Published Thursday, August 26, 2010 @ 9:27 am

Debtors attempting to avoid bankruptcy by waiting for housing prices (and equity) to increase may be waiting a long time. In fact, according to The New York Times, wealth-building via housing booms may have also gone the way of guaranteed pensions, free healthcare, and secure employment.

Per the NYT, “many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg. The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming. More than likely, that era is gone for good.”

This rather bearish news on the state (and future) of the housing market is capped by the finding from Dean Baker, co-director of the Center for Economic and Policy Research, who “estimates that it will take 20 years to recoup the $6 trillion of housing wealth that has been lost since 2005. After adjusting for inflation, values will never catch up.”

Unfortunately, many Americans aren’t buying this news on the housing bomb. “In an annual survey conducted by the economists Robert J. Shiller and Karl E. Case, hundreds of new owners in four communities — Alameda County near San Francisco, Boston, Orange County south of Los Angeles, and Milwaukee — once again said they believed prices would rise about 10 percent a year for the next decade.”

In truth, the housing-as-investment ideal that arose post World War II hasn’t been on solid ground for decades–when inflation of the 1970s and favorable tax policies increased housing prices followed by a long decline in mortgage rates in the early 1980s. In the next decade, rates rose, allowing American homeowners to withdraw about $100 billion in home equity houses. These billions paid for a lot of luxury—luxuries that we’re now paying for, in spades,  since the inflated home prices burst the housing bubble in the 2000s.

“The experience we had from the late 1970s to the late 1990s was an aberration,” said Barry Ritholtz of the equity research firm Fusion IQ. “People shouldn’t be holding their breath waiting for it to happen again.”

With substantial sums of money available from home equity in the 1990s now a distant memory, many homeowners in the new foreclosure-plagued, underwater American reality are fortunate to still be solvent. For others, the tumble in housing prices has taken it’s toll, leaving many wondering where to turn no that their own personal “home sweet homes” are leaving a sour taste in their moths.

Don’t wait for your own personal housing bubble to burst. Join the millions of American homeowners who have found immediate help to keep their hard-hit homes. If you have been hit hard by the lingering housing crisis, knowing a qualified bankruptcy attorney can help you to conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future beyond our own “Great Recession.”  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Monday, February 1, 2010 @ 10:23 am

If A Wealthy Developer Can Walk Away From The Mother Of All Underwater Mortgages, Why Can’t You?

Rachel Beck, national business columnist for The Associated Press, asked this very question in a recent article upon finding that heavily capitalized developer Tishman Speyer Properties was able to simply “walk away” from 11,232 Manhattan apartments because it couldn’t pay its mortgage, under the guise of “good business,” while at the same time, in the same country, Rick Gilson, a college custodial supervisor in South Dakota, resists walking away from the mortgage on his mobile home, fearing he’ll be considered “a deadbeat.”

As Beck found, “Those two borrowers face the same financial dilemma: Their mortgages far exceed the values of their properties. Yet one gets to walk away without guilt, while the other can’t. Mr. Gilson is scared to dump the mortgage on his mobile home. He owes $31,973, but the home is only worth about $14,000.” “I have 12 years of money put into this property that I will never get out,” said the 50-year-old Gilson. “But I am still paying because this is what I have been told to do. That’s what I think is right.”

As Beck illustrates, up to this point, the focus of the real estate crisis has been on individual Americans facing their own personal mortgage meltdowns. Today, one in four U.S. homeowners (nearly 11 million Americans) are underwater on their mortgages.  While some experts believe it makes sense to walk away if you’re deeply underwater as it’s not necessarily worth it to keep paying a mortgage when they can find comparable rental housing for less, the argument against walkaways is not only a dropping credit score, but that they will wreak economic havoc. Banks will have made more bad loans, will then make fewer loans and home prices will continue to plunge.

Obviously the rules are different, though, for what Beck calls “the walk away of all walk aways.”

