Archive for the ‘Foreclosure’ Category

Well, as most of you may know by now; Washington is too busy bailing out your mortgage companies to help homeowners. Therefore, I decided thought this would be a good time to reprint an article my partner Stefan Cencarik wrote a few months ago.

Many of our clients tell us that they are considering bankruptcy because they are having difficulty making their monthly mortgage payment. If you fall into this category, you are not alone. Whether or not you can keep you home depends on several factors. To determine if you can/or should keep you house, follow these steps:

Create a budget:
First, you should total all of your net monthly income (take home pay) for both you and your spouse; be sure to include any rental income you receive. Second, write down all of your household expenses, which include: your mortgage payment, utilities, car payments, food, health care (if not deducted from your paycheck), transportation, insurance, gasoline, child care, child support, and other necessities that you require to meet your basic needs. Do not include payments to unsecured creditors, such as credit cards, medical bills, and personal loans in your budget.

Next, subtract the total amount of your monthly expenses from your family’s net monthly income; you should have an approximate total of your monthly disposable income. If this number is negative (or in the “red”), then it is likely that you cannot afford your mortgage while meeting your basic needs. In other words, you are sacrificing some of your basic needs to pay the mortgage, or you are paying for your basic needs while not making your mortgage payments. If the number is positive, then you can’t make your mortgage payments because of your debt burden.

Ask your mortgage lender about loan modification
If you cannot afford your mortgage payments; then bankruptcy cannot help you save your home. However, many times mortgage lenders will provide their customers an opportunity to lower their monthly mortgage payments by “modifying,” or changing the terms of the loan. These changes typically lower your interest rate, provide graduated repayment options, or extend the term of your loan. At times, mortgage lenders will also allow you to payback all overdue mortgage payments as part of a balloon payment, or permit you to make additional payments to “catch up” on the mortgage. The loan modification requirements vary among lenders and you should contact the “loan modification,” “workout,” or “loss mitigation” department at your mortgage lender.

Consider Chapter 13 Bankruptcy:
If you have sufficient income to pay your mortgage, but you are behind on your mortgage payments then a Chapter 13 Bankruptcy will allow you to “catch up” on your past due mortgage payments over a period of 24 – 60 months. You will be required to pay your regular monthly mortgage payment AND make a monthly payment to the Chapter 13 Trustee. The bankruptcy will stop any foreclosure action and will allow you to live in your home.

The Chapter 7 Bankruptcy Alternative:
If you cannot afford your regular monthly mortgage payment, and you cannot workout an acceptable modification with your lender, a Chapter 7 Bankruptcy will permit you to leave the home while eliminating any financial liability on the mortgage loan. In other words, when the bank eventually forecloses the property you will not be responsible for paying back a deficiency assessment. This deficiency is assessed to you when the foreclosure auction sale price is not sufficient to payoff the mortgage loan in full. A Chapter 7 bankruptcy will permit you to leave the property without any financial liability and provide you with a fresh start.

Contact one of our Massachusetts Bankruptcy Attorneys:
The worst thing you can do is do nothing. While this article is designed to explain your options, it is not legal advice. Everyone’s situation is different, if you have any questions, you should consult with one of our Massachusetts bankruptcy attorneys toady; the consultation is free, so you have nothing to lose.

If you have applied for a loan modification with your Mortgage Company or servicer, you are not alone. In fact, there are published reports of mortgage lenders and servicers receiving hundreds of thousands of requests for loan modification. However, there are few published success stories about homeowners who have actually been granted a loan modification. It is estimated that since early March, a mere 55,000 trial loan modifications have been granted by mortgage lenders following the launch of President Obama’s foreclosure prevention program. This success rate is low considering the number of homeowners who are currently facing default, foreclosure, or even eviction from their home. Due to the high volume of loan modification requests, loan servicers are currently overwhelmed by the influx of applications. President Obama’s administration launched a foreclosure prevention program and guidelines on March 4, 2009, however, it has taken mortgage companies and servicers months to overhaul their internal systems and train their staffs on processing applications. This period where lenders are ramping up for loan modifications has caused delays and frustration for many homeowners who are looking for a lifeline from their mortgage company.

The “Investors First/Customers Last” Approach

Another barrier to loan modification is the pressure placed on mortgage servicers by their investors. In many instances, hundreds of mortgages are “pooled” or packaged together as a securities and sold to a group on investors. Sometimes there are hundreds of investors in these “pooled” securities. Not only is it difficult to get all the investor’s consent for a loan modification; but, there is no incentive for these investors to grant consent to modify any mortgages that are part of their pool. These investors are not required to, and there is nothing to compel them to consent to any loan modification. Many servicing agreements between investors and mortgage servicers restrict and prohibit the mortgage loan servicers from modifying the material parts of any loan, such as the interest rate, repayment terms, or monthly payments. This results in you, the homeowner, waiting months and months for approval your loan modification that is probably never going to come.

Bankruptcy Court Intervention: A Guaranteed Solution

So, what is a homeowner to do? A Chapter 13 Bankruptcy can help homeowners prevent the foreclosure of their home, and provide a plan for the repayment of all past due mortgage and escrow payments. A Chapter 13 Bankruptcy cannot modify the terms of your first mortgage, and, in many instances, the success of a Chapter 13 case depends on the willingness of the mortgage lender to modify a mortgage and reduce monthly payments. In limited cases, a Chapter 13 bankruptcy can avoid and eventually discharge a second mortgage. This action can be taken immediately in a Chapter 13 case, which can reduce your total monthly mortgage payment by the amount of your second mortgage. This relief applies in limited circumstances and it is important that you consult with an experienced Massachusetts bankruptcy attorney at Grantham Cencarik, P.C. to determine whether you qualify.

The First Step: Call Us – (617)497-7140

In the mean time; if you receive a letter from your lender concerning foreclosure; call us immediately; because the longer you wait, the more likely you are to lose your home. Also avoid talking to anyone who claims that they can save your home without filing bankruptcy, chances are, it is one of the many predators out there who try to steal the equity in your home, or who take money from you. If you are approached by one of these people, tell them you want to have your lawyer review their offer first, then call us for a free consultation.