Bankruptcy Or Short Sale Better Options Than Modifications

It seems that banks are continuing to be extremely slow and difficult to deal with on modifications, even though the HAMP guidelines were published almost 9 months ago. I see many clients come in that may have tried a modification on their own or through a company, only to obtain no real relief. Many banks will give a denial, but then tell the homeowner to resubmit the exact same paperwork to be re-reviewed. This is only going to result in yet another denial unless something has changed in terms of financial ratios and the homeowner is kept is more months of frustration and delays.

The problem, as discussed in my do it yourself guide, is that homeowners often do not give the banks what they want to see. The other problem is that many homeowners are in over their heads and the terms a bank might give them will still not help, even if they can actually get approved.

In many cases, homeowners can keep their home through a Chapter 7 or 13 bankruptcy filing. This also helps the homeowner reduce other debts at the same time. The homeowner can still keep certain property and vehicles, so unless the homeowner was planning on buying a major item in the next 2 years, a bankruptcy filing can be the most effective way to get a fresh start.

A short sale (where the bank allows you to sell your home for less than what is owed) is also a good alternative. The banks will take tremendous losses in the process and the homeowner is no longer liable for a huge mortgage. It will take a few years to get bank into a position to purchase, but with the large number of vacant properties available for rent at a reasonable price, it shouldn’t be that much of a concern.

For more information, contact us at
Chris Barsness

New California Loan Modification Law

The governor took action over the weekend on two pending bills regarding loan modification. AB 764 was a tough measure with various restrictions, but it was vetoed. SB 94 was signed into law October 11th and is effective immediately as urgency legislation.

SB 94 essentially prohibits anyone (including an attorney or real estate agent) from collecting any fees to perform a loan modification or forbearance until the service has been completed. It also prohibits obtaining any security to assure payment and obtaining a power of attorney. Even if the person assisting you with a loan modification is willing to wait to get paid until the service is done, without a power of attorney, the homeowner will have to do all the work with the lender themselves. Attorneys often take deposits called retainers up front, but do not bill the client until the work is performed. This assures that the bills will get paid; however, the broad language in this bill implies that attorneys cannot collect a retainer to secure payment.

AB 764 was much tougher and required payment be collected only after the modification was successful, so even if the work was done, if it didn’t go through, one couldn’t collect.

Without a power of attorney or deposit to assure payment, our firm will no longer be taking new cases for loan modifications. We will provide related legal services for foreclosure relief, bankruptcy, wrongful foreclosure, and can provide a consultation to help homeowners pursue a modification on their own. This consultation comes with a copy of our self-written how to guide for performing your own modification.

Unfortunately, the law intended to protect consumers went too far in making it nearly impossible for a homeowner to get even legal assistance in the process.

Chris Barsness, Esq.

Foreclosure Legal Pitfalls

One of the biggest advantages to hiring an attorney to assist a homeowner with foreclosure relief or loan modification is the fact that there are numerous issues people are unaware of that, if not handled properly, could result in making their situation worse.

Remember that your lender is often taking computer notes and usually records calls. Although there are issues regarding the legality of recording phone calls in California and its potential as evidence in a case, it is still something that could come back to haunt homeowners.

Here is just one example: Let’s say you purchased your house 3 years ago and told your loan officer or broker that you made a certain amount per month. The broker may have done what is called “stated income” which does not require proof of income, such as paystubs. Some borrowers may have heard or even been told by their broker that they can exaggerate or increase how much they make because it is not verified by the bank, thus allowing them to qualify for a more expensive house. Whether you intentionally increased (“fudged”) your income or your broker may have done it for you, if you later tell your lender how much you were really making at the time or accidentally tell them you may have gone a little too high on what you actually make, you may have just given the lender the leverage it needs against you. “I shouldn’t have even qualified for the loan because I didn’t really make that much.” You were likely in a non-recourse loan in California, which means you have no personally liability. The only thing the lender can do is to take back the home, they can’t sue you for any missed payments, decrease in value of the home below what you owe, etc. Now suddenly the lender can sue you for fraud in connection with the original loan. Without realizing it, you opened yourself up for personal liability.

This is only one of a number of small legal issues that many homeowners don’t understand. Lawyers serve as an intermediary to take the emotion out of the issues and understand the potential legal issues out there.

I am often asked by potential clients what exactly I do for homeowner that they couldn’t do for themselves. Many people think it is just a matter of calling the lender and faxing over some bank statements and tax returns. Yes, that is part of the process, but remember that the banks spend millions of dollars per year on law firms and lawyers. They have an army of lawyers working for them to be sure they protect their financial assets. Homeowners should understand that banks see numbers not people and they will use any potential legal edge possible to be sure to maximize their profits.

Victim of No Results or Scam Loan Modification? Steps to avoid scams.

