this town.  One downside to Knoxville is that it has the highest crime rate on the list.
  • 10.  La Cruces, New Mexico:  Just $116,000 on average housing prices, La Cruces is another college town with wonderful economic growth.  40 miles from Mexico, La Cruces has an excellent tax climate, but the doctors per capita are sparse.
  • 9.  Lexington, Kentucky: Cost of living is 11% below the national average, and housing prices are at an average of $144,000.  Kentucky has a favorable tax climate, and a lot of doctors.

Is retirement on the horizon for you?  Are you worried whether your retirement income will stretch to provide a quality lifestyle? If these are some concerns that have popped into your head, you may want to consider relocating to one of these 25 havens for retirees who might wish to continue to work past retirement age.

Look out for the next post, which will continue with the next 1-8 cities.  Whether you are looking for a place to relocate with a warm climate, plenty of doctors, or a cheap housing, this list has many options to choose from.

The article can be found here:

Retirement But Not Totally

The economy has had a great impact on those facing retirement. Many have lost jobs or have been forced to take jobs that pay much less than pre-recession employment.  In addition, many people have lost homes due to foreclosure and high mortgages that greatly exceed their home’s value. Bankruptcy fillings in the pre-retirement demographic are skyrocketing, and have been high for many years.

With the growing costs of necessities such as food, gas, and medical care, many people worry whether or not social security can provide a comfortable retirement.

One way to help ensure quality of life in retirement is to keep working.  And there are many places in the country that can provide better working opportunities than others.

A recent Forbes.com article, highlights the 25 top cities for a working requirement.  What ever your preferences may be location, culture and climate wise, this article may help you choose a top location to enjoy a comfortable retirement.

Cities 18-25

  • 25. Athens, Georgia: This beautiful college town sits at a high-ranking on the Milken Institute’s Job and Economic Growth Index with a 6.9% unemployment rate which is a refreshingly low percent compared to the country’s average of 8.5%.  Not to mention that this town enjoys very favorable climate and weather, house pricing is an average of just $130,000.
  • 24.  Austin, Texas:  Perks to living in this city include low crime rate,  a cost of living 7% below the country’s average, and no state income tax.  House pricing is a little above the national average at $950,000, but still reasonable.
  • 23.  Bismarck, North Dakota: Doctors per capita are at an amazing 50%, which is above the country’s norm.  Winters here may be cold, but unemployment rates are at only 2.8%.
  • 22. Bloomington, Illinois: This city is the head of State Farm, which results in a steady economy.  Cost of living sits on the national average and unemployment is at 6.8%.
  • 21. Cheyenne, Wyoming: Crime rates are low and physicians are plenty.  It’s one of the least populated cities on this list and has a 6.5% unemployment rate. Winters here are cold, however.
  • 20.  College Station, Texas: This is a college town, and is leading in job and economic growth.  5.8% unemployment, plenty of doctors and a warm and sunny climate also make up this town.
  • 19. Columbia, Missouri: The physician per capita rate in this city is more than three times higher than the national average. The unemployment rate is 5.0% and this city is known for having great job and economic growth.
  • 18. Corvallis, Oregon: Yet another college town, Corvallis has 5.8% unemployment rate and room for strong economic growth.  There’s no state sales tax, plenty of doctors and low violent crime rate.

These are the top 18-25 finishers for cities offering a working retirement, so if you are looking for an economy that is more impressive than just “so-so” maybe one of these cities should be considered for your comfortable working retirement.  Stay tuned for a follow-up post detailing the next 9-17 cities .

Relocation may be a great retirement planning tool. Discharging or reorganizing your debt, as seen as possible through a bankruptcy proceeding, may also be a prudent step towards retirement planning.

After bankruptcy, you may well have funds to fortify your saving accounts and 401k/IRA account. This can help ease the financial crunch which often accompanies retirement.  Call us if you or a friend might like to invest in a bankruptcy filing.


Follow the link below to read the article in whole:


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.