Boston Bankruptcy Lawyer Blog

President Obama is expected to reject interim director and Harvard Law professor Elizabeth Warren and appoint Richard Cordray, former Ohio attorney general, to be the director of the Consumer Financial Protection Bureau, according to reports learned by Boston bankruptcy lawyer Neil Burns. The CFPB officially opens July 21. Nevertheless, coming up with the idea for the agency, lobbying for it during the Gramm-Dodd leglislation, and laying the groundwork by "directing" it since its inception, Massachusetts' Elizabeth Warren and her team have undertaken numerous alliances and endeavors in advance of the opening. Boston bankruptcy lawyers who represent consumers are looking carefully at the regulators to determine what new rules and programs we can pass on to our Massachusetts consumer clients. So far, we have gleaned the following:

On July 12, 2011, Professor Warren announced the CFPB approach to examining large banks, with over $10 billion, with respect to the financial protection and disclosure to consumers. Using examiners formally from the FDIC, other federal and state regulatory agencies, the CFPB will examine local practices, and educate to enforce compliance. The monies in these banks comprise more than 80% of banking industry assets.

In an alliance with the military Offices of the Judge Advocate Generals, the CFPB entered into an agreement to protect members of the armed services regarding consumer financial products and services. Noting that military personnel are too often "targeted by predatory lenders" and become "victims of unfair financial practices," the parties agreed to work together to educate the military personnel, enforce consumer laws and study financial products and practices to determine how to protect consumers.

The CFPB has drafted new CFPB mortgage disclosure forms to protect consumers. The goal is to remove critical items from the preverbal fine print. With a mandate from the Dodge-Frank Act, which brought about the birth of CFPB, the agency was instructed to integrate the "truth-in-lending" form and the "good faith estimate" form in a way that will be simpler, less complicated, and not duplicative. CFPB floated two proposed forms and sought comments on each. The responses were focused on "cautions," "key terms," and "summary." The projected payments sections presented the next most comments. According to CFPB, comments were critical in revising the mortgage disclosure forms.
Massachusetts student loans are another consumer area the CFPB seems intent on working on (well, their focus is national!). In their initial CFPB student loan postings, the CFPB is merely providing information. They note that the average college graduate has over $23,000 in student loans. They differentiate between the publicly backed student loans and private student loans. However, as the CFPB points out, discharging student loans in bankruptcy is very difficult.

The CFPB website allows for inquiries of myriad consumer financial questions, including loan modification, foreclosures, equity loans, credit card issues, payday loans, cash advance rules, motor vehicle loans, tax refund loans, credit counseling, credit reports, travelers checks and money orders, wire transfer, etc.

With respect to the drama in Washington over Elizabeth Warren's nomination, Massachusetts consumers will have to stay tuned. One side of the aisle wants her out, the other side in, and advocates are hoping that the debt ceiling crisis will be resolved so Congress can go into recess and the president can name Ms. Warren in a stealth interim nomination, avoiding Senate confirmation. As Professor Warren recently said "Every day, somebody's got a plan to undercut this agency, to knock it down," so her job description, before her job even starts, has been to defend the agency she advocated for and that Congress put into place.

Massachusetts consumer advocate and Harvard bankruptcy law professor Elizabeth Warren was grilled by Representative McHenry, the North Carolina chair of a House subcommittee the other day. The testimony was supposed to be about the direction of the Consumer Financial Protection Bureau in a report to Congress. The Congressman, however, seemed less concerned with what Professor Warren had accomplished at the CFPB, and more focused on character assassination, actually calling her a liar regarding the simple matter of scheduling the hearing. A video of the exchange can be viewed. The CFPB, the brainchild of Ms. Warren after years of careful study and implemented by Congress following the financial crisis, has been under attack by various factions with allegiance to large financial institutions.

Ms. Warren is now in a political tug of war: Some want her to return to Massachusetts and run for Senate; others want her out of power altogether in Washington. Regardless of where she goes after her temporary appointment, we see her devotion to protecting consumers where they interact with the financial world: credit card rights, 401k disclosures and consumer banking disclosures. The partisan attacks in Washington remind us of President Obama's speech at the University of Michigan, last May, when he related a story of a letter written by a kindergartner asking, "Are people being nice?"

