Is Bankruptcy Failure or Good Financial Planning?
May 20th, 2011I can honestly say that not many of my clients have had a good financial plan. If they did, they wouldn’t be in my office speaking to a consumer bankruptcy lawyer. One common mistake is taking money out of 401k plans or IRA in order to pay off credit card debt. Retirement funds like 401ks and IRAs are 100% protected from both creditors and bankruptcy trustees. The only way that creditors can touch that money is if you voluntarily remove it from your account and give it to them. Many of my clients, prior to speaking with me, have taken money out of retirement and used it to make minimum payments. Now, they still owe more money than they can pay to creditors, and now they owe taxes, too.
Everyone should have a financial plan if they want to retire at some point. Even if your plan is as simple as saving a percentage of your salary, it is something. Anyone can open an IRA; it doesn’ I t need to be a company plan. Placing the bulk of your retirement funds into one of these accounts will be a good start to a protected future. There is no better time to start planning than now. Or, if you already have a plan, now is a good time to revamp your financial plan for the future.
I truly believe that bankruptcy is not financial failure. Instead, it is, very simply, financial planning for the future. Any client who has come see me, a Manhattan bankruptcy lawyer, was worried about their debts. I don’t want them to be worried about what they owe. I want them to protect what they have. The debts will always eventually get sorted out. Protecting assets is what they should really be focusing on. So, am I saying what you think I’m saying? Yes, I am. Protect your 401k and/or IRA and worry less about your debts. Why? Because if you know these assets are protected and your plan is to protect these assets at all costs, you will realize much sooner that it is in your best interest to file for bankruptcy protection. If something goes wrong, isn’t it better to know your options ahead of the game? That’s what I call financial planning!
Chapter 7 and Chapter 13 Bankruptcy Questions
April 8th, 2011I just filed for Chapter 7 or Chapter 13 bankruptcy, why did the bank send me 1099C?
As April 18 deadline approaches, people are reporting that they are receiving “1099 C” forms from their creditors/banks. This last parting “gift” is causing panic throughout the nation. Clients of Georgette Miller Law who just filed their Chapter 7 or Chapter 13 bankruptcy need not worry. Debt discharged through bankruptcy is NOT TAXABLE.
Q. I was told a 1099c form is income that I have to report on my taxes. How can it be that I have “made money” and have to pay income tax even though I just filed a Chapter 7 or Chapter 13 bankruptcy?
A. From the bank’s standpoint, it forgave your debt. Since you don’t owe them money any more and they can write off their loss, the Internal Revenue Service would ordinarily treat the bank’s loss as your gain i.e. income. The bank didn’t want to forgive your debt. They’d rather garnish your bank accounts or make robocalls causing you to lose sleep. You made the bank forgive your debt when you filed your Chapter 7 or Chapter 13 bankruptcy case. A great advantage to filing a Chapter 7 or Chapter 13 bankruptcy is that you almost certainly won’t owe any taxes on account of the 1099C. Here’s what you need to know:
Section 108 of the Internal Revenue Code protects you
You or your accountant will have to fill out a form IRS 982 along with your income tax return. Make sure you look at the February 2011 revision.
Information is available in 2009-37, 2009-36 I.R.B. 309 available with IRS Publication 908.
Cancellation of debt in connection with your residence should be excluded from income until 2012.
Not having to pay taxes – just one more benefit to filing a Chapter 7 or Chapter 13 bankruptcy
Philadelphia Tribune Nominates Georgette Miller
April 6th, 2011In this era of chaos and uncertainty, individuals and companies both large and small often turn to their attorneys for advice, counsel and as a voice for reason and stability. It is in recognition of this vital role that lawyers play in such challenging times The Philadelphia Tribune will introduce its list of top African-American lawyers in the tri-state area on Sunday, April 17th, 2011 edition of Tribune Magazine. This is a magazine and not a newspaper!!!
Philly’s Talented African American Attorneys have been selected by their peer group (Barristers and National Bar Association Women’s Division) and include individuals who are experts in their given fields, accomplished in their skills and proficient in their craft.
We are happy to inform you Bernard Lee and Dexter Hamilton have been selected with other elite attorneys in the Philadelphia region. Bernard Lee was selected in the practice area of Real Estate Law and Mr. Hamilton was selected in the practice area of Government Regulatory. Others selected in the area of Real Estate law were Georgette Miller and Cheryl Gaston. In the Government Regulatory others selected were Christopher Lewis of Blank Rome and A. Michael Pratt of Pepper Hamilton. They join other Top Attorney Selections as Joe Tucker (Tucker Law Group), Zane Memeger (US Attorney), Judith Harris and Larry Turner (Morgan Lewis), Bernard Smalley (Anapol, Schwartz) and Richard Harris of Obermayer Rebmann Maxwell & Hippel LLP to name a few.
