Florida eases rules for mortgage aid

Florida's leading housing agency will more than double the amount of federal mortgage assistance it provides to unemployed homeowners who have fallen behind on their loan payments.

The state has basically loosened the purse strings on a federally funded foreclosure-prevention program that has so far benefited only a small percentage of the homeowners who have applied for help from the Hardest Hit Fund.

"We found that people were coming to the end of their benefits and they had been unable to secure a job to pull themselves up," said Len Tylka, chairman of Florida Housing Finance Corp. "They had good prospects and things were starting to turn around. They were just falling short. And we had gone for so long without really distributing the kind of money we wanted to distribute."

Until now, unemployed or underemployed homeowners who qualified could get only six months of mortgage help, totaling as much as $12,000, from the federal Hardest Hit Fund, which is administered in this state by the Florida Housing Finance Corp. But according to new guidelines released this week, recipients now will be able to receive help totaling $24,000 for an entire year.

Previously, struggling owners could also qualify for a one-time payment of $6,000 to make their mortgage current — as long as they found jobs and recovered from being underemployed, so that they could continue making payments on their own. Under the changes made public this week, those homeowners can now get as much as $25,000.

As of the beginning of June, Florida had received 28,556 applications from homeowners for Hardest Hit Fund assistance. About 5,700 were declared eligible for funds and about 2,000 homeowners actually received assistance — and most of those exhausted their benefits. Only about 225 Florida homeowners received the one-time boost to help them bring their mortgage up to date.

"People thought this was a real freebie handout, but the qualifications were stringent — and they need to be," said Tylka, a custom-home builder based in West Palm Beach. "We felt the need to be really careful, because this is taxpayers' money and not something to throw around. We are doing what we should be doing."

Still, Tylka said, the housing agency, though needing to remain strict about spending the funds, would like to assist more qualified applicants.

Until now, recipients could be no more than six months behind on their mortgage payments to qualify for the aid. But under the new rules, the lender holding the delinquent mortgage determines whether the homeowner should get the funds, regardless of how far behind the owner is on the loan payments.

The revised eligibility criteria and program benefits are available at flhardesthithelp.org.

When the program was about to debut last year, the Florida Housing Finance Corp. delayed a February launch when newly elected Gov. Rick Scott asked that the assistance for each qualified homeowner be cut from a proposed $35,000 over 18 months to just $12,000 over six months.

Other states have also been revisiting their rules to beef up the distribution of funds. Earlier this week in Nevada, for instance, that state announced it would allow applicants to own more than one home, though any assistance can be applied only to the mortgage on the primary residence. Nevada also loosened its income-documentation requirements, and people with a permanent financial hardship — such as retirement or long-term disability — can now participate.

The Nevada program, unlike Florida's, also includes a reduction in the loan's principal of as much as $100,000 if the company servicing the loan approves.

By Mary Shanklin, Orlando Sentinel

mshanklin@tribune.com or 407-420-5538

Florida leads the nation in percentage of homes in foreclosure

Florida retained its dubious distinction as the state with the highest percentage of homes in some stage of foreclosure, according to data released by CoreLogic Friday.

According to the data firm, Florida’s foreclosure inventory level declined 0.6 percentage points in May from a year earlier, with 11.9 percent of the state’s mortgaged homes mired in some stage of foreclosure. The state with the second highest level was New Jersey, with 6.6 percent; followed by Illinois, with 5.3 percent; New York with 5.0 percent; and Nevada with 4.9 percent.

About 1.4 million U.S. homes — 3.4 percent of all homes with a mortgage — were in some stage of foreclosure in May. That figure was flat with April and down from 1.5 million, or 3.5 percent, a year earlier, CoreLogic said.

The company said 92,405 foreclosures were completed in Florida over the 12 months ended with May 2012, compared with 819,327 homes nationwide.

Five states accounted for 48.8 percent of all completed foreclosures during the year ended in May: California, Florida, Michigan, Texas and Georgia, the company said.

Among the reasons for the state’s status as an epicenter of foreclosures: Florida was a magnet for speculation and mortgage fraud during the housing boom. Florida handles foreclosures in its courts, a process that typically takes longer than the administrative proceedings used in some states.

By Martha Brannigan The Miami Herald

Foreclosure rates, mortgage delinquency down in South Floridaregion

Foreclosure rates were down in each of South Florida’s counties, with Miami-Dade recording the largest percentage point decrease, according to a new CoreLogic report. The region is still recording a significantly higher rate, however, than the rest of the country, which had a rate of 3.41 percent in April, the report noted. In Miami-Dade, the foreclosure rate among outstanding loans was 17.43 percent in April, a decrease of 1.61 percentage points compared to the same time a year ago. Mortgage delinquency was also down: 24.35 percent of mortgage loans were 90 days or more delinquent compared to 26.43 percent, a decrease of 2.08 percentage points for April. Foreclosure rates in Broward for the month of April were at 13.86 percent, a decrease of .64 percentage points compared to the same time last year. Broward county also had 19.63 percent of its mortgage loans 90 days or more delinquent, a decline of 1.56 percentage points from last year. Finally, foreclosure rates on outstanding loans in Palm Beach were down to 12.37 percent in April, a decrease of .77 percent from the same time a year ago. As in the region’s other counties, Palm Beach recorded a smaller mortgage delinquency, with 17.63 percent of its mortgage loans at 90 or more days delinquent, a decline of 1.68 percent points. Oscar Pedro Musibay Reporter- South Florida Business Journal

Lien Stripping in Chapter 7 cases: what does it mean?

What Is Lien Stripping?

Lien stripping is a way of removing an underwater second mortgage on a house in a bankruptcy proceeding. Thus, if a house has two mortgages, and the market value of home is less than the first mortgage, the second mortgage is basically unsecured. In a bankruptcy proceeding, if the second mortgage is unsecured, it may be removed or stripped. Here is an example. Let’s say your home is currently worth $350,000. You have a first mortgage in the amount of $400,000, and a second mortgage in the amount of $50,000. The equity in your home does not secure the second mortgage (it covers $350,000 of the first mortgage). If you were to file for Chapter 13 bankruptcy, you could remove the entire second mortgage from your property. In most jurisdictions, lien stripping is allowed in Chapter 13 bankruptcy only. However, in In Re McNeal, Case No. 11-11352 (11th Cir., May 11, 2012), the 11th Circuit ruled that a debtor could strip off a home lien in Chapter 7 bankruptcy if no part of the lien is secured by the home’s equity (this is referred to as being “wholly unsecured”). It distinguished this situation from that discussed in the U.S. Supreme Court’s decision in Dewsnup v. Timm, which said you cannot strip off partially an unsecured lien in Chapter 7 bankruptcy. The ruling is good news for debtors living in the 11th Circuit’s jurisdiction (Florida, Georgia, and Alabama). If you have a mortgage or lien on your home that is wholly unsecured (and in this day and age of plummeting real estate values, many people do), you can enjoy the many advantages of Chapter 7 bankruptcy and still be able to strip off the junior lien. Once the lien is stripped off, it will become unsecured debt and be discharged at the end of your Chapter 7 bankruptcy.