Detroit Bankruptcy Lawyer Kurt O'Keefeforeclosure | MIchigan Bankruptcy Blog

Homeowner Help? Or Government Sellout?

Kurt O'Keefe — Thu, 26 Jan 2012 06:40:57 +0000

The long awaited on again, off again, multi-state settlement between the Attorneys General of our various states and the mortgage company rapists, uh, crooks, is apparently on again.

Unless this is your first trip to this blog, let me end the suspense: the proposed settlement is:

image credit: dreamstime

Sorry to ruin the ending.

What the heck am I talking about?

Many of the various mortgage crimes perpetrated on American homeowners by mortgage companies and mortgage servicers, the other companies the mortgage companies to which the mortgage companies outsourced the collection and allocation of your payments, are to be absolved, beause,

GET THIS!

The mortgage companies promised not to do it any more! Wow! I bet our various representatives, in Michigan, as in many states, the Attorney General is an elected position, really had to go to the mat to get that concession. I’ll wager there was blood on the floor!

Gag me with a spoon.

image credit: dreamstime

It is bad enough to let the mortgage mafia off the hook; but to pretend that you got something out of them when you are letting them off the hook adds insult to injury.

Gretchen Morgensten has the best account of the vast crimes wrought by the mortgage industry, in her book Reckles$ Endangerment.

The normally consumer oriented, big government will protect the little guy, Center for Responsible Lending, actually endorsed the terms of the attorney general settlement.

The bastards mis-allocate your payments, put you in default with their defective bookkeeping, which, just incidentally, increases the mortgage servicer bottom line, and, now, they promise to stop!

Fan-frickin’-tastic.

No more robo-signing.

This is akin to letting a bank robber off without jail time because he promises not to rob banks anymore.

There is much more, but how sick do you want to get?

This time around, it says homeowners can still sue on their own, and that it “would not shield banks from prosecution related to criminal activities” (from the Center for Responsible Lending site linked to above).

Whaddya mean: “prosecution related to criminal activities”?

What the hell else can you anyone be prosecuted for?

They have not been prosecuted yet; Obama just appointed a commission to whitewash the crimes at the federal level, and now the State AGs will run home and campaign on how they socked it to the bad guys. They are not going to try to take them on.

Good luck getting any law enforcement agency interested in your case.

How Much Is Your Home Worth?

Kurt O'Keefe — Tue, 20 Dec 2011 07:07:24 +0000

H is for home value, in the Alphabet Game, bankruptcy experts across the country blog on different topics.

I always ask potential clients this question, how much is your home worth?, I mean, really, and the response frequently is something like: well, it is worth $200,000, but right now, I can only get maybe $160,000 for it.”

So, what do we mean by “worth”?

There are state tax valuations, which are normally not worth the paper they are written on, and worth even less these days.

How about that last bank appraisal?

The one you did for the re-finance back in 2008 or earlier?

Uh, no good.

Most appraisals during those peak bubble years were bogus, done to hit a number that would allow the mortgage to go through and the mortgage broker to take a commission.

What I mean is, what would a willing buyer pay, right now, as is, no painting or other fix up. Your best guess as to the actual market price, usually based on sales of similar homes close by. Almost everyone I talk to has a foreclosed home, or more than one, for sale nearby.

If your neighbor’s house is basically the same as yours, maybe a little better, and is for sale for $150,000, that means, it is worth less than that, or someone would have purchased it at that price. So, your home is also worth less than that.

Doug wrote about renting v. buying a home this week, and I recommend everyone do this.

If you are in a home now worth less than what is owed, and have trouble making the payments, you need to figure out the answer to our question: How much is your home worth?

Most of us, due to wishful thinking, I suppose, overestimate the value of our home.

Get a free estimate from a local realtor, but, get a good answer on the value.

Don’t assume prices are going to rebound soon, either.

I have seen estimates of another 20% decline in home prices over the next year.

You cannot do intelligent financial planning without knowing stuff like this.

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OTHER LETTER “H” TOPICS:

Hearing   Omaha and Lincoln, Nebraska Bankruptcy Attorney, Ryan D. Caldwell
Homeowner’s Association Dues   Marin County Bankruptcy Attorney, Catherine Eranthe
Household   New York Bankruptcy Lawyer, Jay S. Fleischman
House   Northern California Bankruptcy Lawyer, Cathy Moran
Homestead   Colorado Springs Bankruptcy Lawyer Bob Doig
House   Los Angeles Bankruptcy Attorney, Mark J. Markus
Household Size   Hilo Bankruptcy Attorney, Stuart T. Ing
Honesty   Cleveland Area Bankruptcy Lawyer, Bill Balena
Honesty (and Fraud Avoidance)   Philadelphia Suburban Bankruptcy Lawyer, Chris Carr
Harassment by Creditors   Downriver, Michigan Bankruptcy Attorney, Christopher McAvoy

Forgiveness Of Debt Income, What Everyone Ought To Know

Kurt O'Keefe — Thu, 15 Sep 2011 05:24:38 +0000

DISCLAIMER: NOTHING IN THIS POST IS MEANT AS TAX ADVICE, CONSULT A PROFESSIONAL

Some of my clients were about to pay income tax because of 1099-C forms received on rental properties they had abandoned.