Continue reading "Elizabeth Warren: Consumer Protection Leader" »

Will the foreclosure crisis continue in the United States? Will there continue to be record foreclosures in Massachusetts? Will record Massachusetts bankruptcies continue? Massachusetts foreclosures are down 67% from last year, yet there are thousands of Massachusetts properties in or near foreclosures. According to real estate researchers, 23% of households nationally are "underwater" in their mortgages; research reporting company Zillow claims that the number is closer to 27%. Furthermore, if you count the true costs of selling, such as realtor fees, moving and closing costs, an even larger number of folks have "effective negative equity" in their homes. There are two million homes in foreclosure or for which the homeowners are behind in their mortgages.

What is the historical context of this? According to research undertaken by Yale economist Robert Shiller, there were two land bubbles in the 1800's, and only one in the twentieth century: a farmland oriented bubble in the late 1970's. Wherefore, the housing bubble that began this century was an historical anomaly, albeit a drastic economic event, affecting the whole economy, and, arguably, much of the world. Dr. Shiller's research concluded there would be a housing bubble in 2005, referring to it as an "extended asset class and not a full blown bubble, at least not yet." The chart below shows why!

Continue reading "Foreclosures and Massachusetts Bankruptcies" »

We have written on several occasions about financial consumer advocate and Harvard Law Professor Elizabeth Warren. In several Massachusetts consumer blog articles, we encouraged her appointment as director of the newly established Federal Consumer Financial Protection Bureau. After all, she designed the agency to protect consumers in financial issues, after the Great Recession and financial crisis/banking crisis/mortgage crisis, which began in 2008. She has been appointed as a "special advisor" on a "temporary" basis, to set up the CFPB, but not as director, on a longer-term basis. She has hired staff, set up a fraud alert hotline, and hosted conferences on credit cards and mortgages. She still has no official position, however, and the CFPB has yet to commence operations.

Nevertheless, we thought we'd revisit the CFPB, and Professor Warren, to see what progress, if any, has been undertaken. The agency becomes official on July 21, 2011, and has been running as a quasi-agency in the mean time. On the one hand, there is so much lobbying by the banking industry against such a strong consumer advocate that it may not allow the president to appoint Ms. Warren. There may not be sufficient votes to have the Senate confirm her.

On the other hand, however, Professor Warren is getting the CFPB set up and running, and she is advocating for consumers from a high perch. She has the support of smaller banks, however, when she proposed a $20 million fine on large mortgage banks for wrongful foreclosures, she hit a raw nerve with the big banks. Senators who are supported by the big banks and financial institutions oppose her. Those senators and the lobbyists for the big banks have begun to advocate for a "committee" to replace the "director" of the agency, which, in essence, would assure that nothing at all gets done.

In March 2009, Congress passed the HAMP, the Home Affordable Modifications Program, in an attempt to assist folks refinance and modify their mortgages. Recently, in Boston, lawyers representing home owners who were denied access to the program filed suit in federal court asking the court to stop foreclosures of those homes. If successful, the lawsuit could affect thousands of homeowners throughout Massachusetts.

The program is designed to be a debt reduction mechanism, with the federal government and the mortgage lender each contributing. The math works like this: successful applicants will have to pay no more than 38% of their monthly income for principal, mortgage interest, taxes and condo fees. Then the US Treasury Department will match any additional reductions down to 31% of your household income. Further, if the above reduces the payments by 6% or more, you get $1000 per year (up to five years) towards reducing the principal loan. While the benefits for homeowners is a monthly reduction in expenses, the benefit to lenders is clear too: they do not have to go through the costs of foreclosure and taking the likely loss on the mortgage, and, they get $1,000 per year from the government for participating.

Continue reading "Home Affordable Modifications Program Lawsuit in Boston" »

On October 15, 2010, the Social Security Administration announced that, for the second year in a row, that cost of living benefits will not be increased. This is based on the Consumer Price Index which was flat for the latest one year period. This is the second year in a row that Massachusetts consumers will not see any rise in there monthly benefits. Those folks that rely on Social Security payments for the bulk of their income, have had two years in a row of zero increase. This applies to all 58.7 million beneficiaries.

