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DannLaw Covid-19 Update 13

Covid-19

March 7, 2021 By Marc Dann

A lot has changed since we posted our last update. A new president is in the White House, mortgage forbearance programs and foreclosure moratoriums have been extended by the federal government, a $1.9 trillion stimulus package is working its way through Congress, millions of Americans have been vaccinated against the coronavirus and the entire U.S. population may be inoculated by early summer.

For the first time in a very long time, there is light at the end of the COVID tunnel.

Unfortunately, that light could become an oncoming train for homeowners who make unwise or incorrect decisions when forbearance and foreclosure relief programs sunset in the months ahead. To help ensure that the end of the pandemic doesn’t mark the beginning of a nightmare for people pummeled by the virus, I’ll discuss the aid programs that are now available, how to take advantage of them, and then outline steps families should take now to secure their financial future.

FORECLOSURE MORATORIUMS

Let’s start by taking a look at the foreclosure landscape.

I’m pleased to report that there is some good news for borrowers whose mortgages are backed or owned by the federal government. The moratorium on foreclosures imposed by the Federal Housing Administration (FHA), Veterans Administration, the U.S. Department of Agriculture (USDA), Fannie Mae, and Freddie Mac will remain in effect until June 30, 2021.

While the extensions provide much-needed breathing space for homeowners who were in or were about to be in foreclosure when the pandemic struck, I must emphasize that the bans are temporary reprieves, not pardons. Mortgage servicers will begin processing judicial and non-judicial foreclosures the minute the moratoriums are lifted.

The news isn’t anywhere near as good for homeowners with loans that are not government-backed. While some states have enacted eviction and/or foreclosure moratoriums that protect borrowers whose mortgages are held by private lenders, many, including Ohio, have not. That means foreclosure is a very real and imminent threat—especially as courts in more and more jurisdictions resume normal operations.

Whether you are now protected by a federal or state moratorium or are involved in an active foreclosure proceeding, now is the time to contact experienced legal counsel like the attorneys at DannLaw for advice.

We have helped thousands of families save their homes by negotiating affordable loan modifications and utilizing groundbreaking legal strategies that stop or soften the impact of foreclosure.

We also perform a thorough review of every client’s mortgage history and case file to determine if their servicer or lender made mistakes or committed violations of federal or state consumer protection laws. Those errors and violations often enable us to defeat the foreclosure claim and recover substantial monetary damages from lenders that can put families on the path to financial security.

To learn more about our innovative and highly effective foreclosure defense strategies schedule a free consultation by completing our contact form or sending us a direct message on Facebook. But don’t delay, every day you wait could bring you one day closer to losing your home.

Forbearance

Before I dig into the details about the current state of forbearance relief, please keep this oft-repeated phrase in mind:

Forbearance is NOT forgiveness.

As I have noted in every one of our COVID updates, borrowers will be required to make the principal, interest, and escrow payments that have been deferred when their forbearance period ends. No one, not President Biden, members of Congress, nor the CEOs of major lenders and servicers has ever so much as hinted that these costs will be forgiven. That means homeowners will, at some point, be on the hook for thousands of dollars in arrearages.

That said, here is an overview of the relief programs that are available and applicable deadlines.

Borrowers with FHA, VA, or USDA loans have the right to request up to 12 months of forbearance in two six-month increments. The deadline to apply for an initial 180-day forbearance period has been moved from March 31, 2021 to June 30, 2021.

In addition, the agencies are also providing two extensions of up to three months each for homeowners who paused payments on or before June 30, 2020. The extensions will give homeowners nearing the end of their maximum 12-month forbearance period extra time to recover from financial hardships caused by the pandemic. Borrowers who qualify must apply for the additional time no later than June 30, 2021.

Homeowners with Fannie Mae/Freddie Mac loans are eligible for up to 12 months of forbearance. At this point, the agencies have not set a deadline to apply for an initial 180-day forbearance period.

Like the FHA, VA, and USDA, Fannie and Freddie are also giving borrowers approaching the end of their maximum forbearance period more time to resume making payments.  Homeowners who entered forbearance on or before February 28, 2021 may now request an additional three months of relief.

With due apologies to Shakespeare, we’ve arrived at the point in the update where I must say: To forbear or not to forbear, that is the question. Although every situation is different, here are some broad guidelines that will help borrowers with government-backed loans determine if they should enter, remain in, or avoid forbearance:

  • While forbearance is not a perfect solution, it is far better than foreclosure. That is why struggling homeowners should take advantage of the available relief programs. If you are in forbearance and are unable to resume making your mortgage payments stay in until you are back on your feet. If you are not in forbearance but need to be, contact your lender, and apply ASAP.
  • If you are in forbearance but can now afford to make your mortgage payments, it’s time to plan and execute an exit strategy. Staying in longer than necessary will needlessly increase the amount of deferred principal, interest, and escrow you owe moving forward.
  • Borrowers who have been and can continue to make their mortgage payments should avoid forbearance like the plague.