How is Credit Reported During a Bankruptcy?
February 13th, 2011The Fair Credit Reporting Act (FCRA) mandates that the credit bureaus correct errors within 30 days of notification. However, creditors are not required to make any reports on your credit while you are going through the bankruptcy process, which could be anywhere from a few months for a Chapter 7 to 5 years on Chapter 13 case. When making payments under Chapter 13, many creditors will not report this activity for fear of violating the automatic stay that is put in place when a debtor petitions for bankruptcy. This stay prevents a creditor from taking any further action to collect debts – and some take this a step further to include reporting of debts. The preference is to wait until the debt is either paid in full, or discharged. Another reason why it isn’t done during the bankruptcy process is because a debtor may not complete their bankruptcy requirements. This means debts will not be discharged and will remain enforceable.
For most people, their credit report is totally irrelevant to their life during a bankruptcy and immediately following the discharge. Those seeking a Chapter 7 Bankruptcy would be unable to take on any new debt prior to filing and during the process. Those seeking Chapter 13 Bankruptcy are only able to take on debt in the form of a refinanced mortgage. This would be taken care of by the lender with knowledge of a current Chapter 13 petition.
Under the FCRA, United States residents are entitled to one free copy of their credit report every 12 months from each of the three major credit bureaus: Experian, Equifax and Transunion. It is advised that you request and check that your report is accurate once the discharge process has been completed to make sure everything was reported correctly. Once a debt has been discharged at the completion of the bankruptcy process, the debt must be reduced to zero. If creditors do not report your discharge, they may be in breach of FCRA. If a debt is still showing up on your credit report after it was discharged, send a copy of the discharge papers to the creditor and/or collection agency with a note requesting it be changed to a zero balance as part of your Bankruptcy discharge.
5 Credit Myths that lead to disaster
February 10th, 2011People are obsessed with getting and keeping an excellent credit score. We hear these statements regularly on our financial helpline:
A caller who can’t pay their monthly bills because their debt payments are so high says, “I can’t go to credit counseling because I heard it will damage my credit score.”
A caller who is not saving in their 401(k) and missing out on the company match says, “I don’t want to pay off my credit cards. I am keeping a balance to help my credit score.”
This makes no financial sense. People aren’t going to seek help getting out of debt — lowering the interest rate and possibly the balance owed — because it will hurt their credit score? How is this helpful? If people don’t get their debt under control, they may never retire. We’ll have a nation of people working into their 80′s with no savings but they can all come together and brag about their credit scores.
Don’t even get me started with the notion that carrying a balance on a credit card will somehow help the score. First of all it is wrong and secondly, people are actually harming themselves financially — thinking that paying high interest on credit cards instead of paying them off is a good financial strategy.
Don’t get me wrong, having a good credit score has value; it can save on the cost of borrowing money so it is helpful to have the best score possible. Just make sure you are basing your credit strategy on sound information — not common myths that get you nowhere.
Let’s examine some of the biggest credit myths that can lead to disaster:
Assuming if you pay your bills on time, you don’t have to do anything else.
Paying your bills on time accounts for about 35% of your credit score but there is another 65% which includes amount owed (30%), length of credit history (15%), new credit (10%) and type of credit (10%). Consider all of the other factors.
Also remember that there may be errors on your credit report so if you don’t check it, you’ll never know and your score will be affected. According to Deborah McNaughton, author of The Get Out of Debt Kit, 80% of credit reports have errors (as cited by Bankrate.com). Many of the erroneous reports had missing information that may boost a score, such as missing a revolving account in good standing, or miscellaneous incorrect information such as an incorrect birthday.
Check your credit report. You can receive a free report from each of the three credit reporting agencies once a year at www.annualcreditreport.com. Credit reports are unique to Social Security numbers, so if you are married, you may want to stagger your requests with your spouse every six months. You can also request your actual score for a onetime fee (which is less than $15 through most credit bureaus). Most credit monitoring services will provide your score for free when you sign up for their service.
Assuming when you divorce, your accounts automatically divorce with you. They don’t. If you have a joint account and one of the parties on the account is late, you are both late. With some types of loans, such as a mortgage or a car loan, the lender may not accept a letter asking you to be removed from the account after a divorce even if that property is going to your ex-spouse. They will need to qualify for the loan on their own before you will be removed from the account. Take this into consideration because if they don’t refinance, and then have late payments, you may find yourself with some credit issues. When possible, close all joint accounts and refinance any debt separately. If it is not possible, maintain some type of control, whether it is an escrow account or at least access to information to make sure the accounts are paid in a timely manner. Don’t assume. Also see the last point about closing accounts.
