Chicago Foreclosure Lawyer Blog

Now that so many people have web-enabled cell phones, the risk that jurors may self-educate during breaks in a trial has caused some jurisdictions to contemplate restricting access to cell phones for jurors. According to Time.com, a case in Miami became a mistrial when the judge interviewed the jury and discovered that nine of the twelve jurors had done research on Google to help form their verdict.

I honestly find it surprising that so many people manage to bring cell phones into courthouses -- there are quite a few in the Chicago metro area that won't allow you to bring a phone with a camera inside the courthouse. How many phones don't have a camera these days? I look forward to the day that one can present evidence 100% electronically. Perhaps seeing the info on a giant screen would keep people from looking for more info on their phones -- the need for fancy electronic gadgets would be satisfied.

Per the New York Times, Freddie Mac and Fannie Mae are to receive more Federal funds. The new deal removes the $400 billion cap on money to be paid to Freddie and Fannie over three years. While this should increase liquidity in the mortgage industry, there is an interesting side note. It turns out that the executives in charge of the two mortgage giants will be receiving some pretty hefty compensation, and not in the form of stock.

Here's the compensation package for the chief executives of both companies: "$900,000 salary, $3.1 million in deferred payments in 2010 that are not dependent on performance and an additional $2 million tied to meeting certain goals." Here's a great idea -- why not roll some of that money into securing loan modifications for the multitudes of people with distressed mortgages.

According to the New York Times, the four biggest mortgage backers in the U.S. are going to remain on government support for quite some time. Why? Because someone has to guarantee the securitized mortgages that are still out there. As homeowners default, someone has to absorb the value of the defaulted mortgage.

Ultimately, that responsibility falls upon taxpayers -- money given to these mortgage giants comes at a cost. Much like a pay day loan, these companies are finding themselves in a position where they must borrow more money from the government in order to keep up with their existing debts to the government.

To make matters worse, AIG, a company oft-described as, "too big to fail," is unable to sell assets that could bring it revenue to pay off its existing commitments. In some situations, this is because subsidiary businesses are not wholly owned by AIG and require that their investors be bought out before a business can be sold.

Although many of the major banks are repaying or have repaid their TARP loans, it seems that the mortgage backers are nowhere near being out of the woods yet. Perhaps this will lead to increased pressure to comply with the government's loan modification programs.

Most standard mortgages contain an acceleration clause. The clause generally requires a lender to provide a borrower with notice of default and its intent to accelerate. It also requires that the lender prescribe steps that can be taken to cure the default and a date at least thirty days from the date of notice by which a borrower must cure the default.

This clause is often ignored by lenders and is a condition precedent to filing a foreclosure action. Simply put, a condition precedent is an affirmative action that must be taken before performing another action. In this context, a lender must take the steps outlined in the mortgage's acceleration clause prior to filing for foreclosure. Failure to do so does not invalidate the mortgage, but it can lead to the temporary dismissal of the foreclosure claim, resetting the clock for the distressed borrower.

More after the jump.

Continue reading "Using 2-619 Motions and Affirmative Defenses When Plaintiff Fails to Accelerate" »

According to CNN.com, foreclosure filings were down 8% in November. As the article indicates, this number may be a bit artificial as mandatory mediation and other remedies delay the filing process. At the same time the S&P/Case-Shiller home price index has shown a small increase in property values for five consecutive months. This has slightly reduced the number of homeowners whose mortgages are valued higher than their homes.

As long as housing values continue to increase steadily, it would stand to reason that many people facing foreclosure could completely avoid it or have a stronger bargaining position for a loan modification. Any recovery, if sustainable, should be gradual, but it's nice to hope for a better market in 2010.

A previous post hinted that the Treasury and HUD would be finding ways to spur banks to work out more loan modifications pursuant to HAMP. Today, Secretary Geithner indicated that TARP will be extended to October 2010. Part of the unspent TARP money will be used to spur the loan modification programs originally implemented by the stimulus package.

This is good news for those who are currently attempting loan modifications and having no luck. However, it is best to take a wait-and-see approach on these things. Who knows which financial shoe will drop next.

This article from the New York Times indicates that although properties in foreclosure are attractive due to the price, there may be other costs associated with them. These costs, in turn, can make the properties seem less attractive.

Since most properties are sold, "as is," a potential buyer may be taking on some serious problems. Some situations, like short sales, may seem simple, but hidden red tape makes them more complex. Since the seller's bank (and possible second and third lenders) must approve the sale price, the process can take a long time. Moreover, list prices may not accurately reflect what the final purchase price would be.

This doesn't mean that investing in a property that is being foreclosed is a bad idea. The article itself is a good read for anyone interested -- it outlines some possible pitfalls and stumbling blocks.

While looking for some blawgs to add to my RSS feed, I stumbled across this blog post from Julia Wei, a California attorney whose practice areas include real estate and lending matters. At first glance, it seems like something that should inspire a knee-jerk reaction in an attorney in my practice area. Once you really get to the meat of what she's discussing, it gets a bit interesting.

Ms. Wei is really commenting on a trend in the world of foreclosures -- firms that will tell you that you can keep your home free and clear of any debt. Given the recent ruling in New York State, where a judge awarded a couple free and clear title to their home, this outcome may seem possible. In the vast majority of cases, this remedy is extreme. It may even be that this judge is reversed on appeal.

More thoughts after the jump.

Continue reading "An Interesting Blog Post From The Golden State" »

Some law firms are making the move to social networking sites like Avvo, Martindale Hubbel Connected, Linkedin, Facebook, and Twitter. As Christine E. Mayle indicates, there are some ethical pitfalls involved in social networking. Even blogs (or "blawgs" as industry wags like to call them) can cause problems. More detail and though on these ethical issues can be found after the jump.

Continue reading "Ethical Pitfalls of Social Networking" »

As part of the economic stimulus package, the Federal government established the Home Affordable Modification Program. Although many people are enrolled in the program, only a small portion have converted their temporary loan modifications into permanent modifications. Many people are having difficulties making the cuts permanent. Although the government predicts that 325,000 people will have made their loan modifications permanent by the end of the year, analysts indicate that this number is highly inflated.

The Treasury Department has stated that it will be monitoring lenders and requiring them to submit plans for increasing the number of loan modifications that convert from trial to permanent. Lenders who fail to comply will be subject to fees and sanctions. Individuals seeking to avail themselves of this program can find more information here.

A Yield Spread Premium is, quite simply, money paid by a lender to a mortgage broker for bringing it loans that are "above par." The "par rate" is generally the interest rate for which a specific borrower qualifies. Above par loans are sold to consumers at a higher interest rate. An amount of money based on the difference between the par rate and the actual interest rate of the loan is paid to the broker. This is the yield spread premium.

These premiums generally range from $1000-$2000, but we have seen them go as high as $4000. Although YSPs are currently in a grey area of legality, the academic community and consumer rights attorneys have argued that these payments are totally unrelated to the services mortgage brokers provide and represent a financial incentive to misinform consumers. Basically, if a broker stands to make $1000 to $4000 more dollars on a transaction, why would he or she inform a consumer that a cheaper loan package exists?

More on YSPs to come as we develop our research base and seminar series.