Similarly, foreclosure rates have increased during the first quarter of this year. Realty Trac recently reported that more than 900,000 homes of 1 out of every 138 homes in the country has received a foreclosure related notice.  In Arizona, the Associated Press has reported that 1 in every 49 homes has received a foreclosure related notice during the quarter.

These trends are often times because people do not know that there are laws and programs available that can help them keep their homes or even allow them to remove second and third mortgage payments.  Bankruptcy and the Federal Government’s modification programs can work hand in hand to make life manageable again.

Arizona Bankruptcy Courts are part of the 9^th Circuit Federal Courts.  Some individuals within the 9^th Circuit recently found how bankruptcy and a loan modification can go hand in hand.  Their story might sound familiar to those attempting a modification on their own.  The individuals had initiated loan modification negotiations with Wells Fargo months before they eventually filed for bankruptcy.  Bankruptcy laws do not allow a bank to foreclose or sell someone’s home while they are in bankruptcy without first getting the Court’s permission.

During the modification negotiations the lender directed them to stop making their payments.  When they did stop the Bank had an attorney try and get the Court’s permission to foreclose because they had failed to make payments.  Outside of the bankruptcy they may have been able to foreclose but now they first had to get the Court’s permission.  The Court set a hearing where both sides were heard and the Court decided not to allow the foreclosure to happen but wanted the Bank to follow up with the Loan Modification and let the Court know what was happening.  The hearing was set 2 months later.  The bank didn’t have answers then either.  The judge reset the hearing again for 6 weeks later , then finally for 6 months later.  The Court stated “Nearly one year after it began the process Wells Fargo was still having difficulty determining whether it had a completed loan modification application upon which it could act.”  In re, 20 CBN 594 (Bankr. E.D. Cal. 2010)  During this time the individuals stayed in their home free from the worry that it would be foreclosed upon at anytime because of the bankruptcy laws.  Again, they may have lost the home had they not been in a bankruptcy which did not allow the bank to foreclose.

Many banks are doing their best to assist those who qualify for a loan modification.  But many banks are large and it is difficult for them to make changes that work with new laws or, in this case modification programs.  Loan Modification are not new but the extent to which they are now being utilized is unprecedented.  Federal Programs provide specific requirements that may allow you to keep your home and reduce payments to something more manageable.  If for some reason you don’t qualify now, a bankruptcy may be of help and may stop foreclosures while working with a bank.

For many people, bankruptcy is not the best option, for others modifications may not be the best option either but for some one or both might help them get on top of their finances and allow them to stay in their home.  What is most important it that people know their options and know how current laws and programs can be a tool they use to reign in finances during this difficult time.

For more information, or to register for one of our free bankruptcy seminars, please visit www.mcguiregardner.com or www.freearizonabankruptcyseminar.com.

In Arizona the problems are particularly evident.  Clients often come to us after having first been completely frustrated by lenders who are unwilling or unable to modify their mortgages.  Further complicating matters, many in Arizona have a first and a second mortgage, most often with different companies.  Modifying the two mortgages in a meaningful way is difficult.

Too often we see a bank tell a client to become late in order to qualify for a modification and then they do not return calls, put up unreasonable obstacles to modification, request documents, lose them, request them again. . . you get the idea.  Sadly, many of these homeowners then end up in foreclosure or bankruptcy.

For more information on loan modification or bankruptcy, please visit our website at www.mcguiregardner.com, or bankruptcylawyeraz.com. If you live in Arizona, and want to learn more about bankruptcy, check out www.freearizonabankruptcylawyer.com for the time and date of our next free seminar near you.

The report indicates that Bank of America Corp. and Wells Fargo Bank have started trial modifications for only 4 and 6 percent, respectively, of the eligible mortgages in their servicing portfolios.  JPMorgan Chase & Co. has started trial modifications for 20 percent of eligible loans, a much higher number. 

This report makes clear that the loan modification progran is not having the desired result.  We often meet with clients who are extremely frustrated with the lack of help they receive from their bank.  Unfortunately, many of these clients must file bankruptcy to save their house.  If you are interested in finding out more information about loan modification, or bankruptcy, please visit our website at www.mcguiregardner.com to see how we can help you today.

