Illinois Bankruptcy Lawyer Blog

As pointed out here, recent studies have empirically shown what bankruptcy attorneys have known anecdotally for years -- that debtors can not only obtain credit after filing, but that on average they receive 3 times as many solicitations as non-debtors. Those study concluded that this kind of behavior by banks and financing companies indicates that such creditors

• are aware of the debtor's recent bankruptcy -- even referring to it in it solicitation material

• do not believe that debtors are chronic deadbeats -- but rather that bankruptcy can be followed by greater financial stability (otherwise why extend additional credit to them?)

• may have been playing the bankruptcy system themselves when they fought tooth and nail to change the law, only to liberally grant credit to the very people they said were damaging them due to repeated defaults.

To my knowledge the credit industry has yet to respond.

Bankrupt Lenders as of August 20, 2007§ Aegis Mortgage § American Home Mortgage § Investment Corp. § Homebanc Mortgage Corp. § Mortgage Lenders Network, U.S.A. § New Century Mortgage Corp. § Resmae Mortgage Corp. § Ownit Mortgage Corp § People's Choice Home Loans =====================================================

Report Says Countrywide Has Begun Undisclosed Number of Layoffs

Monday August 20, 10:09 AM

LOS ANGELES (AP) Countrywide Financial Corp., the nation's largest mortgage lender, has begun laying off staff as part of its effort to ride out the credit crunch that has rocked the home loan industry, according to a report published Monday. The job cuts occurred in Countrywide's Full Spectrum Lending unit, according to the Wall Street Journal, citing an internal e-mail sent Friday to employees of that division. The e-mail didn't disclose how many employees were laid off from that division, which handles many Alt-A mortgages, which are given to customers who either have minor credit problems or who cannot provide full income documentation required to get a traditional prime loan. Last week, Countrywide, which as a whole employs about 61,000 people, was forced to borrow $11.5 billion so it could keep making home loans. It was a move that rattled investors who have watched a number of smaller mortgage companies go under because of credit problems. Countrywide Financial spokesman Daniel Weidman did not immediately respond to a phone message left early Monday seeking comment. Its shares rose 74 cents, or 3.5 percent, to $22.17 in early trading Monday after rising 13 percent on Friday. They have traded in a 52-week range of $15 to $45.26 over the past 52 weeks. Countrywide is the largest mortgage lender by volume, accounting for more than 13 percent of the loan servicing market as of June 30, according to the mortgage industry publication Inside Mortgage Finance. The mortgage lending industry has been grappling with a spike in mortgage defaults and foreclosures as the housing market has cooled. Many homebuyers have been forced into default or foreclosure because they haven't been able to sell their homes or end up owing more than their home is worth. A jump in subprime mortgage defaults earlier this year forced several lenders out of business and prompted industry-wide tightening of lending standards involving higher risk borrowers. Like other lenders, Countrywide, based in Calabasas, has also tightened its credit guidelines and stopped selling some types of adjustable rate loans.

Glenn Stearns, Chapter 13 Trustee for the Chicago Suburbs (the "collar counties") recently pointed out that creditors holding revolving charge accounts (department store credit cards are a classic example) frequently file claims as general unsecured creditors despite the fact that

• cardholder agreements may give rise to a non-possessory purchase money security interest, and
• section E3 of the chapter 13 plan now in use allows such claims to be characterized as secured

As a result the creditor may receive more in so-called adequate protection payments than they would in the form of a general distribution or dividend to unsecured creditors. Examples of creditors falling into this category include Best Buy, Circuit City, Home Depot, and Harlem Furniture.

Bankruptcy: In re Big Idea Productions, Inc., 03 B 35893

Adversary: Big Idea Liquidating Trust v. Safeco Insurance Co., 07 A 00092

Issued: July 24, 2007

Judge: John H. Squires

See the opinion here or download a copy from the Box on the right >>>

RIP

As pointed out in this post, yet another million-dollar real estate concept has bitten the dust in Central Florida. This time it's the condo-tel. Que? Let me explain -- the idea is both simple and (if you ask me) makes perfect sense. It springs from the same well as the idea of conventional condo's; specifically, a hotel looks to guests to "buy" their room or suite, then "rent" it back to the hotel to book with other guests when the owner isn't there to use it. Many hands lighten the load. Everyone wins. Well, not everyone. See, although it has been just a year since the condo-tel movement (fad?) peaked in places such as Orlando and Miami, it is already officially dead according to news people and analysts from Las Vegas to Florida. Why? Turns out that people who placed deposits are backing out in droves, primarily because (you knew this was coming) they were planning on buying with HELOC money they now can't borrow due to the liquidity crunch that sabotaged their home's value, caused interest rates to soar, given underwriters around the country Excedrin headaches, and sucker-punched real estate from coast to coast. Plus, with former mortgage cream-puffs such as American Home Mortgage unable to fund $800 worth of home loan commitments (and counting), it looks like the crisis continues to resonate even with innovative ideas like the condo-tel.