Avoiding consumer credit counseling because it will hurt your credit score. For someone with serious debt, working with a not-for-profit credit counseling agency to develop a debt reduction plan and get out of debt permanently should take priority over credit scores. Credit counselors will work with your creditors to try and reduce your monthly payments, or settle your debt altogether. Debt settlement doesn’t affect scores as badly as you would think. In fact, many people don’t realize that late payments affect scores more than a debt settlement. Here is an example of how a debt settlement can affect credit scores, and how that compares to late payments.
A late payment hurts your score more than a debt settlement if your score is in the 680 range; it only significantly pulls it down if you are in the 780 range. Let’s be honest here, people ready for credit counseling probably don’t have the highest scores anyways, and the bottom line is credit scores are fluid — they can be rebuilt. According to Credit.com, a debt write off can stay on your credit report from seven to ten years, but as the information ages, so does its negative impact.
Making late payments aren’t that big a deal. According to FICO, a 30-day late payment can affect your score by as much as 110 points. Late payments can have a huge impact on your credit score causing it to drop like a stone. This is one disaster that is relatively easy to avoid. Simply set up all of your accounts with an automated minimum payment schedule from your checking account. This way you’ll never miss a payment. You can always pay additional amounts through online banking. Set yourself up for success with this one because it can be an easy one to miss and makes a significant impact.
Closing accounts to clean up your credit. Closing an account may be a good idea if you only opened the account to get a discount on merchandise or have too many credit cards which is causing confusion, but it won’t clean up your credit or help your score. In fact, it can hurt your score when the account you close has a long credit history — especially a good one. Your credit history accounts for 15% of your score, so in making decisions which cards to keep and which ones to close, keep in mind how long you’ve had the account open and close the most recent ones first.
Are credit scores important? Yes, but they are not the “be all and end all.” Now that we’ve dispelled some of the biggest myths, consider what the “be all and end all” is for you. What are your biggest financial challenges and concerns? Our latest research shows that less than 18% of employees feel they are on track for retirement. Are you part of the 82% that isn’t? Do you have a personal net worth statement and is it going in the right direction? The point is when you focus on the important financial issues, you have a chance to meet your financial goals. Clean up your credit if you have to, and do your best to keep a good credit score, but let’s not go overboard and lose sight of everything for just one number.
Inspiration and Music Conference 2011
February 1st, 2011Philadelphia’s Inspiration Station Praise 103.9 is coming off of an extraordinary 2010, where its profound on-air content, remarkable work in the community and blockbuster events earned a Stellar Award nomination as the “Best Inspiration Station” in the country.
In 2011, Praise 103.9 looks to elevate its inspirational efforts by producing the first ever Inspiration & Music Conference, which will be held on Sunday, March 27th at the Pennsylvania Convention Center. “I foresee it being a day of hope, love, fellowship, networking and empowerment for everyone that will be in attendance,” says Praise 103.9 Operations Manager & Radio One Inspiration Format Director Elroy Smith.
This event is not only for the city of Philadelphia, but for the entire country. Here are the workshops designed to enhance people’s personal, spiritual and musical dreams come true.
WORKSHOP 1: “Best Inspirational Singer in America” talent search to tour with James Fortune & FIYA hosted by CoCo Brother.
WORKSHOP 2: “Ministries of Music” with Donald Lawrence and Lonnie Hunter teach singing techniques to church choirs.
WORKSHOP 3: “Beyond the Music” with Yolanda Adams, Vickie Winans, Tye Tribbett, Mathew Knowles (Music World Entertainment Founder/CEO/President & Manager of Beyonce) and Kerry Douglas (WorldWide Gospel President/CEO).
WORKSHOP 4: “Marriage Beyond the Vows” with Marcos Mercado.
WORKSHOP 5: “Single & Saved” hosted by AV from the “Yolanda Adams Morning Show,” comedian John Gray, author/minister/singles coach Dr. Laverne Adams and Dezzie.
WORKSHOP 6: “Faith & Finances” with financial expert Georgette Miller. In the “Faith & Finances” workshop at the Inspiration & Music Conference, you’ll learn how to get out of debt, how to spend wisely, and how to save in this down economy with financial expert Georgette Miller, Esq.