Deciding how to settle the balances accrued during forbearance is just as important as choosing whether to enter the program and when or if to leave. While the specific plans offered by each agency differ, in general, the following four options are available. It is important to note that FHA, VA, USDA, Fannie and Freddie are prohibited from requiring borrowers to make lump sum payments of the amounts due.

Repayment plan. This option enables borrowers to pay the balance due by increasing their mortgage payment for a few months.

Deferral or partial claim. This option allows homeowners who can resume making their regular payments but can’t afford more to move missed payments to the end of their loan or put them in a subordinate lien repayable only when they refinance or sell their home or terminate their mortgage.

Loan modification. Borrowers who can no longer afford their pre-pandemic mortgage payment can negotiate a loan modification. The amount owed in deferred principal, interest, and escrow will be rolled into the loan. The monthly payment will probably drop, but the term or the principal balance of the mortgage may increase.

Lump-sum reinstatement. An option to consider for borrowers who have the financial wherewithal to pay back missed payments all at once.

Your mortgage servicer should reach out to you 30 days before your forbearance period ends to discuss your options. Here are two important points to ponder:

First, remember, you cannot be forced to make a lump sum payment. If that is the only option offered by the servicer, ask them about the other plans they offer.

Second, each repayment option is complicated and carries risk. Don’t think for a minute that your servicer is looking out for your best interests. In many cases the opposite is true. That is why you should consult with DannLaw before leaving forbearance. We will work with you to devise an exit strategy that protects you and your family and helps secure your financial future.

Things are even more complicated and risky for homeowners whose mortgages are held by private lenders. If you are in forbearance, please stay in regular contact with your servicer because they have the ability to change the terms of your plan at any time. They can also require you to make a lump sum payment if you choose to leave or they decide to end your forbearance period. In addition, it is highly likely that any repayment options they offer will be designed to maximize their profit at your expense.

DannLaw’s experienced legal team knows how to deal with and hold private lenders accountable. If you have a private mortgage, don’t hesitate to contact us to arrange a free consultation so we can assess your situation and help ensure that your home and your finances don’t become victims of the pandemic.

Finally, I want to remind everyone that forbearance is not automatic. You must always contact your lender or servicer and ask to defer your payments and you must make the request no later than the deadlines I’ve listed in this update.

If you have any questions about forbearance, foreclosure, or other consumer credit or lending issues, do not hesitate to contact us. We are here to help.

Thank you for taking the time to read this update. Be well, and take heart, we’ve come a long way together and I’m confident better days are just ahead.

Filed Under: Covid-19, Foreclosure, Founding Partner, In the News Tagged With: Consumer Fraud, Coronavirus, Foreclosure Defense, Loan Modification, Marc Dann, RESPA, U.S. Economy

December 30, 2020 By Marc Dann

Hello, happy holidays, and welcome to DannLaw COVID-19 update 12. In this edition, I’ll unwrap the details of the long-overdue stimulus package that was just passed by Congress and signed by the President.

While the 5,600-page bill doesn’t contain anything that would set 12 lords to leaping or qualify as tidings of great joy, it does provide some much-needed financial relief and protection for consumers, workers, and homeowners impacted by the ongoing pandemic.

Direct Payments

Like the CARES Act, the new bill funds direct payments to individuals and families. Single adults with adjusted gross incomes of up to $75,000 in 2019 will receive $600. Couples earning up to $150,000 will receive $1,200. People who earn up to $112,500 and file as “head of household” will also receive $600. The payment will increase by $600 for each child under the age of 17 in a family.  People with incomes above these levels will receive a partial payment that declines by $5 for every $100 in income.

If you earned less in 2020 than 2019 and would be eligible for a payment as a result, you will be able to claim the money as a refundable credit when you file your tax return for 2020. Be on the lookout for instructions on how to request the payment when your tax forms arrive—if you don’t ask for it you won’t get it.

According to Treasury Secretary Steve Mnuchin, payments via direct deposit should start showing up in bank accounts within two weeks. If yours is being delivered via the USPS it may take much longer to arrive.

Extended Unemployment Benefits

The bill extends unemployment benefits until at least March 14, 2021, for people receiving state-level benefits as well as those who are receiving checks from the Pandemic Unemployment Assistance (PUA) program which covers the self-employed, gig workers, part-timers, and others who are typically ineligible for regular unemployment payments. Everyone who qualifies for unemployment checks will also get an additional weekly payment of $300 through March 14.

Although it is half the amount provided by the CARES Act, the extra $300 per week will be critically important for families struggling to keep their heads above water as the third wave of the pandemic washes over the U.S. and the wait for vaccines to become widely available continues.

