One of the themes I stress when meeting the clients is the need to take responsibility for a stable retirement.  When the credit card debt is impossible, I want clients to devote the energy and discipline they have used to juggle the credit card debt to saving for retirement.

The number of clients who haven’t thought clearly about retirement is predominant.  But even then, I was surprised by my recent conversations with clients after the dramatic stock market collapse of the past few months.

Clients seem to think that “401(k)’s” were a kind of investment that should be avoided because it had crashed.  They did not seem to understand that a 401(k) was merely a vehicle for retirement savings, independent of what it was invested in.  They were prepared to shun 401(k)’s because they had gone down in value.  Arhghhhh!

So I need to add a chorus to my song about preparing for retirement rather than paying off impossible credit card debt.  Drumroll, please….

It’s not news that the federal economic rescue package hasn’t had much positive effect yet.  My colleague Carmen Dellutri describes the impact of “mortgages as securities” on the ability of anyone to speak for the lender in modification.

I talked with a lawyer I respect enormously who has a national perspective on what’s happening with consumers and bad or upside down loans.  His experience was that no bank wanted to make a decision to modify a loan until they knew whether they’d get a better deal from the feds.

So, at least in the short run, the hugely expensive bailout allows banks to pay dividends to their shareholders with taxpayer money and further freezes the incentive for banks to rework troubled loans into performing loans, rather than candidates for foreclosure.  Such a deal.

There was a cerebral flash and then it was gone:  the buying power of a typical family has not risen since 1999, I read in  Newsweek,  while my husband marvels at the incredible credit card debt of my clients.

I wonder whether the explosion of consumer credit, fueling the illusion that everyman can enjoy a middle class lifestyle in an era of stagnant wages, has had any role in muffling protest about wage inequities?  What do you think?

My friend Gene Melchionne mourned a spate of recent suicides linked to financial problems and pointed out that bankruptcy can be a solution to debt issues.  And I thought of the all the folks trying to sell you  something, a book, a program, debt management program or debt settlement solutions in order to avoid bankruptcy.

Bankruptcy, in their parlance, has all the appeal of cancer.  They make bankruptcy a horror so you’ll buy whatever it is that they are selling, including you, Dave Ramsey.

Nonsense.  Bankruptcy is a tool to deal with a bad set of facts.  Regret the factual situation, but don’t spurn a legal and effective solution.

If you have a disease, the disease seldom goes away when you reject treatment.  Likewise, rejecting bankruptcy seldom results in financial health:  it just prolongs the stress, the reckless living without insurance or reserves, and the mindless I-can-do-this until there is a financial or physical train wreck….. or a suicide.

Those who paint bankruptcy as a sign of failure or a matter of shame to further their own economic interests ought themselves to be ashamed.

December 10th is the deadline for  California homeowners who are over 62 or disabled to apply for low interest loans from the state to pay property taxes.  When the interest rate on delinquent real estate taxes is now 18%, this program could make a significant difference to elders with financial challenges.

To qualify, you must have lived in the home since December 31, 2007; have 20% equity in the property; and have a household income of less than $35,000.

To apply, call 1 800 952-5661 or see the State Controller’s webpage on the program.

Pundits discussing the turmoil in the financial markets keep coming back to the need for “housing to recover” before we get stability among financial institutions.  No one is discussing what the measure of “recovery” is.

In the California Bay Area, where I practice, the median price of housing has fallen on average 25%.  If recovery means a return to those peak values, I dispute that such would be “recovery”.  Mortgage lending, without standards and without the institutional restraint of having to live with the loan you made, created the artificial high in home values.  When everyone who could fog a mirror or wield a pen was a candidate for homeownership because some heedless institution would make a loan, the supply of homes was inadequate for the number of prospective buyers.  The relentless upward march of prices created a “buy now before it’s more expensive” atmosphere.

Those who bewail the drop in home prices don’t discuss how real that “lost” value ever was.

So, I don’t yearn for a return to that housing market.  I hope for a return to the availability of mortgage money to people who might actually be able to repay the loan on its terms, not tranactions dependent on a further refinancing or sale of appreciated property.

There is a substantial likelihood that any California home mortgage refinance transaction during the last three boom years contains flaws that allow the borrower to rescind the transaction.  But rights under Truth in Lending expire three years from the date of the loan.

