Total Bankruptcy

Nevada Senator John Ensign (R) has raised a fuss that may be delaying the housing bill being considered in the Senate currently.  The bill is Congress' most comprehensive and ambitious response to the housing crisis, offering the chance for nearly 400,000 homeowners to trade mortgages with skyrocketing interest rates for fixed-rate packages with government-backed loans.

Ensign, however, wants none of the bill if it doesn't include a proposed amendment to add $6 billion in tax breaks encouraging renewable energy renovations and implementations for homes.  While many Democrats approve of measures to increase use of renewable energy, they oppose Ensign's bill, which does not pay for itself.  His proposal would likely languish in the House of Representatives, where a majority of Democratic representatives have pledged not to vote for bills that would increase the deficit.

It remains to be seen whether Ensign's one-man battle can last long.  Senate Majority Leader Harry Reid, Ensign's counterpart from Nevada, expects the housing bill to be voted on early next month.

The strategies for dealing with a foreclosure on an individual basis are often little understood; yet, an even less understood phenomenon is how neighborhoods deal with a rash of foreclosures.  Of course, abandoned homes that are untended start to reflect poorly on a neighborhood if enough of them accumulate.  A glut of foreclosed homes can even begin to lower property values in a neighborhood.

According to an NPR report, a group in Detroit called Urban Farming is taking a new approach to abandoned properties by tilling and planting the unused land, turning the spaces into urban gardens for food products. The group has worked with Wayne County to recycle, in effect, 20 plots in a pilot program that could expand if all goes as expected.

Just another creative way that people are dealing with the lumbering economy....

An NPR report on the mortgage crisis detailed how investment banks willingly and knowingly accepted bad loans--to the extent that they had hard numbers on what to accept and what to reject.  Economist Dean Baker has the gory details:

According to its report, one investment bank had a contract with New Century, a leading issuer of subprime debt, that it would reject no more than 2.5 percent of its loans. Of course, such a contract would be an invitation to submit bad loans.

With the 2.5 percent cap, it would have been easy for New Century to push through bad loans along with good ones, knowing that any investment bank would stop rejecting any loans past this point.  The profits to be had from selling these bundled mortgages overshadowed any caution that might have helped restrained this epidemic; in fact, New Century and its investment partners not only condoned, it seems, but actively encouraged these bad mortgage loans.

Much more on the foreclosure crisis is available at Total Bankruptcy, including a helpful predatory lending glossary.

The tough outlook for the economy has made many consumers feel the ill effects and caused them to make many changes in their day-to-day life.  But according to new figures made available, via Bloomberg.com, many aren’t quite ready to give up the affluent lifestyles to which they have grown accustomed.

According to these statistics, U.S. consumer borrowing more than doubled what was forecast for the month of March.  Instead of the $6 billion that economists predicted for the month, consumer credit leapt to $15.3 billion.  Compare that to February, in which credit rose by $6.5 billion, and you’ll note the severity of the swerve upward.  It marks the last month in a quarter that saw consumer credit as a whole rise by $34 billion, the most since the first quarter of 2001, which was not coincidentally the last recession into which the U.S. entered.

Experts point to new, tightened lending standards for home-equity loans as one culprit—in addition to the general recession—that is causing consumers to turn to credit in credit cards and the like.  With home prices dropping and potential to drop many more percentage points in the upcoming months, perhaps this latest shock will force economists to adjust their predictions in the second quarter and beyond.

For more on credit and foreclosure, visit the articles section at Total Bankruptcy.

The San Jose Mercury News is reporting that local health officials are worried about the potential for disease epidemics like West Nile Virus carried by mosquitoes.  And where would mosquitoes carrying the deadly disease be likely to breed in record numbers?

The swimming pools of foreclosed homes.

A Santa Clara County official remarked "One of the first things to go bye-bye for a resident in foreclosure is pool maintenance. It's a drain on their resources."  To discover places where mosquitoes might breed, the county is flying a survey plane looking for telltale signs of pool neglect in homes without the county limits.

Santa Clara County had four reported cases of West Nile virus last year, though none so far this year.  And with record foreclosures hitting California, their concern is real and demonstrates how far the foreclosure crisis will impact the United States in ways that we haven't begun to see yet.

Foreclosure statistics for the first quarter of 2008 were released today, and, as predicted, things are getting worse for the housing market.  Q1 of this year saw a 23% rise over foreclosure filings from Q4 2007, and a 112% rise over Q1 of 2007.

In raw numbers, around 650,000 homes have been repossessed, or 1 in every 194 households in America.  Some other frightening numbers from the CNN report linked above:

- foreclosures increased in 46 states and in 90 of the nation's 100 largest metro areas.

- previously "safe" areas saw massive foreclosure filings: Connecticut saw a 300% increase, while Massachusetts saw a 260% increase.

