Foreclosure Offense: Senators Push For Greater Assitance for Homes In Foreclosure

The New York Times reports:

“Senators prodded government officials involved in the bank-rescue plan to do more to help struggling homeowners avoid foreclosure and expressed impatience on Thursday over the pace of the unfolding program.”

“The lawmakers on the Senate Banking Committee urged the officials, in effect, to make the banks do something for the homeowners in return for the billions that the banks are getting from Washington in infusions of capital meant to thaw the credit spigots and get the economy moving again.”

Concerns seem justified, as foreclosure filings surged past 750,000 in the third quarter. And, according to Realty Trac, a foreclosure tracking company, foreclosures seem to be rising fastest in Nevada, Florida, California and Arizona “— states where home prices soared the most during the recent housing boom.”

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Mortgage Meltdown: 2008 Chicago-area Foreclosures Could Exceed 40,000+

The Chicago Tribune recently ran several stories related to the state of foreclosures in Cook County, Illinois and the increasingly large burden placed on the county in attempting to reconcile the situation brought on the sub-prime mortgage crisis.


For stories, see:,0,610972.story,0,3770516.story,0,6780549.story


What’s more…they’ve gad to hire additional judges to deal with the foreclosure caseload.

For the story, see:


Mortgage Meltdown: Chairman of Fed Bernanke Says Bailout Will Take Time; Recovery Will Take Time

The New York Times reports:

Despite the hope that the bailout would quickly relieve some of the economic pressure placed upon the economy, chairman Ben Bernanke warned Wednesday that economic stability will not occur immediately even despite market stabilization. He added that the labor, housing and credit markets would also take time to rebound, without giving an actual estimate of time for recovery. He added, ‘We will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity.’

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Mortgage Foreclosure Meltdown: Study Finds Roughly One In Six Homeowners

The Wall Street Journal reports:

According to Moody’s Economy, one in six U.S. homeowners is now saddled with a home that is worth less than her mortgage. The plummet in home values increases the potential for foreclosures which results in greater economic pressure for an economy that is already on the verge of a recession, according to some.

Additional foreclosures can set off a wave of decreased home values, as a foreclosed home tends to lower values of neighboring homes. The current housing slump, which set off last year’s credit crisis, has decreased home valued by almost one-third in some areas, which accounts for over ten million households.

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An increasing number of clients have contacted us recently who have filed bankruptcy thinking (or being told) that doing so would stop foreclosure and possibly result in being able to recover money damages from the “lender”. The reality that these clients are now realizing is that filing bankruptcy in response to a foreclosure is causing them more problems than solutions and costing more money than they thought without getting the anticipated or promised results as to the foreclosure.

A bankruptcy is a Federal proceeding designed to assist the filing “debtor” with working out debts. There are generally two types of proceedings: one in which the debtor’s assets are “marshaled” and sold off to pay creditors, and a second where debts are relegated to a payment schedule if the Bankruptcy Court approves the debtor’s plan. Recent changes in the bankruptcy laws have made it difficult if not impossible to discharge certain debts such as credit card debt.

When a Bankruptcy is filed, the law invokes what is termed an “automatic stay” of proceedings against the debtor. This would include any foreclosure, which was filed or initiated prior to the bankruptcy. However, the foreclosing party generally asserts that it has an interest in the property superior to any other creditor, and thus the foreclosing party simply asks the Bankruptcy Court for “relief from the automatic stay” to pursue the foreclosure outside of the bankruptcy. These requests are generally granted, which then permits the foreclosing party to proceed with the foreclosure either in state court (in “judicial” foreclosure states) or through a trustee’s sale in “non-judicial” states. As such, the only thing filing bankruptcy did, as it relates to the foreclosure, was temporarily halt the process, and the debtor/borrower winds up back in the same position in the foreclosure as s/he did before the bankruptcy was filed.

A debtor can challenge a foreclosing party’s request for relief from the stay in the bankruptcy case, but this is a highly technical procedure invoking specific provisions of the United States Bankruptcy Code. If the challenge is denied, this results in the foreclosure being put back into the same posture as it was before the bankruptcy was filed.

Such challenges to the foreclosing party’s request to proceed with foreclosure may also involve the filing of what is termed an “adversary proceeding” inside of the bankruptcy case, which is in essence a mini-lawsuit on the issues raised in the Adversary Complaint and any responses to it. These proceedings are usually subject to a very rapid trial schedule, leaving the debtor and/or his attorney little time to mount a proper defense and result in the attorney having to do a lot of work in a short period. If the defense is not properly presented and the requested relief is denied, that defense cannot be re-raised outside of the bankruptcy in a separate state court or other proceeding.

A foreclosure case in a judicial foreclosure state can be defended without having to file bankruptcy and depending on legally available defenses, certain of which are revealed through a formal audit of the loan documents. The scheduling in state court usually affords more time to prepare a defense through the use of discovery (e.g. document requests and depositions) and motions filed with the court. State courts are also generally more lenient than the Federal Bankruptcy Court when it comes to requests for extensions of time to file papers, respond to discovery or motions, and the like.

In non-judicial foreclosure states, a borrower can file a separate lawsuit to seek assertion of rights or defend a foreclosure, again without having to file bankruptcy. As with judicial foreclosure states, the scheduling of such proceedings is usually, in our experience, much more liberal than the rapid scheduling of adversary proceedings in Federal Bankruptcy Court.

Further, an adjudication of Bankruptcy has many long-term consequences:

(a) the borrower’s FICO (credit) score is significantly lowered;

(b) the borrower will have problems obtaining credit for a car loan, etc;

(c) the borrower may have problems securing rental housing (as landlords frequently check credit reports before signing a lease); and

(d) the Bankruptcy stays on the borrower’s credit report for years.