Property: xxxxxxxxxxxxxxxx, Lake Forest, IL 60045 PIN: xx-xx-xxx-xxx-0000

Transaction involved the sale of a newly constructed home for a purchase price of $1,859,000. Loan amount was to be $1,487,200. Borrower"s cash to close amount was $277,841.38. On July 18, 2007 a closing was scheduled. Seller"s attorney and buyer (buyer had no attorney) were present. All lenders documents were signed and seller"s documents were presented. The borrower then stated he had to leave to get his cashier"s check. Buyer/borrower never returned with funds to close nor did he call. On Mon July 23, 2007 the lender cancelled the closing.

The closing was then rescheduled for July 26, 2007 at noon. Seller"s attorney and buyer (buyer had no attorney) were present and all lender"s documents were signed and seller"s documents were presented. The buyer/borrower had to leave to get his cashier"s check. The buyer/borrower left the closing at 1:30 and returned at 5:45 with an unidentified male. The closer requested funds from the buyer. The unidentified male had the checks for closing and seemed reluctant to present them to the closer. The closer was presented: 2 cashier"s checks each in the amount of $50,000, 9 money orders each in the amount of $20,000 and 1 money order in the amount of $1,200. The closer felt uncomfortable due to hesitation to turn over checks and number and amounts of money orders. The closer consulted with the office manager and closing manager who decided to "dry close" until the next day so that funds could be verified. The closer returned to the closing table and informed the closing of the decision to "dry close" and verify funds. The unidentified male said "I am going to need those checks back, because I am the one who signed them. They won"t be any good tomorrow. I will bring you new ones tomorrow." The closer returned checks to the unidentified male. The closer returned to the office manager to advise him of what she was told by the unidentified male. The office manager decided the transaction can not close unless the buyer"s funds were wire transferred. The closer returned to the closing table and informed the buyer and unidentified male of the office manager"s decision. The seller"s attorney asked for wire instructions and everyone left.

Fri Jul 27, 2007 the lender requested their wire be returned and package shredded.

Mon Jul 30, 2007 the loan officer and seller"s attorney tried to reschedule closing for a third time. The office manager consulting with underwriter decided to terminate Chicago Title"s involvement.

The increasingly ominous financial cloud looming over the housing market does not leave us feeling that working will make us secure. As pointed out by Michael Vizard, Channel Insider, tight credit means smaller budgets and fewer mergers and acquisitions. Of course this goes without saying. SMB's currently slugging through the summer on slow, if any cash flow, with grander ideas of seasonal expansion will find the avenues of additional funding smaller an smaller. How many will fall victim? I never quite understood the reasoning behind low interest home loans when the source is NOT a real estate company.

Yet to embark on the 2nd American Dream, your own business, you need to put that same home up as collateral. I can hear the risk managers in the background growling already. And as for risk? Little thought was given to the new applicant signing up for a 2nd loan to cover the down payment which they clearly did not have for the initial purchase. Use that same reasoning when trying to upgrade your computer network too improve customer service an retain more paying clients, it falls on deaf ears. The raising rate of Foreclosures will eventually turn into Bankruptcies. Which now adds an additional black mark against anyone applying for employment an has a Credit Check run on them. So beyond the housing market this will also affect the employment possibilities of many talented individuals which companies are currently scrambling for. This blog's recent posting, Alliance Bankcorp of Oak Brook, still has my hair [what little is left] in knots, because I'm sure there are more to come. An what happen to all the loans that of course were sold to other sources? an those not? New rates that force more foreclosures. What if anything is going to happen to the officers and said "salespeople" of such organization? Nothing. Talk about white collar crime. What kills me this is suppose to be a "regulated" business. Like the flow of money, they never used their own, their funding came from higher sources, say Federal Reserve. An no-one questioned the tactics or loans that were generated. What is this? Get what you can until they turn the water off, your hands are clean because someone "else" signed the agreement to pay. We continually hear stories of low unemployment rates and turn a blind eye to the many two income families with (2) jobs each. The cost of living or should we say survival, has risen so fast in the last 6 years alone the pace itself will bury many. Personally I learned my lesson in the 80's when we had the first housing market debacle. In those nightmare times cash ruled and accordingly I have done without alot of new gadgets and additional toys. Push my vehicles over 100k miles, started a garden that now feeds me in the summer months an make time for fishing. A Winnebago on the Mexican coast is looking pretty good.

On Monday September 10th, DuPage Bar Center - Glenn Stearns will host a seminar on "The Bankruptcy Abuse Prevention & Consumer Protection Act." Just curious here ... does abuse prevention apply to companies like Alliance Bankcorp? Does the Act actually protect us against those snakes in suits that pass for financial executives? Still wondering about that ...

Bankruptcy: In re Doctors Hospital of Hyde Park, Inc., 00 B 11520

Adversary: Doctors Hospital of Hyde Park v. Desnick, 02 A 00363

See Additional Findings of Fact and Conclusions of Law (July 25)

Judge: Jack B. Schmetterer

Summary: Both sides attempt to re-argue facts and issues settled by the Court the first time around. No new evidence is introduced. The Court rests on its prior opinion.

Download opinion from the Box on the right >>>

:: Bankruptcy Attorney in Illinois :: M. Hedayat & Associates, P.C. ::