I can’t tell you how many of our clients have already paid thousands of dollars to a loan modification company or a loan modification law firm or lawyer, only to have nothing happen. In some cases, the client’s home has already been sold and they don’t even know it until they get a notice of eviction (3 day notice to quit) on their door. There are reputable companies and law firms/lawyers out there putting forth efforts to save homeowners, but there are many that are simply greedy. They pile on as many cases as possible and have legal assistants, paralegals, or former loan officers do all the work.

These companies and law firms may not realize the potential liability associated with case overload. The loan modification arena is a very tricky one. Lenders may tell an assistant that they are postponing a foreclosure, but the trustee moves forward with the sale. There could be certain duties owed to the client and failure to exercise the proper amount of care can result in liability for negligence.

In addition, the State Bar of California and California Attorney General are dedicating significant amounts of staff to investigating and prosecuting anyone who ventures outside the ethical and legal bounds in search of getting rich. There have already been several loan mod companies shut down, but there are also loan modification attorneys that should be shut down. I have personally checked up on some companies advertising as loan modification lawyers here in southern California, only to find that some are not even licensed to practice law in California, have large histories of disciplinary actions from the state bar, or have been working in a completely unrelated field until 3 months ago when they suddenly became a trusted loan modification attorney.

In order to protect yourself, here are a few words of caution:

1) Anyone who tells you that you have to have an attorney to modify your loan is not telling you the truth. You can do it yourself; however, there are many legal issues involved in the process, so you could be doing yourself a disservice to not at least speak with an attorney before moving forward.

2) Beware of “attorney-backed” or “attorney-affiliated” companies. The state bar has already issued an ethics alert stating that these types of companies are not acting within the ethical bounds of the state bar here in California. I don’t know exactly what these words mean, but my understanding is that they have an attorney who may work for the company or is somehow connected to the company, but they never actually review or get involved in your case ever.

3) Do your homework on law firms. There are confidentiality and ethical issues involved in giving guarantees, success rates, and prior cases results, but the attorney or firm should be able to give you an idea how long they have been working in real estate law and what type of experience they have. For example, have they ever gone to court and gotten an order to stop a foreclosure, have they represented clients in bankruptcy court so they are familiar with these interrelated issues, have they actually filed lawsuits for predatory lending, have they postponed existing trustee sales? If you never speak with an attorney at the firm when you are looking to hire them, do you really think an attorney is aggressively going to work on your case? Would you ever go to the doctors office for a serious condition and never actually see the doctor, just do whatever the nurse or assistant tells you to?

If you feel that you have been a victim of these types of scams, you may have legal rights you can pursue.

Chris Barsness, Esq.
Law Office of Barsness and Cohen

Owners of Rental and Investment Properties Must Act To Protect Themselves

There are thousands of owners of rental and investment properties that are facing decrease in rental income or other financial hardships. Although they want to save the property, it may not feel like it is as pressing of an issue as their own home where they live. However, if you have tenants, this raises another potential issue for liability. If the lender forecloses on the property, they may do a trustee sale in which they will not be able to go after the owner for personal liability for any unpaid payments or a difference between the sale price and what was owed. This does not mean that the owner is free to just let the property go. Obviously there are potentially harmful credit impacts, but also the existing tenants have rights. More than likely, they have a written lease agreement with the owner. If they are suddenly served with a notice to move out or be evicted by the new owner after foreclosure, they may decide to bring a lawsuit against the former owner for damages. In fact, if they find that the former owner knew about a pending foreclosure when entering into the lease, they could have a claim for fraud, which will not go away even in bankruptcy.

Even though it is not where you live, owners of rental and income properties must still work to resolve any potential foreclosure of those properties. The federal programs do not include investment or rental properties, but many lenders will still work with you to try to reduce your payment and keep the rental. They will not do this if you don’t aggressively pursue any potential option they may have.

Call us today to evaluate your situation.
Law Office of Barsness & Cohen

Lenders Pay Cash For You To Leave Your Home

Many homeowners are unaware of the options that they may have when they are delinquent on their home loan. They hear about loan modifications and think that this will automatically save their home and is the only option they have. Many homeowners simply let the bank foreclose and simply walk away from their home. You should always know all your rights before making any decisions!!

Depending upon where you are at in the foreclosure stage, your lender may have a financial interest in you leaving your home quietly and quickly. Often lenders who see homeowners that are over 9 months delinquent or who have tried to do a loan modification and failed decide that they are simply going to move forward with foreclosure. They take into account many factors, but keeping a good person in their home they have lived in for 30 years is not one of them. It all comes down to the profit and loss, the almighty dollar!