The “Faith & Finances” workshop will take place at 5:30 pm on Sunday, March 27th at the Pennsylvania Convention Center. For ticket registration go to: http://ev9.evenue.net=
6 advantages of hiring professional lawyers in loan modifications problems
February 1st, 2011There are many homeowners who are facing the problem of their existing mortgage monthly payments. Therefore, they are heading towards loan modification alternative to change existing mortgage loan repayment schedule. In that situation a loan modification lawyer and specialist will guide you to manage your existing mortgage loans according to your requirements. They will modify and change your existing loan plan to another one which will suit to your needs and requirements. Usually people get loans from the financial institutions but sometimes they feel trouble with rules of existing mortgage plans because of many factors whether it is a personal problem or financial problem. In that situation, a professional lawyer will make you feel relaxed by guiding you the process of modifying your existing loan properly in favor of your needs.
It is not mandatory that you have to hire a professional lawyer in order to continue loan modification process. However, people hire lawyers to get some legal advice and assistance. There are many other reasons that make hiring experienced lawyer for loan modification essential. All you need to make your own requirements list for modification and then search over the web best lawyer who will guide as well as help you properly in the process of loan modification. You wonder to know that why you need to hire any professional lawyer before heading to modify your existing loan.
1. You will not easily deal with lenders because of two reasons- First; you will get different answers from each agent of lender. Second it is not necessary that all agents will be equipped with tools to assist you in modification process. Therefore hiring loan modification lawyer will surely help you in getting the best deal of loan modification.
2. Loan modification lawyers understand your requirements and needs properly and review your entire case from a perfect legal perspective. They know how to deal with the lender and help you create the application so it processed efficiently.
3. Even in some cases lender takes your request an application more seriously if you have loan modification lawyer on your side. As lawyer uses legal terms and information as leverage while negotiating with lenders. It means you will get the best deal if you have a lawyer on your side without any difficulty.
4. Another important factor is keeping you safe from being cheated or misguided by any lender. You can defend yourself easily while you are negotiating with lenders having the assistance of professional and experienced loan modification lawyer.
5. In some cases you will be forced to roam around in the lender office from one department to another department without any progress. It means it takes your valuable time without any progress. With the assistance of loan modification lawyer you can easily foreclose proceedings. Even your loan modification lawyer will continue your proceedings on your behalf.
6. Finally, you will be safe and secure by hiring a professional lawyer. A professional lawyer would surely help you modify your existing mortgage loan.
Keeping these points in your mind you will surely get your best professional lawyer.
“Slow and steady wins the race” has never been truer than it is today.
January 8th, 2011The “New Rules of Personal Finance” start with the foundation of eliminating debt and saving money.
It may not sound new or glamorous, but getting this first piece of your financial life right will help make everything else fall into place. And though slashing debt and saving money sounds familiar, a huge number of people have aggressively ignored this wisdom. Much financial ruin over the past 20 years stems from people borrowing heavily against their future, rather than saving for it.
Many people have rediscovered the power of thrift. Some people eat out less, while others put off buying new clothes and many are focused on rebuilding their savings. In sum, thrift is the new black.
Here are 5 things you can do to establish your own thrifty bona fides.
1. Get on a Budget
For the personal-finance writer, this is a bit like recommending that people floss more. Fact is, everyone hears about budgeting, but very few people actually do it.
The key here is to start simple and keep it simple. Don’t let minutia deter you from getting the budget down in rough terms. You have your income (salary or other income, after taxes), and you have your expenses (housing, food, transportation, etc.).
Ideally, the difference between those two is positive. If it’s not, then you know you’re losing money on basic expenses, and we haven’t even gotten to fun things like movies, trips or new clothes!
A number of websites, such as Quicken.com, provide budgeting help. SmartMoney.com (part of The Wall Street Journal family) also has a number of budget-related worksheets that can help get you started on the numbers-crunching game.
2. Eliminate Credit-Card Debt
Once you get on a budget, the first thing you should do is eliminate your credit-card debt. Why? Because it’s almost certainly the most costly debt that you have.
I know this is challenging for many of us, but before you can start thinking about cashing in on great investment opportunities, you have to get rid of expensive debt.
This advice might sound like common sense, but a surprising number of people try to build a savings account or investment account while maintaining relatively high balances on their credit cards.
This, of course, doesn’t make much sense. Credit-card interest rates can easily run in the mid teens. Savings rates are nearly 0% in many cases, and investment accounts on average return 6% to 9% over time — though not lately!
In other words, you’d be much better off paying down the expensive credit-card debt and then moving on to investment and savings.
3. Reduce the Cost of a Common Thing
Once you’ve got a budget, look for a common thing (meaning something you do often) that could be done more cheaply.
