Reform of Complicated Mortgage Forms to Help Potential Homeowners

Posted on February 28, 2013 by Staff Writer

On June 20, 2012 the Consumer Financial Protection Bureau (CFPB) testified before the House Financial Services Subcommittee on Insurance, Housing, and Community Opportunity to highlight CFPB solutions to the problems with the current federal law regarding consumer mortgages. In a presentation, CFPB Deputy Director Raj Date explained that the two forms consumers must agree to under federal law have overlapping information and inconsistent language. “Not surprisingly,” he said, “consumers often find the forms to be confusing. It is also not surprising that lenders and settlement agents find them burdensome to provide and explain.”

The first of these developed under the Truth in Lending Act (TILA), and the other by the Real Estate Settlement Procedures Act. (RESPA) According to Date, these forms did not properly detail how mortgages worked with consumers. “For example,” he said, “many consumers select a loan based on their ability to afford the mortgage payments. But some consumers experienced “payment shock” because they did not understand that they payments could include unaffordable amounts a few years or even months after closing.” The Dodd-Frank Act transferred authority of the TILA and RESPA to the CFPB in 2011.

This ultimately means that the convoluted TILA and RESPA will be replaced by the CFPB with easier-to-understand forms “that will make the mortgage process easier for consumers and industry.”

Research to come up with the new forms include but is not limited to:

Meeting with consumer advocates, other banking agencies, and credit settlement agents to better understand the issues that consumers and the industry face
Launched the “Know Before You Owe” project—an informative drive on the CFPB website to share prototypes of the disclosure funds and a place for consumer feedback.
A Small Business Review Panel to “gather information from representatives of small lenders, mortgage brokers, settlement agents, and not-for-profit organizations about the costs of the proposals under consideration and potentially less burdensome alternatives.”

While these new procedures won’t help the one in 17 Arizona homeowners who foreclosed in 2010—and those who faced subsequent bankruptcy because of it—it is good new for Arizona residents as the state recovers from its particularly bad housing crash. If you or someone you know does, however need bankruptcy assistance, contact a dedicated Arizona bankruptcy attorney today.

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Retaining Assets During Bankruptcy in Arizona

Posted on October 17, 2012 by Staff Writer

For many Arizona residents, bankruptcy is the only option to escape the crippling burden of debt or foreclosure. Chapter 13 is commonly called the “wage earner’s bankruptcy,” as workers can continue to keep a portion of income that they earn during bankruptcy to help get their feet back on the ground. Filing a Chapter 13 bankruptcy is a bit more complicated than the straightforward Chapter 7. According to the U.S. Federal Bankruptcy Courts, a Chapter 7 provides for “liquidation,” which means “the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.”

In Arizona, according to the Arizona state bankruptcy courts, a Chapter 7 bankruptcy provides for a Homestead Exemption, of up to $150,000 for either a home (including mobile homes), plus the land upon which the home is situated. Personal property exemptions can be up to $4,000 and money, benefits, and proceeds up to $20,000. There are a few other property exemptions—making Arizona one of the best states in which to file a Chapter 7 bankruptcy—but if you’re interested in retaining the majority of your assets, including money earned while in the throes of bankruptcy, filing a Chapter 13 might be better for you.

The biggest advantage of a Chapter 13 over a Chapter 7 filing, according to the U.S. Bankruptcy Code, is that “Chapter 13 offers individuals an opportunity to save their homes from foreclosure.” If a person files for Chapter 13, he can “stop foreclosure proceedings and may cure delinquent mortgage payments over time.” In a state such as Arizona, which was hit particularly hard by foreclosures and the imploding of the housing market, a Chapter 13 filing might be a better option for cash-strapped residents.

If you or someone you know is considering bankruptcy, don’t go through it alone. Contact a dedicated Arizona state bankruptcy attorney today.

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Owning a Home After Bankruptcy

Posted on September 18, 2012 by Staff Writer

Arizona was hit notoriously hard by the housing market crash of 2008, making several top ten lists for foreclosures and drops in new home sales. The state is on its way to a full recovery, however. In August 2012, according to RealtyTrac, the state was down to 57,438 homes currently in foreclosure, as opposed to the 3.2 million that were foreclosed in 2008. According to a 2009 article published in the Phoenix Biz Journal, the foreclosure rate rose 225 percent from 2006 to 2008 in the state.

Bankruptcy and foreclosure often go hand in hand, and one can result in the other. As foreclosure rates drop across the state, so are the rates of personal bankruptcies. In May of 2012, the USA Today reported that late home payments are decreasing faster in Arizona than in the nation as a whole, reflecting the positive trends in the state. As former homeowners pull out of bankruptcy, they will look again to owning a home. This is another example of how the housing market recovery and bankruptcies are related.

It may seem impossible to immediately take on a new mortgage after bankruptcy, especially if foreclosure is what led to financial insolvency. Yet counterintuitive as it sounds, taking on credit—and using it responsibly—is the only way to recovery after bankruptcy. New mortgage restrictions that have been passed and made into law over the past few years, which include mandates of insured clarity of the borrower. Taking on a new, easy mortgage could be the best way to recover from bankruptcy.

