The Law Planet Blog

As the United States slowly recovers from the mortgage crisis and ensuing economic downturn, the fact remains that thousands of homeowners all across America are still facing the threat of foreclosure. Given the current state of the economy, the possibility of missing just one mortgage payment can sometimes be the tipping point that pushes a homeowner closer to the brink of foreclosure. Despite a seemingly dismal outlook, mortgage modification and foreclosure defense are just two of the tools available to help struggling homeowners protect themselves against foreclosure.

A foreclosure occurs when a lender sues a borrower for not making payments toward the property. The lender’s goal in filing this lawsuit is to recover, through the sale of the property, the money it lent to the borrower. Once a lender files a foreclosure lawsuit, an official will deliver a summons to the homeowner’s residence notifying them of the suit. However, a foreclosure not only has the potential to wreak havoc on a homeowner, it can also lead to community degradation and other negative societal impacts.

According to the Joint Center for Housing Studies, each foreclosed home can reduce nearby property values by 1 percent or more. Additionally, foreclosures can also lead to:

•    The foreclosed home and property falling into disrepair
•    A decrease in buyer perception of the area
•    Unpaid HOA fees, normally leading to an increase in the existing members’ payments
•    A refusal by prospective homeowners to live in a neighborhood that includes foreclosed and neglected properties

While these examples are ominous, it is important to note that a successful mortgage modification can help prevent such negative impacts in addition to possibly allowing a homeowner to keep his or her home. Click on the links below for more information.

Lenders’ Cost of Foreclosure Policy Paper – Mortgage Bankers Association

Foreclosure Sales Affect Home Values - Nearby Homes Feel Effect – About.com

Link to Joint Center for Housing Studies – Harvard University

The Financial Industry Regulatory Authority (FINRA) has permanently barred Michael J. DiMare, of Ponte Vedra Beach, Fla., from the securities industry for “misappropriating over $1.9 million in client funds.” In its news release on the settlement, FINRA stated that Dimare, formerly a registered representative, hid his financial scheme by making false statements and submitting falsified account statements to his customers.

DiMare worked for John Hancock Mutual Life Insurance Company (John Hancock) as a sales manager between 2001 and 2006, and as a registered representative/insurance agent with ING Financial Partners, Inc. (ING) from late 2006 to mid 2008. According to FINRA, DiMare persuaded his clients from at least 2001 to 2008 to invest in fictitious CDs and bonds, including what he described to be “tax free” corporate bonds.

FINRA’s investigation revealed that between 2001 and 2008, DiMare instructed some 14 of his clients to write checks payable to John Hancock – even after he no longer worked there – which he deposited directly into his bank account for eventual personal use. DiMare concealed his scheme by submitting false account statements to his clients who thought they were making legitimate financial investments.

In response to the situation, James S. Shorris, Executive Vice President and Executive Director of Enforcement for FINRA, made this statement:

"FINRA will continue to bar individuals who engage in deceit and theft with no regard for the high standards of ethical conduct that govern the industry. By deceiving customers into believing they were making legitimate investments when, in reality, he was simply enriching himself, DiMare epitomized the darkest side of the securities industry."

DiMare never admitted guilt nor denied FINRA’s charges, but the now barred schemer did consent to the entry of the agency’s findings in the settlement. John Hancock and ING reimbursed the customers defrauded by DiMare’s scheme.

Florida Broker Barred for Selling Phony Financial Products, Taking More Than $1.9 Million From Clients – FINRA’s News Release

Tips from FINRA to help Investors Avoid Financial Fraud

A recent report released by real estate research firm Zillow states that 44.3 percent of South Florida homes were underwater during the first part of 2010. Zillow’s first quarter analysis report also determined that home values in Palm Beach, Broward and Miami-Dade counties continued to decrease from 2009.

In a recent article on the Real Time Blog, Palm Beach Post Real Estate writer, Kim Miller, reports that it could take up to five years for home values to begin climbing,according to Zillow. In addition, the real estate research firm expects national home values to hit bottom not in the second quarter of 2010, but the third, presumably extending the housing crisis nearly all the way through 2010. Zillow is also predicting that negative equity and foreclosures will compound to keep home value appreciation in the U.S. near zero possibly until 2015.

According to foreclosure data, services and online marketplace RealtyTrac, Florida homeowners continue to face some of the highest foreclosure rates in the country. The following is a current breakdown of the foreclosure situation in South Florida:

Palm Beach County: 18,755 Foreclosures
8,401 Homes for Sale

Broward County: 42,467 Foreclosures
3,960 Homes for Sale

Miami-Dade County: 40,184 Foreclosures
8,094 Homes for Sale

Homes still sinking, 44.3 percent in South Florida underwater – Palm Beach Post

Link to RealtyTrac’s map of Florida Foreclosures & Home Sales

Link to Zillow’s Web site

In response to the housing crisis gripping the nation, the Obama administration implemented the Home Affordable Modification Program (HAMP) to stem the growing number of foreclosures in the United States. HAMP is a part of the government’s comprehensive Making Home Affordable initiative to help homeowners who are struggling to make their mortgage payments, or homeowners who are facing foreclosure.