If your benefits have run out, log onto your state’s unemployment website to see if you must do anything to receive the extended aid. According to experts, most states should automatically restart your payments, but I strongly urge you to be proactive and check for yourself.

And I know this will come as a surprise, but you will probably have to wait a few weeks for new payments to arrive.

Mortgage Forbearance

As we’ve noted in previous updates, the CARES Act provides for up to 12 months of payment suspension/forbearance for borrowers with federally-backed loans owned by Fannie Mae, Freddie Mac or insured by the FHA, VA, or the Department of Agriculture. While forbearance is a valuable tool that is helping many families remain in their homes, there are some important things to keep in mind about forbearance:

First, forbearance is not automatic—you must apply. Fannie and Freddie have not set a deadline for accepting applications but if your loan is insured by the FHA, VA, or USDA you must contact your servicer and request an initial Covid-19 forbearance on or before February 28. Click here to learn more about the Fannie/Freddie forbearance process and here for info if your mortgage is backed by the FHA, VA, or the U.S. Department of Agriculture.

Second, and I know I’ve said this numerous times, FORBEARANCE IS NOT FORGIVENESS. At some point, you will be required to make the principal, interest, and escrow payments that have been deferred. Whether you have been in forbearance for some time or intend to apply, you should consult with an experienced mortgage attorney to discuss the financial challenges you will face when forbearance ends. I invite you to contact DannLaw to arrange a free consultation so we can evaluate your situation and begin planning an exit strategy that will enable you to preserve your equity and keep your home.

Third, if you are in forbearance look closely at your monthly statement to make sure it is correct. You should also check your credit report. If your servicer is entering negative information or you notice discrepancies contact us so we can help protect you and determine if you have legal claims that may entitle you to financial compensation.

Fourth, If you haven’t been able to make payments because you lost your job or were laid-off when the COVID-19 crisis cratered the economy but are now back to work you should consider taking your loan out of forbearance before the amount of delayed interest, principal, and escrow you owe becomes unmanageable.

Foreclosure Moratoriums Extended

I’m pleased to report that Fannie Mae, Freddie Mac, the VA, FHA, and USDA have extended the moratoriums on foreclosures enacted earlier this year. Single-family homeowners with loans backed by Fannie, Freddie, or the VA are now protected from foreclosure through at least Jan. 31. The FHA moratorium will remain in effect until February 28.

In addition to the CARES Act moratorium, the governor of New Jersey issued an executive order in March that prohibits foreclosure-related evictions. Under the order, homeowners cannot be removed from a residence even if a final judgment of foreclosure has been entered and a sheriff’s sale of the property has taken place. The order will remain in effect until two months after the governor declares the COVID-19 crisis has ended. In addition, more than 150 private lenders in the state have agreed to offer relief to homeowners impacted by COVID-19. You can learn more about the programs being offered in New Jersey here.

You can find a complete list of states that have imposed foreclosure/eviction moratoriums here.  Ohio is conspicuous by its absence–the state has done nothing to assist homeowners.

Unfortunately, the CARES Act forbearance and foreclosure programs do not apply to borrowers whose loans are not “government-backed.” That means unless you live in a state that has enacted protections that apply to private lenders foreclosure remains a very real threat. If you are being threatened with or are already in foreclosure, I urge you to contact DannLaw today to arrange a free consultation. We may be able to take steps to slow down the process and help you save your home.

Eviction Relief

The bill extends the CDC-ordered moratorium on evictions until January 31 and provides $25 billion that will be distributed by state and local governments to people who have fallen behind in their rent.

To receive assistance a renter’s household income for 2020 may not exceed more than 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals must qualify for unemployment benefits or have experienced financial hardship — directly or indirectly — because of the pandemic.

We will provide details on how to apply for this critically important aid as they become available.

Student Loans

The Department of Education has extended the federal student loan relief included in the CARES Act, including zero-interest-rate forbearance and a moratorium on collection activity, until January 31.  Here’s an important tip: make your payments if you can because every dollar will be used to reduce the principal on your loan. Follow my advice and you will owe considerably less when the relief programs end.

I do have bad news for people with private student loans: you don’t qualify for the relief programs. That means debt collectors can continue to pursue and torment you during the pandemic.

Renewal of Paycheck Protection Program

Most of the funding in the new stimulus package is devoted to renewing and strengthening the Paycheck Protection Program (PPP) created by the CARES Act. Unlike the original version of the PPP, the revised edition focuses on small businesses, including those with ten or fewer employees, minority-owned firms, and companies located in low-income areas. You can find more info about the restructured program here.

We will provide details of how and where to apply for the new, improved version of the PPP in the coming weeks, but I urge any and every business owner who may be eligible to explore and participate in the program.

