Loan Modification, bankruptcy, debt settlement

Stern v Marshall – Big or Little Impact?

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Supreme court shadowed by Capitol
Creative Commons License photo credit: Serge Melki

Yesterday, June 23, 2011, the Supreme Court issued its ruling (actually it’s second ruling) in this very long running and convoluted case (it started back in 1994).

I love Chief Justice Robert’s reference to Dickens’ Bleak House story of a lawsuit that had become so complicated that “no two…lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause: innumerable young people have married into it;” and, sadly, the original parties “have died out of it.” A “long procession of [judges] has come in and gone out” during that time, and still the suit “drags its weary length before the Court.” One could obviously right exactly the same thing about Stern v Marshall.

There are already some great discussions on this ruling out on the web. Two I particularly enjoyed are Steve Sather’s at A Texas Bankruptcy Lawyer’s Blog and Steve Jakubowski’s at The Bankruptcy Litigation Blog.

Here’s one great comment from Steve Sather: “Thus, the Court’s consideration of the constitutionality of §157(b)(2)(C) is not just about which person in a black robe will decide a particular case or which estate of a dead person will receive a lot of money, but rather, it is a mighty bulwark protecting us against a new King George and his corrupt judges.”

Probably the biggest concern is whether this ruling will increase the workload of an already overloaded court system. The majority opinion stated that no, “We do not think the removal of counterclaims such as Vickie’s from core bankruptcy jurisdiction meaningfully changes the division of labor in the current statute.” However, the dissenting opinion, written by Justice Beyer, stated that it would increase the workload because a game of jurisdictional ping-pong would occur between the District and Bankruptcy courts.

I guess only time will tell.

New Foreclosure Scam

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Find the $5
Creative Commons License photo credit: quinn.anya

As reported in the Modesto Bee, Alan David Tikal was arrested in Las Vegas for committing real estate and mortgage securities fraud, grand theft, and filing phony documents. It appears he was preying on immigrants who spoke either no English or English as a second language. The Bee reported that their review of documents showed transactions with 19 homeowners in Stanislaus County, all with Latino surnames.

Sad to say, it’s the usual deal of someone hoping to save their home and willing to believe that they can pay someone a few thousand dollars to get a substantial reduction in their payments. Ladies and gentlemen, it’s just not going to happen.

Here’s the new fraud deal that many are falling for. People who desperately want to save their homes are lead to believe that by paying someone $1000 to $3000, they will get a new loan at only 25% of what they owed. No bank in the world is offering this good a deal, even with HAMP backing.

This is why California and other states passed laws prohibiting companies and people from taking money up front to get a loan modification. Too many people were paying and then winding up losing their homes anyway because the companies or agents really did nothing. This is just another variation on that scam.

Buyer beware – if it sounds too good to be true, it is – don’t believe it. And especially don’t pay anyone up front to help get your loan reduced, modified, or refinanced. They should only get paid when the action is complete. Captaloans strongly suggests using only a lawyer or certified legal firm to help you with your loan modification.

Three New Judges Added to CA Bankruptcy Court

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Fossil fuel>>Sign Of Our Time

Creative Commons Licensephoto credit: Don Hankins

Three new judges, Wayne E. Johnson, Scott C. Clarkson, and Mark S. Wallace have been appointed to the U.S. Bankruptcy Court of the Central District of California. The Bankruptcy Court has five locations: Los Angeles, Santa Barbara, Riverside, Woodland Hills in the San Fernando Valley, and Santa Ana. Clarkson and Wallace will serve in Santa Ana while Johnson will be in Riverside.

The judges of the United States Court of Appeals for the Ninth Circuit are responsible for selecting and appointing the Central District of California’s bankruptcy judges. The Ninth Circuit has a panel that recommends bankruptcy judges to the full court when there are vacancies. Bankruptcy judges serve for 14-year renewable terms and handle all bankruptcy-related matters under the Bankruptcy Code.

Alex Kozinski, current Chief Judge of the Ninth Circuit Court, stated, “[w]e have been fortunate to find such knowledgeable and experienced bankruptcy attorneys to serve as judges of one of our busiest bankruptcy courts.”

Johnson has worked as a bankruptcy attorney for law firms in Los Angeles since 1994 and then as a sole practitioner since 2003. Clarkson has spent the last 20 years as the managing attorney of Clarkson, Gore & Marsella APLC. Wallace has been of counsel for the firm of Stutman, Treister & Glatt, P.C. since 1991.

This brings the total number of bankruptcy court judges for the Central District to 18.

US Bankruptcy Filings Up 9% in 2010

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According to the American Bankruptcy Institute, consumer bankruptcies in the US increased 9% in 2010 from the previous year. That’s over 1.5 million bankruptcies filed. This includes Chapters 7, 11, 12 and 13 filings.

The 9% is the nationwide average. In some areas of the country, filings were down, but in others—particularly the southwest—they were up substantially. For example, bankruptcies were up 25% in California and close to 24% in Arizona.

ABI Executive Director Samuel J. Gerdano said, “The steady climb of consumer filings, notwithstanding the 2005 bankruptcy law restrictions, demonstrate (sic) that families continue to turn to bankruptcy as a result of high debt burdens and stagnant income growth. We expect that consumer filings will continue to rise in 2011.”

But there are opposing views. Quoted in a Wall Street Journal article, Robert Lawless, A University of Illinois law professor stated, “Over the course of the year, I think bankruptcies will be going down. The reason for that is borrowing’s down…there’s less of a reason for people to take the legal step of filing for bankruptcy.”

Unfortunately, borrowing is not the only reason people file for bankruptcy. Even though the economy is showing weak signs of recovery, unemployment is still very high and home foreclosures show little sign of decreasing yet.

Some States Forcing Foreclosure Mediation

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A recent article in the Wall Street Journal pointed out that while the total number of states that have a foreclosure mediation program has increased to 21 (it was only 10 a year ago), there are now also a few of these how that have mandatory mediation. This article was based on information supplied in a report from the Center for American Progress.

The original report from CAP has a great table showing these 21 states with information about their programs. The 21 states are:

  • California*
  • Connecticut*
  • Delaware
  • Florida*
  • Hawaii
  • Illinois
  • Indiana
  • Kentucky
  • Maryland
  • Maine
  • Michigan
  • Nevada
  • New Jersey
  • New Hampshire
  • New Mexico
  • New York*
  • Ohio
  • Oregon
  • Pennsylvania*
  • Rhode Island*
  • Wisconsin

The states with an asterisk have mandatory programs, all the rest are voluntary where the homeowner has to request to opt-in to the program.

The article points out that the percentage of successful mediations leading to reduced payments and preventing foreclosure is much lower in those states that have a voluntary process than the six that are mandatory. In New Jersey, which is voluntary, 20% of borrowers who entered foreclosure opted for mediation (but of those, 65% successfully received a loan modification). In Connecticut, which is now mandatory, 70% of those entering foreclosure went through the mediation program (with 60% successfully receiving a loan mod).

One has to wonder that with the 60-65% success rates (or better possibly), why are more borrowers not opting for the mediation process in those states that are voluntary. Apparently, either homeowners don’t know about the availability of the mediation or they choose to not bother, perhaps believing it won’t work or they don’t qualify.

While some argue that mandatory mediation should be a federal program so that it could be offered in all states, the failure of the HAMP program (as discussed in our last post) would seem to indicate that keeping this at the state level will be much more effective.

What do you think?