For instance, I plan to start riding my bike to work as it gets warmer. A friend of mine says she is opting to walk to the coffee shop rather than drive. These small actions save money on subway fares or gas. It may not sound like much, but it adds up.
The key is to find something already built into your lifestyle and do it in a cheaper way, creating a recurring savings.
Energy costs are another way to build in savings. For instance, energy costs can fluctuate. Up north, winter is usually costlier. In the south, the summer, especially if you have air conditioning, can be more expensive.
Take the peak months and maintain a budget that handles those peak months. As the costs come down in nonpeak months, move that extra money into savings instead of blowing it on something frivolous.
4. Delay Gratification
It’s good to treat yourself to a nice meal or a trip somewhere. But you can’t do it every day. As my grandfather said, “First we work, then we eat.”
By delaying gratification, we build discipline, we establish control of our financial lives.
For instance, say you want to get a flat-screen television. There are several ways to do this. Pop out to Best Buy and put it on your Visa — and sort things out later. That would be a carefree approach more common in the pre-crisis era.
Second, you could time the purchase to come after a key income moment, such as a raise or an expected bonus. At least in this way, you are directing a reward toward the acquisition. A bit more disciplined.
Third, you could set a savings goal and build in a “matching” notion that would go into the flat-screen TV fund.
In other words, you decide that you want to add $5,000 to your savings account in the next 12 months. For each dollar you put into the savings account, you put 20 cents into your flat-screen TV account. Once you get to the goal, you will have a contingent “reward” account from which you can buy the flat-screen TV.
5. Develop an Accountability Strategy
When you commit to something — exercising more, eating better, saving money — it is challenging to stick with it. Whole forests have been felled in the name of books meant to help us stick to self-improvement promises.
A powerful tactic is to share your goals with someone you trust so that this person can hold you accountable. It’s easy to tell ourselves that we’ll “get to it tomorrow.” It’s tougher to confess letting things slide to someone who is holding you accountable.
Who is the ideal accountability partner? Ideally, someone you trust enough to be straight with, especially when you’re not meeting your goals. Spouses can keep each other accountable, and that’s how my wife and I have it arranged. Other options are good friends, but make sure you’re ready to give it to them straight. If you prefer someone more removed from your personal life, a financial adviser or even someone in the clergy might play a deeper role in helping you meet your goals.
Share your budgeting and money-saving strategy with your accountability partner and then schedule check-ins on a weekly or monthly basis. Ideally, your accountability partner will help you get back on track when you fall behind.
If you or someone you know is struggling with paying the mortgage or have a mortgage with onerous payment terms, call Georgette Miller for a consultation on how you can help lift a heavy burden or visit my site: www.georgettemillerlaw.com
Source: Adapted from “The Wall Street Journal Guide to the New Rules of Personal Finance” by Dave Kansas. Copyright 2011 by DowJones Co. To be published by Harper Paperbacks, an imprint of HarperCollins Publishers, on Dec. 28, 2010.
A Mortgage Nightmare’s Happy Ending
December 31st, 2010TWO and a half years ago, Robert and Amy Ahleman, a construction contractor and a financial services employee, were mired in a mortgage nightmare. After missing just one loan payment on their modest, well-kept bungalow in Bensalem, Pa., the couple began receiving notices from their lender. Default fees and eviction threats followed.
As the amounts they owed ballooned because of mounting late fees and other dubious charges, their lender refused to take their payments, claiming they were insufficient — which put the Ahlemans even further behind.
The couple soon realized that filing for bankruptcywas the only way to save their home. At the time, the Ahlemans had two mortgages, one for just under $200,000 and a second for $50,000, and the debt was smothering them.
Today, however, the Ahlemans have a happier story to tell. Not only did they survive their harrowing experience with their home intact, but they say they have emerged happier and thriftier for it.
“Given how much we love the house and our neighborhood, being able to go through that and get out of it makes you look at life totally different,” says Ms. Ahleman, 33. “We can wake up every morning now and not worry about our house being ripped out from underneath us.”
Back in July 2008, when the Ahlemans’ troubles were first detailed in a front-page article in The New York Times, their experience was less common than it is today. Since then, of course, millions of average Americans have been sucked into a foreclosure maelstrom that is ruining their finances and their lives.
This disaster has been accompanied by a still-unsettled debate about how best to stem the foreclosure crisis. When the federal government first stepped in to shore up the economy in 2008, it chose to buttress Wall Street and the banking system with hundreds of billions of dollars in taxpayer bailouts while largely leaving homeowners on their own.
