Federal HAMP Loan Modification Program Ending December 31, 2016

A part of a recent omnibus spending bill, Congress has decided to end the HAMP Loan Modification which offered loan modifications and principal reductions to homeowners struggling to make their mortgage payments or in foreclosure.

Contained in the bill is the following language: “The Making Home Affordable initiative of the Secretary of the Treasury, as authorized under the Emergency Economic Stabilization Act of 2008 … shall terminate on December 31, 2016.”

Chief Deputy Whip Patrick McHenry (R, NC-10), the Vice Chairman of the Financial Services Committee, released the following statement:

“For more than four years, I have been front and center in trying to help homeowners and protect the American taxpayer by ending President Obama’s wasteful and failed mortgage modification program. I am pleased to say that day has finally arrived.

“With passage of today’s consolidated appropriations bill, Congress has finally ended the Home Affordable Mortgage Program (HAMP), which harmed the very people it was intended to help: those who were struggling to keep their homes after the financial crisis. While I would prefer the money saved by eliminating the program be put towards reducing our deficit, I am grateful that we have finally acknowledged HAMP for what it is: a failed government program that hurt those in need.”

Despite claims be critics and Republicans that HAMP hurt homeowners more than it helped, we have had many successful loan modifications for our clients, some with large reductions in principal and interest rates.

The issue with the critics’ arguments (the non-political ones to be clear) is that some homeowners could not afford to own the home they lived in no matter if the lender reduced principal and interest to the lowest levels the program allowed for.  It fails to factor in unemployment of underemployment, as well as low or reduction in salaries of homeowners who at one time could afford their payments.  

There is some truth to the criticism in that there were gross abuses of the modification program, like banks playing hide the ball with documents sent in etc., but when the end of the line came many homeowners could still not afford the home they lived in even with principal reductions and low 2% interest rates fixed for 30 years.  The government simply could not put more income into homeowners’ pockets to make some type of affordable payment.

If you are interested in a loan modification 2016 is the time to act.  Contact out office ASAP as loan modifications can take months and must be started now to be complete before the expiration of HAMP.

Mortgage Debt Forgiveness Act Extended!!

As reported here, Congress has passed the extension of the Mortgage Debt Forgiveness Act that expired back on December 31, 2014 and made it applicable to 2015 and through January 1, 2017.

If you remember, under the federal tax code, when a lender forgives or cancels a debt obligation you owe then the IRS treats that amount forgiven as income to you that you pay taxes on.

In 2007, Congress created a special exception to this rule for owners who had mortgage debt canceled as part of a short sale arrangement with their bank, a foreclosure or a loan modification. Since then the exception has been extended until it expired last December 31, 2014. 

That left thousands of homeowners who received modifications, waivers of deficiency, and did short sales in 2015 with possible huge tax bills coming.  For example, an owner who participated in a short sale and had $100,000 of mortgage debt forgiven might owe the IRS $28,000 or more.

The extension of this act gets homeowners off the hook for any IRS debt through the end of 2016.

Mortgage Debt Forgiveness Act May Be Renewed After All

It appears that the Mortgage Debt Forgiveness Act previously discussed here may be renewed after all; great news for anybody who received a principal reduction or conducted a short sale in 2015.

The original MDFA was allowed to expire on December 31, 2014, whereby any forgiveness of principal in a loan modification or short sale was taxable income to the borrower.

A new bill was introduced late Tuesday to extend the MDFA 2 more years to cover 2015 retroactively as well as 2016.    The bill also states that as long as a written agreement to forgive the mortgage debt is drafted in 2016, the tax exemption will still apply, even if the actual forgiveness occurs in 2017.

More to come as this act is debated in the last few days of 2015 by Congress. It is expected to be passed and mid-week before Christmas Day.

The Lies Your Foreclosure Defense Lawyer May Be Telling You/Advertising

Recently viewing some blogs and websites of other lawyers I find a common trend.  Many lawyers bash the general lawyer pool stating that “only they fight for real justice and don’t just delay cases.”

Well, they may take cases to trial, true.  They may win an EXTREMELY high number of foreclosure cases; high being 2-5% foreclosure defense trial wins out of their caseload of typically 50-100 or many hundreds of cases as that is extremely high for foreclosure defense.  But they don’t tell you that fact of the true number of wins.  You only see them blog about their win; not the 50 losses in between each win.
Even worse is these misrepresentations do not make the public aware that even winning at trial is rarely a win in the foreclosure context.  99.99% of foreclosures are dismissed without prejudice, meaning that the bank can simply re-file.  And with the impending Bartram decision at the Florida Supreme Court pending an opinion where the current case law is that each new defaulted monthly payment is a new default the bank can foreclose on the bank can always come back after the borrower; and the Florida Supreme Court likely to uphold this  But these lawyers don’t tell you that part.
So what makes these “special” lawyers services who take cases to trial any better?  Ultimately are they not just doing exactly what they preach against; delay the foreclosure?  If the bank is simply free to re-file the case even upon a trial win, is that not just delaying the inevitable just as they bash other lawyers for doing (foreclosure delay not defense)?   
And what about all of the additional legal fees you charge to do depositions of the bank witnesses, costs to fly them in, costs to do a trial, and the dozens of extra hours to do a trial?  Not disclosed of course that they billed their client an extra, for rough example, $10,000 additional just to get a “win” which the bank can turn around and re-file 2 months later simply by sending another default letter and filing a new lawsuit.

Was that $10k extra worth the extra 2-3 months, or as a homeowner would you rather be a few thousand bucks in and have a favorable loan modification at a low/reasonable interest rate and affordable payment so you can keep your home without worries of who is going to knock on the door?  I’d bet on the latter 9 times out of 10.
Shame on you legal community for not being up front with your clients and the false advertising you have on your websites trying to make yourself sound better than the other foreclosure defense lawyers out there.  The Florida Bar should outlaw this practice of colleague bashing practice in advertising to the public.  Sure, there are scams out there and some terrible lawyers who shouldn’t be practicing law at all, but the vast majority of the “regulars” you see at the courthouse in foreclosure court know the case law (and keep up current on it) and how to properly defend a foreclosure case.

And other times a normal person cannot afford to pay a lawyer $10-20k to defend a foreclosure case as if they had that kind of money they wouldn’t be in foreclosure to begin with.  So this bashing by the so-called foreclosure “elite” lawyers means nothing if they serve the more financially blessed people out there able to afford to fight a case fully and completely. 
Our office has a high level of satisfied clients overall because we focus on getting the client a favorable loan modification to keep their home, not trying to spend our clients’ money on depositions and dozens of additional hours of legal fees (remember, trial isn’t free!!!).  When a client simply cannot afford their property, we are realistic with them about short sale and bankruptcy options. Being up front and honest with your clients and potential clients is something that has seemingly passed by some of these “big shot foreclosure lawyers” you read about in the news and made their names on the backs of their clients’ tens of thousands of dollars and lost homes along the way.  I would rather have 10 satisfied clients who kept their homes than my name in the paper or on the news in some narcissistic fashion.

As I have said in the past, try to understand early on what your lawyer’s motivation is- is it to truly help you save your house, or is it to get a published appellate decision or his/her name in the newspaper or on TV at your (large) expense and potentially you losing your house eventually?