Black and Buono Blog

...by Kiley Black

As a realtor, when dealing with a short sale transaction, you need a real estate attorney who has been down this road.

As you know, short sales are not cut and dry. There can be any number of issues with title problems and liens, and only an experienced real estate attorney can make this process smooth.

You also know that a short sale is very difficult for the seller and for the buyer. Generally when selling a home, the seller is moving on in some form or another. During a short sale, the seller is essentially losing their home. The process is difficult.

Black and Buono can help your seller through the short sale process, as well as assisting your customer with credit card counseling  and debt restructuring, and/or bankruptcy help.

While the buyer is most likely getting a very good deal, the process is long and confusing. It can also be challenging if there are liens on the property. Many buyers don't understand the short sale process; they tend to become very impatient while waiting for short sale approval.

Black and Buono can help your buyer get lender approval for the short sale. There are also many legal documents that are needed for a short sale that we can help you with, and we have experience in short sale home closings.

Contact Black and Buono, qualified and experienced lawyers for the short sale process in Massachusetts.

...by Anthony Buono

Homeowners who are struggling to make their mortgage payments or facing foreclosure to the short sale process should consult Black and Buono, a real estate law office that also specializes in personal bankruptcy law and debt restructuring.

Black and Buono offer practical guidance on how to make it happen. We know the lenders and their policies in regards to foreclosures and short sales. We can explain what is needed to apply for a short sale.

As the real estate market continues to stagnate, more and more property owners are presented with the very real possibility of losing their investment with nothing to show for it. To make matters worse, good information about possible alternatives remains difficult to find. Black and Buono can addresses that problem and explain the ins and outs of foreclosure and how to perform a short sale and what factors to consider.

When you are going through this you feel very alone. It is important to remember that you are not alone. This historic real estate downturn has affected 1000’s of people in the Framingham-Worcester area. There are solutions to your problem.

Buyers and sellers of distressed properties and real estate brokers and agents of short sale homes in Massachusetts should contact Black and Buono.

...by Anthony Buono

Those filing personal bankruptcy may think they should do it without a lawyer because they cannot afford one. We are bankruptcy attorneys so of course we are going to say, “you really should hire a lawyer”. But the fact of the matter is, you really should.

But don’t take our word for it. Here is an excerpt from the USCourts.gov website:

Businesses must have an attorney to file a bankruptcy case. BUT, individuals may represent themselves in bankruptcy court. While individuals can file a bankruptcy case without an attorney it is extremely difficult to do it successfully.

It is very important that a personal bankruptcy case be filed and handled correctly. The rules are very technical, and a misstep may affect a debtor's rights. For example, a debtor whose case is dismissed for failure to file a required document, such as a credit counseling certificate, may lose the right to file another case or lose protections in a later case, including the benefit of the automatic stay. Bankruptcy has long-term financial and legal consequences - hiring a competent bankruptcy attorney is strongly recommended.

If you are considering declaring personal bankruptcy, please contact Black and Buono. We have represented hundreds of clients in all phases of Chapter 7 Bankruptcy and Chapter 13 bankruptcy proceedings, from preparing the initial petition through plan formulation and confirmation.

...by Kiley Black

A Deed in lieu of foreclosure is becoming an increasingly popular alternative to foreclosure.  A “deed in lieu” means the homeowner transfers all their interest in the property to the lender in order to avoid a foreclosure. The main difference: the transfer is voluntarily made. However, there are some limitations and restrictions you must be aware of if you are contemplating a deed in lieu of foreclosure.

Creditors Claims - Preferences: There is the possibility that other creditors of the Mortgagor may attempt to void the conveyance as a fraudulent transfer or a preference under bankruptcy law.  In order to prevent such a re-characterization, you have to demonstrate that the value of the property is less than the amount of outstanding debt.  You can do this by obtaining an appraisal, which needs to show the current value of the property is now less than the amount of outstanding debt owed under the note and mortgage at the time of the deed in lieu.  Massachusetts has adopted the Uniform Fraudulent Transfer Act and, in doing so, has created a four year period for avoidance of fraudulent conveyances.
 