I was stunned.

These people were bankruptcy clients, who had already filed Chapter 7 and received discharges.

So they no longer had personal liability on their old debts, but it is NOT income to them.

This had not stopped certain creditors from sending a 1099-C form, stating there was income by virtue of forgiven debt, resulting in income tax liability to my client.

I AM NOT A TAX ADVISER.

But I am certain there is no income from discharge of a debt in bankruptcy.

That is the box to check on IRS form 982 (available at www.IRS.gov):

“1 a Discharge of indebtedness in a title 11 case”

Title 11 is the Bankruptcy Code.

If you filed bankruptcy, and discharged the debt, and you got or get one of these 1099 forms, file the 982 form so the IRS knows that your debt was discharged in bankruptcy.

For reasons that escape me, a notice of every bankruptcy filing is sent to the IRS, so somewhere in there, they know you filed bankruptcy.

The IRS gets a notice whether you list them as a creditor, or not.

What if you did get a 1099-C for forgiveness of debt income, and did NOT file bankruptcy?

Form 982 1 e is for “qualified principal residence indebtedness.”

With the explosion of the real estate bubble, lots of homes are worth less than the mortgages owed on them.

Under President Bush, Congress passed this exception, if your home is foreclosed for $150,000, but you owed $300,000 on it, you do not have $150,000 of debt forgiveness income.

IF you qualify.

This exception is designed to apply to money used to buy or improve your primary residence.

You will not qualify if you took out a second mortgage to put money into your business or pay credit cards.

Also, if you are insolvent, but have not obtained a bankruptcy discharge, Form 982 (1) b applies.

CONSULT YOUR TAX ADVISER

DISCLAIMER: NOTHING IN THIS POST IS MEANT AS TAX ADVICE, CONSULT A PROFESSIONAL

Forgiveness Of Debt Income, What Everyone Ought To Know

Mortgage Balance Not Reaffirmed?

Kurt O'Keefe — Tue, 23 Aug 2011 06:00:53 +0000

Had a different question last week, from someone who did not reaffirm her mortgage in her Chapter 7 case, kept current on the payments, but wanted to pay off the balance for less than what was owed on the mortgage balance.

REAFFIRMATION

Just to review, reaffirmation is the process for you to obligate yourself once again to pay a debt, after you file bankruptcy. It is an agreement between you and the creditor, filed with the court, BEFORE you get your Chapter 7 discharge.

So, you cannot force the creditor to sign, and the creditor cannot force you to sign.

Even after you sign, you have 60 days to just change your mind and back out. This is an absolute right; you do not need a reason.

As I keep saying, reaffirming on a mortgage is a mistake.

The benefit is all to the creditor, who can sue you if it later forecloses on the defaulted loan, and the Michigan foreclosure sale amount is LESS than that balance.

You can keep your Michigan house after Chapter 7 if you just keep making the payments, on the loan and the taxes and insurance. Of course, if you cannot, and default, the bank can foreclose, whether you reaffirmed or not.

Back to the question: potential client wants to take retirement funds and get the mortgage cleared for $30,000 less than what she owes.

She stayed current on the payments; of course, the house is underwater, so her thinking is that the mortgage company is better off taking her lump sum and writing off the rest, which has alrady been discharged in her bankruptcy.

True enough, but, this loan is not in default. It is a performing loan on their books, not one fo the tens of thousands of problem loans it has.

So, she is thinking of walking away from this house, taking out the retirement money and bjust paying cash for a different house.

I counsel against taking out retirement money unless there is a very good reason, which I do not think this is.

What do you think?

MERS Says No Mas! To Michigan Foreclosures

Kurt O'Keefe — Thu, 04 Aug 2011 06:09:46 +0000

No mas!

MERS is folding up its tent as far as foreclosing in its own name, or filing pleadings in bankruptcy court in its own name, as it told is clients they have to get an assignment from MERS, and then file stuff in their own name.

No more MERS foreclosures in Michigan.

Our Michigan court of appeals probably influenced its decision, holding that MERS could not foreclose in Michigan by publication.

Even this is not good enough for Abigail Field of the Foreclosure Fraud site, who wants MERS outlawed.

I yield to no one in anti-MERS sentiment, but am philosophically opposed to just outlawing stuff I think, even know, is bad.

Not good precedent.

I believe there are enough laws on the books against fraud, civil and criminal. They just need to be enforced.