- the worst area for foreclosures is the Southwest, specifically California, Nevada and Arizona.  Foreclosure hit 1 of every 54 homes in Nevada, and 1 in 44 homes in Las Vegas.  Stockton, California remains the epicenter of the crisis, with 1 in 30 homes being foreclosed, with Riverside/San Bernardino coming in second with 1 in 38 homes.

Bloomberg reports that foreclosures increased 57% and bank repossessions almost doubled in March when compared with a year earlier. Figures from RealtyTrac, Inc. estimate that one in every 538 homes in the United States is in foreclosure, with Nevada, California and Florida feeling the brunt of the foreclosure action.

Experts are estimating that $460 billion worth of subprime mortgages will reset in 2008, and that foreclosure rates will continue to increase throughout the year. This will mean even more houses in an already saturated market, which will likely translate to continued decreases in home prices. Some experts are even predicting a recession lasting twice as long (20 months) as is considered normal.

Though President Bush has vowed to veto the Senate housing bill currently being considered, his administration announced that it plans to advance homeowner bailout programs of its own, beginning with the expansion of FHASecure, a program that transfers mortgages to prime-rate mortgages insured by the Federal Housing Administration.

The Federal Housing Commission hopes to refinance as many as 500,000 borrowers into FHA-backed mortgages by the end of the year.  Those it is targeting are  homeowners with adjustable-rate mortgages who got behind on mortgage payments.  Those who were late on two monthly mortgage payments in the past year—either consecutively or at different times—will now be eligible for an FHA loan up to 97 percent loan to value, while those who missed three payments will be eligible for a loan up to 90 percent loan to value. 

Homeowners with more outstanding debt may still be eligible if the lenders agree to write down the balance of the principal, a practice that will be encouraged by the promise of owning an FHA-insured loan when the lender previously faced starting foreclosure proceedings.

For more on the foreclosure crisis, the burst of the housing bubble or the government's plans to bail out homeowners, visit Total Bankruptcy's articles section for the latest news and analysis.

The Senate invoked cloture—the process for ending a filibuster or debate by a three-fifths vote—on its housing stimulus package, meaning that the bill is fast-tracking through.   This is good news for homeowners, who would benefit to the tune of $4 billion.  However, around $13 billion would be delivered to housing lenders and builders in terms of tax breaks.  Moreover, in order to spur on the sale of foreclosed homes, the measure would give a tax credit of $7,000 to individuals who purchase these homes—this would, it must be noted, actually encourage banks to push through foreclosure proceedings, which would not benefit many homeowners, as some commentators have noted.

President Bush has stated that he is opposed to the housing stimulus package, because it would bail out speculators and lenders, he claims.

Brian D. Montgomery, FHA commissioner, announced on April 9^th the latest proposal by the Bush Administration to address the foreclosure crisis currently deranging the American economy. Essentially, the repartee between Republicans and Democrats amounted to more of the same: the Bush administration proposed an expansion of FHA Secure that could help 100,000 borrowers by year’s end.

The program would allow struggling borrowers to refinance their mortgages to 30-year, fixed-rate loans insured by the federal government. Geared toward homeowners who have shown an effort to make payments despite financial hardship, the plan would allow those two and three months behind on mortgage payments to refinance.

The plan would also make insurance premiums paid by borrowers with federally-backed loans priced on a risk basis to “protect” the government and taxpayers from potential defaults.

Democrats, on the other hand, are pushing for a more aggressive plan that could, according to Representative Barney Frank (D-MA), help 1.2 million Americans save their homes. Naturally, Republicans criticized the proposal as too lenient toward “irresponsible” borrowers and reckless lenders, insisting that the market will work itself out if more or less left alone.

The Federal Reserve has offered banks another $200 billion in US currency in exchange for debt that includes mortgage securities, and includes subprime mortgage loans that they hold.  Essentially, experts explain, the Fed is using the available funds to encourage confidence in these securities among investors.  But should investors be buying bad debt, not to mention the Federal Reserve throwing $200 billion in US funds at these nearly worthless mortgages?

Beat the Press has another great evaluation of this latest move:

So how does this story play out? Well, insofar as the Fed is successful, the counterfeit currency retains its value for a while longer. This allows Citigroup, Merrill Lynch, Bears Stearns and the rest of the big boys more time to dump their counterfeit currency on suckers who haven’t figured out how the game is played.

Not exactly a ringing endorsement.  Read the article for a good evaluation of why bailing out the banks doesn't help anyone—it just slows down an inevitable slide by ignoring the "$8 trillion housing bubble," as Baker puts it.

Business and finance press watchdog Dean Baker of Beat the Press analyzes a NYTimes report indicating that in some hard-hit areas, foreclosures exceed home sales.  Pretty wow.

Here's the sentence that intrigued me:

In fact, the percentage [of foreclosures] that do result in sales are likely to be higher today than in the past because fewer mortgage holders will bother with foreclosure proceedings on second mortgages.

