Mortgage Modification Redefault Under TARP and HAMP

The Special Inspector General for the Troubled Asset Relief Program (TARP) on July 24, 2013 published figures concerning the program. According to the Special Inspector General, HAMP helped about 865,000 homeowners avoid foreclosure through permanent mortgage modifications, however, more than 306,000 of these modifications have redefaulted into private sector modifications or foreclosure. Of the homeowners still in the HAMP modification, more than 88,000 have missed one or two monthly payments.

Twenty-two percent of homeowners who have defaulted on their HAMP permanent mortgage modifications have moved into the foreclosure process. Redefault rates of the oldest 2009 HAMP permanent mortgage modifications have continued to increase as they age at a rate of 46%, while the 2010 HAMP permanent mortgage modifications are redefaulted at a rate of 38%.

The redefaults cost taxpayers money. As of April 30, 2013, $815 million has been spent on more than 163,000 HAMP permanent modifications that redefaulted.

In spite of this bad news, the HAMP program has been extended to December 31, 2015. Hopefully this will allow the program to become more efficient and figure out how to reduce the number of redefaults by looking at early warning signs which would allow the program to further help homeowners.

WHO IS MOST LIKELY TO DEFAULT

Data shows a pattern of homeowners that are most likely to default:

1. Received the least reduction in their monthly mortgage payment and overall debt;
2. Are still underwater; and
3. have subprime credit scores and high overall debt.

The Treasury obligated $19.1 billion for the HAMP First-Lien Modification Program, however, as of April 30, 2013, the Treasury has only expended $4.4 billion, or 23%, on HAMP permanent modifications. On April 30, 2013 865,100 homeowners were in an active HAMP permanent mortgage modification. Of these, 88,813 have missed one or two payments.

The Southeastern United States (AL, FL, GA, MS, NC, PR, SC, TN and VI) have an average default rate of 28%, with Florida being slightly lower at 27%. In the area where I practice, Jacksonville, Florida, as of April 30, 2013, there were 7,784 permanent modifications, 5,199 active modifications, and 2,509 redefaulted modifications reflecting a redefault rate of 32%.

Rental Property In Bankruptcy: Can I Get Rid Of It?

Most people that file bankruptcy are trying to keep everything they have, while relieving themselves of the burden of being responsible to creditors for their debts. A simpler way of stating that is, how can I keep my stuff and not have to pay my debts?


Sometimes, however, a debtor actually wants to give property back. I know what you are thinking, why would someone want to give there things away? Well, sometimes people acquire things they later do not want. For example, if you purchased a car on a note, and repairs to vehicle cost more than just getting another car, you may want to just buy another car. It sure would be nice to be able to give the car to the note holder and not owe them any more money, and not be responsible for insurance, tags, etc.


A similar example would be under performing rental property. That is, rental property, with a mortgage, that cost more to maintain it (repairs, taxes, and insurance) and pay mortgage payments than what the landlord received in rent. Again, I know what you are thinking; this could not be. But, wouldn't it be nice to be able to give the property to the mortgage holder. And yes, this actually does happen.


Well, through bankruptcy, you can absolve yourself of being personally liable for the debt. I have never heard of the giving back of a car to be a problem in bankruptcy, however, real property could be a different story.


The owner of real property could be responsible for ongoing debts associated with the ownership of the property after the filing of the bankruptcy. Sometimes the debtor does not want the property, and the mortgagee also does not want the property. The mortgagee could get stuck with unmarketable property, such as contaminated property, or be subjected to high association fees.


So, can you make a creditor take the property. The simple answer is NO. The giving back of property associated with the filing of a bankruptcy takes planing. Although the giving back of a car is usually simple, when it comes to real property, I highly suggest you seek the advise of competent bankruptcy attorney in your area.

You should keep in mind the bankruptcy law is not necessarily logical. Trying to plan for bankruptcy without consulting an attorney could easily and unintentionally cause you to be put into a situation you do not want to be in. Seeking advise from a bankruptcy attorney early is highly advised.

Will I Loose My Home If I File Bankruptcy?

So, you are trying to relieve yourself of debt so you can move on with the rest of your life. You are also putting off the bankruptcy because you heard from someone you will loose your house you have so diligently been paying for over the years, you should seek the advise of a competent bankruptcy attorney that practices in the area in which you live.

 

I receive calls on a regular basis asking if they are going to loose their home if they file bankruptcy.  In some cases, they are telling me they can not file because they do not want to loose their home.  If you are one of these people, don't feel bad, as I even have other attorneys asking questions related to this topic that seem to somehow be cloaked in a whirlwind of misstatements.

 

The Answer: well, that depends on where you file, and the value of your home. 

That is, unless you file in Florida, where the light shines (I know, cheesy right?).

This blog is directed towards debtors filing if Florida, as that is where I practice.  As a general rule, if you have homestead property in Florida, that is, real property that is exempt from creditors claims pursuant to the Florida Constitution, then you can claim a homestead exemption on Schedule C of your bankruptcy, and keep you home. 

