FACTS
Homeowners can use a little known but increasingly popular provision of the bankruptcy code to eliminate second mortgages and avoid foreclosure. Statistics are hard to come by, but the provision has been used effectively on hundreds, if not thousands, of cases during the past two years.
The first mortgage cannot be eliminated if you plan to stay in the home. But second mortgages are treated differently. They can be declared unsecured debt when there is no equity to cover them.
When that happens in a personal bankruptcy proceeding, the second mortgage is put on hold and no payments are required while the homeowner completes a repayment plan for other debts, which typically takes three to five years. At that point, the second mortgage is eliminated.
Mortgage bankers don't like the practice. The law has been like this for years. It's just never been used as much because in the past there was usually enough equity in a home to cover the second mortgage. (sjmercnws5811)
MORAL
If your first mortgage is more than the value of your property, then you can have the second mortgage as an unsecured debt and upon completion of the Chapter 13 or in some cases a Chapter 11 plan, the second mortgage disappears, becomes void and you only have the first mortgage to contend with. But do remember that it can take three to five years. This holds true in any state in the union since it is a federal bankruptcy law.
CALIFORNIA PLACES THIRD FOR MORTGAGE FRAUD LOANS ORIGINATED IN 2010
FACTS
New York and Florida are first and second in mortgage fraud loans originated in 2010. California is third. This is part of the annual report released by Lexis-Nexis Mortgage Asset Research Institute. The annual report is based on verifiable cases of fraud reported to the institute's Mortgage Industry Data Exchange, or MIDEX. (sjmrcnws51111)
MORAL
Since the fraud is still ongoing, it would seem people are getting creative with documents such as W-2’s, tax returns, pay stubs and VOE’s among other documents. Remember, all loans are now pretty much “full doc” loans. So I guess we are going to be busy defending a lot more people accused of mortgage fraud?
UPDATE ON PENDING CALIFORNIA LEGISLATION AFFECTING MORTGAGE LENDERS/BROKERS AND MORTGAGE LOAN ORIGINATORS
FACTS
1. ASSEMBLY BILL 643, In ASSEMBLY Committee on BANKING AND FINANCE: Reconsideration granted. Provides that a mortgage broker includes specified mortgage loan originators. Provides that the fiduciary duty owed to a borrower includes a requirement that the broker provide a borrower prepurchase debt counseling that explains what a prudent debt-to-income ratio would be for the borrower, taking into account the borrower's income and credit rating. Requires the establishment of a related standard.
2. SENATE BILL 510, From SENATE Committee on BANKING AND FINANCIAL INSTITUTIONS: Do pass as amended. Authorizes an employing broker to appoint a manager of a branch office and delegate to that manager responsibility to oversee and supervise operations and activities. Requires that the appointment be made by means of a written contract. Authorizes the Real Estate Commissioner to suspend or revoke the license of an appointed licensee for failure to properly oversee and supervise operations.
A.B. 643, Amended, An act to amend Section 2923.1 of, and to add Section 2923.51 to, the Civil Code, relating to real property transactions. Existing law provides that a mortgage broker, who provides mortgage brokerage services to a borrower is the fiduciary of the borrower and any violation of the broker’s fiduciary duty is a violation of the mortgage broker’s license law. Existing law provides that this fiduciary duty includes a requirement that the mortgage broker place the economic interest of the borrower ahead of his or her own economic interest.
This bill would provide that a mortgage broker, for purposes of these provisions, includes specified mortgage loan originators. This bill would provide that the fiduciary duty owed to a borrower includes a requirement that the mortgage broker provide a borrower prepurchase debt counseling that explains what a prudent debt-to-income ratio would be for the borrower, taking into account the borrower’s income and credit rating. The bill would require the Department of Corporations, the Department of Financial Institutions, and the Department of Real Estate to collaborate to establish a standard for determining a prudent debt-to-income ratio for borrowers.
Existing law requires that, upon a breach of the obligation of a mortgage or transfer of an interest in property, the trustee, mortgagee, or beneficiary record a notice of default in the office of the county recorder where the mortgaged or trust property is situated and mail the notice of default to the mortgagor or trustor. Existing law, until Jan. 1, 2013, prohibits a mortgagee, trustee, beneficiary, or authorized agent from filing a notice of default for an additional 30 days on loans made between Jan. 1, 2003, to Dec, 31, 2007, that secure owner-occupied residential real property, under certain circumstances. This bill would prohibit a mortgagee, trustee, beneficiary, or authorized agent from filing a notice of default unless the borrower has been provided counseling relating to foreclosure prevention that includes assistance in negotiating an agreement to cure the default.