The government runs all criminal prosecutions, so all we can do there is harp on our elected officials.

At least the Michigan attorney general is investigating at mortgage fraud issues.

MERS Assignments Valid?

But this does not end the issue of the validity of foreclosures with MERS in the chain of title.

If MERS cannot foreclose in Michigan (by publication), how can the company it assigns its rights to foreclose?

How can it assign greater rights than it holds?

Put another way, if you do not own a car, you cannot sell it to me.

Now, if you transfer your interest in the car to Joe Blow, how can Joe Blow sell me the car? He does not own it either.

So MERS new policy is not dispositive of the underlying issue: what interest does/did MERS hold in a home being foreclosed?

And title to homes in which MERS already foreclosed is still clouded, as we say in the legal biz.

Many of those homes are going through the foreclosure process AGAIN, just to make the title companies happy.

image credit: bleacher report.com

Michigan Bankruptcy Mortgage Options (Part Two)

Kurt O'Keefe — Tue, 02 Aug 2011 05:13:54 +0000

This is the conclusion of a two part series, part one on bankruptcy mortgage options can be found here.

Now, you cannot force the mortgage company to foreclose, or take your house back.

They might agree to a short sale, but, as with a modification, you cannot force it on them.

They might accept a deed in lieu of foreclosure, in lieu is French for instead of, because it saves them a lot of time and money versus the foreclosure process, but, again, you cannot force it on them.

If you do this, make sure the paperwork states the mortgage balance equals the value of the home.

And if you have a second mortgage, forget about a deed in lieu, and they will also have to sign off on a short sale.

If they foreclose on your mortgage, great, save your money for the next house.

But, first, get your monthly budget together, and consult a bankruptcy attorney.

For a second mortgage to foreclose, they have to pay off the first. Ain’t gonna happen.

If the first mortgage holder forecloses, you still owe the balance on the second, and whatever other debts you have.

In Michigan, if the first mortgage forecloses by publication, there is an auction, and if they bid what you owe them, after the 6 month redemption period, they get the house, and you owe them nothing.

So if you can handle your other debts, and have no second mortgage, no need for a bankruptcy, at least until the foreclosure sale.

FORECLOSURE SALE PRICE

You will have to check the sale price after the auction, nobody tells you. Your county sheriff runs the sale, so their office will have a record of the sale price.

It you owe $200,000, and they bid $100,000, and that is a commercially reasonable price, you still owe the difference even after they take your house.

It does not matter what they get when they sell the house later. Your potential liability is fixed by the foreclosure sale auction price.

My advice, as always, get the facts.

What can you sell your house for, right now, as is, no painting or fix-up?

How much do you owe?

What is your realistic monthly budget, income and living expenses?

Assume home values will continue to go down, that the cost of other living expenses, food, fuel, et cetera, will go up, and, your income, will stay the same or go down.

Can you afford to stay in your house?

Does it make economic sense to do so?

Image credit: Dreamstime

If I File Bankruptcy In Michigan, What Happens To My House?

Kurt O'Keefe — Thu, 14 Jul 2011 06:11:42 +0000

The first question is: What do you want to happen to your house in bankruptcy?

What do you do about mortgage payments?

There is nothing automatic; you are not required to keep or leave your house in Chapter 7 or Chapter 13 bankruptcy.

Let’s start with Chapter 7 bankruptcy.

Assuming you have no equity in the house, that is, that you owe more on the mortgage than the house is worth, or, the equity is not more than you can exempt, just keep making the mortgage payments and pay the taxes and insurance. You do not have to reaffirm a mortgage; unless they are giving you a better deal, there is no reason to do so.

In Chapter 7 bankruptcy, you get a discharge of your personal liability on your debts. In effect, this takes your name off the mortgage note you signed, to pay back the money you borrowed against the house.

But the mortgage survives as a lien on your home; they can still foreclose if you do not pay.

It gets tricky if you have a second mortgage, because your house is probably worth less than what you owe on the first mortgage. The second can only foreclose if it pays off the first, not likely. And, once you get your bankruptcy discharge, they cannot sue you.

So you are probably better off to stop paying on a second, even if you want to keep your house.

If you want to give up the house, stop paying and hope the mortgage company forecloses or accepts a deed in lieu of foreclosure from you.

Michigan Foreclosure: The Big Picture

Kurt O'Keefe — Tue, 05 Jul 2011 05:44:32 +0000

What do the statistics tell us about the big picture for our economy now?

That there will be more bankruptcies in Detroit, and everywhere else in Michigan, and the U.S.

The foreclosure crisis continues, if you want chapter and verse, read “Reckless Endangerment.”

Foreclosure sales are declining, but in judicial foreclosure states, which Michigan is not, and one third of the homes in foreclosure in those states are more than two YEARS behind in payments.