Social Security income is the primary source of income for 64% of recipients; one third of all recipients rely on Social Security for 90% of their income.

The flip side of the equation is that the ceiling for workers paying into Social Security will not be allowed to be raised in 2011. That income ceiling is set now at $106,800. All earned income above that amount will not be taxed for Social Security.

Massachusetts Institute of Technology economics professor Peter Diamond was awarded the Nobel Prize in Economics. The Swedish Academy awarded Professor Diamond and two colleagues the award for an unemployment modeling that can be used in other economic arenas. According to the Nobel Prize Committee "the laureates models help us understand how unemployment, vacancies and wages are affected by [state] regulation and economic policies." Also called "markets with search frictions," the research examined the marketplace, including unemployment, where buyers and sellers don't easily find each other. Massachusetts consumers who are concerned about jobs and employment should appreciate the timeliness of the award, considering the 8.8% Massachusetts unemployment rate.

Dr. Diamond's "A Model of Price Adjustment" published in 1971 showed that, contrary to Econ 101 theory, competition can lead to monopoly pricing. This occurs when identical sellers that fix their prices lead to consumers failing to search for a better price. Professor Diamond's work proved that increasing unemployment insurance enables workers to pass up more marginal jobs. "In contrast to the classical models established in these markets, buyers and sellers do not always contact each other instantly and the demands and objectives of each are not always satisfied, as happens with companies seeking employees and those seeking a job. Since the search takes time and resources, it generates friction in the market, so there may be unemployed, although there are vacant jobs. "

Continue reading "Nobel Prize to Massachusetts Unemployment Expert" »

Notwithstanding the upturn in the economy, the number of foreclosures in Massachusetts is up this year. In 2009, the number was 9,269, while this year the number is close to 10,000, through August. With the mortgage companies throughout the US stopping or slowing foreclosure cases because of improper documentation the rate of increase may slow. We will see.

The concern of course is what is on the horizon: in the 100 largest metropolitan areas in the US, the amount of mortgages that are overdue by more than 90 days, called seriously delinquent mortgages, rose by almost one third in the past year. This is up from about 10% the year earlier. While Boston is not in the top 25 metropolitan areas of foreclosure rates (Florida has 17 of the 25), all of eastern Massachusetts is in the 7-11% range, with parts of Western Massachusetts in the 11-15% range.

Continue reading "Massachusetts Foreclosures Up" »

Our Massachusetts bankruptcy blog recently reported that GMAC Mortgage had stopped all foreclosure proceedings because of improper documentation. Yesterday, JP Morgan Chase announced they too would halt over 50,000 foreclosure actions as a result of in adequate documentation. Just like in the GMAC case, JP Morgan Chase acknowledged that their employees have been signing affidavits that were not truthful: in a deposition last May, a JP Morgan executive testified that her staff had signed 18,000 legal documents each month without much verification as to accuracy. The resolution of the problem may take weeks, but is not likely to reduce the number of foreclosures filed.

Massachusetts Congressman Barney Frank, Chairman of the House Financial Services Committee, urged Fannie Mae, the federal agency that buys mortgages on the secondary market, to half their work with "foreclosure mill" law firms that do not verify documentation before filing lawsuits to foreclose on homeowners.

Continue reading "Will Massachusetts Attorney General Act on Mortgage Foreclosure Crisis" »

Our personal bankruptcy clients often note that before their job loss or before their credit score reduction, they were quite satisfied. In a now famous study by Princeton University professors, the research shows that while happiness "rose steadily with annual income, the quality of the respondents' everyday experiences did not improve beyond approximately $75,000 per year."

"Beyond $75,000...higher income is neither the road to experienced happiness nor the road to the relief of unhappiness or stress, although hither income continues to improve individuals' life evaluations." Professor Angus Deaton, an economist and Professor Daniel Kahneman, who won the Nobel Prize in Economics. Interestingly, however, 85% of Americans feel happy every day notwithstanding their income.

The study showed that a 10% rise in annual income moved Americans up in satisfaction the same amount, regardless of income. "High incomes don't bring you happiness, but they do bring you a life you think is better," the study says. The study of relative income and relative deprivation have been around since social scientists began their research.