An Absolute Conveyance -Freely Made: The deed in lieu should indicate that it is an absolute conveyance and that there are no other agreements between the parties with respect to the property.  As a practical matter, this means there cannot be agreements between the parties that would allow the Mortgagor to make a claim in the future, that despite the recording of the deed, the actual intent was to allow for redemption and reacquisition of the property by the Mortgagor if future payments were to be made.  Also, to avoid any suggestion of duress, undue influence and coercion, the deed should also recite that it is freely and fairly made.
 
Affidavit from the Mortgagor: The intent of the Mortgagor should be confirmed by a satisfactory Affidavit, which states that the conveyance is an absolute conveyance, freely and voluntarily made, not given as a preference against other creditors of the Mortgagor, and that the consideration for the deed includes the cancellation of all debts and charges secured by the mortgage (describing the mortgage and the recording information) and the release of the mortgage.  
 
Payoff All Outstanding Mortgages and Liens: Unlike a foreclosure, a deed in lieu is a voluntary conveyance and, therefore, subject to all junior mortgages and liens that would normally be extinguished by a proper foreclosure.    Hence, you will need to obtain and record the necessary releases of all other mortgages and liens on the property or our title insurance policy would need to take an exception for the same.

...By Anthony Buono

Bankruptcy filings by individuals are off sharply this year compared to 2010, reflecting a modest improvement in household finances in Massachusetts.

During the first six months of 2011, Chapter 7 bankruptcy filings dropped to 7,733 filings, down about 20 percent from 9,411 filings during the first six months of 2010.

Business bankruptcies, however, are on pace with 2010 numbers. During the first six months of this year there were 111 Chapter 11 filings, compared to 105 filings during the first six months of last year.

Chapter 7 filings usually involve liquidation and are used by individuals or families and, sometimes, companies that fail to right their courses through Chapter 11 proceedings.

Nationally, the number of personal bankruptcy filings dropped 6 percent during the first quarter of 2011.
While unemployment is still high, creditor pressure has eased to some degree as foreclosures have dropped in recent months.

The declining number of personal bankruptcies may also simply be because during the worst of the recession, many people filed and the people left are more stable financially — or they’re just trying to hold on as the economy gradually improves.

Original article in Boston Business Journal

...by Anthony Buono

A strategic default in terms of home ownership is the decision by a homeowner to stop making mortgage payments (to default) on their debt despite having the financial ability to make the payments.

This is particularly associated with residential mortgages.  It usually occurs after a substantial drop in the house's price when the debt owed is much greater than the value of the property, meaning negative equity or underwater, and is expected to remain so for the foreseeable future.

Homeowners who walk away in strategic defaults are not necessarily the ones most 'underwater.'

Credit scores are designed to predict the risk of default. But when it comes to strategic default -- which is when people who can afford to pay their mortgages don't, usually because their homes are worth less than their loans -- analysts have noticed a reverse phenomenon: Good credit scores can indicate a higher likelihood that a homeowner will voluntarily bail on a home loan.

Today, somewhere around one in three mortgage defaults is strategic.

"People who make the decision to strategically default tend to be more savvy," said Andrew Jennings, the chief analytics officer for Fair Isaac, the company that created the leading FICO credit score. "Most of the people who walk away from a mortgage are saying, 'This is not a contract that makes sense anymore.'"

FICO analysts looked at a population of borrowers who started out current on all their bills but wound up 90 days or more behind on their mortgages.

The people who stayed current on their other bills but stopped paying their mortgages had better initial credit scores and lower credit balances, and were less likely to have gone over their limits -- all signs of responsible money management.

Intriguingly, one factor that wasn't a strong predictor of strategic default was how far "underwater" these homeowners were. What mattered far more was the future trajectory of home prices.

Another point: research indicated that 40% of strategic defaulters lived in "recourse" states, where they could face lawsuits over debts that remained after foreclosure. It's not clear whether defaulters didn't understand the risks or whether they had bet that their lenders wouldn't come after them.

“We feel that people take this action without fully understanding the consequences," Jennings said. The message coming from them is that if enough people take this action, there is no way the banks are going to come after us, and even if they do, we can declare bankruptcy."

Strategic default dumps the traditional "payment hierarchy" on its head. In the past, lenders could count on people skipping other payments first before they reneged on their mortgages. And, the trend seems to be growing. A study at the University of Chicago found that 35% of mortgage defaults in the U.S. were strategic in September 2010, compared with 26% in March 2009.