Thanks for taking a few minutes to read DannLaw Covid-19 Update 12. As always, we are here to help homeowners and consumers so please feel free to contact us if you need help or advice.

Happy New Year to you and yours and best wishes for a great 2021.

Filed Under: CFPB, Covid-19, Evcitions, Foreclosure, In the News, Payroll Protection Program, private student loans, Property seizure, student loan debt Tagged With: Eviction Moratorium, Foreclosure Defense, Foreclosure Moratorium, Loan Modification, Paycheck Protection Program, private student loans, Stimulus Package, student loan debt

July 20, 2020 By Marc Dann

Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyA lot has happened since we issued our first COVID-19 on March 13. In our tenth update we’ll take a look at recent developments, discuss impending challenges and opportunities, issue a couple warnings, and dispense some sage advice…

Involuntary Forbearance can threaten your financial future

Let’s start with a cautionary tale about involuntary mortgage forbearance. As we’ve said repeatedly, while it can be a lifesaver for people who are facing financial disaster as a result of the pandemic, forbearance is NOT forgiveness. Homeowners will eventually have to make the interest, principal, and escrow payments they have been delaying.

In addition, forbearance may jeopardize court-approved bankruptcy repayment plans and could make it difficult to buy a new home or refinance an existing loan. That’s why we urged homeowners to think carefully before taking advantage of the forbearance programs made available by the CARES Act and many private lenders.

Unfortunately, a number of banks and servicers didn’t give borrowers a choice. Back in May we warned that a number of banks and mortgage servicers were putting homeowners into forbearance by “mistake.” One of the offenders, and I’m sure this will shock no one, was Wells Fargo. According to a CNBC report, borrowers who called servicers seeking information about forbearance and other relief programs were put into forbearance without their consent by swamped call center workers.

At that time we doubted that Wells, perennial winner of the worst bank in the world award, was really doing this by accident. Turns out we were right. NBC News reported on July 16 that Wells was purposely placing borrowers into forbearance without seeking or receiving their permission.

The story focused on Troy Harlow of Buchanan, Virginia who filed personal bankruptcy in 2017 after a kidney transplant put him on permanent disability. Troy never missed a house payment because his primary goal was to stay in his home.

Wells Fargo
Wells Fargo is among the banks and servicers who have placed borrowers into forbearance without their consent.

That didn’t matter to Wells. Without his knowledge or permission, on April 29 the bank told the bankruptcy court overseeing Harlow’s payment plan that he had asked to pause his mortgage payments because he had been hurt by COVID-19. Harlow who never even thought about asking to be placed in forbearance continued to forward the full amount owed on his mortgage to Wells.

Harlow’s attorneys soon learned that he wasn’t the only victim. Wells had played the same dirty trick on homeowners in 11 states.

That news set off alarm bells here at DannLaw and led us to launch an investigation to determine if borrowers in Ohio and New Jersey have been scammed by Wells and other lenders. With that in mind, we’re asking homeowners to do two things:

First, contact your lender to determine if they have placed you in forbearance without your permission.

Second, if they have you should contact us right away so we can help rectify the problem and determine if we should file a class-action suit on behalf of every borrower who has been abused by Wells and other lenders. You can reach us by calling 216-373-0539 or filling out and submitting our contact form. Please do this right away because involuntary forbearance can cause real problems for years to come.

Is it time to take your loan out of forbearance?

If you chose to place your loan in forbearance, it’s time to start thinking about an exit strategy. If you haven’t been able to make payments because you lost your job or were laid-off when the COVID-19 crisis cratered the economy but are now back to work you should consider taking your loan out of forbearance before the amount of delayed interest, principal, and escrow you owe becomes unmanageable.

To determine if you should begin making your house payment again, consider the amount you owe on your home relative to its value. If your home is worth more than your mortgage balance it is an asset that you should protect. If it is worth less than you owe it is a liability so your mortgage payment should be viewed as a housing cost and compared to alternatives like paying rent. You should also evaluate other factors including the state of the housing market in your neighborhood, the company that owns your loan, and whether you intend to sell your house sometime in the next few years.

The moratorium on foreclosures is about to end

OH Foreclosure TimelineThe moratorium on foreclosures imposed at the beginning of the COVID-19 crisis are coming to an end in some Ohio counties and will lapse for federally backed mortgages at the end of August. That means sheriff’s sales will resume soon.

If you were in foreclosure when the pandemic struck you should contact your attorney right away. If you have not retained a lawyer contact us to arrange a no-cost consultation so we can review your case and discuss ways we may be able to help save your home. To learn more about the options available to you click here to visit the Foreclosure Defense page on Dannlaw.com.

