California bankruptcy attorneys are extremely busy as Chapter 7, Chapter 11, and Chapter 13 bankruptcy filings continue their dramatic increase over the levels seen last year. Chapter 7 and Chapter 13 bankruptcies have seen steep increases in particular due to lenders becoming more aggressive in their pursuit of foreclosing on properties as opposed to modifying loans on them. According to data from the U.S. Bankruptcy Court Central District of California, bankruptcy filings in Orange County for this past July increased by 24.8% from a year earlier. The level of bankruptcy filings for the county hit its highest level in almost five years. Other counties in the southern half of the state saw dramatic increases as well with Los Angeles County reporting 5,187 filings in July, up 50.6% from a year earlier, Riverside/San Bernardino counties with 3,942, up 32.7%, and the Central District, 13,050, up 30.8%.
The residents of Orange and the surrounding counties in Southern California, like the rest of the nation, continue to struggle as the number of jobs created is dwarfed by job losses on a monthly basis. With the national unemployment rate stubbornly hanging at 9.5%, the pain for homeowners is being exacerbated by lenders’ increased reliance on a little known formula called the Net Present Value (NPV) Test. This test calculates the best financial return for the lender based on different outcomes from modifying the existing mortgage versus foreclosing on the property. With homeowners’ financial health steadily deteriorating, NPV tests are deciding for foreclosure over modifying loans with increasing frequency.
This trend was noted in the recently released Treasury Department statistics which showed that foreclosures are being filed even when homeowners have made all their scheduled payments and have successfully completed their trial modifications. The increase in lender denials of loan modification applications calls into question whether the lenders are granting the trial modification in good faith or just trying to cover their bases. NPV calculations, which are never disclosed to the public, are known to lenders prior to the initiation of trial modifications, meaning that lenders are setting the course toward foreclosure well in advance of the completion of the trials. Much to the surprise of homeowners, lenders often start the foreclosure process immediately after denying a permanent loan modification.
The good news for homeowners seeking loan modifications is that the Rest Report, a new software program which runs the same NPV calculations that lenders have long kept secret, has just been released. Despite just being released, the report is already considered to be one of the most important documents for homeowners seeking home loan modifications. Rather than being ambushed by lenders at the end of a trial modification, homeowners can now learn in advance whether the lender wants to modify the loan or foreclose prior to starting the process.
The Rest Report may be a good indicator early in the loan modification process whether or not the lender will modify the loan. Truthfully, knowing up The report can provide verification on whether the loan to be modified qualifies under HAMP guidelines, create multiple return scenarios for the lender, and determine loan modification alternatives if the loan doesn’t qualify under HAMP guidelines.
The information provided by the REST Report eliminates surprises and allows homeowners to assess all options, whether a loan modification is in progress or is just being contemplated. The California bankruptcy attorneys at Zhou & Chini are now able to run REST Reports through an independent third party so that you can have the same information your lender is using to decide whether to modify or foreclose. To schedule a consultation on how a REST Report can make the difference between a loan modification and foreclosure, or to speak with a California bankruptcy attorney, visit zhouchinilaw.com or call (800) 972 9600.