The question of second mortgages is an interesting one.  Of course, just like first mortgages, your bank has every right to start a foreclosure proceeding on your second mortgage.  Baker's point is that some mortgage lenders in certain areas of the country (he mentions Las Vegas and Florida, two of the hardest-hit) won't bother with foreclosing on second mortgages because they don't stand to recover anything after the first or primary mortgage is dealt with.

Second mortgages are often unsecured loans, just like home equity loans; this means that when home prices have plunged, the owner is stuck with a loan that's not backed up by any tangible asset.  Unsecured debts like this can be eliminated in Chapter 13 bankruptcy, which strips any excess unsecured debt that exceeds the actual value of your home.  Your second mortgage would exceed the actual value of your home, and therefore that debt would function like any other debt (credit card, etc).

There's the impetus behind the "recycling" of these foreclosed homes: if the debt can be stripped, the lender likely won't pursue getting that non-existent money back and will make what it can from the housing market.  Which, these days, isn't much.

For more on bankruptcy and second mortgages, talk to a bankruptcy lawyer near you!

According to reports from KESQ.com, a new foreclosure rescue scam has sprung up in California. Residents have received mail offers for foreclosure-fighting services from a company called M & A Associates.

Unfortunately, the company's offer is a scam and they fraudulently used the Better Business Bureau's logo on their mailings to make themselves seem more legitimate.

For struggling homeowners, a scam like this can cost serious money and might endanger home ownership. Be on the lookout for any anti-foreclosure offer that you receive. Always do background research before committing to an offer.

The company claimed that it stopped using the BBB logo on its materials.

A western Pennsylvania woman's Chapter 13 bankruptcy case raised a big red flag for bankruptcy lawyers and those facing foreclosure, according to the New York Times.

Ms. Sharon Diane Hill filed for Chapter 13 bankruptcy protection in 2001 in an effort to protect her home from foreclosure. Her 5-year case ended officially in March, 2007, at which point she was current on her mortgage. Countrywide, the company servicing her loan, recognized that she did not owe the company any money.

But a month later, Hill received a letter from Countrywide insisting that she owed more than four thousand dollars for various charges on her mortgage! According to the letter, the charges had been racked up while she was making regular payments under her bankruptcy plan.

When Hill's bankruptcy lawyer questioned the legitimacy of the charges, Countrywide sent copies of three letters--dated 2003, 2004 and 2007--to the lawyer. According to Countrywide, the original copies of the letters had been sent to not only Ms. Hill, but also her lawyer and bankruptcy trustee.

No records showed receipt of the letters, however, and Hill's lawyer noticed that one of the "copies" of the "originals" contained an address that he hadn't moved to until well after the date printed on the letter. This alerted him to the fact that something was amiss.

Countrywide's lawyer said that the letters had been "recreated" to reflect mortgage charges, which basically means that Countrywide fabricated evidence for its case. The bankruptcy judge in charge Ms. Hill's filing expressed shock that something of this nature could take place.

Apparently, this isn't the only problem that's arisen with Countrywide during bankruptcy hearings. Stay tuned for more updates.

Rogue comic strip "Brewster Rockit" has taken on the subject of subprime mortgages. The comic, which details the adventures Brewster Rockit and the space crew of the R. U. Sirius, can be found at the following link: Brewster Rockit

This week, President Bush announced his plan to help homeowners struggling to pay their mortgages and facing foreclosure.

The plan includes a five-year freeze for interest rates on certain mortgage loans, but many critics have written the plan off as too little, too late. For a detailed explanation of the Anti-Foreclosure Plan, please follow this link.

In a national housing conference and interviews Monday, Treasury Secretary Henry Paulson noted that an agreement between federal regulators, many of the country's largest banks, mortgage investors, and consumer groups could mean breaks for borrowers with subprime mortgages about to reset, according to various news sources.

The deal is designed to help "financially responsible but struggling homeowners," according to Paulson, and will aim to keep families in their homes. As of now, the negotiators plan to include a test of primary residence in the agreement: those having difficulty paying the mortgages on investment properties will not be eligible for the help, while those struggling to pay the mortgages on their homes will.

The main feature of the agreement will be a freeze on mortgage rate resets for a period of time that has not yet been agreed upon. Reports indicate that consumer groups are pulling for a longer period (five to seven years), but lenders and mortgage investors want a shorter period.

Paulson has announced that a final decision on these measures should be reached soon, possibly before the end of the week.

The foreclosure crisis rocking the United States may not seem like an international problem. But for Narvik, Norway, a town 120 miles north of the Arctic Circle, the housing slump is causing serious problems.

According to reports from the New York Times, the town of 18,000 earns most of its revenue from the energy generated by a nearby hydroelectric plant and a flourishing tourist industry. Using future income as collateral, the town invested heavily in the Florida real estate market during the housing boom.