Evictions set to resume

Dann Law Firm - Foreclosure DefenseToday it is estimated that more than 8 million Americans, including tens of thousands of Ohioans, are behind on their rent payments and may soon be evicted from their homes. This number could rise substantially when the CARES Act’s Pandemic Unemployment Insurance payments sunset at the end of July.

While distressing, the situation is not hopeless if renters and landlords communicate with each other and work together to overcome the challenges caused by the pandemic. Here are some important steps to take:

    1. Renters should communicate in writing with their landlords about their ability to pay, partially pay, or not pay rent. Both renters and landlords are trapped in a dilemma they did not cause, so landlords may be willing to work out payment arrangements. No one benefits from a vacant apartment.
    2. Check this list to determine if your landlord has a federally backed mortgage and is therefore prohibited from evicting tenants. If you are a landlord with a federally backed mortgage you may apply for forbearance if your tenants are unable to pay their rent. The eviction moratorium/forbearance program will end in late August unless Congress extends it.
    3. If you reach an agreement with your landlord regarding late or partial payments put it in writing. We will soon post a form on our website that will make it easy to create written versions of tenant/landlord agreements.
    4. Do not ignore letters or emails you receive from a court and always attend hearings when ordered. While there are legal defenses available to renters and strict procedures that must be followed before a landlord can evict a tenant, ignoring notices and/or failing to appear just about guarantees that your belongings are going to end up on the street.
    5. Retain legal counsel. If you cannot afford an attorney call your local legal aid office. As a service to people impacted by COVID-19, we are making DannLaw’s Cleveland and Cincinnati offices available if you need a computer or internet access to participate in a virtual eviction hearing. A member of our legal team will also be on hand to answer general questions about evictions.
    6. I and Jeff Watson, General Counsel to a number of real estate investor groups will conduct a virtual seminar for landlords and tenants on Thursday, July 23 at 8:00 P.M. This informative session, titled, “The Eviction Tsunami: Facts and Strategies that Lawyers, Landlords and Tenants Must Know,” will feature a discussion of the growing eviction crisis as well advice and strategies that will help landlords avoid insolvency and tenants escape homelessness. To register for the seminar click here.

Collection firms are up to their old (dirty) tricks

While debt collectors are typically shameless, there has been noticeable slow-down in activity since the onset of the COVID-19 crisis in March.  But as states take steps to restart their economies and courts begin to reopen, we’ve received reports that collection lawyers, debt buyers and creditors are ramping up operations.  That means debtors must be on the lookout for and pay close attention to any legal notices they receive.

As we noted in our discussion about evictions, the quickest way to lose a case and have a judgement entered against you is to ignore the problem. Trust me, it’s not going to go away simply because you toss a letter in File 13 or don’t show up for court. So please, respond in writing to communications you receive and appear in court when ordered.

In addition, you should contact us to arrange a no-cost consultation. We’ll be happy to discuss your situation and your options. We’ll also determine if debt collectors have violated any of the laws and rules that protect consumers. If they have, you may be entitled to financial compensation. Here’s a brief overview of the rules that govern the collections industry:

  • The Fair Debt Collections Act (FDCA). Enacted in 1978, the FDCPAis the most well-known federal consumer protection statute. Its primary purpose is to prevent third-party debt collectors from using abusive, unfair, false, or deceptive practices to collect debts. To put it simply, collectors may not lie to or mislead consumers in the course of attempting to collect a debt. Violators of the Act may be liable for statutory damages, actual damages, and attorney’s fees.
  • Telephone Consumer Protection Act (TCPA) The TCPAlimits the use of automatic telephone dialing systems (ATDS) and artificial or prerecorded voice messages by telemarketers. Since its passage in 1991, the TCPA has been expanded to cover the use of ATDS’s and voice messages by debt collectors and now applies to cell phones if an affected consumer does not have a landline. Under the law collectors may not call a cell phone unless the owner gives consent. That means it’s important for consumers to deny consent verbally during the initial call and then to immediately withdraw consent in writing.

Statutory damages under TCPA range from $500.00 to $1,500.00 per call and may be applied to each and every call made if it is found that a debt collector willfully violated the Act. The ability to “stack” damages serves as an effective deterrent and provides just compensation for consumers who have been victimized by aggressive debt collectors who willfully violate the law.

Check Your Credit Report Weekly

The CARES Act allows you to obtain copies of your credit reports from annualcreditreport.com on a weekly basis. You should take advantage of this opportunity because a number of state unemployment computer systems have sustained massive data breaches.  DannLaw has filed class-action lawsuits in Ohio and Arkansas related to those breaches.

In addition, several provisions of the CARES Act are inconsistent with the Fair Credit Reporting Act. Please reach out to us right away if you notice inaccuracies on your credit report because you can sue credit reporting agencies and entities that furnish information to them if they refuse to correct mistakes.