Now that the foreclosure mess continues to hamstring the economy and has upset political expectations, policy makers have focused more closely on it. But a divide remains: Should homeowners simply be foreclosed upon en masse, or should banks work with them to modify mortgages and reduce the loans to levels that homeowners can manage?
The Ahlemans can attest to the fact that a modification, when properly engineered, can offer a less financially painful solution for everyone involved in a potential foreclosure. Yet while the couple’s default survival tale is uplifting, it’s hardly the norm. The terms they received on their loan modification are rarely offered to troubled borrowers today, and so their journey — and their escape from the possible consequences of a foreclosure — remain unusual.
Some analysts and leading economists have cited a failure by banks to provide loan modifications as a signal reason that the foreclosure crisis continues to drag on so ruinously, years after it began. Each month, roughly 250,000 new foreclosures are started, while 100,000 are completed, according to a recent report by the Congressional Oversight Panel, which was created in 2008 to monitor financial markets and those who regulate them.
Figures like these have a huge effect on almost everyone in the country, experts say. Foreclosures blight neighborhoods, put financial pressure on families and drive down local real estate values. Investors who hold the loans in securitization trusts are also hurt by foreclosures, because recoveries on these properties are low. And consumers, made more cautious by a crippled housing market, spend less freely, curbing the economy’s growth.
SOME are prospering from foreclosures, particularly loan servicers that administer mortgages for banks and investors who own the underlying properties. As the report from the Congressional Oversight Panel noted, loan servicers can profit significantly by pushing borrowers into foreclosure. It gives the servicers more opportunities to keep charging lucrative fees and little incentive to seek a modification.
Another obstacle to loan modifications arises if imperiled borrowers have second liens, like home equity loans, on their properties. These liens are often held by lenders who are also servicers on the first mortgage. They, too, have little interest in seeing any modification because it would harm the value of their holdings and reduce their income from fees.
Because of these realities, the Home Affordable Modification Program of the Treasury has been largely ineffective when it comes to helping borrowers get loan modifications from their banks, according to the Congressional panel.
As of mid-December, HAMP had processed almost 520,000 permanent loan modifications. The panel estimated that by the time the program is finished, it will have prevented only 700,000 foreclosures over all — quite a contrast to the three million to four million modifications that the Treasury anticipated when it rolled out its plan. Up to 13 million foreclosures are expected to have occurred by 2012, the panel said.
Tim Massad, acting assistant Treasury secretary for financial stability, attributed the program’s results to three things: “The eligibility pool is smaller than we originally thought, and it has been much more difficult to contact borrowers,” he said. “Third, the banks have not executed these programs very well.”
Kurt Eggert, a professor at Chapman University School of Law in Orange, Calif., said: “I think it’s clear that while HAMP was well-intentioned, it hasn’t delivered nearly enough. I think a big part of the problem is that nobody is effectively holding servicers’ feet to the fire to say, ‘Where are the loan mods that you should be delivering that help both borrowers and investors?’ ”
IN late 2008, a little more than a year after they filed for bankruptcy to protect their home, the Ahlemans received a letter notifying them that their loan was being transferred to a new lender and loan servicer. The company that they would now be dealing with was Litton Loan Servicing, a unit of Goldman Sachs.
Ms. Ahleman said she immediately began pestering Litton for a loan modification.
“I harassed and harassed Litton,” she recalls. “We had to submit the paperwork right when our loan was transferred. We didn’t hear anything through January and February. I would call them hysterical, crying.”
After months of no progress, in the spring of 2009, a reporter called Litton to ask why the Ahlemans’ loan modification was stalled. Litton responded quickly and later made the couple a compelling offer: It said it would cut the interest rate on their first mortgage from a variable rate of 9.3 percent to a fixed rate of 4.59 percent. Litton also offered to waive $38,332 in arrears on their loan, which included late fees and legal costs that had accumulated while the loan was in default.
Separately, Banco Popular, the bank that owned the $50,000 second mortgage on the Ahlemans’ property — which carried a whopping interest rate of 12 percent — wrote it off entirely. This eliminated the couple’s obligation to pay the debt, which had grown to $62,000, including fees and other charges. (The couple paid taxes on the forgiven mortgage.)
Under the terms of the new loan, the Ahlemans’ mortgage obligations dropped from almost $250,000 to roughly $198,000. Their monthly payment fell from $1,959 to $1,376.
The Ahlemans say their loan deal gave them a life-changing second chance. Since they received it in June 2009, they have made their payments on time; they emerged from bankruptcy a year ago.
With work busy for both of them, they have been able to put money away in case they hit another rough spot.
