We have previously commented on misconceptions about force-placed insurance (where mortgage lenders buy expensive insurance for themselves to protect their interest in a borrower's home). http://njbankruptcyblog.blogspot.com/2011/03/force-placed-insurance-when-your.html. The New York Times has updated us on the use and abuse of the lender's right to maintain insurance in two recent articles:
"How to Handle Force-placed Insurance"
http://www.nytimes.com/2012/01/21/your-money/home-insurance/how-to-handle-force-placed-insurance-wealth-matters.html?_r=1.
"Hazard Insurance with its own perils"
http://www.nytimes.com/2012/01/22/business/hazard-insurance-with-its-own-perils-fair-game.html?_r=1
Disputes over force placed insurance have been going on for some time. In our November 11, 2011 posting, we reviewed In re Taylor, 655 F.3d 274 (3d Cir. 2011), involving a dispute with a mortgage lender which had added the cost of forced placed insurance to mortgage arrears. http://njbankruptcyblog.blogspot.com/2011/11/third-circuit-issues-warning-to-lawyers.html.
These articles point out the cozy relationships that existed in some cases between the mortgage servicers and the insurers who provide the high cost force-placed insurance. That insurance is a profit center; its high cost and lack of protection makes it an especially bad deal for the borrower. The lender is justified in keeping the property insured, and if the borrower lets the existing coverage lapse, the lender has no choice.
However, we have seen cases where the lender is collecting and escrowing for the insurance premiums. When the loan goes into default, the lender lets the existing policy lapse and buys force-placed insurance at higher cost. This would be justified if the property has been vacated (because most homeowners policies require continued occupancy). If the property is still occupied, however, common sense would dictate that the lender keep the existing policy in place with its lower premiums that buyer higher cost replacement coverage. I have not heard a good response for not doing so where the borrower continues to occupy the home.
In any event, what the author of the first article reminds us is that a lot of these abuses can be nipped in the bud. Do not ignore notices that tell you your regular homeowners insurance is being canceled. It is easier and less expensive to pay the premium for such insurance yourself than to fight with the lender later over the added monthly cost of force-placed insurance that does not even protect you. On the other hand, if the lender is acting wrongly (note that they have the right to buy such insurance when they need to), it is time to see an attorney and to take legal action. Class actions against some lenders for such practices have already gotten underway.
But again, prevention is the best cure. Who wants the stress and expense of battling with the lender even if they win. At the same time, make noise and let the lender, your attorney, your legislative representatives, and anyone else who will listen know what is happening.
The system of home mortgage lending is malfunctioning if not already broken. Borrowers need not put up with abuses, but need to be proactive, savvy and attentive. Prompt legal advice on what to do when a mortgage goes into default is an important first step.
For more help with these and related topics, see our website at http://www.nv-njlaw.com.
Saturday, January 21, 2012
Saturday, January 14, 2012
Managing our expectations-how we got into this mess and how we will get out
I was recently discussing with a friend what caused so many people to get themselves into financial trouble and why many people have trouble coming to grips with their situation and how to dig out of it. One of the reasons, I believe, is that too many people people created too-high expectations of what standard of living they should enjoy, while too few sat down to run the numbers, to see what they could afford.
A major factor, I believe, is our tendency to compare ourselves to those around us. As this recent article in the New York Times shows, our perception of reward and danger is shaped by what we expect of ourselves and the world. http://www.nytimes.com/2012/01/14/your-money/the-importance-of-setting-expectations-whether-high-or-low.html. And a lot of the ups and downs of the national financial psyche can, I think, be explained by our individual and collective inability to manage our expectations.
We tend to measure our social and personal standing in the community by what the people around us are doing, saying or thinking. When everyone was spending money on new cars, new houses, and other trappings of success, that raised the bar for those of us who measured ourselves against others. It did not matter that those people were running up mortgage or credit card debt to spend beyond their means. We had to do as well....
This of course creates a self-fulfilling feedback loop. We spend and buy because others are doing so. More money goes around, and the expanding money flow creates jobs and apparent well-being. But if the spending is fueled by increasing debt, as it was until 2008, the appearance is an illusion that sooner or later has to come to an end.
I believe we are now in the negative flip side of that ever-upwards-spiralling loop of expectations. This started with the crash of harsh reality, when things start going wrong. Small things at first, but then worry sets in, then fear. Instead of everyone expecting that the real estate market and the stock market will go up forever, now we fear the worst, and expect that the future will be just as bad as we think the present is, or worse.
Neither our inflated view of the ever better future, or our current expectation of doom is rational. For the past few years since 2008, the smart money has been sitting on the sidelines waiting for fire-sale bargains. That may be ending, but I believe far too few people are ready to invest in people and projects that, viewed outside the lens of expectations, make a lot of sense. We have, in a word, become too fearful for our own good.
The problem was (and still is in my view) that so few people learned to manage their expectations. So few individuals know how to do simple financial planning or care to keep a basic budget, to see what they could afford. Even today, so few people I see and so few business owners I counsel can really tell me what they have to spend to survive. We suffer from a studied blindness to simple personal finance. That has gotten many into trouble and until that changes, the root problem remains.
The key to managing expectations is found in the article I refer to above. Hope for the best, but plan for the worst. Maintain a positive outlook, but one tempered by and grounded in objective facts. Make decisions based on an objective non-emotional assessment of the present, but with a positive outlook. Be grounded in the real numbers that a budget, or cash flow projection shows. Actively market and sell to new customers. Look for new opportunities. Remember that the past is not prologue to the future and every day is a new day. Above all, remember that things go in cycles.