 

So, what happens if you live in a mobile home?  If you live in a mobile home, and do not own the land under it, you may have to wait a couple of years after moving to Florida in order to claim an exemption, as this is a statutory rather than constitutional exemption that needs to be claimed. 

As a side note, if you are planning on moving to another state, you should speak with bankruptcy attorneys in both the state you are moving from, and the state you are moving to, about where you should file bankruptcy. There may be significant advantages in filing in one state over another. This should be done well before moving, in order to arrange for proper planning.

You may wish to review some related blogs, including

http://jacksonville-bankruptcy-grange.blogspot.com/2011/09/when-you-should-consider-finding.html

http://jacksonville-bankruptcy-grange.blogspot.com/2013/02/bankruptcy-attorney-jacksonville-how-to.html

Members Only Workshop ~ Hyatt Regency  

New Orleans, LA ~ October 24-26, 2013

Registration Information

• Registration is open to current NACBA Members and their support staff.

• Early Bird discount ends at 5:00 p.m. PST on Friday, September 6th, 2013.

• Support staff may attend without member attorney if employed by member firm.

• Registration of support staff by mail or fax only.

• Registration of multiple firm attendees by mail or fax only.

• Registration fee includes: breakfast, lunch, Friday night Reception, printed materials for one pre-selected Track, and a flash drive containing materials for all Tracks.

• Workshop registrants DO NOT need to purchase a meal ticket. Meals tickets for guests of Workshop attendees are available for $100.

• You may attend any session in any of the three concurrent tracks. When you register, you will be asked to identify the one Track that you plan to attend and for which you will receive written materials. You may attend any session from any Track that you wish, however, and will be able to pre-purchase the written materials for the other two tracks when you register.  If you own an iPad, iPhone or any tablet using the Droid operating system, you will be able to download an app that will allow you to access the materials and take notes during the sessions.

•  For a Brochure and Schedule, Click Here

Received Extra Income After Filing Chapter 7

What happens if I receive extra income after filing a Chapter 7 bankruptcy?

Well, as in most things concerning bankruptcy, there is not a clear cut answer.

In a Chapter 7, most assets of the case are viewed as a snap shot.  The debtor must list all assets as of the date of filing the Chapter 7 petition with the Clerk of the Bankruptcy Court.  If the debtor was entitled to an income stream prior to the filing, then this right would probably be property of the bankruptcy estate, and must be listed regardless of whether or not it was received.  In fact, if you simply have the realistic expectation of your income changing after filing, it should be disclosed to the Court.  However, as long as the income stream was not foreseen until after filing, it would not be an asset. 

Of course, this has exceptions. Most notably, the receipt of an inheritance. In that case, we would have to look at the right to receive an inheritance up to 6 months after filing.

As you might imagine, the Court also does not look kindly upon fraud and bad faith. For example, lets say Mom, that just won the lottery, wanted her daughter to benefit from it, so pre-petition they arranged to sign a lease post-petition for a room in a modest house for $10K per month. I think this is obviously a filing in bad faith. This filing was probably designed to keep creditors from receiving funds, and the debtor had at least the expectation of having the ability to pay a substantial portion of debt owed to creditors.

Chapter 13 Payment Missing: Maybe It was HOT Mail

I recently received an email from a bankruptcy attorney in Jacksonville, indicating he received an email with an attached letter. The letter purported to be from the United States Postal Service, and was advising the recipient that a mail truck carrying letter bound for Tennessee had crashed and burned. That is, all the mail in the truck was burned.

A few things, right off the back, struck me as strange. The letter was sent to the address of the recipient of the supposed burned mail. How would the post office know what address the burned mail was bound for?

Anyway, if you recently mailed a payment to the Chapter 13 Trustee, with a delivery address of Memphis, TN, and it did not arrive, you may want to check out the story of the mail truck.

And, I know what you are thinking. Sure, a mail truck burned! Like, really. Well, that was my reaction too. So, to be able to tell you this was a joke, I went to Google and did a brief search. What do you know...there actually was a fire involving a crash between a dump truck and a mail truck. The only thing that did not match up was the date. The crash was March 21, 2013, whereas the letter indicated the crash was May 7. If you would like to see the article, just click ---> Click Here

If the link does not work, you can copy and paste this link:

http://usnews.nbcnews.com/_news/2013/03/21/17402238-mail-on-fire-after-postal-service-18-wheeler-crashes-along-florida-interstate?lite

Student Loan Debt Media Inquiry

I recently received an email from the National Association of Consumer 

Bankruptcy Attorneys (NACBA), of which I am a member, asking for a 

response to their inquiry, as to clients with unmanageable student loan debt. More specifically, they are looking for students who are

1.  Relatively recent graduates;

2.  Unable to find jobs; and

3.  On the brink of bankruptcy because of their student loan debt. 

Their request is in response to a media request from a major national news outlet.

The NACBA is an advocate of student loan reform in the bankruptcy code. Currently, the bankruptcy code does not allow for the discharge of student loans.

If the above description describes you, and you are willing to share your story, please give me a call at 904-652-0060. The media deadline is April 3, 2013.