Chicago Foreclosure Lawyer Blog

In our last update on this topic, we gave some raw numbers from the National People's Action report on Bank of America and Chicago foreclosures. A quick analysis of those numbers indicates that although it holds a large number of properties, Bank of America has been less than quick to get homeowners into permanent modifications.

This has had a significant effect on Chicago neighborhoods, in particular those on the west side of the city, as well as some on the far north. Bank of America filed 202 foreclosures in Chicago's West Ridge neighborhood in 2009. When you combine West Ridge's foreclosures with those of neighboring Rogers Park, you have a total of 297 foreclosures filed by Bank of America within the northeast corner of Chicago. When looking at the neighborhoods of Austin, Humboldt Park and West Town, Bank of America is responsible for 369 foreclosures west of the recently-gentrified Near North neighborhood. On the South Side, West Lawn, Chicago Lawn, West Englewood and Englewood total 348 Bank of America foreclosure filings for 2009.

These neighborhoods are further impacted by these foreclosures and others -- empty properties provide safe haven for drug dealers, gangs and an increasing homeless population. These empty buildings also make it much more difficult for other distressed home owners to pursue remedies like a short sale. The decline in property values has left 1 in 4 homeowners underwater on their mortgages -- the increase in foreclosures in this neighborhood is bound to drive property values even lower.

Do these neighborhoods also indicate a trend of predatory lending in Chicago? Perhaps. However, with neighborhoods like Lakeview and Lincoln Square facing over 50 Bank of America filings each, it may be a bit difficult to establish a serious trend. Add to that the fact that Bank of America inherited a large amount of this debt from Countrywide. It may very well be that predatory lending occurred. The bigger story, in my opinion, is that Chicago's biggest forecloser is not doing much to work with borrowers.

A recent article in the New York Times was rather surprising, even to me, someone who practices foreclosure defense litigation. As you may have read in our previous post, Fannie Mae's plan to prevent strategic defaults seems designed to punish all homeowners who find themselves seriously underwater on their mortgages.However, the New York Times indicates that the wealthy are engaging in strategic defaults than any other group.

More analysis after the jump.

Continue reading "Strategic Defaults -- Who's Foreclosing Now?" »

Two days, two articles, two different viewpoints. If you listen to NPR, you may have heard the segment on the "troubled Obama mortgage program." If you read MarketWatch, you may have read that loan modifications are on a sharp rise. So, which one is right? Oddly enough, both are pretty accurate once you filter out the spin.

After the jump, I attempt to do just that.

Continue reading "The HAMP Program -- Success or Failure? It Depends Who You Ask." »

People come to our offices at many different stages of foreclosure. Some come well before default, because they anticipate problems ahead. Some come to us in the eleventh hour before their home is to be sold. Although every case is different, I will attempt to describe what "too late" generally means after the jump.

Continue reading "Another Frequently Asked Question -- How Late Is Too Late?" »

As the person who often deletes spam comments on this blog, I have been discovering that many of them are posted by other firms that engage in bankruptcy practice. Our firm also handles bankruptcy cases, but generally separately from our foreclosure defense practice.

Here is the obligatory disclaimer: We are a debt relief agency. We assist people with filing for relief under the Bankruptcy Code.

My own concerns about the ethical implications of comments that do not provide this disclaimer aside, I feel that it is important to give it before the jump. After the jump, I will talk about bankruptcy vs. loss mitigation strategies and when they are most effectively used.

Continue reading "Bankruptcy vs. Loss Mitigation" »

A question that I am frequently asked is, "why does this take so long?" This is usually asked in the context of mortgage foreclosure and the trial process. There is no good answer to the question; it truly varies from case to case. People are often surprised by how long litigation can take. Simply filing a motion to dismiss could push things back two months.

How does this happen? A typical scenario is after the jump.

Continue reading ""How Long Does It Take?" " »

The New York Times Op-Ed page states that the Administration's new foreclosure prevention plan could save up to 1.5 million homes from foreclosure. Some highlights of the plan include: requiring lenders to consider reducing the principal on some underwater loans, new short-term modifications for borrowers receiving unemployment payments, and added incentives and requirements for banks that should increase participation.

This plan sounds like a better deal for borrowers. By moving towards required participation, the Administration is taking a step in the right direction. However, even if the plan saves homes, we are still expected to lose 3.6 million more through 2012. This basically means that the housing market will stay depressed for quite some time.

In my opinion, the Administration should take a large step towards heavy regulation of mortgage lenders. Requiring lenders to participate in these programs and monitoring compliance would be a step in the right direction. Instead of backing up banks that lose money at foreclosure auctions, spend that same money on a program that pays down underwater mortgages (while also requiring principal reductions from the banks) to restore some equity into our nation's homes. For those who would immediately cry, "government handout," keep in mind that the money would be spent on a handout to a massive bank as opposed to a financially distressed individual. To prevent abuse, prohibit borrowers from using that equity to finance another loan for a period of two years.

There is still a lot that could be done, but we are slowly getting there via baby steps.

The New York Times is reporting that a new Federal program seeks to provide new incentives for borrowers and lenders to resolve distressed mortgages via short sale. The new program, scheduled to take effect on April 4, will provide cash incentives to increase the number of successful short sales.

In a normal short sale, banks allow borrowers to sell their home for less than is owed on the mortgage. In some situations, borrowers are still on the hook for the remainder of the loan's balance. The new Federal program would absolve the borrowers of that deficiency. It would also provide cash payouts to lenders and borrowers.

One key element that may actually make this program work is that lenders will have realtors assess the value of the properties and then be forced to accept an offer that comes in at or over the assessed value. This is a large step forward from the current system where lenders will reject a short sale offer if they subjectively feel that the offer is "too low."

Only time will tell if this is going to be more or less successful than the HAMP loan modification program. At very least, it should keep a few REO properties off of lenders' books.

I never expected that an article at CNN.com would surprise me, but this one did. It discusses how people were shocked to discover that, after a successful short sale or judicial sale, the lender pursued them for the remainder of their debt.

This should come as no shock to anyone familiar with the industry and with the foreclosure process. However, if you're not familiar with those things, it can be a bit surprising. When an individual buys a home with a mortgage, there are two documents that are executed. One, the Note, contains a promise to pay back a debt. The other, the mortgage, ties that debt to a specific piece of property that can be taken to satisfy the debt.

So, don't be surprised. If a lender releases the mortgage, you may still be liable for the remainder of your obligation under the note.

In November 2009, the Legal Aid Society of New York filed a class action suit against Aurora Loan Services, L.L.C., Timothy Geithner, and other Federal officials. The suit, filed in the U.S. District Court for the District of Columbia, takes an interesting approach.

First and foremost, any individual who is eligible for a loan under the Federal Home Affordable Modification Program (HAMP), and whose loan is serviced by Aurora is likely a member of the class. This means that an untold number of borrowers in Chicago, greater Cook County, and across the state of Illinois may be part of the class. Some of our own clients may very well fall within the class. At some point in the future, those whose loans are serviced by Aurora may very well receive a notice telling them that they may opt-out of the class if they wish to pursue their own lawsuit.

More thoughts on the complaint after the jump.

Continue reading "A New York Lawsuit With Promising Implications for Chicago Homeowners" »

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" »

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" »