The Con Premieres August 5

Marc Dann - "The Con" Documentary ScreenshotFinally, I would like to extend a personal invitation for you to join me on August 5 for the premiere of “The Con,” a four-part series about the 2008 fraud and corruption-fueled collapse of America’s housing market. I’m both proud and humbled to say the series highlights the steps I took as Ohio Attorney General and at DannLaw to hold those responsible for the crisis that led to 10,000,000 families losing their homes accountable for their actions.  The series provides a lesson for the risks we face as we hurtle toward a pandemic-related recession.

“The Con,” like all movies being released in the midst of the pandemic, is being released direct to video via independent theatres. To receive your invitation to the free live premiere, click here and then click on “Follow” above the video. If you like The Con on Facebook, you’ll be invited to the free live premiere on August 5. We’ll be posting more news about “The Con” in our blog and on our Facebook page in the weeks to come.

Filed Under: Bankruptcy, Consumer Fraud, Covid-19, Evcitions, Foreclosure, Founding Partner, In the News, Mortgage Fraud, The Con Tagged With: Consumer Fraud, Coronavirus, deceptive practices, Foreclosure Defense, Housing Market Crisis, Mortgage Fraud, Wells Fargo

April 17, 2020 By Marc Dann

Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyI was mildly enthusiastic about the CARES Act immediately after it was passed because it appeared to be substantially different from the stimulus plan crafted by the federal government during the Great Recession of 2008.

That package funneled trillions of dollars to the big banks and Wall Street speculators whose unfettered greed nearly destroyed the world’s financial system but did relatively little to help working and middle-class families devastated by the collapse of the housing market. By the time the economy began to turn around 10,000,000 of them had lost their homes.

By contrast, the CARES Act appears to direct $937 billion in aid to where it’s needed most: into the pockets of the more than 20,000,000 million Americans who are now unemployed and the bank accounts of small business owners who are literally hours away from losing everything they have built.

Sure, Congress doled out hundreds of billions of dollars to corporate America, including the airlines who have been ripping off travelers for decades, but the stimulus checks, enhanced unemployment benefits, and small business loan programs funded by the Act will help millions of people weather the Covid-19 storm—at least for the next couple months.

While it appears that Congress got a few things right, there are holes in the legislation that could negatively impact consumers, homeowners and small business owners. In this update I’ll identify the gaps and provide advice on who to deal with or avoid them.

Problems with the Paycheck Protection Program 

As I mentioned earlier, hundreds of thousands of small businesses across the nation are about to go under. The Paycheck Protection Program (PPP) is designed to help keep them afloat by providing forgivable loans owners can use to pay expenses including employee wages, rent, and utilities.

In concept the program is great. In practice, not so much.

That’s because the nationally chartered banks and SBA approved lenders charged with administering the program are permitted to pick and choose which applications to accept and in what order. As a result, they’ve been playing favorites. Business owners who have an existing relationship with a PPP lender go to the front of the line. Those who don’t, including minorities, are shoved to the back—if they’re able to apply at all. I’m sure you won’t be shocked to learn that Wells Fargo and other large financial institutions are telling smaller customers to hit the road and “try other banks.”  Publically owned Ruth’s Chris Steakhouse just announced that they alone sucked up $20 Million of the funds appropriated.

This type of discrimination is especially troubling in light of the fact that  Congress did not appropriate enough money to meet the needs of all the small businesses that are in trouble. When the money runs out, thousands of hard-working entrepreneurs and their employees will be doomed simply because they couldn’t access the help they were promised and desperately need.

We launched an investigation into this situation after being contacted by frustrated and infuriated small business owners. If you think something is wrong with the way a lender is handling or, more to the point, not handling your PPP application, please give us a call or email me at [email protected]

On the positive side, a number of clients have told us that smaller community banks are eager to process PPP paperwork. We’re not surprised. Over the years we’ve learned that community banks are extremely responsive to the needs of small borrowers. If you’ve been unable to make headway with a large lender, I encourage you to contact one of the community banks listed here.

Stimulus Checks can be hijacked by Judgment Creditors and banks

Stimulus checks funded by the CARES Act are already being deposited in the bank accounts of millions of Americans. That’s the good news.

Here’s the bad news: The Act doesn’t prohibit private debt collectors from garnishing stimulus money. That means if you’re behind on debt payments and have an outstanding court judgment, a private debt collector can grab your stimulus check. Attorney Javier Merino, head of DannLaw’s New Jersey office, along with consumer lawyers Josh Denbeaux and Ira Metrick just published an op-ed in the New Jersey Law Journal dealing with this issue.

If you fall in this category you should keep a close eye on your bank account and withdraw the money as soon as it is deposited. To stay one step ahead of judgment creditors you can track your stimulus payment here.