Even in non-judicial foreclosure, which, here in California is a trustee sale of property, the bank has to incur substantial costs and time delays to foreclose. The lender looks at the costs and is often willing to pay cash to get a deed in lieu of foreclosure. This simply means that you agree to turn over the home to the bank and walk away at a certain time. This saves the lender the costs of paying the trustee to send notices, schedule the sale, attend the sale, transfer a trust deed, and then go to court to evict the homeowner. Even if your lender has taken title at a trustee sale and are entitled to immediate possession, they cannot simply go in and change the locks to force you out. If you occupy and are still in possession of the house, they have to serve you with a notice to quit and then go to court to get a court order to get you out. The lenders will often pay what is called “cash for keys” to avoid hiring attorneys and going to court to force you out.

Often the right negotiations and key pieces of leverage can get homeowners thousands of dollars from the lender that can help them start a new life.

We handle these types of cases and can assist you in obtaining the best possible remedy for your situation.

The information contained above is informational only and only discussed California law, you should consult an attorney in your state to evaluate all your legal options.

Chris Barsness, Esq.

Homeowners Must Act To Save Their Homes From Foreclosure – There is no foreclosure moratorium!

May 19, 2009- As part of the Obama Helping Families Save Their Homes Act of 2009, Congress provided guidance to loan holders, servicers, and homeowners in dealing with potential foreclosure or a foreclosure moratorium.

The legislation provides that Congress feels that lenders and servicers of mortgages should not start foreclosure proceedings or foreclosure sales on a homeowner’s primary residence until the foreclosure provisions of the recent plans have been fully implemented.

Congress also states that they feel that the homeowner should also keep a home that may be in foreclosure in good repair, not allow damage to occur to the property, and should respond to the servicer or holder of their loan to requests during this foreclosure moratorium.

Homeowners should beware because this is not a federal foreclosure moratorium, but only sets out the general feelings of the US Congress and duties they think should be imposed. Your lender or servicing company can and will still move forward with foreclosure, so you must act to save your home. These are just guidelines and recommendations. Do not assume this foreclosure moratorium discussion bans lenders from foreclosure, trustee sales, or evicting you from your home!

Chris Barsness, Esq.
Law Office of Barsness and Cohen

Congress approves Helping Families Save Their Homes Act of 2009

May 19, 2009- Congress passed the Helping Families Save Their Homes Act of 2009 sending the legislation to President Obama for signature. This program expands the previously announced Obama Making Homes Affordable and Homeowner Affordability and Stability plans. Although the provisions that would give bankruptcy judges the power to cram down mortgage in bankruptcy proceedings was absent, the legislation adds more incentives to lenders to keep people in their homes with reasonable payments through mortgage modifications.

The act expands the number of homeowners who will be eligible for loan modifications. These programs can extend mortgages to 40 years, reduce interest rates, and reduce the principal on both first and second mortgages for a person’s primary house. If a home that has a modified loan under this program is sold within the first 5 years after the modification, the mortgage holder (lender) gets anywhere from 10 to 90 percent of any equity accumulation from the net sales proceeds.

Since the plan gives the loan servicer (who is usually the only person you can negotiate with when it comes to your loan) a safe harbor when entering into certain loan modifications, workouts, or other loss mitigation plans, this should help push servicing companies to worry less about liability in modifying loans and more about helping homeowners.

The legislation also extends the increased Federal Deposit Insurance Act (FDIC) coverage limit from $100,000 to $250,000 from the end of 2010 to the end of 2015.

Chris Barsness, Esq.
Law Office of Barsness and Cohen

California Foreclosures Accelerate

Industry source, RealtyTrac, announced that a record number of foreclosures went forward in April. A total of 342,000 homes received notices of default, auction notices or underwent bank repossessions in the month of April.

California easily outpaced every other state with with 96,560 filings, which is not a surprise to me. In our practice defending homeowners, the banks have accelerated the pace with which they are deciding to simply take over properties, even if they are underwater. Despite these bleak numbers, record numbers of loan modifications are still going through. The guidelines of the Obama Making Homes Affordable Plan have pretty much been implemented by most banks and they are processing applications quicker than in the past. The banks also seem to be more willing to work with people at most stages of delinquency, even those that are current on payments.

The trouble is that most homeowners wait until they are approaching a trustee sale date that is weeks away and it is virtually too late to help them. We have fought in court and stopped trustee sales literally hours before the sale, but that is not always the case. Usually lenders need several weeks prior to a trustee sale to review documents and voluntarily agree to postpone the sale.

Don’t hesitate, there are programs available for many homeowners, but waiting too long can result in your lender writing it off for foreclosure sale.

If your home is about to or was just sold at a trustee sale, the lenders may be willing to pay you to turn over your home in a timely fashion and avoid the lender having to proceed with an unlawful detainer (eviction) proceeding in court. There are options available.

If you would like a free consultation, please contact us at 888-881-6591 or visit
You can also read more about the foreclosure numbers at