Bill McLeod's Law Blog

• When Your Mortgage Company Files Bankruptcy
  

  The foreclosure crisis sweeping the nation is also sending some mortgage companies into financial ruin, leaving many folks caught in the middle. Last week the Federal Trade Commission issued a new publication giving consumers advice on what to do if their mortgage company files bankruptcy.

  The PDF of "How to Manage Your Mortgage If Your Lender Closes or Files for Bankruptcy" can be found here. There is also information how to obtain the publication by mail.

• The US Trustee v. Countrywide
  

  It has been reported that the US Trustee has subpoened records from Countrywide Financial, one the largest mortgage lenders - if not the largest. According to CNNMoney.com (and a New York Times report), in two separate bankruptcy cases in Southern Florida, the debtors

  objected to Countrywide's claims of what was owed on their home loans. One couple contended that their mortgage payments were current, while Countrywide claimed $2,400 in overdue mortgage payments in that case.

  Countrywide has not commented on the litigation. Yet.

  Read more here.

• The News Today...
  

  If the Federal Reserve cuts rates, mortgage payments should decline, right? Perhaps not.

  Today's Boston Globe also reports on foreclosure rescue scams.

  And finally, may Bostonians have noticed the number of new condominium construction projects that have sprung up over the last few years...and the building boom continues. But if you build it, the buyers will not necessarily come. Today's Boston Herald reports that some new condominium projects are finding that it is easier to rent the units rather than sell them.

• A Thanksgiving Message for My Clients and others...
  

  I imagine it is very hard to think of Thanksgiving when foreclosures in Massachusetts continue to rise. I think I am safe saying that it's going to be hard for me to think of it, since I'll be likely thinking about the work I am not getting done while I am visiting family. This is also compounded by the fact that my mind is still reeling from a statistic I heard this afternoon from a prominent creditor's rights attorney.

  At a brown-bag lunch seminar on foreclosures, the attorney told the crowd of debtor and creditor attorneys that in 2008 it is expected that 2 million mortgages will adjust up. In other words, the New Year is not going to bring an end to the housing mess that was brought on by the irrational exuberance (to steal a phrase) in housing. Things are not going to get easier for the people I represent.

  Even though people were wishing each other Happy Thanksgiving, many were in a mad rush to get everything done they needed to get done in anticipation of the holiday. As I was sitting at my desk this evening, trying to clean it off before tomorrow – when I know I’ll have more work that I know I need to get done before, like so very many, I hit the road – I received a phone call.

  It was a relative of a client who I met last week to discuss options. This client was very nervous – as many are – when they come to meet me. No one really plans on seeing a bankruptcy attorney in their life. You're never going to open a high school yearbook and under a class picture it reads: "Future plans: I'm going to file bankruptcy!"

  At some point during the meeting, his nervousness subsided, and he started to relax and tell me his side of things.

  I spent about and hour and a half learning about his history, how the debt grew and grew. And we discussed what we could do to get through bankruptcy; to let him get on with his life. As the meeting went on, he began to smile more. When it was over and as I was walking him out, I asked him if he felt better than he did when he came in. He admitted that he did. I smiled back and said simply “that’s part of my job.” We parted ways, and shortly after that, I headed home.

  The relative called to tell me that he died unexpectedly over the weekend. I was taken-aback bit. No, more accurately, I was stunned. The relative had called, knowing that he had come to see me, and just wanted to know if there was anything they needed to know or do. I told them no, not now, but that they could call if they ever had any questions or concerns and perhaps I could help. Then, after I offered my condolences again, there was a long awkward pause.

  All day I have been wishing people a “Happy Thanksgiving.” All day I have been either talking to people who deal with people in financial crisis, learning about how to help people in a financial crisis, or talking to people in financial crisis. Yet, during that pause, all I could do was think ‘how can I wish this person a Happy Thanksgiving?’ There was no easy answer to the question, and honestly, I am not sure what I said.

  Some of us will have a Happy Thanksgiving, and some of us will not. And the more I think of it, some of them are my clients. It will not always be that way. We will all, at some point, be forced to face loss and pain. I can tell you that some holidays will be happier than others. This is life, and there’s nothing that this bankruptcy lawyer can do to change that. But as we head into Thursday, I urge you all to look around you and be thankful for what you do have.

  Chances are, you do have at least one thing to be thankful for: a tomorrow.
  

• Deutsche Bank Gets a Kick
  

  On October 31, a US District Court judge sitting in the Northern District of Ohio issued a decision involving Deutsche Bank’s attempts to foreclosure on a number of properties in Ohio. The bank claimed that the federal court had jurisdiction because there was diversity of the parties: the parties resided or had a principal place of business in different states, and the amount in controversy exceeds $75,000. The bank is not incorporated nor has a principal place of business in Ohio. The bank was not the original lender, but alleged it held an assignment of the mortgage.

  On October 10, the judge ordered the bank to produce a copy of the assignment: “Since the Plaintiff bears the burden of establishing federal diversity jurisdiction as well as standing to bring an action, Plaintiff is ordered by October 17, 2007, to file a copy of these executed Assignments demonstrating Plaintiff was the holder and owner of the Note and Mortgage as of the date the Complaint was filed, or the Court will dismiss the Complaint.”

  An assignment was filed on October 10. The document stated that the bank had been assigned the mortgage on August 13, 2007, and purportedly recorded on August 21, 2007.

  The complaint was filed on July 27, 2007. In dismissing the foreclosure cases,

  This Court acknowledges the right of banks holding valid mortgages, to receive timely payments. And, if they do not receive timely payments, banks have the right to properly file actions on the defaulted notes – seeking foreclosure on the property securing the notes. Yet, this Court possesses the independent obligations to preserve the judicial integrity of the federal court and to jealously guard federal jurisdiction. Neither the fluidity of the secondary mortgage market, nor monetary or economic considerations of the parties, nor the convenience of the litigants supersedes those obligations.

  Read the case here, and please be sure you read footnote no. 3 on pages 5-6. It’s priceless.

  
  

• The Two Edge’s of BAPCPA’s Sword
  

  There’s been a lot of debate over how unfair BAPCPA (the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005) is on consumer debtors. Some of that debate can actually be found on this site. There have been aspects of BAPCPA that I have called silly, and some that we have to question the logic on. Recently, the US Bankruptcy Court in New Hampshire issued a ruling that appears to correctly interpret the post-BAPCPA Bankruptcy Code, but also shows how absurd the amendments to the code may be.

  Prior to BAPCPA, a Chapter 7 filing was not presumed to be an abuse of the bankruptcy code. Abuse needed to be proved by the party claiming it, and a finding of substantial abuse could lead to dismissal or conversion

  Under BAPCPA, the word “substantial” disappeared, leaving only “abuse.” Also, the means test was implemented, creating an objective means to determine whether the