The town's mayor believes she was duped into investing the town's money by Terra Securities, a Norwegian brokerage firm. Terra's license has since been revoked by the Norwegian government, which agreed that the company's disclosures were less than transparent.

But the town, with nearly a quarter of its annual income lost to the housing market, must now face the question of how to move forward. Reports indicate that Narvik will have to operate on a severely reduced budget next year, which could mean public services like kindergarten classes, museum displays, and hospital care could be sacrificed.

It seems the global financial ramifications of the collapsed subprime housing market are only beginning to show themselves.

The Mabuhay Alliance, Greenlining Institute and Mexican American Political Association organized a protest of about 60 homeowners on November 27th, according to reports from the San Jose Mercury News.

The protesters gathered outside the California offices of Countrywide Financial in what will reportedly be the first of several such events. Their demands? That Countrywide halt foreclosure proceedings on borrowers who have fallen behind on home payments, and that the company help its borrowers modify their adjustable-rate mortgages to loans with more affordable terms.

Organizers of the protest have reportedly suggested that Countrywide executives channel money meant for bonuses into a fund to aid borrowers in need.

In the quarter ending September 30th, Countrywide reported its first financial loss in 25 years.

Trulia.com, a website that details residential real estate listings across the country, has announced that it will begin including properties in foreclosure in its database, according to reports from RISMedia.

By incorporating information from RealtyTrac.com, Trulia will now allow users to search for foreclosure properties at the state, city, and local levels. The site also reportedly includes comparative information so that users can see how foreclosure properties stack up against similar properties in the area.

In addition, the site has launched a Q&A forum that allows users to get in touch with other consumers and professionals interested in the foreclosure market.

Pre-primary speeches are beginning to reflect an awareness of the country's economic situation, according to the New York Times.

In speeches this morning in Iowa, both Hillary Clinton and Barack Obama noted that the next United States President needs to have a thorough understanding of the economy. Among the issues specifically mentioned were rising energy costs and mortgage foreclosure.

Experts have estimated that 2.2 million American families will be affected by the foreclosure crisis in the coming years, a number that has apparently been recognized by presidential hopefuls. As lawmakers have already realized, large groups of Americans are looking for solutions to their mortgage-related woes.

And they'll likely vote for whoever has the best home-saving plan.

Stevie L. Johnson, one-time licensed escrow officer, has been sentenced for his fraudulent mortgage schemes, reports the Houston Chronicle. After making nearly $40 million off of hundreds of illegal home sales, Johnson faces 40 years behind bars.

While some forms of mortgage fraud became common during the housing boom, all  are illegal. And no two frauds are alike: some involve falsely inflating a borrower's income on application forms, some involve appraisers, some real estate agents.

While the market was booming, the deceptive claims went unnoticed, but now that the market has cooled, many fraudulent claims are coming to light.

Before Johnson received his sentence, two other mortgage fraudsters got 25-year sentences for their mortgage scams. Defense attorneys claim the sentences are over-the-top, but perhaps that's what it takes to discourage such fraudulent practices.

Results are in from the October 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices, in which bank managers from 52 domestic and 20 foreign banks were asked about current trends in the lending business.  Here’s a summary of the stats published by the Federal Reserve:

Over the past three months (compared to the previous three), both the supply of and demand for loans to businesses and households has decreased.  Most banks interviewed have begun using stricter standards on residential home mortgages, including prime mortgages, subprime mortgages and nontraditional mortgages.  The same applies for consumer loans, with the exception of credit card loans.

Standards for credit card loans have shown little change over the past three months.

The Federal Reserve suggests that a lowered tolerance for risk on the part of lenders and investors, stemming from losses from investments in the failing subprime real estate market, has played a role in these changes.

The stricter lending standards used by most of the banks surveyed include an increased minimum credit score required to make loans, and a decreased number of loans offered to those who do not meet credit score requirements.

KATU News reports that an elderly Oregon couple committed suicide this week by running their car in their garage while leaving the house door open.  Officials involved with the investigation reportedly suspect that the couple believed they had few choices after receiving notice that their home was being foreclosed upon.

Deputies responded to a call from neighbors who grew concerned when the elderly couple did not answer the door and when the couple's several dogs were not in sight, sources say.  The couple's four golden retrievers were also found dead in the house.

Some of the responding officers grew sick from the carbon monoxide fumes in the house, but were treated quickly and returned to good health.

HR 3609, a bill now waiting for approval in the House, would ease some of the burden for debtors trying to file for Chapter 13 bankruptcy to avoid foreclosure.

Currently, one of the eligibility requirements for Chapter 13 bankruptcy is the completion of a credit counseling course prior to filing.  For those who want to file for Chapter 13 as an emergency measure to prevent foreclosure, though, there isn't always time to complete the course.

The bill would provide an alternative for debtors in danger of losing their homes: by presenting proof that foreclosure proceedings have begun on their primary residence, they could waive the credit counseling requirement. 

