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The Economy appears to be improving; at least that is what the numbers and news broadcasts relay.  However, many of our clients at The Mark Bamberger Company see people who continue to suffer pain.  As I related in a previous article, many experts report a second wave of foreclosures and resultant Chapter 7 and 13 bankruptcies due to a second expected bounce in some adjustable rate mortgages.

Many of our clients are still either unemployed or severely under-employed.  Many of them continue to see mounting bills they cannot pay.  Home mortgage lenders seem to be “cutting off their nose to spite their face”, by taking billions in government bailouts; then openly imposing obstacles to mortgage modifications.  Additionally, finance charges and late-payment penalties are making creditor payments harder than ever.

What is the answer?  There is no standard answer for everyone; but with planning, families can avoid the pitfalls of the still-hindered economy.  Bankruptcy may be a good option; but before that decision is made, debtors should meet with their attorney; be it me or someone else, and do a global assessment of their financial situation.  Specific questions to ask, among many others, include:

1. Is my house safe from foreclosure or loss in a bankruptcy?  If my house is in foreclosure, how far in is it (from initial complaint through final sheriff’s sale)?
2. How much equity do I have in vehicles and other big-ticket real and personal property?
3. How much unsecured debt (e.g., credit cards, medical debts, and personal loans) can be discharged in my bankruptcy?
4. Can I afford to pay for a bankruptcy?  This is often easier than many think since they can be economical, paid off through monthly payment plans, and paid from the money not paid to unsecured debt during the bankruptcy period.

Above all, don’t panic; there are almost always options.  Empowerment comes from taking control, even if the situation appears dubious!

MJB  7/3/10

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Mark J. Bamberger, Esq., Principal

The Mark Bamberger Co., LLC

Those with adjustable rate mortgages (“ARMs”) who made it through what seems to have been the worst part of the recent Recession are taking a deep breath in thanks of maintaining their homes from foreclosure either within or without Bankruptcy.  It is good news, to be sure.  But before uncorking that champagne, bear this in mind.  Many economic experts who study these things forecast that a second wave of foreclosures and bankruptcies on the near horizon.

The reason for this pessimistic prediction has to do with the structure of many housing loans.  Many of the ARMS still out there are about to hit a second “adjustment” phase, in which, like the first one, the rates will shoot for the sky.  This could raise some ARMs from 6% to perhaps more than 10%, meaning hundreds of dollars more in monthly mortgage payments for the average household and further financial peril.  This wave is predicted to begin washing up on our shores later in 2010 and into 2011 and 2012.  And no, this has nothing to do with the Mayan calendar!

As before, the important thing to do is avoid panic.  Just as the federal programs for home retention, for example President Obama’s Home Affordable Program, helped so many through the first wave, many who know this stuff say a second mortgage assistance program is on its way.  Also, mortgage brokers are now accustomed to dealing with attorneys representing economically challenged and desperate clients.  My mantra is this: “As wonderful as your house is, in this market the bank does not want it!  It is in their best interest to keep you as a paying customer as long as they can”.  In other words, they are on your side – well as much as a monolithic, cold, heartless creditor can be.

And on the subject of mortgage broker empathy, more often now I see more clients in my offices concerned about the pace of their loan modification under federal or state home retention programs.  They also complain about the mortgage brokers repeatedly losing paperwork and nagging them for “updated financials” to process their modification applications.  Although I join many others in assuming an insidious and nasty motive from mortgage brokers, some of this just makes sense.  As I advise my clients, mortgage creditors are so overwhelmed with modification applications that it can literally take four months or more for them to review a client file and render an offer on modification.  The lost paperwork and need for them to update that client’s financial information is more an artifact of the backlog than anything insidious.  Alternatively, if a client has evidence of nasty motives, I am more than happy to take their civil case against that mortgage broker.

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