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Here we go again. Every twenty years this country suffers through a serious financial crisis, usually based around real estate lending. Why? Because of bad lending practices. Why are there bad lending practices? Because Congress keeps softening or eliminating mortgage lending regulations. Why does Congress do this, even when they know the consequences? Funding – big banks and lending institutions fund most of our politicians. Why do lending institutions want relaxed regulations? Because they can make more loans. Why do they want to make more loans? Because they are paid a huge commission from each loan. Why does the bank want huge commissions? Because it puts more money into the shareholders pockets and justifies huge bonuses to the upper management. So is this insanity ever going to stop?
Point in fact: In November, 2015 Rep. Andy Barr (R-Ky.) introduced The Portfolio Lending and Mortgage Access Act (H.R. 1210), which passed the House by a 255-174 vote. The bill is intended to give all banks and lending institutions the same exemption meant for small and rural banks to all banking institutions.
So what is the problem you ask? Perhaps a little history will help. The reason the real estate lending market collapsed was due to little or no regulations governing mortgages. In late 2011 the Consumer Financial Protection Bureau “CFPB” was established with the goals of putting some sanity into the lending market and to protect consumers from unscrupulous lenders. In 2013 and 2014 the CFPB issued regulations that, in order for a lender to obtain a qualified mortgage status, they were required to make certain a borrower has the ability to repay (what a novel concept).  So what is benefit of a “qualified mortgage status“? The lenders who follow strict guidelines are provided “safe harbor” protection from federal penalties and lawsuits brought by borrowers who have defaulted on their loans.  Except small and rural banks do not need to follow the ability-to-repay rule.  H.R. 1210 would expand this limited exemption to all banking institutions. Hence, my statement about “here we go again”.
Proponents argue that the bill has a safety valve – if the lender makes a bad loan the lender must keep the loan and cannot sell it to the secondary market or securitize the loan. The message is that a lending institution has a right to make loans without concern over the borrower’s ability to repay, because that institution will be stuck with the loan forever.
What the proponents do not address is what happens when the insolvent lender closes their doors with hundreds or thousands of “bad loans”. Those loans will have to be absorbed by the lending market (aka Countrywide).
What is the real problem? CFPB is taking strides to control runaway creditors: banks, savings and loans, vehicle lenders, payday loan companies, plus many more. No one agency has done as much in a very limited time to speak for the consumer. Rep. Maxine Waters (Calif.), the top Democrat on the House Financial Services Committee, warns that “the bill undermines the anti-predatory lending provisions of the Dodd-Frank Act and virtually eliminates one of the most significant consumer protection rules implemented by the CFPB.”

The post Congress Deregulating Mortgage Lending – Will Lead to More Bad Loans appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

Consumer Credit Counseling Services of Nebraska (CCCSN) closed its doors this year.  The agency opened in 1976 and was viewed as the best organization to help debtors avoid bankruptcy by establishing repayment plans with creditors.  The agency has been acquired by GreenPath Debt Solutions of Farmington Hills, Michigan, a large credit counseling agency with 60 offices in 13 states.
The closing represents a real loss to Nebraska residents.  CCCSN offered face-to-face financial counseling, but that type of organization has become expensive to operate. Credit counseling agencies are largely funded by a fee called “Fair Share” in which the agency used to keep up to 15% of the funds being paid in credit card payment plans.   However, in recent years banks have reduced that rate to 3 or 4 percent.
As the fair share rate has dropped, the industry has been forced to consolidate and larger credit counseling agencies with centralized computer and phone systems have gobbled up less efficient local agencies like CCCSN.  Although GreenPath still maintains an office in Omaha and Lincoln, the agency does not even come close to matching the personal counseling services provided by CCCSN.  Two or three GreenPath employees have replaced the large veteran staff CCCSN used to employ.
When the fair share rate was 15% the agency could afford to spend time in face-to-face meetings with clients. The agency was not limited to establishing Debt Management Plans (DMP) although that certainly was a core function.  CCCSN helped many customers avoid bankruptcy by teaching them to establish workable budgets. Those days are gone.  With lower fair share rates the only way to stay profitable is to enroll as many customers in a DMP as possible and then to farm out the work to a national organization. Personal counseling is basically a thing of the past.  Veteran counselors are gone. Lower paid data input workers are now the norm.
The dramatic changes in the credit counseling industry have been documented by professors Robert Manning and Anita Butera in their report A Failing Grade For the Post-BAPCPA Credit Counseling and Bankruptcy Education Industry?  Those changes include:

• A growing dependence on referrals from credit card collection departments.
• A reduction of Fair Share compensation rates from 15% to 3 or 4%.
• A growth of for-profit credit counseling companies disguised as nonprofit credit counselors that utilize a maze of related companies to siphon off revenue from their nonprofit sister companies.
• A consolidation of credit counseling agencies in favor of larger agencies that utilize economies of scale, large IT departments and DMPs that follow the strict guidelines established by the credit card industry.
• A reduction in face-to-face counseling.
• A movement towards DMP mills largely controlled by credit card collection departments though referral agreements best described as a Master-Slave relationship.
• A failure of the Internal Revenue Service to deny nonprofit status to agencies that are controlled by a single family that siphon off revenues to their for-profit entities.