And foreclosures in the judicial foreclosure states have increased twice as fast as the non-judicial states in the last year.

The scariest sentence in the story on mortgage servicer LPS statistics:

“Overall, when compared to historical norms, delinquencies are almost double, and foreclosures are eight times higher.”

More foreclosures, more homes for sale, depressing prices further, more homes underwater, more foreclosures, the vicious circle continues, leading to more bankruptcies.

Although, if your home is worth less than what is owed on the first mortgage, you can file Chapter 13 bankruptcy and get rid of that second mortgage, which is good for homeowners.

Those stuck with the securities stuffed with bad mortgages are starting to sue for, of course, fraud, and getting some recoveries.

Regions Financial investors lost $1.5 billion in five mutual funds it sold, some as investment grade debt, but filled with crap mortgages.

They settled the mortgage fraud claims for $210 million.

Sounds like $1.3 billion still missing.

Business Week has a story on debt collectors chasing people who already filed bankruptcy, and had the debt discharged.

If this happens to you, I can help if you cannot get your bankruptcy lawyer to handle it.

What happens is, bottom feeding debt buying companies buy bad debts by the thousands.

No paperwork, just a computer screen, stating how much you owe and maybe a couple other things.

They could “scrub” the accounts, checking for bankruptcy filings, but, hey, that cost money.

Of course, debts discharged in bankruptcy do not exist and should not have been bought and sold to begin with.

The House Payment In Bankruptcy Story

Kurt O'Keefe — Thu, 12 May 2011 05:48:23 +0000

What can I keep paying for if I file bankruptcy?

What bills do I have to stop paying if I file bankruptcy?

These are common questions I get from people.

Too much to cover in one post, so more later.

First, let’s discuss mortgage payments.

In chapter 7, if you want to keep your house, keep making the mortgage payments and insurance and taxes.

The first questions I ask anyone, do you have or are you buying a house?

What is it worth?

Yes, I mean today, as is, no painting or fix up, what you could sell it for.

We all like to think our stuff is worth more than it is.

Hey, it is our stuff.

So, homes, like anything else, are not worth what you paid for them, what the tax assessor says, whatever the mortgage company says, a home is worth what a willing buyer will pay you for it tomorrow.

So, if your home is underwater, say you owe $72,000 on a house worth $45,000, like the client I spoke to this morning, and, with your current income, you cannot both make the payment and eat, may be best to stop paying.

Right away.

In Michigan, it can take a year or longer to foreclose.

Stay for free and save your money for your next residence.

Unless the mortgage company can prove you committed some type of fraud in getting the loan, your mortgage debt will be discharged in the chapter 7 bankruptcy.

That means, you owe nothing, no matter what is done with the house.

Now, filing chapter 7 bankruptcy by itself does NOT take the house out of your name.

You will still be liable as the owner until it goes out of your name.

By foreclosure, or you deeding it back to the mortgage company, or the state taking it for taxes.

But something else besides the bankruptcy has to happen to get your name off the title.

The House Payment In Bankruptcy Story

The MERS Decision Story

Kurt O'Keefe — Fri, 29 Apr 2011 16:10:01 +0000

Fallout from the Michigan Court of Appeals decision tossing out two foreclosures by MERS is sweeping the state of Michigan.

Had a call yesterday from someone whose closing was canceled at the last minute, because, MERS had done the foreclosure and quit claimed the property to the bank, which had agreed to sell the home to the caller.

My realtor wife advised me title companies across Michigan are backing out of deals and canceling closings.

Because, if a MERS foreclosure is in the chain of title, it is, as they say in the title business, “clouded.”

In my caller’s case, MERS foreclosed, the homeowners left and bought a new house, the redemption period expired, the

bank sold the house.

But, under the Michigan Court of Appeals decision, the former homeowner could sue to get the foreclosure sale set aside, putting the home back into his name.

And he would win.

So, title companies, who issue insurance guaranteeing to the buyer, and the buyer’s mortgage company, that the seller does indeed have good title to the property.

No title policy, no mortgage; no mortgage, no sale.

No telling how far back this can go, what if MERS foreclosed 3, 5, even ten years ago?

Not sure off the top of my head how long they have been around.

I have been blogging about MERS for years.

As filing fees for real estate documents increased, the mortgage companies decided to skip paying those annoying fees every time they bought a mortgage.

They had to pay to have it recorded with the county register of deeds, to put the world on notice that there was a lien on the property.

So, the initial mortgage was recorded in the name of MERS, as “nominee,” whatever that is, for the actual mortgage company.

Then, every time the mortgage was sold or assigned, nothing else was recorded with the county, just on MERS records.

So, MERS had no actual interest in the mortgages, could not collect any money due on them, and, that is why the court threw out the foreclosures last week.

The MERS Decision Story