Interest rates will be higher, of course, but these will lessen as time passes, providing that you never make a delinquent payment. Understanding the ins and outs of bankruptcy is a complicated process, and shouldn’t be gone through alone. Contact a dedicated Arizona bankruptcy lawyer today.

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New Rules Could Hurt Average Homebuyer

Posted on August 2, 2012 by Staff Writer

According to JPMorgan Chase & Co. analysts and reported in Bloomberg News, “a change in rules for the most liquid part of the agency mortgage-bond market as Wall Street fights municipal seizures would make even government-backed loans costlier for certain borrowers.” Cash-strapped homebuyers and would-be homebuyers—especially lower income, first-time buyers—rely on government loans to make ends meet when buying a home. Any change in the rules for agencies who control the flow of money in and out could be bad news for the average American homebuyer.

Under the new rules, loans from areas that use eminent domain powers to buy “underwater” mortgages would be excluded from the TBA (to-be-announced) market. In this market, where, according to Bloomberg, “forward sales contracts can be filled with any bonds matching a broad set of characteristics would have a significant effect on credit availability for borrowers in these locations.”

The new rule would also allow investors and banks to withhold new mortgages. For other types of loans, the “use of eminent domain would lead investors to demand interest rates as much as 2 percentage points higher,” according to Bloomberg.

An underwater mortgage is defined by Investopedia as “a home purchase loan with a higher balance than the free-market value of the home.” According to the Huffington Post, “the Federal government has refused to take major initiatives to help underwater homeowners. As a result, we are likely to see close to one million foreclosures both this year and next, with the numbers only gradually slipping back to normal levels by the end of the decade.” With the foreclosure rate slowly recovering, these new laws could result in a setback that erases any recent tentative gains in the housing market.

If you or someone you know could be affected by these new regulations, don’t go through it alone. Contact a dedicated Arizona bankruptcy attorney today.

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California Proposes Legislation to Help Homeowners Avoid Foreclosure

Posted on July 14, 2012 by Staff Writer

According to Reuters, in early July California legislators “approved a swelling bill aimed at stopping abusive practices by mortgage lenders and helping homeowners avoid foreclosure.” One such practice is known as dual tracking, ”in which banks move ahead with foreclosures while still negotiating with homeowners over loan modifications. Reuters calls the legislation “among the most ambitious of its type in the nation.” The law also allows homeowners to sue banks for “robo-signing,” in which “foreclosure documents are signed en masse without review.”

In the housing and financial crisis of 2008–2010, California consistently rated high among states with the most number of foreclosures. Nevada usually leads with the most foreclosures, followed closely by Arizona, and then California. If the legislation works in California, it seems probable that Arizona lawmakers may look into creating their own form of the same legislation, since the states share similar foreclosure trends.

The law, however, is opposed by “banks, mortgage services, and some real estate market professionals,” according to Reuters, who say that “such legislation imposes unnecessary burdens on lenders and has the effect of delaying, rather than preventing, foreclosures.” If this proves to be the case, such a law could actually impede the recovery of the industry.

Foreclosures are consistently ranked among one of the top reasons for personal bankruptcy, and the two often go hand in hand. According to ClearBankruptcy.com, 1.5 percent of all personal bankruptcies in 2010 were caused by an attempt to avoid foreclosure, by any means necessary. This often meant file for financial re-organization, to hold on to the American dream of home ownership.

If you or someone you know is facing bankruptcy due to foreclosure, don’t go through it alone. Contact an experienced Arizona bankruptcy attorney today.

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Will Filing Bankruptcy Stop an Eviction in Arizona?

Posted on April 18, 2012 by Staff Writer

Failure to pay rent or violation of lease agreements may result in a tenant receiving an eviction notice from the landlord. Arizona renting and leasing laws state that a landlord needs to give the tenant he or she plans on evicting a document demanding the tenant has five days to comply or quit, or pay or quit. In other words, the tenant can either pay past-due rent, comply with lease regulations or move out of the unit. If a landlord does not hear from the tenant, they can then proceed with filing eviction papers at the end of the five-day period.

While all of us want to pay rent in a timely manner, unforeseen occurrences can result in the inability to make a payment. Being laid off, unexpected medical bills due to an accident or illness or other unfortunate circumstances can prevent someone from having enough money to make a rent payment. Sometimes landlords are understanding and allow extra time for rent to be paid. However, some are not so understanding and will proceed with the eviction process regardless of the circumstance.

Can a tenant delay eviction by filing bankruptcy in Arizona? According to the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, the answer depends on when the tenant filed bankruptcy. If a tenant files for bankruptcy prior to the eviction notice being served, then an automatic stay prevents a landlord from issuing an eviction notice. Despite this, the landlord can legally ask the bankruptcy court to void the automatic stay in order to proceed. Frequently, a judge approached by a landlord wanting to evict someone who has already filed for bankruptcy will lift the stay because breaking lease agreements does not affect the tenant’s financial condition.

Alternatively, filing for bankruptcy after being served an eviction notice may do nothing to delay the eviction process, especially if illegal drug use or excessive property damage is involved. However, landlords need some kind of proof of this kind of lease violation before continuing with an eviction that is based on these allegations.

If you are facing eviction due to sudden financial hardship and are considering filing for bankruptcy, contact a professional Phoenix Arizona bankruptcy attorney immediately to assist you in solving your housing problems and overcoming your financial distress.