Some consider this revision necessary, since many debtors have lost their homes and cars because of an inability to complete the counseling course in time.  If accepted as currently written, the bill will also include a lengthened allowable repayment period for any debt secured by the borrower's home.

As recently as a week ago, George W. Bush was touting the "liquidity" of the economy in the face of the ongoing subprime mortgage crisis in the United States.  He suggested that all indicators point to the market correction being a "soft landing."

Today, Bush will make formal statements outlining a plan for relief on homeowners.  Administration officials revealed that the steps Bush will propose include mandating that the Federal Housing Administration allow an additional 80,000 homeowners with less-than-perfect housing records to sign up for its mortgage insurance program.  However, more steps will be introduced in his remarks.

In expectation of the proposals, the stock market opened strong this morning, with Asian markets going strong and the yen lowering, and European stocks also rising.

The New York Times recently reported that Senator Richard Durbin (D-IL) would propose an amendment to the bankruptcy code that would offer more options to families facing foreclosure.  No details have yet been revealed, but various news outlets are reporting that Durbin will introduce the "Helping Families Avoid Foreclosure Act" in September.

Presumably, the proposed amendments would give homeowners facing foreclosure more options in bankruptcy by deleting the qualifying clause that makes home loans virtually the only debt that cannot be effectively restructured in a Chapter 13 bankrupty case.

In April, the National Association of Consumer Bankruptcy Attorneys (NACBA), in cooperation with several other consumer organizations, released a proposal for bankruptcy reform.  That proposal included deletion of the clause preventing the restructuring of home loans, along with provisions to preserve remedies against predatory lenders, prohibit enforcement of mandatory arbitration clauses, and other measures.

NewRatings.com reports that foreclosures in the first half of 2007 are up 55 percent over the same period in the previous year. RealtyTrac, an online foreclosure properties marketplace, said over 900,000 foreclosures were filed in the first half of 2007. Less than 600,000 foreclosures were filed in last half of 2006.

Foreclosures increased by 30 percent from the last half of 2006. The CEO of RealtyTrac is predicting that by the end of the year, foreclosures could be up 65 percent over 2006.

Bloomberg.com reports that foreclosures across the United States hit a record in the first half of 2007. Almost 926,000 foreclosure notices were filed, 56 percent more than the previous year. This report must be taken with a grain of salt, however. RealtyTrac only started tracking foreclosure data in 2005.

Foreclosures were the highest in California and Florida, where home prices have fallen as much as 25 percent, and in Michigan, where 50,000 automotive industry workers have been laid off in the past 10 years.

Recent boosts in 30-year mortgage interest rates have also contributed to the inability to sell homes, thus reducing home prices.

Bloomberg said 58 percent of properties in foreclosure are linked to subprime loans.

In the confusing sea of paperwork transferring mortgage notes from lender to holder to securitized pool, many consumers aren't at all sure exactly which entity owns their mortgage notes, or how one entity is related to another.  The surprising news that's working to the advantage of many homeowners facing foreclosure is that the mortgage lenders and note holders may not know, either.

Florida attorney April Charney, Forbes magazine tells us, noticed that a lot of the mortgage foreclosure cases she saw involved affidavits of lost notes. An affidavit of lost note is essentially a sworn statement that says, "we own this debt, but we can't find any paperwork to prove it, so please just take our word for it".  A bit of investigation revealed that in many cases, the paperwork didn't exist, or originated at the wrong time, or conflicting interests had been recorded.  In some cases, notes had been illegally purchased by pools after they were already in default.

These flaws can bring a mortgage foreclosure action screeching to a halt; Forbes reported on one such homeowner who is still in residence five years after foreclosure actions were commenced.

If you're facing foreclosure, don't assume the worst. Get the professional help you need to untangle the paper trail and find out whether you have valid defenses in a forecosure action.

Just one week ago, Colorado Governor Bill Ritter took a major step to try to stop the mortgage foreclosure problem in the state by signing five foreclosure-related bills into law. With Colorado having one of the highest foreclosure rates in the country and Denver being described as the “Wild, Wild West of mortgage fraud," Ritter said that the new bills would help stem this problem in the state. From strengthening existing mortgage fraud laws and prohibiting improper real estate appraisals to requiring mortgage brokers to register with the state and understand their ethical duties to consumers, Ritter and Colorado residents are hoping this block of legislation below will have its desired effects.

? House Bill 1322: This new Colorado foreclosure law will attempt to strengthen existing mortgage fraud laws in the state via several measures in its language.

? Senate Bill 203: This legislation would provide more regulation of the mortgage brokerage industry in the state by requiring mortgage brokers to register with the state.

? Senate Bill 216: In a similar light to SB203, this new Colorado foreclosure law will regulate mortgage brokers by spelling out their ethical requirements, which include not tricking people into deals that are of no benefit to consumers.