If you borrowed money to refinance your home or took out a home equity line of credit, violations of TILA allow you to unwind the transaction.   Everything you paid to get the loan and everything you paid to the lender since then is a credit against the principle amount of the loan.

The right to rescind contemplates that the borrower then tender to the lender the difference between the original loan and all the credits the borrower is entitled to.  Historically, that tender was achieved by refinancing with a new loan.  Alternatively, borrowers are negotiating with lenders to modify the defective loan to one for a smaller amount, presumably on better terms.

The power of Truth in Lending is that it is a strict liability statute:  the borrower doesn’t have to prove they were deceived or that they were damaged.  They need prove only that the law was broken.  The borrower is entitled to their attorneys fees for making this happen.

Powerful, huh?  But the opportunity only lasts for three years from the date of the loan.  Get your loan documents reviewed to see if you have rights under Truth in Lending.

T

I had a refreshing meeting with a client this week in which she had reached acceptance of the need and utility of filing bankruptcy.  Surprisingly, she came to that understanding as the result of meeting with an honest debt management company.  Her counselor at the debt management company suggested that she really didn’t make enough money to make repayment of her debt realistic.

Brett Weiss reported on the experiences of a Chapter 13 debtor conducting a new business after failure of his restaurant business.  A Charlotte NC bankruptcy attorney sees bankruptcy as a way to catch those who are falling.

Lehman Brothers, a long established investment bank, resorted this week to bankruptcy to conduct an orderly liquidation.

Consumers anguished about the thought of filing bankruptcy should look around them and realize that bankruptcy is not a mark of shame, but rather a rational approach to difficult financial situations.

If the situation is impossible, don’t let false pride keep you from a solution and a fresh start.

People whose residence changes on the eve of the November election need to know the rules about eligibility to vote:

4 TIPS:  VOTING RIGHTS FOR HOME FORECLOSURE VICTIMS

NoVoterLeftBehind.net is emphasizing four things every American going through foreclosure needs to know about their vote:

* Voting is an inalienable right that you can’t lose due an inability to meet mortgage payments.  If any one tries to tell you don’t different, don’t listen to him or her!

* If you are in the foreclosure process - but still living in your home - you still vote where you live.  The foreclosure process itself does not bear on your right to vote or where you exercise that right.

* If you are forced to move due to foreclosure before the voting registration deadline, you should re-register at your new home location. Go to http://novoterleftbehind.net/knowrules.cfm to find your states rules on voter registration.

* If you move due to foreclosure after the voting registration deadline —  but before the election — go to vote where you were last registered to vote.  Keep in mind the following:  You have the right to vote by signing an affirmation (or similar form) if your right to vote is challenged for any reason; and if your name isn’t on the registered voter list, you have the right to vote by provisional ballot.

ABOUT NOVOTERLEFTBEHIND.NET

While it’s hard to consider the bigger issues when your personal situation is in turmoil, it is important.  How will things change for the better if we don’t exercise the right to vote.

The seller in a recent short sale just learned that all the effort to achieve that sale had not protected her from a lawsuit by the junior lien holder on the property.  The holder of the second deed of trust, who consented to the sale for less than it was owed, now wanted her to pay the shortfall.  And thus the call to a bankruptcy attorney, after all.

I talked to the realtor who arranged the sale:  did she negotiate for a release from the second in connection with the sale?  did the seller understand before the transaction that the junior lien holder retained their rights against the seller?  what was the benefit to the seller from the short sale?

I suspect that the answers, had I gotten any, would have been no;  no; and none.  But the realtor got a commission.

Part of what is going on in a short sale is exploitation of the idea that a foreclosure is the financial end of the world, a fate to be avoided at all costs.  That idea is fed, of course, by lenders and realtors.

In my view, if you can’t sell a property for an amount equal to what’s owed, you can choose between a foreclosure, which satisfies the first deed of trust but probably not the second deed of trust, or a bankruptcy which releases the borrower from any liability for either loan, and whatever other debts they may have as well.

In today’s real estate downturn, I frequently tell clients that the only return that they will get from their property is the opportunity to live in it, payment free, for the 6-10 months or more until a foreclosure can be completed.  Negotiate a short sale, and you need to move out immediately and begin paying rent.  Do you suppose the realtor in my scenario counseled the home owner on that option?