That title goes to the 56-building Stuyvesant Town and Peter Cooper Village complex, the largest single-owned residential area in the city. Commercial real-estate firm Tishman and its partner, investment, paid $5.4 billion for the property, hoping to make money by converting rent-regulated apartments into high-priced luxury condos.

Enter the current housing crash and now the property’s value sits squarely at $1.8 billion: a difference not simply underwater, but drowning.  While Tishman has said that it was turning the property back over to creditors to avoid filing for bankruptcy protection, Tishman has failed to restructure $4.4 billion in debt, unable to find another buyer. So, Tishman exits the deal with a mark on its reputation, and yet a conciliatory $33 billion in assets.

Residential homeowners like Rick Gilson don’t have it so easy. With a mobile home that started depreciating the minute he moved in over a decade ago, he rents out the property just to make the payments, living in another home with his wife.

“I get so stressed over this,” Gilson told Beck. “It’s like the elephant in the room and there is nothing you can do about it.”

While the unfair truth is that real-estate tycoons can default on a $4.4 billion mortgage, but dis-similarly-situated individuals can’t walk away from a $31,000 loan, average Americans do have choices.  As homeowners languish waiting for more immediate mortgage help, many are turning to bankruptcy to stop foreclosure and other creditor actions. For reliable bankruptcy advice that you can trust, contact The Law Firm of John T. Orcutt. And to find out more about your bankruptcy options, visit The Law Offices of John T. Orcutt’s “Things to See and Hear” information.

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Published Sunday, January 31, 2010 @ 6:10 pm

As the mortgage crisis continues on, ironically, President Obama seemed right at home at the podium during his 2010 State of the Union address just as millions of Americans face losing their home. As a result, many concerned citizens sought in the President’s national address any signs not only of “hope” or “change”—expressions made famous during his campaign days—but also second year specifics about what a new year would mean for the millions of average Americans, just like them, facing imminent foreclosure.

In that address, the President laid out an ambitious agenda attempting to attack one specific problem from every conceivable angle: the terrible economic squeeze on America’s middle class.  One portion of his plan mentioned helping Americans stay in their homes, retain their home’s value or absolve home debt, as the President works to “lift the value of a family’s single largest investment.”

President Obama revealed he intends to “step up” programs that encourage re-financing for affordable mortgages. Yet, while the President made clear that he would be increasingly busy in his second year on many fronts, many critics charged that his speech, as well as homeowner assistance policies to this point, has been short on specifics of how to put government to work for those average Americans facing the loss of their homes.

Under the President’s current and primary homeowner assistance plan, the Home Affordable Modification Program (or HAMP),  “responsible borrowers” who have unpaid principle balances of less than $729,750 (for one unit) from a mortgage originating prior to January 1, 2009 may qualify for loan modification assistance if your mortgage payment is greater than 31% of your monthly gross (pre-tax) income.

In addition to flack the President received for only providing housing help for the fuzzily defined “responsible homeower,” apparently the plan, as of last month, has been less than successful for even the most responsible of borrowers. According to a recent Treasury Department report, 27 percent of the 650,000 homeowners taking part in the mortgage modification program are now delinquent on their mortgage payments.  In fact, only 1,711 participating homeowners attempting to avoid foreclosure have been able to convert their modifications to permanent status. Homeowners facing foreclosure and needing help to secure a loan modification have been encouraged to visit http://www.makinghomeaffordable.gov.

To clarify, this type of organized modification effort does not constitute a refinance as the President spoke of; it’s simply a retooling of the mortgage, including a term that might be extended or an interest rate that could be adjusted.  Yet last night, the only thing the President said about the help distressed homeowners might get was this:

The steps we took last year to shore up the housing market have allowed millions of Americans to take out new loans and save an average of $1,500 on mortgage payments. This year, we will step up re-financing so that homeowners can move into more affordable mortgages.

The President never specifically mentioned HAMP, how HAMP might need time to work, or how it could be fixed.  And, most notably for some, he did not mention the word “foreclosure,” at all.