? Senate Bill 85: Similar to SB216, this legislation will prohibit the improper influencing of real estate appraisals.

? Senate Bill 249: Last but not least, this new Colorado foreclosure law will charge insurance companies with an annual fee in order to compensate for analysis and enforcement of the industry.

Just how prevalent is the need to stop foreclosure in Colorado? Last year, there was one foreclosure per every three households in Colorado, with Denver seeing more than 37,400 foreclosures.

If you’re facing foreclosure in Colorado or somewhere else, get in touch with a local bankruptcy lawyer who can explain how Chapter 13 bankruptcy has helped others stop foreclosure.

While controversy rages about whether the subprime mortgage foreclosure crisis sweeping the country is the result of unethical practices in the mortgage industry or poor judgment on the part of borrowers, one clear reality can't be ignored:  a lot of people are getting hurt by the mortgage foreclosure crisis who never took out a high-rate, adjustable loan in their lives.  Those people include home sellers, investors who are taking losses on properties as homes sit unsold for months due to the glut in the market, and economies impacted by the virtual collapse of the subprime mortgage industry.

In April, GE's WMC Mortgage unit laid off 771 employees--half of it's remaining staff.  WMC's staff had already been cut by 460 employees in March.

These layoffs are just one recent example of the drastic cuts in the mortgage industry over the past year.  In May, subprime mortgage lender New Century Financial Corp. announced the elimination of 2,000 positions.  The company had already announced 3,200 terminations when it filed for bankruptcy protection two months earlier.

Other recent notable mortgage industry layoffs include a oss of approximately 3,000 jobs from ACC Capitol Holdings and the elimination of an undisclosed number of the 2,400 positions at Freemont Investment & Loan.

Each of these layoffs not only impacts hundreds or thousands of families, but raises local unemployment rates, aggravating economic difficulties for entire areas.

Just five days ago, Massachusetts banned mortgage foreclosure rescue schemes with an emergency measure that will last for 90 days as the foreclosure rate continues to surge throughout the state. Foreclosure rescue schemes typically involve for-profit lenders promising help to people who need to stop foreclosure and actually taking possession of homes through manipulative means. Massachusetts Attorney General Martha Coakley was described in a Reuters story as saying that these foreclosure rescue scammers make a bad situation even worse and that the emergency measure is the best way to protect homeowners in the meantime. The story added the state legislature would have to approve a permanent ban on foreclosure rescue schemes in Massachusetts.

A record 19,487 homeowners faced foreclosure in Massachusetts last year and much of this problem was attributed to subprime loans, which allow people with less-than-stellar credit histories and other red flags to own homes at low-interest rates that shoot up past their financial means in the future. In fact, the Federal Reserve Bank of Boston reported that two-thirds of the state’s foreclosure filings in the third quarter of 2006 were due to subprime loans despite the fact that these loans make up only 12 percent of all mortgages in the state.

If you’re facing foreclosure in Massachusetts or another state, contact a bankruptcy lawyer as soon as possible to learn how Chapter 13 bankruptcy has helped others stop foreclosure in the past.

NPR recently interviewed past employees of subprime mortgage broker Ameriquest, and even with all of the information that's come during the current mortgage foreclosure crisis, some of the stories are shocking.  Former employees describe the company not just failing to mention payment increases and upward adjustments in mortgage rates, but directly telling consumers that their mortgage rates would not increase, and in some cases even concealing adjustable rate mortgage documents in a stack of paperwork with fixed rate terms described on the first page.

Listen to the interview on NPR's website.

In Colorado, there was reportedly one mortgage foreclosure for every thirty-three households in 2006, and the problem was especially severe in the Denver - Aurora area, where more than 37,000 foreclosures were reported last year.

Colorado isn't the only state hard-hit by the recent wave of foreclosures, though.   The greater Atlanta, Georgia area saw nearly 64,000 foreclosures in 2006, and was second only to the Detroit area in number of foreclosures per household.

Nevada, Texas, Indiana, Florida, Ohio, Utah and Tennessee also made the top ten in terms of foreclosures per household.

Reuters is reporting that U.S. Senate Banking Committee member Jack Reed (D) is drafting legislation to assist homeowners facing foreclosure.  Reed is reportedly seeking input from several consumer groups that have studied the current foreclosure crisis and pushed for governmental intervention. 

Proposed legislation is also reportedly forthcoming from Senator Charles Schumer said he would propose bail-out legislation, and Barney Frank, Chairman of hte U.S. House of Representatives Financial Services Committee will hold hearings on Tuesday seeking solutions to the mortgage foreclosure crisis.

California-based subprime mortgage lender New Century has filed for bankruptcy protection, and announced plans to immediately terminate 3,200 employees.  If the bankruptcy court gives its approval, New Century will sell its loan servicing business to Carrington Capital Management.