As such, filing bankruptcy in response to a foreclosure usually only accomplishes a very limited result (that being a short delay in the foreclosure process), and has significant short- and long-term consequences for the borrower/debtor. Anyone contemplating the filing of bankruptcy in response to a foreclosure should thoroughly consider ALL of the ramifications before filing as, in the end, doing so might cause more problems than it was intended to solve.

Jeff Barnes, Esq.

[email protected]


As all of you know, the Congress of the United States wound up passing the “Bailout Legislation” which has been touted as being in the best interests of those in foreclosure, as being legislation which will help homeowners, and which will reduce foreclosures. However, a close reading of this bill reveals that these claims are dubious at best, and that a significant portion of that version of the bill which was passed (for $840 billion, over the original $700 billion) concerns payments for things such as wooden arrows, tax reimbursements on rum imports, etc. that have nothing to do with helping homeowners facing foreclosure.

The bill essentially provides for the creation of an entity controlled by the Secretary of the Treasury and other politicians for the purpose of purchasing “troubled assets” with your tax dollars on the alleged premise that the infusing of this money into those institutions selling the troubled assets will loosen credit markets and make monies available for loans to homeowners. However, there are no conditions or restrictions, which require those entities receiving funds to use the funds for purposes of creating loan availability. Given the overall state of the economy, the institutions receiving these monies will probably wind up using most if not all of the funds to pay their own mounting debts including interest on loans or lines of credit and operating expenses, leaving little or no funds to loan to borrowers.

Whether particular assets will be purchased is the subject of investigation, review, and reports to Congress before any such purchase is approved. The entity has the discretion to purchase specific “troubled assets” after making a determination as to whether such purchase will, in the end, benefit the entity. As part of this discretion, the entity may determine that it will make more money by foreclosing on an asset than entering into a loan workout agreement with the borrower. Again, the decision is in the discretion of the entity.

The entity may also receive “reasonable requests” for a modification of the terms of the mortgage loan, but again, the entity has the discretion to approve or deny such request, which, if even considered, has to be approved by Congress.

There are no provisions in the bill to halt, slow, cease, or impose a moratorium on foreclosures generally. Having the entity formed, staffed, and implementing procedures for asset purchase will take months if not longer, especially given that this is an election year. As such, the current rampage of foreclosures will continue unabated despite the taxpayers forking over $840 billion of their money to bail out those who, in many instances, perpetrated the mortgage meltdown in the first place.

Jeff Barnes, Esq.

e-mail: [email protected]

Foreclosure Offense: Countrywide Agrees To $8.68 Billion Settlement Thanks To Work Of 11 Attorneys General

In Sacramento, California, Legal Newsline reports:

With news of billion dollar settlement, foreclosures may not be imminent for some affected parties. With word traveling fast, several Attorneys General received wind of the decision on Sunday night.

According to San Diego City Attorney Mike Aguirre, one of many attorneys suing Countrywide over its lending practices, “This is definitely a home run.” Lead negotiator California Attorney General Jerry Brown hailed, “Unlike last week’s congressional bailout.” He further stated, “This loan-modification program provides real relief for borrowers at risk of losing their homes.”

Of the $8.68 billion settlement, $3.5 billion is being awarded to California, the largest award of its kind. The second largest award – $484 million in 2002 – was paid by Household Financial Corporation.

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Foreclosure Offense: Foreclosure Scam Artist Receives 10 Year Sentence; Forfits $2.5 Million

In New York City, Reuters reports:

Maurice McDowall, a New York operator of a fraudulent foreclosure rescue scheme was sentenced on Wednesday to 10 years in prison and will forfeit $2.5 million. This case involved a scam that ran from November 2003 through April 2005 in Brooklyn and The Bronx.

Mary Banks, one of the victims of the scheme, told the U.S. District Court in Manhattan on Wednesday that she had put her life’s work into her house since 1958 and was “still fighting to stay in my premises.” She said defendant Maurice McDowall, who pleaded guilty in June to charges of conspiracy to commit bank and wire fraud, “deserves any misery he has put on us.”

Other victims told the court how they trusted McDowall to help them avoid foreclosure but fell foul of the scheme. McDowall, 49, said he was sorry for the crime and told the court, “While I was committing the crime we were all in the pot. Whatever we decided to do to save the home we did together.”

In sentencing McDowall, U.S. Judge Robert Patterson also ordered him to pay $100,000 restitution. The forfeiture of $2.5 million was part of his plea agreement. Another defendant Aleksander Lipkin also pleaded guilty in June. He agreed to forfeit $7 million and faces up to 30 years in prison when he is sentenced on October 10. Six people in all were indicted in December last year with fraudulently obtaining titles to scores of homes and taking out bad bank loans against them worth more than $20 million.

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Mortgage Meltdown: Report Finds Serious Potential for “Another Wave of Unnecessary and Preventable Foreclosures”

Website Legal Newsline reports:

Mortgage servicer efforts to keep U.S. homeowners from going into foreclosure have decreased according to a report by state attorneys general and banking regulators on Monday. The State Foreclosure Prevention Working Group(1) report found that for the period February through May that nearly 80 percent of seriously delinquent homeowners are not on track for any loan work-out or loss mitigation assistance to help them avoid foreclosure. “Too many homeowners face foreclosure without receiving any meaningful assistance by their mortgage servicer,” the report said, “a reality that is growing worse rather than better, as the number of delinquent loans, prime and subprime, increases.”

The report — — is based on data collected from subprime mortgage servicers. “While some progress has been made in preventing foreclosures, the empirical evidence is profoundly disappointing,” the report said.

For article, see

For report, see