In a recent article on the topic, Reuters indicated that over 230,000 of the approximately 1.4 million HAMP mortgage modifications had been made permanent by the end of March. According to U.S. Treasury spokesperson Meg Reilly, "More than 1.1 million borrowers were receiving a median savings of $500 each month.” The Obama administration hopes to help between 3 to 4 million homeowners receive permanent modifications through HAMP by 2012.

The primary objective of HAMP is to help borrowers avoid foreclosure by modifying troubled loans in order to achieve a more affordable payment. Under the terms of HAMP, however, homeowners must meet certain conditions in order to be eligible for a modification.

To be eligible for a HAMP modification, the following conditions must apply:

•    Your are the owner-occupant of a one- to four-unit home;
•    You have an unpaid principle balance equal to or less than:
      •   1 Unit: $729,750             •   3 Units: $1,129,250
      •   2 Units: $934,200           •   4 Units: $1,403,400;
•    You are having difficulty making your mortgage payments;
•    You got your current mortgage before January 1, 2009; and
•    You have a mortgage payment (including taxes, insurance, fees, etc.) that is more than 31% of your current gross (pre-tax) monthly income.

It is important to note, however, that a homeowner does NOT need to be behind on his or her mortgage payments to participate in the Home Affordable Modification Program. If you are a responsible borrower who is struggling to remain current on your payments, or if you are at risk of default due to a financial hardship or recent payment hike, you may be eligible for a HAMP modification. Please use the resources below to learn more about HAMP and the mortgage modification process.

Home Affordable Modification Program – U.S. Government

US mortgage modification program helps 230,000 permanently – Reuters

Home Affordable Modification Program Guidelines – U.S. Department of the Treasury

As the nation slowly recovers from one of the worst recessions in recent history, millions of homeowners throughout the United States continue to struggle with their monthly mortgage payments. Many hardworking and responsible homeowners who have fallen victim to the unhealthy economy in addition to the mortgage crisis are facing the threat of foreclosure as well. Although the situation may seem dire, a successful mortgage modification can yield a bevy of positive results, including the possibility of avoiding foreclosure in addition to helping a homeowner keep his or her home equity.

The U.S. Department of Housing and Urban Development (HUD) defines a loan modification as a permanent change in one or more of the terms of a mortgagor’s (homeowner’s) loan, which allows the loan to be reinstated. This process normally results in a payment the mortgagor can afford. A lower monthly payment (sometimes half of the original amount) is just one potential advantage of a successful mortgage modification. Some of the other benefits include:

•    An Interest Rate Reduction – Possibly as low as 2%
•    Brining a Delinquent Loan Current
•    Credit Rating Protection
•    A shift to a Fixed-Term Mortgage from an Adjustable-Rate Mortgage

A successful mortgage modification not only has the potential to benefit a homeowner, it can also benefit their lender as well, making it a win/win situation for both parties. A lender generally loses money – sometimes a large amount of money – on a foreclosure, meaning that the lender will generally work to avoid such a situation when possible. A lender stands to benefit more from a homeowner who is making payments, even at a modified or lower level, than from a foreclosure. Therefore, a successful mortgage modification can lead to a homeowner keeping his or her home in addition to the lender continuing to receive payment.

Follow the links below for more information about mortgage modification.

Answers to Questions About New Mortgage Modification Program – NY Times

U.S. Department of Housing and Urban Development (HUD)

Home Affordable Modification Program – Part of the U.S. Government’s Making Home Affordable Program

As millions of American homeowners continue to deal with a struggling economy and a poor housing market, more and more of these individuals and families now have to contend with another problem: a breakdown in communication between banks that service mortgages. Not only does this miscommunication bring frustration, it can also lead to mistaken or even premature foreclosure in spite of a pending mortgage modification application.

This communication breakdown can occur between banks or servicers that are participating in the Obama Administration’s Making Home Affordable Program, despite provisions that prohibit servicers from auctioning a person’s or family’s home while a mortgage modification is pending. The article indicates that the lapses in communication that can lead to premature or mistaken foreclosure continue to occur because they go unpunished for the most part. USA Today indicates that the U.S. Treasury Department is reportedly aware of such problems and is “moving to fix them.”

In a ProPublica news report on the topic, the breakdown in communication between servicers generally occurs due to their organizational structure. The ProPublica article points out that one division normally deals with modifications while a separate unit contends with foreclosures, presumably leading to both internal and external communication problems.

"Basically, you have the right hand at the mortgage company not knowing what the left hand is doing," said Mark Pearce, North Carolina's deputy commissioner of banks. Communication glitches and mistakes are "systemic, more than anecdotal" among mortgage servicers, he said.

Although miscommunication between mortgage servicers does occur, having the assistance of an experienced team of mortgage modification professionals that will aggressively ensure that the servicers communicate properly can help prevent such tragedies from coming to light.

If you are a homeowner in need of assistance with a foreclosure, contact an experienced foreclosure attorney to discuss your situation.

Homes can be lost by mistake when banks miscommunicate – USA Today

Disorganization at Banks Causing Mistaken Foreclosures – ProPublica

Link to the Obama Administration’s Making Home Affordable Program