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Monday, June 22nd, 2009

Your Second Mortgage Debt Could Potentially be Dismissed by Filing Bankruptcy

What type of debt you have can make a big difference in how bankruptcy can affect your debt.

Generally speaking, unsecured debt is more likely to be dismissed - that is, retired completely - than secured debt.

And, your debt is usually either secured or unsecured, one or the other. So stuff like credit card debt and payday loans are considered unsecured, because there's no property attached to them.

Car notes and mortgages are secured debt, because they are connected to a property.

However, as columnist and attorney Ronald H. Surabian points out in the Burlington Union, second mortgages are a different story. After attending a recent workshop he wrote:

The thing that I found interesting about the Chapter 13 bankruptcy proceedings is that second mortgages, home equity loans and the like can be wiped out if these second mortgages are considered unsecured.

And this is something that we even overlook here. We often speak of how filing bankruptcy may help your credit card debt or mortgage, but we don't often discuss second mortgages.

Perhaps we should be because millions of homeowners have a second mortgage - often taken out to fund home repairs or improvements - and are now struggling to make that extra monthly payment.

So, is your second mortgage unsecured and, therefore, potentially able to be dismissed by filing bankruptcy? Surabian provides a clear example:

Assume the fair market value of your home is $370,000 and you have a first mortgage of $376,000 and a 2nd mortgage of $95,000. The second mortgage will be treated as unsecured and will be treated in the same way as credit cards. It will either be wiped out or paid off for pennies on the dollar.

There you have it. If you're facing foreclosure because of a second mortgage and other debts, then bankruptcy may be able to save your home.

To see if your second mortgage is considered unsecured, speak with a local attorney about filing bankruptcy.

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Posted in Home Foreclosure | Comments Off

Thursday, March 13th, 2008

Where’s Your Foreclosed Mortgage Going Now?

The Federal Reserve has offered banks another $200 billion in U.S. currency in exchange for debt that includes mortgage securities, and includes subprime mortgage loans that they hold.

Essentially, experts explain, the Fed is using the available funds to encourage confidence in these securities among investors.

But should investors be buying bad debt, not to mention the Federal Reserve throwing $200 billion in U.S. funds at these nearly worthless mortgages?

Beat the Press has another great evaluation of this latest move:

So how does this story play out? Well, insofar as the Fed is successful, the counterfeit currency retains its value for a while longer. This allows Citigroup, Merrill Lynch, Bears Stearns and the rest of the big boys more time to dump their counterfeit currency on suckers who haven’t figured out how the game is played.

Not exactly a ringing endorsement.

Read the article for a good evaluation of why bailing out the banks doesn't help anyone—it just slows down an inevitable slide by ignoring the "$8 trillion housing bubble," as Baker puts it.

Need your own bailout? Learn about filing bankruptcy.

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Posted in Home Foreclosure | Comments Off

Friday, August 31st, 2007

President To Offer Proposals for Subprime Mortgage Crisis

As recently as a week ago, George W. Bush was touting the "liquidity" of the economy in the face of the ongoing subprime mortgage crisis in the United States.  He suggested that all indicators point to the market correction being a "soft landing."

Today, Bush will make formal statements outlining a plan for relief on homeowners.  Administration officials revealed that the steps Bush will propose include mandating that the Federal Housing Administration allow an additional 80,000 homeowners with less-than-perfect housing records to sign up for its mortgage insurance program.  However, more steps will be introduced in his remarks.

In expectation of the proposals, the stock market opened strong this morning, with Asian markets going strong and the Yen lowering, and European stocks also rising.

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Posted in Home Foreclosure | 1 Comment »

Wednesday, March 7th, 2007

National Urban League President Unveils Plan to Increase Home Ownership

National Urban League President Marc Morial tied homeownership to personal wealth, greater economic empowerment, and closing the gap between blacks and whites in the United States when he described six major policy recommendations designed to minimize obstacles standing in the way of many Americans owning their own homes.

