Sign the Principal Paydown Plan Petition!

The National Association of Consumer Bankruptcy Attorneys has started an online petition to show support for their Principal Paydown Plan. 

The plan provides that underwater homeowners who file Chapter 13 bankruptcy can apply all of their monthly mortgage payments to principal for five years by reducing the interest on their loan to zero for that period. This will dramatically reduce negative home equity, which virtually every housing economist has cited as the leading factor pushing up home foreclosures nationwide.

This plan may not require legislation to enact, making it a fast and effective way to bring down the negative equity in the economy, temporarily reduce mortgage payments, and still protect the interests of the mortgage holder.

Click here and sign the petition now!

MI Court of Appeals: MERS Cannot Foreclose on Homes in Michigan

On Friday the Michigan Court of Appeals issued an opinion with potentially far-reaching effects: MERS - the Mortgage Electronic Registration System - lacks standing to foreclose by advertisement on many homes in Michigan.

The case is Residential Funding Co., LLC v Saurman, Docket No. 290248 (Decided April 21, 2011).  In that case, two home owners challanged their evictions at the end of their redemption periods claiming that MERS did not conduct a valid foreclosure.  Their reasoning was that MERS did not hold the underlying debt, which the Michigan foreclosure by advertisement statute requires it to hold.  The court agreed, and held that the foreclosure sales were invalidated.

What does this mean?

If your home was foreclosed by MERS or its assignee, CONTACT AN ATTORNEY.  

You may have a legal defense which could buy you significant time and leverage in negotiating to stay in your home!

UPDATE 6/2: MERS has sought leave to appeal to the Michigan Supreme Court.  Stay tuned!

Filing for Bankruptcy Could Save Your Home [MSNBC]

The following is a good article from MSNBC debunking some of the myths about bankruptcy, particularly regarding how it affects your credit:

It's not a move to be taken lightly. But the impact — especially on your chances of getting a loan — may not be as dire as many consumers assume. In fact, homeowners facing foreclosure may be able to improve their credit with a bankruptcy filing.

http://www.msnbc.msn.com/id/41787682/ns/business-personal_finance/

Whether to Keep the Home is not Always an Easy Decision

Many of the people I consult with own a home.  Some are behind on payments and facing a foreclosure.  Others are current on the home, but have fallen behind in other areas.  It is true that bankruptcy can help in these situations, but the first question must always be: is the home worth saving? 

A bankruptcy will not change the monthly payment on your primary residence.  I've consulted many clients who initially wanted to save their homes more than anything, but after considering how much they owed, how much the home was worth, and what the actual costs of home ownership compared to renting were, they decided that walking away was a better decision.  I haven't heard anyone who has regretted walking away from a $100,000.00 home to discharge $175,000.00 of debt and $1000+ per month payments.

Second, it's important to understand the limitations of bankruptcy.  A chapter 13 bankruptcy allows you to repay the amount you're past due on your home, in addition to making the regular monthly payments, over a 3 to 5 year repayment plan.  Other unsecured creditors are kept at bay and eventually discharged in whole or in part. 

Thus, you have to be able to afford your monthly mortgage payments.  If you cannot currently afford your payments, or if you'll be "house poor" making the payment each month, you need to consider surrendering the home.  There are some exceptions, like "stripping off" a wholly unsecured junior mortgage, which can make the home affordable.  It is important to talk to a bankruptcy attorney to make sure you know all of your options.

Finally, timing is important.  After the foreclosure sale, a chapter 13 bankruptcy cannot force the lender to accept payments in Michigan.  A chapter 13 must be filed before the sale, which means you need to speak with an attorney sooner, not later.  

The bottom line is that deciding what to do with your home is not an easy decision.  A free consultation can help you understand your options, and make the right choice.