If you're thinking about skipping out on your mortgage, here's what you need to keep in mind:

• The foreclosure process varies by state and by lender. Don't count on other people's experiences to predict your own.
• Your risk varies. Some states prohibit lenders from suing you for mortgage balances you owe on a primary residence. Massachusetts is NOT one of those states.  Massachusetts allows the lawsuits. Before you stop paying, talk to a bankruptcy attorney who is familiar with the credit and real-estate laws in your state as well as industry practices.
• Understand what a foreclosure does to your credit. The higher your credit scores, the longer they will take to heal.

Recourse basically means that the lender can come after you (has recourse against you) if your house sold at auction or through a short sale for less than the amount owed the lender.

Original article on MSN money

Attorney Anthony Buono explains what his law firm brings to the table that other real estate law firms in Massachusetts do not bring. He speaks about experience and commitment. With over 30 years of experience in Real Estate and Bankruptcy Law in Massachusetts, the Law Office of Black and Buono has broad based knowledge of the real estate market and processes in the Framingham area and throughout all of Massachusetts.



For more information on why you should have your own real estate attorney, on purchasing a FSBO properties or short sale homes, or information on the bankruptcy process, visit the Black and Buono You Tube channel, or contact us.

...by Anthony Buono

Personal bankruptcy filings have risen to their highest levels since bankruptcy reform legislation was enacted in 2005, spurred by widespread job losses, underemployment and a stagnant real estate market.

The bankruptcy epidemic has affected a wide variety of households, from people in their prime earning years who are struggling after layoffs to retirees who are no longer able to pay their mortgages.

In Massachusetts, the total number of Chapter 7 and Chapter 13 personal bankruptcy filings rose to nearly 23,000 last year, up 16 percent from 2009. Nationally, personal bankruptcy filings rose 9 percent over the same time.

A 33-year-old administrator at a residential treatment facility for at-risk teens had never fell behind on his bills. But the purchase of a condo in Abington during the height of the real estate bubble proved to be disastrous for him.

He bought the condo in 2005 with a friend as an investment and short-term living arrangement, using an interest-only mortgage that became an adjustable rate mortgage after five years.

As the economy lurched into recession, both took pay cuts and David’s roommate lost his job. Hoping to force the lender to modify the loan, the pair stopped paying the mortgage for nearly three years. They finally settled on a short sale, a process that left them with a $90,000 debt. “Unfortunately, like a lot of people we ended up with a mortgage that was set up for failure,” he said.

The bankruptcy epidemic has cut across all circles, but what’s changing is the demographics, local bankruptcy lawyers say.

For the first time, we’re seeing a great deal of elderly people in bankruptcy, before 2007, we didn’t.

One lawyer recalled a woman nearing her 90th birthday who begged him to take her case so that she could pass on a clean estate to her family.

Many retirees filing for bankruptcy are people who are too old to return to work, but facing increases in adjustable-rate mortgage payments.

While job loss remains the biggest trigger for a bankruptcy filing, the second-biggest category is people entering retirement.

Their income is greatly reduced and they can no longer afford credit card payments and in some cases their car payments.

There has also been an increase in higher-income clients seeking bankruptcy because of job loss or reduced income.

Bankruptcy cases fell sharply in 2005 after enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act. The federal law was intended to curb abuse and fraud of the bankruptcy process by debtors and force more debtors to pay back their creditors.

It did so by making it harder to file for Chapter 7 bankruptcy, a straight liquidation process, as opposed to Chapter 13, in which the debtor is required to pay back at least some of the debt over a three- to five-year period.
Under the new bankruptcy laws, debtors who make more than the local median income are required to file for Chapter 13.

The law also imposed new requirements on debtors and their attorneys. Debtors are required to take credit counseling and financial management courses before their case can be discharged by the court.

Lawyers, for their part, are now required to verify their clients’ financial statements and assets. That has created more paperwork and increased attorneys’ fees. A typical Chapter 7 case, which takes approximately three months to make its way through the courts, costs a consumer $1,000 to $2,500, Nielson said. Chapter 13 cases are capped at $3,500 unless the court approves additional expenses.

But what the new law has failed to address is the root cause of many bankruptcy filings: loose credit standards that enabled borrowers to obtain bigger mortgages and credit lines than they can afford.

Although bankruptcy filings linger on a person’s credit report for 7 to 10 years, they can take steps to rebuild their credit.