More than two dozen subprime lenders across the country have shut down in the past several months, and New Century will likely not be the last.

Ohio State Attorney General Marc Dann got a restraining order against New Century Financial to stop the failing company from soliciting consumers for broker services or mortgage loans, accepting loan applications and fees to process loans, pursuing foreclosures, and evicting consumers. New Century, a leading subprime lender, was recently delisted from the New York Stock Exchange after its share price fell to almost nothing. Many financial experts expect New Century to fall into bankruptcy.

A spokesman for the Attorney General said that “despite their comments that they were no longer writing loans in Ohio, they were still taking applications last week. We are stopping them from processing those loans. We don't want them to accelerate foreclosures in an attempt to accelerate cash flow.”

National Urban League President Marc Morial tied homeownership to personal wealth, greater economic empowerment, and closing the gap between blacks and whites in the United States when he described six major policy recommendations designed to minimize obstacles standing in the way of many Americans owning their own homes.

The obstacles the National Urban League Homebuyer's Bill of Rights seeks to overcome are:

• lack of net savings for downpayments and closing costs
• lack of information on how to shop for homes and apply for loans
• lack of quality affordable units in livable locations; and
• lack of consumer protection

The National Urban League Homebuyer's Bill of Rights makes six policy recommendations designed to overcome these obstacles:

1. The Right to Save for Homeownership Tax-Free
2. The Right to High-Quality Homeownership Education
3. The Right to Turth and Transparency in Credit Reporting
4. The Right to Production of Affordable Housing for Working Families
5. The Right to be Free from Predatory Lending; and
6. The Right to Aggressive Enforcement of Fair Housing Laws

Subprime mortgage lenders like HSBC, Countrywide, and New Century are feeling foreclosures in their stock price. Monday, Countrywide’s price per share lost almost 5 percent. New Century lost a whopping 68 percent.

Subprime lenders are companies that specialize in home loans to people with weak credit. Last year, over 13 percent of mortgages originating in the United States were subprime. Foreclosures have been skyrocketing due to weakness in the housing market and the failure of deals like adjustable rate and interest-only mortgages.

Subprime lenders having financial difficulties may repurchase homes below their value, depressing the market and lowering home values even more. Some borrowers could be forced into bankruptcy because of the decrease in the value of their home.

We've talked quite a bit over the past several months about the role of injury and medical bills in bankruptcy.  Recent studies have attributed as many as 50% of all consumer bankruptcy filings to medical expenses and/or lost wages associated with illness or injury.

Today, a local news story from Linden, North Carolina illustrates the kind of abrupt changes unexpected medical expenses can visit on the lives of ordinary Americans--even those who aren't pushed to the point of bankruptcy.

Terry and Jamie Martin were a typical two-income family when their son Lawrence, now 8, was mauled by a dog at his babysitter's house.  The Martins settled with the homeowner's insurance company, but the $40,000 settlement went into a trust that Lawrence will receive when he's 18, and the Martin's still have $12,000 in outstanding medical bills related to Lawrence's injury.

In addition, Jamie gave up her job to stay home with Lawrence after he was diagnosed with post-traumatic stress disorder and anxiety.  Terry is still employed full time, but does not have medical insurance.  Now the family is facing foreclosure on their home on March 13, and a local news station is soliciting donations to help them save their home.

 A news release popped up in my email this morning headlined "Bankruptcy Won't Stop Foreclosure for Troubled Borrowers".   As an attorney who does a lot of research and writing about bankruptcy law, that came as quite a surprise to me.  After all, I knew that Chapter 13 bankruptcy could provide the relief a homeowner needed to catch up past-due payments over time while making current payments.  I also knew that Chapter 7 bankruptcy, while it didn't provide a long-term solution to foreclosure, would in most cases automatically stay foreclosure proceedings temporarily, allowing the homeowner much-needed breathing room in which to assess his options.

So what might that headline mean?  Apparently, this:  "...filing for bankruptcy will not permanently stop a lender from foreclosing on a home if the borrower stops making payments."

In other words, you can't file for bankruptcy, discharge your mortgage debt, and keep your house.  I suspect that's not a big surprise to anyone, and the fact that you don't get a free house in bankruptcy is quite a bit different from the assertion that "bankruptcy won't stop foreclosure".

So why do we so often see these misleading "news" items, spreading the idea that bankruptcy isn't a viable solution for most debtors, furthering the myth that bankruptcy will "ruin your credit for ten years"? 

In the case of this particular news release, it's not hard to guess at the answer.  The only person quoted in the release, and the contact for further information about the release, is Patrick McGilvray of The Home Buying Center, LLC.  A quick glance at  The Home Buying Center's website reveals images strikingly similar to those corrugated plastic signs you see in depressed neighborhoods offering to pay cash for your home fast.  The message in this release seems to be, "Bankruptcy won't save your home, so instead you should avoid foreclosure by quickly selling it to us." 