“We like to have one or two mortgage payments in a savings account so that money is there to fall back on if we do have a bad month,” Ms. Ahleman says. “From going through that whole experience, we became very frugal. Every now and then, we’ll go out to dinner, but we don’t splurge or go on shopping sprees.”
The Ahlemans hold no credit cards, except for the one that Mr. Ahleman, 36, uses for his contracting business. They cut up their credit cards back in 2008, when they filed for bankruptcy, paying them off under a court-approved plan.
“If we can’t pay cash for it, we don’t buy it,” Ms. Ahleman says. “That’s one thing we learned. Credit cards will get you in trouble. I will never allow myself to get in that position again, regardless of what I have to do.”
For policy makers interested in designing loan modification programs that actually work, the Ahlemans’ story may be instructive. Because most banks refuse to provide principal write-downs on troubled loans, the kind of modification the couple received is the exception rather than the rule across America today.
Most loan modifications, if they can be wrangled out of lenders at all, reduce the interest rate only slightly and tack onto the mortgage all the late fees, legal fees and other questionable costs that have accrued in the foreclosure process — simply adding to the debt that borrowers must repay.
“While focusing on the safety and soundness of banking institutions, regulators have focused too little on protecting borrowers from abusive practices,” says Mr. Eggert, the law professor.
The Congressional Oversight Panel noted the possibility that conflicts of interest among loan servicers were preventing loan modifications from being struck. Representative Brad Miller, a Democrat from North Carolina, is advocating that loan servicers be separated from the institutions that hold a borrower’s loan, in order to eliminate such potential conflicts. He is also urging regulators to create strict criteria that loan servicers will have to follow when working on modifications.
Mr. Miller is circulating a letter among his colleagues that outlines his suggestions. It is addressed to top officials at six federal agencies or regulators: the Federal Reserve, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Securities and Exchange Commission, the Office of the Comptroller of the Currency and the United States Treasury.
For the loan modification criteria, Mr. Miller pointed to the rules set out by Farmer Mac, a government-sponsored enterprise that finances farm loans. Those rules include requirements about who qualifies for a change in the terms of their mortgage, and a calculation of the likely loss that a foreclosure might create.
“The criteria are designed to lead to a sensible modification that the farmer can sustain,” Mr. Miller says, “and it protects the investor as well by getting people into mortgages rather than undergoing the horrific expense of foreclosure.”
Mr. Miller also aims to end affiliations between servicers and banks, which he said were proving to be a genuine impediment to loan modifications.
“Having a servicer be affiliated with a big bank does not really have any offsetting advantage,” he says. “It creates conflicts of interest, it puts the servicer in the position of controlling information and allows it to protect itself at the expense of homeowners and investors.”
THE F.D.I.C. has proposed a set of loan servicer requirements that, among other things, would try to eliminate conflicts of interest.
Under its proposal, a servicer would have to disclose an ownership interest that it or an affiliate had in a loan secured by the same property on which another mortgage was outstanding. The servicer would also have to establish a process to address any second lien that it might own where the first mortgage is seriously delinquent.
Mr. Eggert said a national set of servicing standards would be a crucial step toward putting consumers and investors onto a level playing field with loan servicers.
“At the recent Senate testimony where all the federal agencies came forward and testified about servicer problems, it was telling that they didn’t talk about what they have already done about it,” he says. “Instead, they talked about the investigations they are conducting that they hoped would inform them on what to do next. How many years are we into this crisis? We are long past the point of where we should be investigating to see what’s happening.”
For the Ahlemans, at least, their flirtation with financial disaster — and the modification that helped them survive — has made them appreciate life more.
“We’re just really, really happy all the time,” says Ms. Ahleman. “I used to say to myself, ‘When I wake up in the morning, I just want to feel how people who are comfortable in life feel.’ And now we have the ability to do that. It can be done.”
GOLDBECK, MCCAFFERTY & MCKEEVER PC, PHILADELPHIA FORECLOSURE LAW FIRM, FACES SERIOUS CHARGES OF FRAUD
December 13th, 2010Goldbeck, McCafferty & McKeever PC is a law firm that has handled thousands of mortgage foreclosures throughout the State, especially in the Philadelphia area. Earlier this week, the Pittsburgh Tribune Review reported that Chief Judge Agresti of the US Bankruptcy Court for the Western District of Pennsylvania sanctioned Attorney Leslie A. Puida and her firm, Goldbeck, McCafferty and McKeever (GMM), for the falsification of documents by Countrywide Mortgage relating to a foreclosure against Sharon D. Hill, a debtor in a bankruptcy. Agresti determined that Puida and her firm filed fraudulent documents, lied about the fabrication to both opposing counsel and the court, and then refused to take responsibility. Judge Agresti, according to press reports, gave Puida and GMM until Friday December 3 to self-report to the Pennsylvania Disciplinary Board.
