Truth in Lending Act (TILA) and Helping Families Save Their Homes Act of 2009

TILA is a federal statute that is often ignored in a residential loan modification, but its of particular importance and should be studied at length by any person facing foreclosure. While there are many ways to utilize TILA with respect to predatory lending, which can resolve many foreclosure problems, today we are going to discuss its importance in terms of the Helping Families Save Their Homes Act of 2009. This Act amended TILA and enables servicers to make modifications of homeowner's mortgage terms without facing liability from investors if the modification maximizes the investor's value under a qualified loss mitigation plan (AKA The TILA Safe Harbor). Importantly, HAMP (primary mortgage federal modification program), 2MP (second mortgage federal modification program) and HAFA (federal short sale and deed in lieu program) have all been designated as qualified loss mitigation plans by Treasury.

To illustrate the importance of the aforesaid facts, I will share my experience this past Thursday at a Foreclosure Settlement Conference in Ronkonkoma, NY. I walked in and a discussion was had about the investor not participating in HAMP and opposing counsel said no modification was available. The Referee disagreed and said that by accepting federal monies, the servicer must participate. Opposing counsel disagreed and I perked up to support the Referee who had taken my side. I said "Not only should you offer a modification if its in your investor's best interest, but you cannot be liable to your investor if they are not happy with your decision, basically its your choice, so don't blame it on the investor". Now opposing counsel took issue with me, but the Referee wanted more, she cut him off and asked the source of my knowledge and I disclosed that I lecture on this topic to both attorneys at CLEs and to real estate agents at CEs. The Referee was intrigued and said that she was always looking for lectures on these topics as the rules keep changing and the lectures for Referees/Judges aren't often available. I responded that I was glad to learn of her interest and I wish that I knew last month because she would have been my guest at the lecture. Than the Referee asked why I hadn't invited her to the CLEs and I responded that they were in Nassau County, but that we would be having more CLEs in September in Suffolk County. The next thing I knew, the Referee's staff was handing me her card and asking for her to be invited to future classes. I than turned to my right and saw opposing counsel dumbfounded and white, he seemed confused on how our conference had turned into the Referee inviting herself to my class. I guess she agreed that TILA and Helping Families Save Their Homes Act of 2009 are immensely important to forcing a lender (servicer) to give a modification. At the end of the conference the Referee and I both said to opposing counsel that we expect a modification and we are satisfied if they don't want to call it HAMP, but its terms better be substantially similar to a Home Affordable Modification Program (HAMP) result.

To study Treasury’s position regarding the applicability of the servicer safe harbor set forth in Section 129A of the Truth In Lending Act, 15 U.S.C. 1639a (TILA), to residential loan modifications under HAMP and 2MP, the reader is directed to review Supplemental Directive 10-05, which can be found by clicking here.

Mortgage Borrowers receive $108 million from Bank of America

According to the Associated Press, Bank of America has settled federal charges that Countrywide Financial Corp. (which it acquired about 2 years ago), collected excessive fees from about 200,000 borrowers in foreclosures. Now those borrowers will get a huge refund, which is very much deserved. The fees at issue were charged against borrowers who were behind on their mortgage (who obviously couldn’t afford the charges without these nasty fees) and they were substantial fees of thousands of dollars. Moreover, Countrywide misstated the fees to borrowers and misrepresented the amount borrowers owed.

Lieb at Law always recommends that borrowers in foreclosure closely examine their statements and we routinely order Reinstatement Packages to determine how much the bank is charging. It is our position that if borrowers & their representatives do not stand up for themselves they will face abuse. Here is an example of big banking abusing the little guy yet again. Hopefully, lenders will learn the tail of Countrywide and will choose to work with a struggling homeowner rather than charge them more once they are already behind. Otherwise, lenders will keep facing lawsuits. Keep your eyes open & if you believe your lender is maintaining abusive practices contact an attorney immediately.

Short Sale after Bankruptcy

What is the advantage of doing a Short Sale after a Bankruptcy?

It’s true that the Bankruptcy (Ch 7) will already hurt a borrower's credit score to a significant degree and that a Discharge in the Bankruptcy will prevent the lender from seeking a deficiency from the borrower (how much is owed more than how much the home sells for in foreclosure), which are the 2 main advantages of a Short Sale (less credit impact and also avoiding a deficiency). Yet, the advantage of a Short Sale after a Bankruptcy is that on a future Uniform Residential Loan Application, Fannie Mae Form 1003 (when seeking a mortgage for a future home), there are 2 "Yes No" questions that state as follows (and require additional details for a Yes answer):

"c. Have you had property foreclosed upon or given title or deed in lieu thereof in the last 7 years?"

"e. Have you directly or indirectly been obligated on any loan which resulted in foreclosure, transfer of title in lieu of foreclosure, or judgment?"

Therefore, a Short Sale can avoid being Red Flagged pursuant to either of these questions and it can avoid the hassle of attempting to get a future loan. Please note that there is also a question about Bankruptcy in the last 7 years (question “b.”), but question “e.” above survives for the lifetime of the applicant. Therefore, Bankruptcy will only be an issue on applications for 7 years, while a foreclosure is an issue forever.

One month left to close for first time homebuyers

Remember that closings must occur before July 1, 2010 to receive up to $8,000 in tax credit, so the clock is ticking.

I was at a wedding this weekend and a friend (who used a different attorney for the closing) was asking me about the credit because he has not received a commitment from the bank to date and he was getting very worried that he would miss the deadline. The fact is that he has time. Usually closings happen within a week of receiving a commitment and usually the commitment is the last step in being clear to close. Therefore, he should only start panicking during the week of June 21, 2010 if he has not yet received his commitment.

A great source for information about the first time homebuyer tax credit can be found by clicking here.

There you will learn about the necessary tax filing to receive the credit, inclusive of the need to file a paper return and attach Form 5405 and new homebuyers must attach a copy of a properly executed settlement statement used to complete such purchase. If the home is newly constructed, where a settlement statement is not available, the purchaser must attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate. Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.

Good luck and go get that credit.

A foreclosure way of life, it might work for you

I just finished 2 foreclosure defense consults and picked up a newspaper only to read exactly what I had just advised. You can stay in your home. No, the sheriff is not showing up tomorrow. You have time. My point is that if they banks start to learn how expensive foreclosure is by way of court / attorneys costs, the time value of their money that we are locking up, the depreciation in the value of the home, and the transactional costs of eventually selling a home they didn't want in the first place, maybe, just maybe they will learn that a modification is in their best interest.

To read a reassuring New York Times article on the topic, click here.