In other news items, the connection may be more subtle.  The banking and consumer credit industry has a powerful lobby and a massive public relations machine at their disposal.  And bankruptcy isn't the right answer for everyone, nor something that should be entered into without research, professional advice, and an understanding of the options.

But when direct misinformation like, "bankruptcy won't stop foreclosure" and "you won't be able to get credit for ten years after you file bankruptcy" is part of the "news", question the credibility of the source and seek out the unbiased facts.

On February 7, the U.S. Senate Committee on Banking, Housing, and Urban Affairs heard testimony from a variety of consumer advocates and mortgage industry spokespeople on the problems of predatory mortgage lending practices and their role in the mounting mortgage foreclosure claims across the country.  Although mortgage industry professionals suggested that the climbing foreclosure rate is the result of numerous possible and probably combined factors, the foreclosure rate for ARMs and other non-traditional subprime mortgages is substantially higher than that affecting traditional mortgages.

In addition, the Center for Responsible Lending recently conducted a study indicating that minority applicants are disproportionately steered toward high-cost subprime loans, even when their credit scores would have allowed them to qualify for more favorable loans or rates.

Mortgage Lenders Network USA, the 15th-largest subprime mortgage lender in the United States, filed for bankruptcy protection this week.  About 80% of the company's billions of dollars in annual mortgage loans are made through brokers. 

It might be unsurprising that a subprime lender would find itself in financial trouble at a time when mortgage foreclosures are climbing so rapidly, but the economy isn't Mortgage Lenders' only problem.  The company is reportedly facing millions of dollars in fines from state regulatory agencies.

The company laid off more than half of its 1,600 employees late last year.

Anthony and Carol Calvagno of Deer Park, New York filed a lawsuit against mortgage broker Mitchell Sims for deceiving them in a mortgage refinancing scheme.  The Calvagnos thought they were refinancing their mortgage when instead they ended up signing over their deed to Sims.  Sims said they could remain in the house and pay rent.  Sims failed to make any mortgage payments  and the bank foreclosed on the home.

The Calvagnos appeared in court on Tuesday anticipating a hearing on the case.  Instead they heard an unexpected decision by U.S. District Court Judge Arthur Spatt.  The Judge rendered the hearings "moot" in a response to motions made by some of the defendants.  The motions claimed the Calvagnos failed to list their home as an asset in a 2003 bankruptcy filing, thereby negating their right to litigate the property.

As mortgage foreclosures rose all over the country, Chicago saw one out of every 180 households go into mortgage foreclosure during the 3rd quarter.  It was twice the national average and at 16,155 foreclosures, almost 3000 higher than any of the other top 99 metropolitan areas.

Mortgage foreclosure analysts anticipate the 3rd quarter will prove to be a peak in the rate of foreclosures and expect the number to go down in 2007.

One out of every 80 households in the Detroit, Michigan metro area went through a mortgage foreclosure in the third quarter of 2006.  Over 10,000 homeowners who lost their job or suffered some other financial burden ended up with their home in foreclosure during the quarter.

Detroit mortgage foreclosures, which increased 42% from the second quarter of 2006,  actually number more than 4.5 times the national average.  Rising payments on adjustable-rate mortgages and decreased home sales likely forced many of these homeowners  into foreclosure.

Of the 20 top metro areas on a list of 100 U.S. metropolitan areas, Miami posted the highest increase in mortgage foreclosures in the 3rd quarter last year.

One out of every 91 households in the Miami metropolitan area ended up losing their home in a mortgage foreclosure.

Many investors backed out of their speculative purchases in the 3rd quarter which likely contributed to the spike in Miami mortgage foreclosures.

The Detroit and Ft. Lauderdale areas were hardest hit by the wave of mortgage foreclosures sweeping the nation during the 3rd quarter of 2006.  More than 10,000 Detroit area families faced foreclosure between July and September, 2006.  That's more than four times the national average.  And while the numbers in Ft. Lauderdale were slightly lower, that city's foreclosure rate nearly doubled from the previous quarter. 

Other cities on the hardest-hit list include Denver, Indianapolis, Miami and Dallas.

The Center for Responsible Lending held a press conference on December 19 to reveal the results of its study of more than 6 million subprime mortgages made from 1998 through the third quarter of 2006, and the picture is bleak.  The Center estimates that 2.2 million households currently in the subprime market will lose their homes in the next several years.

The report further projects that 1 in 5 subprime mortgages originated in the past two years will end in foreclosure.  The chance of foreclosure on a subprime loan doubled between 2002 and 2005.   Even during those earlier days, however, subprime mortgages had a 10% chance of ending in foreclosure, putting those borrowers at much greater risk than those who finance through traditional mortgages.

Statistically, these higher-risk loans are more often offered to African American and Latino borrowers, although in many cases those borrowers could have qualified for a more favorable mortgage loan.