The Seattle Times reports today on the increasing rate of foreclosures, and notes that foreclosures in the Seattle area are up 64 percent from last year at this time. The article correctly points out that the best way to deal with a lender is to start talking early, but it fails to tell homeowners what to do to get a lender’s attention. So many of our callers report that when they call the mortgage company, they are told that no one will help them unless they are already behind!

Housing counselors are a great resource for people facing foreclosure, but they are already swamped and some programs can only help people who are low income. Unfortunately, sometimes filing bankruptcy is the only option to avoid a foreclosure.

In a Chapter 13 case, the foreclosure sale is automatically stopped and the borrower is given an opportunity to propose a plan based on their income and expenses. Not all homeowners can afford the necessary payments under a Chapter 13, but if they can, the mortgage company is required to accept them. In addition, if there are problems or questions about the amount of the loan or about irregularities in how the loan was obtained, we can look at that in the course of the bankruptcy case too.

On our website, we have lots of additional information about Chapter 13 and how it works. Start here, and then also review the FAQ’s. We are happy to meet with you for a free consultation about whether Chapter 13 bankruptcy is the best option for you to avoid a foreclosure and save your home.

The news has been full of scary stories in the last couple days about IndyMac Bank, Fannie Mae, and Freddie Mac. If you are a homeowner with a late mortgage, or worse, a defaulted loan, what impact does all this have on you? Maybe none, but maybe it will make the situation that much worse.
Fannie Mae and Freddie Mac are directly involved with about half of all mortgages in the United States, usually conventional, prime mortgages. Long before private funds started buying large blocks of mortgage loans, Fannie Mae and Freddie Mac were in the business of buying loans from banks on the secondary market, and thereby creating liquidity for those banks to make more mortgage loans. Unfortunately, as has been widely reported in the last few days, these insitutions were a little bit out of control for many years now, bloated and arrogant, and making far too much money for far too many people who were not really all that concerned with their borrowers.
If Fannie Mae and Freddie Mac are not able to raise capital, either through stock sales or borrowing money themselves, mortgage loans will definitely become more difficult to obtain. If you are in the process of trying to refinance to avoid a foreclosure, this could have a serious impact. Moreover, the much-vaunted housing legislation that has been winding its way through Congress depends on Fannie Mae and Freddie Mac to refinance troubled loans. Hard to say at this point what effect all this turmoil might have on their ability to perform that role.
The failure of IndyMac Bank at the same time seems to have created a great deal of fear, almost panic. Most depositors will be insured by FDIC, and so their accounts will be covered. But if you are a borrower of a loan held by IndyMac, its demise might make it much more difficult to obtain any assistance with your loan or to reach some accomodation with them. Worse yet, if you have a claim against IndyMac for predatory lending or other consumer rights violations, those claims could potentially be cut off by the government takeover.
In Seattle, mortgage foreclosures have only recently started to pick up, and relatively few homeowners have sought bankruptcy protection or assistance from their lender. If you are facing foreclosure, bankruptcy may be an option. There are other possibilities as well, such as refinancing your loan, going through a loss mitigation program with your lender, or investigating whether you have consumer rights claims that could mitigate your losses.
In light of all the bad news over the last few days, it does not seem that the problems of homeowners in distress are likely to go away any time soon.

Memorial Day weekend is coming to an end and summer is unofficially beginning. Shoppers seemed to be out in droves today, but I was surprised how it seemed that everywhere I went today, there were more items on sale than at regular price. People are shopping, but maybe we are not spending as much. Gasoline was over $4.00 all weekend, and I had to put gas in my car. I couldn’t bear to fill it up, hoping the price will go down a little when the holiday is over. I went to buy tomatoes today, along with some other vegetable starts and some seeds, and I went to a discount store instead of my favorite specialty nursery. I wonder how many of you made similar choices in the last few weeks or months.

For some, making spending adjustments will be enough to ride out this difficult economic period. But many of you are beyond that point already, and the bills are really becoming unbearable. Home mortgages are resetting rates at a rapidly increasing pace which is scheduled to peak in 2009, and some of you are probably facing the reality of a mortgage you simply cannot afford. At Resolve Legal, we are seeing people every day facing these problems, and summer sun is unlikely to shine down on any improvement anytime soon.