Here’s more bad news: if you owe money to the bank where your stimulus payment is being direct-deposited the bank can grab it. For example, if you have a bank account that’s been overdrawn, and your stimulus payment is deposited into that account, the CARES Act does not prevent the bank from taking part or all of the stimulus payment to pay back the debt. So far J.P. Morgan Chase and Wells Fargo have said they will not seize stimulus funds. Bank of America, Citibank, and U.S. Bank have yet to clarify their positions.

Waiver of Federal Student Loan interest is in doubt 

Federal Student Loans servicers have not been completely transparent about how they are going to implement the six-month zero interest, zero-fee forbearance included in the Act. In addition, some observers speculate that Navient, Greatlakes, and Nelnet don’t have the technology needed to properly track accounts. If you are taking advantage of the forbearance program please pay close attention to your loan statements and contact DannLaw or other attorneys if you notice a discrepancy in your account.

The CARES Act does not provide relief for federal loans originated before 2005 and private student loans 

The CARES Act does not provide forbearance for federal student loans originated before 2005 that were not consolidated or private student loans. If your loan falls into these categories you must continue to make your payments. If you are unable to do so, contact your servicer in writing and request a modification, forbearance or another type of accommodation.

Monitor your credit if you are taking advantage of the mortgage forbearance provisions of the CARES Act.

As we’ve noted in previous updates, the CARES Act provides for up to 12 months of payment suspension/forbearance for borrowers with federally-backed loans owned by Fannie Mae, Freddie Mac or insured by the FHA, VA and the Department of Agriculture. To determine if you have a qualifying loan send a request for information (RFI) to your mortgage servicer. We’ve drafted a simple RFI you can use. To obtain a copy email us at [email protected].

Please remember forbearance isn’t forgiveness.  That means you may be subject to higher mortgage payments, escrow payments, and other fees when you begin making your payments after the forbearance period. If you do take advantage of the Act’s forbearance program you should look closely at your monthly statement to make sure it is correct. You should also subscribe to a credit monitoring service and check regularly to make sure your servicer is not entering negative information on your credit report. If you notice discrepancies contact us at [email protected] so we can help protect you and determine if you have legal claims that may entitle you to financial compensation.

Bankruptcy may be the solution to your financial problems 

My parents always encouraged me to hope for the best but prepare for the worst. Today, their advice is more valuable than ever before because the COVID-19 emergency is causing unprecedented damage to our economy and levels of unemployment not seen since the Great Depression. Study after study has shown that a majority of Americans would have a difficult time meeting their obligations for more than a month or two if they lost their source of income. The ongoing crisis has validated those studies.

The $1200 stimulus checks and small business loans may ease the pain in the short term, but when that money is gone many business owners and individuals will be forced to consider filing bankruptcy in the months ahead. And while many people are loathe to do so, bankruptcy protections may provide the best option for dealing with the devastation caused by the crisis—a crisis none of us created or could have anticipated.

The fact that the courts and collection activity are essentially shut down gives business owners and individuals a unique opportunity to closely examine their financial situation and begin planning for the future—including a future that includes bankruptcy. Doing so will put you in a good position to move forward once the crisis ends if you don’t have to file and will help ensure that bankruptcy provides the maximum protection for your family and your business if filing proves to be the best alternative.

If you would like to schedule a phone or video conference with one of our experienced bankruptcy attorneys to discuss your financial future and the options that are available to you, please email [email protected]  We are here to listen, to advise, and to help.

Filed Under: Bankruptcy, Consumer Fraud, Covid-19, Foreclosure, Founding Partner, In the News, Payroll Protection Program, private student loans, student loan debt Tagged With: Bankruptcy, Consumer Fraud, Coronavirus, Marc Dann, private student loans, student loan debt, Wells Fargo

April 7, 2020 By Marc Dann

Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyMany of our clients are still sorting through the various types of assistance offered via the CARES Act and the various executive orders signed by the President and the governor of the state in which they live. But learning about the programs and benefits that are now available is only half the equation. The other: deciding whether it’s in your best interest to take advantage of them.

Making those decisions won’t be easy. The CARES Act itself is more than 800 pages long and the rules and regulations the federal government is developing to implement it are only making things more complicated. Throw in the things individual states are doing and you have a nearly impenetrable mass of guidelines, requirements, and instructions that would make any bureaucrat proud.

To help you cut through the mountain of red tape that’s wrapped around the various relief packages we’ll be conducting a series of free Facebook Live legal clinics beginning this week. During the live sessions, we’ll answer questions about the CARES Act and address consumer, foreclosure, and student-loan related issues.

To participate in the clinics, please visit and like the DannLaw Facebook page. The first session will begin on Tuesday, April 7, 2020 at 6:00 p.m. EDT and will deal with the Act and a wide range of issues. You may submit a question during the broadcast or submit questions in advance by emailing [email protected].