The obstacles the National Urban League Homebuyer's Bill of Rights seeks to overcome are:

  • Lack of net savings for downpayments and closing costs
  • Lack of information on how to shop for homes and apply for loans
  • Lack of quality affordable units in livable locations; and
  • Lack of consumer protection

In recognition of skyrocketing mortgage foreclosure rates across the country, particularly in economically depressed areas where homebuyers are more likely to have been saddled with unfavorable non-traditional mortgage terms, Morial said, "It is not enough to put more Americans into their own homes if we fail to arm them with the tools needed to sustain homeownership."

The National Urban League Homebuyer's Bill of Rights makes six policy recommendations designed to overcome these obstacles:

  1. The Right to Save for Homeownership Tax-Free
  2. The Right to High-Quality Homeownership Education
  3. The Right to Turth and Transparency in Credit Reporting
  4. The Right to Production of Affordable Housing for Working Families
  5. The Right to be Free from Predatory Lending; and
  6. The Right to Aggressive Enforcement of Fair Housing Laws

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Posted in Economic News: How Are We Doing?, Home Foreclosure | Comments Off

Tuesday, February 20th, 2007

Skewed “News” Reports Designed to Scare Consumers Away from Bankruptcy…But Why?

A news release popped up in my email this morning headlined "Bankruptcy Won't Stop Foreclosure for Troubled Borrowers".   As an attorney who does a lot of research and writing about bankruptcy law, that came as quite a surprise to me.  After all, I knew that Chapter 13 bankruptcy could provide the relief a homeowner needed to catch up past-due payments over time while making current payments.  I also knew that Chapter 7 bankruptcy, while it didn't provide a long-term solution to foreclosure, would in most cases automatically stay foreclosure proceedings temporarily, allowing the homeowner much-needed breathing room in which to assess his options.

So what might that headline mean?  Apparently, this:  "...filing for bankruptcy will not permanently stop a lender from foreclosing on a home if the borrower stops making payments."

In other words, you can't file for bankruptcy, discharge your mortgage debt, and keep your house.  I suspect that's not a big surprise to anyone, and the fact that you don't get a free house in bankruptcy is quite a bit different from the assertion that "bankruptcy won't stop foreclosure".

So why do we so often see these misleading "news" items, spreading the idea that bankruptcy isn't a viable solution for most debtors, furthering the myth that bankruptcy will "ruin your credit for ten years"?

In the case of this particular news release, it's not hard to guess at the answer.  The only person quoted in the release, and the contact for further information about the release, is Patrick McGilvray of The Home Buying Center, LLC.  A quick glance at  The Home Buying Center's website reveals images strikingly similar to those corrugated plastic signs you see in depressed neighborhoods offering to pay cash for your home fast.  The message in this release seems to be, "Bankruptcy won't save your home, so instead you should avoid foreclosure by quickly selling it to us."

In other news items, the connection may be more subtle.  The banking and consumer credit industry has a powerful lobby and a massive public relations machine at their disposal.  And bankruptcy isn't the right answer for everyone, nor something that should be entered into without research, professional advice, and an understanding of the options.

But when direct misinformation like, "bankruptcy won't stop foreclosure" and "you won't be able to get credit for ten years after you file bankruptcy" is part of the "news", question the credibility of the source and seek out the unbiased facts.

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Posted in Bankruptcy News and Events, Home Foreclosure, The Truth about Bankruptcy | Comments Off

Friday, February 9th, 2007

Senate Committee Hears Testimony on Predatory Mortgage Lending Issues

On February 7, the U.S. Senate Committee on Banking, Housing, and Urban Affairs heard testimony from a variety of consumer advocates and mortgage industry spokespeople on the problems of predatory mortgage lending practices and their role in the mounting mortgage foreclosure claims across the country.  Although mortgage industry professionals suggested that the climbing foreclosure rate is the result of numerous possible and probably combined factors, the foreclosure rate for ARMs and other non-traditional subprime mortgages is substantially higher than that affecting traditional mortgages.

In addition, the Center for Responsible Lending recently conducted a study indicating that minority applicants are disproportionately steered toward high-cost subprime loans, even when their credit scores would have allowed them to qualify for more favorable loans or rates.

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Posted in Economic News: How Are We Doing?, Home Foreclosure | Comments Off

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