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December 16, 2011, by M. Hedayat & Associates, P.C.
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US v. Robertson (7th Cir) - How Harsh is Too Harsh?
November 17, 2011, by M. Hedayat & Associates, P.C.
Justia Opinion Summaries
In U.S. v. Robertson the 7th Circuit weighed in on the factors that should be taken into account when sentencing the perpetrators of non-criminal fraud - in this case, bankruptcy and mortgage fraud. Here the Defendants, a husband and wife, appeared to have reformed themselves and were contributing to their community when the matter came to a head.
Facts: The defendants bought up residential properties then sold them to straw men at inflated prices. The inflated bank loans were justified using false information about the buyers' finances, down payment resources, and intentions about remaining in the properties. Before it collapsed, the scheme had resulted in 37 transactions that cost the lenders involved more than $700,000.
Once their scheme collapsed the Defendants declared bankruptcy. They were questioned in the process about their business, but not immediately prosecuted by the U.S. Attorney. Once they received their discharge, the Debtors settled down, got regular jobs, and raised 3 children. The Court even determined that they had become, essentially, upstanding citizens "fully engaged" in their community.
Legal Theory: One day before the statute of limitations would have expired, the U.S. Attorney charged the couple with a single count of wire fraud under 18 U.S.C. 1343 and 2 counts of bank fraud under 18 U.S.C. 1344. The Defendants quickly plead guilty. Using prevailing sentencing guidelines the wife was sentences to 41 and the husband to 63 months in prison; and both were ordered to pay more than $700,000 in restitution.
Opinion: On appeal, the Seventh Circuit vacated the sentences handed out by the District Court and remanded the case with the admonition that the sentencing Judge take the unusually strong evidence of the couple's self-motivated rehabilitation into account.
The Upshot: Hard not to read too much into this case. At first blush it looks like the 7th Circuit was trying to balance the unilateral and inflexible nature of the Sentencing Guidelines imposed on the courts by Congress in response to the mortgage debacle. Read more narrowly however, the truly self-motivated rehabilitation of the Defendant/Debtors seemed to be the key. In other words, this was an exception, not a crack in the rules.
Can You Refinance under HARP 2.0?
October 25, 2011, by M. Hedayat & Associates, P.C.
Recent changes made to the Home Affordable Refinancing Program (HARP) by the O'Bama Administration will allow some, but by no means all, homeowners to refinance to a lower interest rate and save on their monthly payments - even if they would not ordinarily qualify for refinancing from their lender.
Those changes to HARP cut fees for borrowers who want to refinance into short-term loans and pay off their loans faster. The changes also permit borrowers who owe more than 125% of their home's value - i.e. that are underwater - from accessing the program.
To qualify borrowers must have a mortgage that
- Is now owned or guaranteed by Fannie Mae or Freddie Mac
- Was sold to one of the agencies on or before May 31, 2009
- Is now worth between 80% and 125% of your home's value
- Has never been refinanced under the HAR program before
Here's How to Get Started:
Step #1: Find out if your mortgage is owned by Fannie Mae or Freddie Mac
Step #2: Contact a HARP-approved lender to discuss your refinance options
Have any feedback? E-mail me to share your thoughts or leave a reply to this post.
Lien Stripping 101: How to Kill Your Second Mortgage in Chapter 13
August 24, 2011, by M. Hedayat & Associates, P.C.
We help Debtors keep their homes in a Chapter 13 reorganization by making the mortgage company accept past due payments over time. But even that won't reduce future payments. That calls for mortgage modification or a lien strip. What's a Chapter 13 lien strip? Allow me to explain.
The lien strip technique permits Chapter 13 debtors to remove wholly unsecured mortgages from their primary residences. See In re McDonald, 205 F.3d 606 (3 Cir. 2000), which explains a lien strip may only be used by one in Chapter 13; Dewsnup v. Timm, 502 U.S. 410 (1987) explains why Chapter 7 debtors may not take advantage of the lien strip. Not that if joint debtors own their primary residence jointly or in tenancy by the entirety, they must both be in bankruptcy to affect a lien strip.
When is a mortgage wholly unsecured? When a more senior lien accounts for the entire value of the residence and there is no equity to ascribe to that loan.
Example: Debbie and Danny Debtor bought a house in 2002 for $150,000 and put down $0; so the first mortgage is $150,000. Over the next few years the house appreciated in value on paper (ahhh, the good old days ...) so they naturally took out a pair of $25,000 lines of credit. In 2011 however, their house is worth a mere $100,000 but they still owe $140,000 with respect to their 1st mortgage and $25K a piece on the two HELOCs. Hence the two junior mortgages are wholly unsecured and can be dealt with via lien strip.
Are we lien stripped yet? Hold on cowboy. You're not done yet. Once you've determine that junior liens can be stripped in a Chapter 13 reorganization because they are wholly unsecured, you must make the lien strip happen by filing an adversary complaint against the relevant mortgage companies. Note that not all bankruptcy courts require an adversary complaint - some will allow you to simply bring a motion. We in the Northern District of Illinois are not so lucky. But it can be done.
Is it hard to strip a lien? Depending on your lender, the adversary case may be a slam dunk ... or you may have to work for it. We've had cases go either way. The key is whether there is a genuine dispute over the value of the property or the status of the mortgage loans (which one came first, etc.). If you've got that kind of issue then get ready for a long slog.