So, as foreclosures continue to escalate, American homeowners may feel that they have increasingly fewer options other than bankruptcy. Of this option, the President had a more definite response, with recent efforts to allow bankruptcy proceedings to renegotiate all debts, including home mortgages.

As American homeowners search for more immediate and specific mortgage help, many are turning to bankruptcy to stop foreclosure and other creditor actions. For reliable bankruptcy advice that you can trust, contact The Law Offices of John T. Orcutt for a totally FREE consultation at 1-800-899-1414.

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Published Monday, October 26, 2009 @ 10:38 pm

In discussing the issues surrounding the current economy, the term “mortgage meltdown” is now officially as tired a wordplay as assemblages like “From Wall Street to Main Street,” “Where’s my bailout?” and “It’s a crisis of confidence.” Beyond these catchphrases, you might still be wondering: What is really behind this recession?

In a nutshell, big banks created a huge demand for mortgage backed securities. Mortgage securities are basically your mortgage, packaged with a bunch of other people’s mortgages, which are then sold on the open market to investment banks who pay for the package based on the quality of loans included. Good borrowers with good loan applications made up the “Prime” packages, and different variations of the packages existed for other qualities of debt, such as “Alt-A” and “Sub-Prime”, the latter being defined by weak credit scores and little documentation. The packaging allowed investors to pick and choose, depending on how much risk they wanted to take on. This worked well as long as everyone in the game stayed honest.

It turns out, everyone involved was not being honest. As more and more consumers qualified for loans, the securities became watered down. It got to the point that literally anyone with a pulse was being qualified for a home loan. The prime packages were increasingly including “low-doc” and “no-doc” consumers, who had little prospect of being able to afford their mortgages over the long term. However, the investment banks kept buying and selling, re-packaging bad loans for investment banks who were hungry for more securities.

This giant tinder box eventually exploded when all parties realized that what they owned was worth far less than they thought. Adding to the devastation was the trillions of dollars in side bets on the market, termed “credit default swaps”. When the whole thing blew up, everyone needed to be paid. The only problem- the banks simply didn’t have enough money to go around. Lending froze as everyone clung tightly to the dollars that remained. Despite hundreds of billions in government money, banks still aren’t completely out of the woods.

Now that the dust has somewhat settled, many entities who purchased the bad debt are discovering that they can’t even prove ownership. In a New York bankruptcy court earlier this month, a mortgage servicer was unable to prove it serviced the loan or that the parent bank was the legal note holder. Upon formal request to prove their ownership of the note, the servicer, PHH Mortgage alerted the court that US Bank actually owned the loan. The only “proof” which PHH could provide was some vague paperwork by PHH officials, multiple signatures by the same executive (although with different titles each time), documents post-dated from the date of bankruptcy filing and eventually, an admittance of improper fees levied and even less proof they had a right to what was owed. The judge, unable to ascertain whether the debtor’s proposed Chapter 13 plan would be paying the right bank, completely disallowed the bank’s claim. You heard that right–the judge completely eliminated well over $450,000 in mortgage debt! Not only will this person continue to sleep in her house, she’ll be doing so knowing her mortgage payment isn’t due any time soon. Or ever.

Not every case involving a confused lender will result in such a favorable outcome. A lot will depend on the supporting documentation behind the loan, but if you bought or refinanced a home during the boom years, the chances are higher that your note holder might not be able to prove that it owns the debt. In a bankruptcy setting, this is a huge problem for the lender, and a potential windfall for the consumer.

The recent New York case is being looked at as a serious wake-up call for lending institutions: the days of free passes and assembly-line foreclosures are over. If you’re a consumer with a bad loan and bad terms you can’t afford, at the very least a bankruptcy may be an option to catch you up on the missed mortgage payments. Call an experienced bankruptcy attorney today to discuss how bankruptcy can help you save your family home. In North Carolina, call the Law Offices of John T. Orcutt. 1-800-899-1414.

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