4. S.B. 53, Amended. An act to amend Sections 10079, 10156.2, 10176, 10177, 10237, and 10238 of, to add Sections 10080.9, 10088, 10141.6, and 10236.7 to, to repeal Section 10239.4 of, and to repeal Article 6 (commencing with Section 10237) and Article 6.5 (commencing with Section 10239) of Chapter 3 of Part 1 of Division 4 of, the Business and Professions Code, and to add Section 1808.51 to the Vehicle Code, relating to real estate licensees. This bill would authorize the commissioner to issue citations to unlicensed persons the commissioner believes to be engaging in activities for which a real estate license is required or to licensees who are in violation of any provision of the Real Estate Law or any rule or order thereunder. The bill would authorize citations to include an order to correct the violation. The bill would authorize citations or to include an administrative penalty of up to $2,500. The bill would require any fines collected pursuant to these provisions to be credited to the Recovery Account and, to be made available upon appropriation by the Legislature. The bill would make additional changes with regard to the commissioner’s authority pertaining to discipline and licensure renewal. This bill would further authorize the commissioner to apply to the superior court for an order requiring a licensee to appear before the commissioner or to produce evidence under specified circumstances or as pertaining to matters under investigation. The bill would authorize the court to punish as contempt the failure of a licensee to comply with such an order. The bill would also authorize the commissioner to make information public confirming an investigation or proceeding against an unlicensed person or licensee, as specified. This bill would require a real estate broker who is exempt from the Escrow Law and who engages in escrow activities for 5 or more transactions in a calendar year or whose escrow activities equal or exceed $1,000,000 in a calendar year to file a specified report with the department within 60 days following the completion of the calendar year. The bill would authorize the commissioner to assess specified penalties upon a real estate broker who fails to provide the report to the department. This bill would authorize the commissioner to suspend or revoke the license of a real estate broker for failure to pay those penalties.
MORAL
And this ain’t allllllll! Watch as these bills progress and more come in. If you want to keep your profession as a mortgage loan originator alive I strongly suggest you join the CALIFORNIA ASSOCIATION OF MORTGAGE PROFESSIONALS and contribute to the PAC committee therein. There is strength in numbers. The more numbers the more strength. Ask CAR if you do not believe that. Look at the Real Estate Commissioners of the past 30 years. I believe except for one appointee, maybe two, they are all PAST PRESIDENTS OF CAR. Now this is a political appointment and you are allowed to express your opinion. My opinion? The more votes you control, the more money you can put into a PAC, the stronger your voice is so that it will be heard and not further hamstring your profession. Think about it. The cost is small when you think about losing your profession and the ability to earn money you could not possibly earn elsewhere doing something else.
AFTER ALL THE ADVANCED WARNINGS SOMEONE STILL IS ALLEGED TO BE COLLECTING ADVANCE FEES FOR LOAN MODIFICATIONS
FACTS
Rodney Andrews of Elk Grove, Calif., operated ANDREWS INVESTMENT GROUP which is alleged to have offered loan modification services according to a Sacramento County District Attorney’s Office news release. Andrews has been arrested on suspicion of collecting illegal upfront fees in connection with loan modification services.
In 2009, the California Legislature passed a law prohibiting the collection of such upfront fees to prevent individuals from preying on vulnerable borrowers facing foreclosure or unaffordable mortgage payments, officials said. (sacrob51111)
MORAL
Remember, everyone is innocent until proven guilty in a court of law. But this is rather stupid if true since there has been a lot of publicity and convictions over the last two years.
FORECLOSURE STOPPER GETS TWO YEARS, EIGHT MONTHS IN FEDERAL PRISON
FACTS
On May 10, CHARLES C. JAMISON of Citrus Heights, Calif., was sentenced to two years and eight months in federal prison for assuring potential customers he was a foreclosure stopper, someone who could, for a fee, save their homes from trustee sales.
Jamison, using an alias, promised he could, through a program he called "Stop Now," halt an impending sale. He marketed this to distressed homeowners in the SACRAMENTO REGION who received fliers. The charge: $1,000 a month, and he claimed that included mortgage payments.
Between July 2007 and May 2009, he persuaded desperate people to take desperate measures. Via notarized and recorded grant deeds, they transferred partial interests in their homes to fictitious entities created and controlled by Jamison. Under the names of those entities, he then filed petitions in the U.S. Bankruptcy Court in Sacramento, resulting in automatic stays of foreclosure proceedings. The lenders were delayed in foreclosing on properties in default, while being forced to pay lawyers to contest the sham bankruptcies between $120,000 and $200,000. (sacb51111)
MORAL
That is earning about $60,000 to $100,000 per year presuming he spent it all before getting caught. Now he gets to spend almost three years in a federal prison and loses most of his civil rights. Is it worth it? If you know someone that has issues please call us before they ripen into criminal indictments.
THE INFORMATION CONTAINED HEREIN IS NOT LEGAL ADVICE.
AN ATTORNEY SHOULD BE CONSULTED IF YOU DESIRE LEGAL ADVICE