Our second free live legal clinic dealing with student loan issues will be broadcast on Thursday, April 9, 2020 at Noon EDT. You may submit questions during the show or in advance by emailing [email protected].

Right now, we’d like to share some of the insight and info we’ve been able to distill from the rapidly evolving situation:

Housing

Borrowers whose loans are “federally backed,” i.e. insured by the FHA, VA, or Department of Agriculture or owned by Fannie Mae, Freddie Mac are entitled to a 60-day payment suspension followed by 12 months of forbearance.

Forbearance is not Forgiveness. Borrowers who take advantage of this type of relief will eventually have to pay the piper.

If you have an FHA, VA, or USDA loan, the principal and interest deferred will be rolled into a zero-interest second mortgage when the forbearance period ends. This is known as a “partial claim.” In addition, your escrow payment will be recalculated so your mortgage servicer can recoup the payments for taxes and insurance advanced during forbearance. The bottom line: if you take advantage of this benefit, your payment will increase when forbearance ends. You can learn more about the FHA’s policies here.

Forbearance is even less attractive for borrowers whose loans are owned by Freddie Mac or Fannie Mae because it is unlikely that either will adopt borrower-friendly solutions similar to those implemented by the FHA, VA, and USDA. That means servicers will do one of two things when forbearance ends: demand a lump sum equal to one year of one year’s worth of mortgage payments or offer to modify the loan in an as-yet-unspecified way.  This uncertainty means you should think long and hard about taking advantage of the opportunity to defer payment of your Freddie or Fannie loan.

There’s also a lot of uncertainty regarding non-federally backed loans. No one knows if servicers will offer relief to borrowers who lost their jobs or experienced a loss of income due to the Covid-19 crisis. The only way to find out is to ask. When you do, please remember the guidelines we laid out for communicating with mortgage servicers and other creditors:

  1. Communicate in writing when you can.
  2. If you are unable to communicate in writing, record your conversation if it is legal to do so in your state. Recording is permitted in Ohio and New Jersey.
  3. Contact us to arrange a free consultation if you are uncomfortable with the information provided by your servicer. Rule of thumb: if something doesn’t seem right it probably isn’t. Don’t hesitate to protect yourself.

Student Loans

The CARES Act enables people with federal student loans originated or consolidated after 2005 to defer payments for six months. No interest or late charges will accrue during the deferral period.

Similar relief is not available to borrowers who have Perkins Loans, private loans, or federal loans that were originated before 2005 and not consolidated thereafter. You must continue to make your payments. The only good news: most courts are staying hearings for 60 to 90-days so borrowers have some time to work things out before having a judgment issued against them.

If your student loan is in the collections process please pay attention to any service of process or other court documents that you may receive. If you don’t understand something sent to you by a debt collector, law firm, or Court seek advice from DannLaw or another attorney.

Small Business Loans

Businesses with less than 500 employees are eligible for three programs:

  1. Payroll Protection Program a forgivable loan for 2.5 times the business’s monthly payroll. These loans are available from banks or other Small Business Administration (SBA) Lenders.
  2. SBA Emergency Loans are available to businesses under distress as a result of the COVID-19 Crisis. Ten thousand dollars of the loan amount is forgivable.
  3. SBA Disaster Loans are available to businesses located in states in which a Federal Emergency has been declared.

It’s important to note that the implementation of these loan programs has been disorganized and haphazard.  Banks have been slow to develop and implement their application process and many have limited applicants to existing customers.  In addition, the transfer of funds to the SBA Emergency and Disaster Loan programs has been moving at a snail’s pace. The roadblocks and delays are incredibly frustrating at a time when many small businesses need immediate help if they are to survive the crisis. We’re constantly monitoring the situation so we can help clients receive the assistance they need.

Please visit the SBA Website for additional information about these loans.

Scams:

All individuals and small businesses should be on the lookout for fraudulent and/or criminal behavior. Here are some warning signs:

  1. SBA backed Loans can only be originated by SBA Lenders. Make sure you are providing your information to an accredited SBA Lender. There are no fees associated with applying for these loans and most businesspeople should be able to fill out the relatively simple applications. If you need help only deal with licensed CPAs or attorneys.
  2. There is no fee to apply for the stimulus checks of $1200 or more per family that will be distributed under the provisions of the CARES Act. Indeed, there is no application at all. All you need to do is to verify that your most recent tax return has all of your correct address and bank account information.

You may view our previous updates here.

That’s it for now. Be well, stay safe and if you need help or information please call 877-475-8100 or email us at [email protected]

Filed Under: Covid-19, Founding Partner, In the News, Payroll Protection Program, student loan debt

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