We help people and businesses every day to get relief from debt, and to take back control of their business and personal financial lives. For more information, please visit our website at http://www.nv-njlaw.com
A major factor, I believe, is our tendency to compare ourselves to those around us. As this recent article in the New York Times shows, our perception of reward and danger is shaped by what we expect of ourselves and the world. http://www.nytimes.com/2012/01/14/your-money/the-importance-of-setting-expectations-whether-high-or-low.html. And a lot of the ups and downs of the national financial psyche can, I think, be explained by our individual and collective inability to manage our expectations.
We tend to measure our social and personal standing in the community by what the people around us are doing, saying or thinking. When everyone was spending money on new cars, new houses, and other trappings of success, that raised the bar for those of us who measured ourselves against others. It did not matter that those people were running up mortgage or credit card debt to spend beyond their means. We had to do as well....
This of course creates a self-fulfilling feedback loop. We spend and buy because others are doing so. More money goes around, and the expanding money flow creates jobs and apparent well-being. But if the spending is fueled by increasing debt, as it was until 2008, the appearance is an illusion that sooner or later has to come to an end.
I believe we are now in the negative flip side of that ever-upwards-spiralling loop of expectations. This started with the crash of harsh reality, when things start going wrong. Small things at first, but then worry sets in, then fear. Instead of everyone expecting that the real estate market and the stock market will go up forever, now we fear the worst, and expect that the future will be just as bad as we think the present is, or worse.
Neither our inflated view of the ever better future, or our current expectation of doom is rational. For the past few years since 2008, the smart money has been sitting on the sidelines waiting for fire-sale bargains. That may be ending, but I believe far too few people are ready to invest in people and projects that, viewed outside the lens of expectations, make a lot of sense. We have, in a word, become too fearful for our own good.
The problem was (and still is in my view) that so few people learned to manage their expectations. So few individuals know how to do simple financial planning or care to keep a basic budget, to see what they could afford. Even today, so few people I see and so few business owners I counsel can really tell me what they have to spend to survive. We suffer from a studied blindness to simple personal finance. That has gotten many into trouble and until that changes, the root problem remains.
The key to managing expectations is found in the article I refer to above. Hope for the best, but plan for the worst. Maintain a positive outlook, but one tempered by and grounded in objective facts. Make decisions based on an objective non-emotional assessment of the present, but with a positive outlook. Be grounded in the real numbers that a budget, or cash flow projection shows. Actively market and sell to new customers. Look for new opportunities. Remember that the past is not prologue to the future and every day is a new day. Above all, remember that things go in cycles.
We help people and businesses every day to get relief from debt, and to take back control of their business and personal financial lives. For more information, please visit our website at http://www.nv-njlaw.com
Monday, January 9, 2012
Creditors and debt collectors continuing to violate borrower rights?
In a recent New York Times editorial http://www.nytimes.com/2012/01/08/business/mortgage-servicing-horror-stories-fair-game.html?_r=1 columnist Gretchen Morganstern discusses deceptive practices, abuses and violations of law by mortgage processers, most specifically Lender Processing Services. She also notes that a proposed global settlement with various banks has been stalled, possibly because state regulators were too quick to give them a pass.
Of late, law firms handling foreclosures appear to have become much more careful in handling these cases. This of course has slowed the rate and which foreclosures can be completed.
While it can be argued that punishing the banks for past misbehavior doesnt help us out of the current mess, the counter argument is that with more attention to legal obligations and less on the bottom line, maybe the problem would not be as bad as it now is.
The lawsuits came about because certain parties did not follow the law in their dealings with borrowers or loan applicants. But the problem may be more general and widespread.
Of late, we have seen increased numbers of cases where creditors have illegally harassed our clients, trying to collect debts that were discharged in bankruptcy, or trying to collect money while a bankruptcy is ongoing. The circumstances indicate that these are not innocent mistakes, but a wilful refusal to abide by a bankruptcy discharge or the automatic stay which protects borrowers in bankruptcy and protects the legal process has serious consequences.
Anyone who has experienced this sort of misbehavior should not let it slide. If too many people do that, it only encourages more violations of other peoples' rights. The law provides potent remedies against such violations by creditors and debt collectors.
If you have further questions about this topic, we invite you to visit our website at http://www.nv-njlaw.com/bankruptcy-credit/
Of late, law firms handling foreclosures appear to have become much more careful in handling these cases. This of course has slowed the rate and which foreclosures can be completed.
While it can be argued that punishing the banks for past misbehavior doesnt help us out of the current mess, the counter argument is that with more attention to legal obligations and less on the bottom line, maybe the problem would not be as bad as it now is.
The lawsuits came about because certain parties did not follow the law in their dealings with borrowers or loan applicants. But the problem may be more general and widespread.
Of late, we have seen increased numbers of cases where creditors have illegally harassed our clients, trying to collect debts that were discharged in bankruptcy, or trying to collect money while a bankruptcy is ongoing. The circumstances indicate that these are not innocent mistakes, but a wilful refusal to abide by a bankruptcy discharge or the automatic stay which protects borrowers in bankruptcy and protects the legal process has serious consequences.
Anyone who has experienced this sort of misbehavior should not let it slide. If too many people do that, it only encourages more violations of other peoples' rights. The law provides potent remedies against such violations by creditors and debt collectors.
If you have further questions about this topic, we invite you to visit our website at http://www.nv-njlaw.com/bankruptcy-credit/
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