My own observation is that clients can not distinguish the difference between traditional credit counseling agencies, DMP mills, debt settlement firms and other debt relief agencies all claiming to be nonprofit agencies. Debtors cannot distinguish the true nonprofits from the profit-maximizing wolves in sheep clothing nonprofits.  As a consequence, the older community-based credit counseling agencies are dying nationwide.
Goodbye CCCSN.  We hate to see you go.
Image courtesy of Flickr and Sean MacEntee

When people come into my office one of the first things they ask me is often “how will this affect my credit?”  The answer is complicated.  Some of my clients come to me having never missed a payment in their life.  Their mortgage, their car payment, and their credit cards are all current.  Typically these individuals have been doing everything possible to maintain their payments, including using one credit card to pay the minimum payment on another.  For these individuals maintaining their good credit score, despite the hard times they were enduring, is part of their identity.  Unfortunately, for these individuals a bankruptcy filing will have the most dramatic affect on their credit score.  However, many other individuals come to me years after first experience financial hardship.  Long before stepping into my office they have been forced to default on credit cards or give a car back to the bank in order to have enough money to put food on their table.  For these individuals a bankruptcy filing will have little affect on their already low credit score.
A bankruptcy filing remains on your credit report for up to ten years.  However, its affects on your credit score are most dramatic immediately after filing.  Their is no need to wait ten years to rebuild your credit score.  Below are some positive steps that you can take to rebuild your FICO score in just a few short years:
1)  Obtain credit:  It is important that you have a payment history if you want to rebuild your credit.  Your payment history comprises up to 1/3 of your credit score and the lack of a payment history can be as damning as a bad one.  By cautiously obtaining a few small credit lines you will be able to re-establish a payment history.
2)  Don’t pay late:   As stated above, your payment history is a large part of your credit score.  If you pay late on your bills your score will be impacted in a dramatic manner.  You may want to consider putting due dates on your calendar or setting up your bills for automatic payments.
3)  Know your credit limits:  Many lenders look to your your debt to credit ratio when processing your loan application.  It is assumed that individuals whose balances are low compared to their available credit are more able to repay these debts.  Try and keep your debt to about one third of your available credit.
4)  Keep lines of credit open.  Even if you don’t use a credit card, the available balance is taken into account in determining your debt to credit ratio.  Keeping these accounts open is a good way to rebuild your credit score. However, it is important to continue to monitor these accounts to be sure that the accounts remain secure.
5) Work with creditors who positively report.  Their are three types of creditors.  First their are creditors who do not report at all.  These are typically businesses that work on an upfront cash basis.  Certain cell phone companies, for instance, require you to pay each month up front.  Failure to pay results in your phone being turned off, but you have no liability for any unpaid balance.  These creditors do not report positively or negatively on your credit report.  Second their are creditors who only report when you have been bad.  While you pay on time every month, they do not report anything to the credit bureaus.  However, the minute that you miss a payment they file a report, harming your credit.  Finally we have creditors who positively report.  These creditors tell the agencies what you have done each month.  Each time they report that you have paid on time your credit score improves.  It is important to talk to all creditors (credit card companies, landlords, cell phone companies, auto-loans, etc.) to be sure that they positively report.
6)  Review your credit report regularly.  In order to ensure that your credit score heads in the right direction it is imperative that the information on the report is accurate.  Each year you are entitled to receive a free copy of your credit report from each of the credit reporting agencies.  Be sure to take advantage of this opportunity to review your credit status and report any errors.  Take this time to review your credit repair plan and make any adjustments based on your credit reports.
If you are considering bankruptcy you should contact an experienced attorney to help guide you through the bankruptcy and rebuilding process.  Second Chance Legal Services would love to help.  Call (586) 806-2701 today to schedule your free consultation.
 
 

You can stop your mortgage foreclosure by filing a chapter 13 bankruptcy under most circumstances.  Chapter 13 will give you an opportunity to apply for a mortgage modification while under the protection of the Bankruptcy Court.

A chapter 13 bankruptcy must be filed before the foreclosure sale takes place if desire to save your real property. Under chapter 13 you are required to present a plan of reorganization.

Mortgage Modification

In Chapter 13  you are able to use the Bankruptcy Court's new "LMM" program - Loss Mitigation Mediation. You and the mortgage company are able to communicate over a special internet portal so documents do not get lost.

Wipe Out "Under-Water" Second Mortgages

Under chapter 13 bankruptcy, you can avoid or wipe-out your second mortgage if it is wholly "under-water." Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com