Articles Posted in Predatory Lending

The biggest money pit I see when I interview prospects with financial problems is the car — always.  I have even seen people paying half of their disposable income in car payments (plus insurance, tolls, repairs, maintenance, tickets and all the other costs we don’t often consider).  It’s insane.  Here’s a post from Jay Miles in, in answer to a young man thinking about buying a Tesla, that says it perfectly:

No, don’t buy a car.  Cars don’t make money.  They’re depreciating assets.  You already have a wife, so there’s no need to show off.

A layperson is often at a disadvantage when defending against a debt collection suit filed by an attorney. The debtor as a defendant does not know the “rules of the game” and sometimes takes the advice or direction of court staff (who by the way should not be giving legal advice but often do.)

Talking to clients who have appeared to defend in small claim collection suits in this area (suburban Maryland and DC), I am surprised that many will meekly follow court staff instructions to come back to court on another date — when the collector’s attorney fails to show up or is late! This failing is a perfect opportunity to have the case thrown out!

You have a right to ask the court to proceed on the case. Tell the clerk that you are present and ready for the case to be called. When the case is called, proceed to the podium and ask the court to have the case “dismissed with prejudice.” That very important qualifier — “with prejudice” — means that you are asking the court to dismiss forever.

It happened again this week. The client comes into the consultation smiling broadly. He just needs help with a loan modification, he argues. He doesn’t have any other debts. “Look,” he says, pointing at his credit report, “it’s been charged off!”

Sorry, that’s not what it means. A “charge off” is an accounting entry by the lender declaring that the debt is uncollectible, a determination that helps the lender deduct it as a loss against his taxes.

The “charged-off” account is still a live debt of the borrower until such time as the statute of limitations runs out and that can vary from three to seven years and depends also on the type of debt. In this area — Maryland and the District of Columbia — you will need to check the law in the jurisdiction in which you reside.

I had to smile when I read the news that the banks were now lobbying to keep former Harvard bankruptcy professor and Senator-elect Elizabeth Warren from getting appointed to the Senate banking committee.

Lobbying is not cheap. It runs into the millions of dollars for a campaign. And, like most good businesspersons, I am sure the banks did some cost-benefit analysis in making this decision.

This action by the financial industry must mean they see a big threat to profits. And consequently, since bank profits and consumer losses are a zero-sum game, it also means her appointment to the committee could mean a big financial win for consumers. Granted, one person alone will not do it all, but the banks perceive she could have a significant effect on the outcome.

Richmond, VA-based Suntrust Mortgage will pay out $21 million to more than 20,000 African-American and Hispanic home loan borrowers to settle a federal government suit charging discriminatory mortgage pricing from 2005 to 2009. The lawsuit charged Suntrust with violating the Fair Housing Act and Equal Credit Opportunity Act.

This settlement comes on the heels of a settlement last December by Countrywide Financial Corp. and subsidiaries for $335 million for similar loans made between 2004 and 2008. Currently under investigation by the Department of Justice is Wells Fargo & Co.

“At the core (of the suit) is a simple story: If you are African-American or Latino, you likely paid more for a SunTrust loan than equally or similarly qualified white borrowers,” Thomas E. Perez, assistant U.S. attorney general for the civil rights division, told the Richmond Times-Dispatch in a May 31, 2011conference call. “You paid what amounted to a racial surtax,” ranging from hundreds to thousands of dollars per borrower,” he told the newspaper.

The take-away lesson from the recent disclosure of fraudulent lender documents and the subsequent suspension of foreclosures throughout the country is this: Yes, lender mortgage documents are defective and faulty, and it’s been that way for some time.

The big news last month was the revelation that hundreds of thousands of phony affidavits had been signed by an employee of GMAC Mortgage (a unit of Ally Financial) and then submitted to courts throughout the country to support foreclosures. That admission in turn prompted the company to voluntarily suspend foreclosures in 23 states, as well as prompting demands by state attorneys general in Connecticut, Colorado and California to stop foreclosures in those states.

Recently joining the list of lenders suspending foreclosures are Bank of America, JP Morgan Chase and PNC.

If the legal and financial technicalities of the foreclosure mess have you bewildered, you are not alone. (After all, even Wall Street got the documentation wrong, which is why we’re seeing the recent suspension of foreclosures.) This is a short video by Rep. Alan Grayson of Florida who does a very good job of explaining it to a lay audience.

Ah, country witticisms. I love ’em. They’re funny, and true.

So it is with the current debate surrounding the appointment of Harvard Law professor and consumer bankruptcy expert, Elizabeth Warren, to head the new Bureau of Consumer Financial Protection.

For consumers, who have been beaten up by the financial system in this country, the agency is one of the best things to come out the recent financial reform act.

Welcome! Today is Inauguration Day for the nation. This also happens to be the inaugural post for this blog. And like the new president’s inaugural address, this is an opportunity for this author to lay out what he intends to do with this blog.

For the past three years, this bankruptcy and foreclosure defense law firm has been seen first-hand the financial storm that has wracked the country, from our vantage-point helping persons in financial distress in Maryland and the District of Columbia. Starting in 2005, we saw a spike in the number of clients coming into the office with housing-related debt problems. That was at the height of the easy-mortgage boom and frankly it was shocking to see the type of predatory lending being done — housekeepers or laborers who were put into homes they could never really afford. The real estate and loan brokers took fees at the table, and the borrower exhausted his or her personal savings and defaulted after one or two payments.

Next up were the sub-prime mortgage re-sets in 2006 and 2007 — borrowers who had gotten mortgages with very low interest-only or negative amortization loans that had re-set and spiked to monthly payments beyond what they could afford. In those years, the market had started to level off and drop, so now refinancing and sale became impossible unless the homeowner could bring thousands of dollars to the table. (Compounding the problem were typical prepayment penalty clauses making refinance even more expensive.)

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