Meanwhile, Pittsburgh Attorney Patrick J. Loughren has filed a cause of action against 33 non-lawyer employees of GMM and the firm itself in the Court of Common Pleas of Allegheny County at GD 10-021437. Loughren alleges that: “These non-lawyers prepare complaints, sign lawyers’ names to those complaints, and file those complaints in county courts across this Commonwealth without an attorney ever having read the document. ” [Emphasis in original]. Further, according to the Complaint, the non-lawyers prosecute the actions by filing other documents purported to be signed by lawyers, but are signed by non-lawyers, frequently before notaries who improperly state that the documents were signed by the lawyers. Attorneys fees are improperly claimed for this unsupervised work by non-lawyers, usually paid by the foreclosing lender unless the loan is reinstated. According to the Complaint, all three named partners of GMM have admitted the main allegations of the Complaint in sworn testimony. Gary McCafferty testified in a deposition taken on September 21, 2010 in the ongoing US District Court case of Kimberley A. Robinson v. Countrywide Home Loans, Inc. et al. No. 08-cv-01563 in the Western District of Pennsylvania.
“Q: Was it the practice in 2006 that Complaints could be filed without an attorney reviewing the Complaint?
A: It could be, yes.
Q: Did the firm authorize its administrative staff, which I’ll just describe as non-lawyers, so inclusive of secretaries, paralegals, legal assistants, to sign attorneys’ names and file them, knowingly that the attorney had not read the document?
A: Yes.” [Emphasis in complaint.]
Joseph Goldbeck, former shareholder and of counsel to GMM, was, according to the Complaint stated:
“Q: Back in 2006, you were an active practicing lawyer at the firm?
A: Yes.
Q: And did you authorize individuals who were employed at the firm who were not lawyers to write up Complaints and sign your name to them and file them without you reviewing them?
A: Yes I did.” [Emphasis in Complaint.]
In another Western District bankruptcy case, DeAngelis v. Countrywide Home Loans, Inc., the Complaint states that Michael McKeever, the third name partner at GMM, testified at a hearing on December 8, 2009 that it was a standard practice at GMM in 2007 and up to the date of his testimony for non-lawyer staff to sign lawyers’ names to pleadings without the lawyers reviewing the document.
The Complaint further alleges that (1) the firm filed suits without investigation by attorneys of the underlying facts in FHA cases, which violates FHA Regulations; (2) the non-lawyers also prepared and filed pleadings in Bankruptcy Court without attorney supervision, which the Complaint states, is also the unauthorized practice of law; (3) “Every foreclosure action pending in every Court of Common Pleas in this Commonwealth that has been prepared by and filed by the Non-Lawyer Defendants, without attorney review, should be dismissed on the basis that the Court lacks jurisdiction over the lawsuit.” In addition, according to the Complaint, GMM should not be permitted to collect and retain attorneys fees for work performed by paraprofessionals without attorney supervision – especially useful in a Chapter 13 bankruptcy.
In his prayer for relief, Loughren requests that the Court (1) declare that the conduct of non-lawyers at GMM constitutes the unauthorized practice of law, (2) grant an injunction barring non-lawyers at GMM from engaging in practice of law in Pennsylvania, (3) enjoin continued prosecution of cases filed by non-lawyers in violation of Pennsylvania law (4) issue a rule to show cause why all pending foreclosure actions filed by GMM should not be dismissed, (5) issue a rule to show cause why attorneys fees should not be accounted for and returned to homeowners, (6) issue a rule to show cause why every judgment entered in favor of defendant clients should not be opened or vacated, (7) enjoin defendants from supporting claims with false affidavits, (8) enjoining the notaries from notarizing documents in violation of statutory requirements, (9) enjoining all non-lawyers at GMM from signing their names to affidavits.
The suit is still in its early stages. Further, it may be difficult to prove in individual cases. However, the allegations in the Complaint involve so many cases that its potential impact could be sweeping. Moreover, the activities of other firms involved in the prosecution of mortgage foreclosure actions in bulk, like Udren and Phelan Hallinan will undoubtedly receive increased scrutiny going forward. You must remember to fight to save your home. Stop listening to the banks and their attorneys and see a bankruptcy attorney early, preferably before you receive the Act 91 notice. If you have already received your notice, come in as soon as possible.