Well, that's all for now intrepid readers. If you'd care for some light reading about Chapter 13 and the history of the lien strip, feel free to peruse the following cases: Holloway v. United States, 01-C-4052, WL 1249053 (N.D. Ill. Oct. 16, 2001); In re Waters, 276 B.R.879 (N.D. Ill. 2002); In re Pond, 252 F.3d 122 (2nd Cir. 2001); In re Bartee, 202 F.3d 277 (5th Cir. 2000); In re Lane, 280 F.3d 663 (6th Cir. 2002); In re Zimmer, 313 F.3d 1220 (9th Cir. 2002); In re Tanner, 217 F. 3d 1357 (11th Cir. 2000).
Avoiding a Foreclosure
May 28, 2011, by M. Hedayat & Associates, P.C.
From the post Avoiding a Foreclosure
Foreclosure vs Bankruptcy - AVOIDING A FORECLOSURE You have received a Notice of Default or a Lis Pendens - either way the lender has initiated a foreclosure against you. […]
Untitled
May 16, 2011, by M. Hedayat & Associates, P.C.
This piece in the San Jose Mercury News is kind of vague about how homeowners are getting rid of second mortgage obligations, so it's no wonder people are flummuxed about the concept. What it discussed isn't magic but a technique called lien stripping that we bankruptcy lawyers employ all the time. Unfortunately, despite the fact that bankruptcy is Federal, the effectiveness of a lien strip and steps necessary to carry it out vary from jurisdiction to jurisdiction. But yes this is real; and yes homeowners can walk away from second mortgages that are truly unsecured. Note that lien stripping is not in any way the same as loan modification. Bankruptcy Courts have yet to crack that nut.
Illinois foreclosures down ...
March 10, 2011, by M. Hedayat & Associates, P.C.
via realtytrac.com
... but still in the national top 10, meaning that 1 in 550 housing units in Illinois is now in foreclosure. That in turn translates to roughly 1 out of every 10 residential homes.
But the real scourge of the real estate market is that is has hollowed out entire blocks and permanently affected the ability of homeowners to move, sell, divorce, or refinance. Most are stuck, and many are stuck paying for more house than they actually have.
Westlaw Case Updates
November 3, 2010, by M. Hedayat & Associates, P.C.
Reed v. City of Arlington (Sep.17) (Cir. 5)
In a Chapter 7 case in which debtors omitted a pending $1 Million+ judgment from sworn statements and filings, district court's order discharging debts and allowing the Trustee to collect on behalf of the Estate is reversed to protect the integrity of the judicial processes.
Deutsche Bank v. Tucker (Sep. 15) (Cr. 6)
Chapter 13 Debtor claims that she need only cure the amount of her mortgage default that is secured, and that all additional fees and expenses should be treated as unsecured. The bankruptcy court agreed, but the district court vacated and remanded. Following remand the bankruptcy court held that bank fees and advances allowed under the Note, Mortgage, and applicable State law, should be included in the cure amount set forth in the Chapter 13 Plan.
In re: Gebhart (Sept. 14) (Cir. 9)
Court may have property sold and any non-exempt equity distributed even if the property only rose in value after the filing date. In this case the value of debtors' home increased during his Chapter 7 and the bankruptcy court's order approving appointment of a broker was affirmed on appeal. The fact that the value of the debtor's homestead exemption, plus encumbrances, had been equal to the market value of the residence at the time of filing did not prevent the trustee from taking advantage of the windfall.
Failed Bank List
November 1, 2010, by M. Hedayat & Associates, P.C.
New Report: Default Mortgages and Foreclosures on 7.3 Million Homes
June 16, 2010, by M. Hedayat & Associates, P.C.
Mortgages in default and foreclosed homes now account for just over 7.3-million homes. The report for April released by Lender Processing Services shows that there is at least some sign of an improvement in the foreclosure crisis with the number of loans 90 days or more delinquent declining from March. However, there are more than 4-million homes in default nationwide and deterioration levels remain excessively high with two loans rolling to a "worse" status for every single loan that has improved. The overall volume of mortgages moving from delinquent to current status declined to a three-month low supported primarily by "artificial cures" associated with the Obama administration"s housing relief program known as HAMP.
New Home Sales Hit Record Low
February 24, 2010, by M. Hedayat & Associates, P.C.
By Martin Crutsinger of the Associated Press
WASHINGTON — According to the Commerce Department's report released Wednesday, sales of new homes plunged to a record low in January; underscoring formidable challenges facing the housing industry as it recovers from the worst slump in decades. New-home sales dropped 11.2% to a seasonally adjusted annual pace of 309,000 units, the lowest level on record. In fact it fell to the lowest in nearly a half century. And the drop was a surprise to economists who were expecting a slight increase over December's pace. While winter storms were partly to blame, sales have fallen for 3 consecutive months despite sweeping and often heavy-handed government support.
Taking Away your Right to Payments (TARP)
January 5, 2010, by M. Hedayat & Associates, P.C.
The O'Bama administration recently announced that before the Troubled Asset Relief Program expires in October some $30 billion of the $700 billion in the fund is to be used to promote consumer and small business lending.
Now, I may be reading too much into this, but by setting aside just a fraction of the fund, this late in the game, and only after bailing out the financial industry, the Feds are sending the unmistakable message that consumers continue to be a low priority despite the fact that unemployment remains at 10% nationwide, the number of homes lost to foreclosure continues to rise, and new mortgages are an endangered species.
All of which begs the question - what the hell has the administration been doing thus far? I mean besides lobbying for a Nobel Prize ...
Source: Huffington Post