GMAC Mortgage, the holding company formally an arm of General Motors, has announced that it will stop all foreclosures, evictions and purchase and sale agreements, and suspend sales of foreclosed properties in 23 states. The reason appears to be that many of the foreclosures they were undertaking were not properly documented - the lawyers for GMAC failed to secure the original promissory notes and other necessary documentation for court proceedings. Massachusetts homeowners should look carefully at any foreclosure actions, using a consumer or Boston bankruptcy lawyer to be sure the documentation is valid.

While the announcement does not affect GMAC mortgages in Massachusetts, they have nine locations here. Nevertheless, they are the fourth largest mortgage lender in the US and hold mortgages throughout the Commonwealth of Massachusetts.

Continue reading "GMAC To Stop Foreclosures in 23 States, Boston Bankruptcy Blog Reports" »

This Boston bankruptcy attorney's blog has been pointing out Harvard Professor Elizabeth Warren's effective work in getting Congress to establish the US Consumer Financial Protection Bureau (CFPB). The new agency, however, is a law yet to be implemented; there is no building, no employees, no new regulations. Today President Obama appointed Professor Warren to get the Agency started. True, it is not a "nomination" for the Senate to approve. But, in Washington these days, there does not seem to be a lot of cooperation, and with elections coming up, there is even less. Thus, it appears like an end run around politics to get something done: start up the agency to protect consumers.

Professor Warren said the following in an interview with Salon.com:

Continue reading "Bureau of Financial Protection "Appointment" Goes to Massachusetts Consumer Advocate" »

This Massachusetts Consumer Blog predicts that Harvard Professor Elizabeth Warren will be appointed the first commissioner to the Consumer Financial Protection Bureau after her work and energy in lobbying Congress to create the consumer focused agency following the financial crisis. Professor Warren was instrumental in guiding Congress to pass the provisions of the financial overhaul bill regarding the Consumer Financial Protection Bureau. "They created a strong, independent consumer agency that will have the tools to rein in the industry tricks and traps and to cut out the fine print," Ms. Warren said back in June.

Our prediction is based on the following recent comment by President Obama, and the fact that he has gone to Warren time and time again on these matters: "I'll have an announcement soon about how we're going to move forward. I have had conversations with Elizabeth over these last couple of months. But I'm not going to make an official announcement until it's ready." Regardless of the administration's choice, it appears that they are ready to move forward and protect consumers in the financial arena.

Continue reading "Harvard Professor Warren to get Consumer Financial Appointment Predicted" »

The Massachusetts Consumer Protection law, Chapter 93A gives several powerful weapons to consumers against companies or individuals in trade or commerce. Two of those weapons in the law are allowing consumers to ask for double or triple damages and attorney fees. A third issue is, following a win, when does interest start to accrue? In the first case handed down by the Massachusetts Federal District Court on the issue of when interest begins, the Court held that interest will begin when the underlying judgment enters.

Federal Rules of Civil Procedure are clear in that interest accrues from the date of a money judgment. Where there is a ruling that attorney fees will be awarded, when will interest start to accrue? Judge Young, a Federal District Court judge, does not have the final say, however, it is likely that other judges, and the Appeals Court, will follow this well reasoned ruling.

This note is not intended as a primer on Social Security, but a brief essay, by a Boston bankruptcy attorney who regularly receives a host of questions from clients on where its going, where it came from, and what is does now. From its inception during the Great Depression in 1935, the Social Security Act was expected to "To provide for the general welfare by establishing a system of federal old-age benefits and by enabling the several states to make more adequate provision..." Essentially, the federal Act was intended to provide economic security for all; a matter too critical to be left to the several states and their various laws.

With the economy devastated by the Great Depression and no longer relying on local farming, there was need for a federal action. President Roosevelt established a Commission which modeled the Act on German leader Bismarck, who, in 1889 designed the contributory pension system. Most of Western Europe adopted some form of what we know as Social Security before 1935. The Act covered assistance to the states to provide for three basic needs: the aged, the blind and dependent children. The law has been amended and augmented numerous times since then. In 1965 Medicare was added, to provide for medical care for the aged and in 1972 the cost of living adjustments were added.

Continue reading "Social Security, Lies and Videotape - a Massachusetts Consumer Lawyer's Perspective" »