Wednesday, April 15, 2009
by Bill Swindell

After weeks of negotiation, a compromise may have emerged over Senate legislation that would give bankruptcy judges greater power to modify home mortgages, including reducing the principal. Lenders have been fighting the proposal, arguing that it would bring more uncertainty to the mortgage market and result in higher interest rates. But bank critics say such powers, especially allowing a judge to reduce the principal, are necessary to help homeowners on a wide basis and halt declining prices. The potential deal, according to sources, would add teeth to a House-passed bill that would allow a judge to consider whether the lender has offered the homeowner a new Obama administration plan to help up to 9 million borrowers avoid foreclosure by allowing them to refinance at lower interest rates. The Senate compromise would mandate that if a lender offered a modification through the Obama plan or a program included in last year’s housing bill, called the Hope for Homeowners Act, the homeowner would be ineligible to modify their loan through bankruptcy.

The possible deal has other provisions. At-risk low-income borrowers and those who pay less than 31 percent of their income for mortgage payments would be ineligible for principal reduction, but they could have their rates reduced or their loans amortized over a longer time. If a homeowner opted for a modification under the Obama plan and wound up paying a quarter of income or less for the mortgage, he or she would be ineligible for any bankruptcy modification. If the principal is reduced by a judge, the possible compromise would allow the lender and borrower to evenly split any profit up to the original amount of the loan if it is sold while the homeowner is still in bankruptcy. Only loans that originated before 2009 and amount to less than $729,750 could be modified in bankruptcy. The program would end in 2014.

All sides cautioned that no final deal has been struck and that negotiations could easily fall apart, especially as banks, credit unions and consumer activists each stake out their position in negotiations led by staffers for Senate Majority Whip Durbin. Citigroup Inc. signed on to an earlier compromise, but other lenders have argued that more limitations need to be placed on the availability for principal reduction. Rep. Brad Miller, D-N.C., has said that banks are reluctant to write down such losses through a process known as “cram-down” because it would show up on their already battered mortgage portfolio. “There are a variety of different proposals that are in writing. Nothing has been agreed to,” said Durbin spokesman Max Gleischman. “We were exactly at the same place we were at last week.” The measure is likely to be combined with other banking provisions, including lifting the cap on the number of business loans that credit unions can make. It would also likely expand eligibility for Hope for Homeowners and increase the FDIC’s borrowing authority up to $500 billion for a limited time to give the agency resources to address the banking sector’s problems. The FDIC language would allow the agency to lower fee assessments that it had recently increased on banks to handle the rise in failing institutions. One source said the banks believe that whatever they may lose via the expanded bankruptcy process could be made up through the lower fee assessment. Another source said the banks made the offer to Durbin and felt that he would likely accept the language.

Follow the blog to keep up to date on this pending legislation. You can also visit ourwebsite to learn more about loan modificaiton and bankruptcy.

Clients, potential clients, and general members of the public are invited to these educational seminars.  Topics to be discussed will provide answers to the following questions, along with a question and answer session at the conclusion of the seminar: 

What types of bankruptcy are available?

What type of bankruptcy fits my financial situation?

Is bankruptcy legal, ethical, moral?

Who may file bankruptcy?

What assets can I keep if I file bankruptcy?

What debts can I discharge (eliminate) in bankruptcy?

What will my creditors receive if I file bankruptcy?

Will bankruptcy allow me to keep my house?

Will bankruptcy allow me to catch up on my house payments?

What may I transfer or sell prior to filing bankruptcy?

If I intend to file bankruptcy, what debts can I stop paying?

If I intend to file bankruptcy, what debts should I continue to pay?

What is the bankruptcy process?

Will I have to go to court?

How long will it take to complete a bankruptcy case?

What does a bankruptcy cost?

How do I pay for my bankruptcy if I am already broke?

How do I get started with a bankruptcy?

            To reserve your seat at the next bankruptcy seminar, please call (928) 225-2597, or call us today to set up a free personalized consultation regarding your individual case.  For more information about the seminars, or to learn about our firm and get answers to your questions about bankruptcy, visit our Website.