One method is a secured credit card, in which a debtor deposits money as collateral to serve as the credit line. That enables them to establish a history of payments.

Original Article - Patriot Ledger

...by Anthony Buono

At Black and Buono, we are often getting the same question. We have clients who are having trouble paying their bills and they want to know if homesteading their property will protect them from creditors in a lawsuit.  We’ve decided to address this in our blog this week.

Massachusetts homestead laws are concerned with protecting a certain portion of the head of household’s property from being confiscated and sold to satisfy debts.

In March of this year, the Homestead Act was changed to allow an automatic homestead of $125,000 without the homeowner doing anything at all, this is an improvement over the past, when no protection was provided automatically. A declaration of Homestead provides for up to $500,000 of protection.

Many homeowners misunderstand the law and think that it provides much more protection than it actually does.  For example, under the Homestead law, $125,000 of the equity in your home is protected. Meaning no forced sale can happen to satisfy "unsecured" creditors.

Notice, we said unsecured creditors. The homestead exemption does NOT protect you from secured creditors such as your mortgage holder.

If you stop making your mortgage payments, the bank can foreclose and sell your house. This can happen regardless of a homestead exemption because the mortgage is a voluntary secured lien, which means that you put up your home as collateral when you took out the loan.

However, the homestead law does protect you from unsecured creditors. Therefore, if your only financial asset was $125,000 equity in your home and you owed were sued for a $100,000 judgment the party suing you could not foreclose on your home to collect.  Remember, the first $125,000 worth of equity in your home is protected by the Homestead law. The same works for Declaration of Homestead of$500,000 worth of protection.

However, in the above scenario, $125,000 of your home’s equity is protected, and you have $225,000 worth of equity in your home, the party suing you actually could force the sale of your home. In this case, you would receive $125,000 of the sale (which is protected) and they would keep the other $100,000 as payment.
 
Through these examples you can see the benefit of a Declaration of Homestead, which protects $500,000 of your homes equity.

Unfortunately, mortgage lenders are not the only secured creditors who are exempt from the homestead protection. Child support debts, condominium association dues, certain debts in bankruptcy filed by your spouse, and a few others.

The most important place that the homestead law has an effect is in bankruptcies. When homeowners are over their head in debt, many homeowners opt to stop paying other bills in order to continue with their mortgage payments.  In other words, they stop paying unsecured debt, which they are protected from, to continue paying their secured debt, i.e mortgage, which they are not protected from.

Bankruptcy judges tend to be fairly lenient with the homestead exemption limit. In a bankruptcy court, the judge will let the homeowner keep their house if their mortgage payments are not delinquent and the equity in their home is $125,000 or less.

If your only asset is the equity in your home of $125,000 or less, the homestead law would most likely discourage someone from suing you.  It may allow you to keep your home if you wind up in bankruptcy court. Declaration of Homestead would give you much more security.However, it will not protect you from all of your creditors.

If you are facing increasing debt, buying a new home, or have more questions regarding the Homestead Act, please contact Black and Buono in Framingham, MA.

...by Anthony Buono

There are times when a situation you believe will end up in bankruptcy actually ends up as a success story. When you hire the right lawyers who look at the whole situation and are able to assess your needs, what you thought was a bad situation can end up with a happy ending.

We had a couple in their 70’s that had a lot of equity in their home. However their home had a mortgage. They were living on their savings and social security and the wife took a fall. The injury incurred quite a bit of uninsured medical expenses, which essentially completely depleted their savings.  They wanted to stay in their home, however they were not able to take any equity out of the house and they were not eligible for refinance or a reverse mortgage because of their limited amount of savings. They did have some assets but they were not easily available to them.

They came to us thinking that they were going to file bankruptcy. Now even though we are bankruptcy counselors, if we can help clients avoid filing for bankruptcy protection, we encourage them to do so. We were able to connect them to a private lender who was able to give them a competitive rate to allow them to refinance both their mortgage and equity rate. They were able to refinance and for a  period of time they were able to make payments interest. They were able to continue on for two years until such time that they were able to relocate to NC, which had been part of their original plan.

This was terrific because it allowed a situation which could have ended in bankruptcy to be completely avoided. It was a win win situation. The lender was happy and the clients were extremely appreciative. We are always pleased when we can do that for someone.