Foreclosure Defense | Ohio | Chicago | New Jersey | Oregon | New York
Join DannLaw founder Marc Dann as he discusses the problems plaguing the Paycheck Protection Program, when and how to access information about mortgage forbearance and other relief programs, and the Trump Administration’s perversion of the CFPB.
If you need help or advice please call 877-475-8100 or email [email protected] to schedule a no-cost consultation
https://www.facebook.com/fightforconsumers/videos/2491221337874893/
As we’ve mentioned in a couple of our COVID-19 updates, under the CARES Act renters who live in “covered properties” as defined by the law may not be evicted for non-payment of rent for 120 days retroactive to March 27, 2020. Landlords are also prohibited from imposing fees, penalties, or other charges for non-payment of rent during the moratorium period and they must provide tenants with a 30-day notice of their intent to evict when the moratorium ends.
We’re glad this protection exists, but the advice we give to homeowners applies to tenants: take advantage of the relief if you need to, but it’s a good idea to pay your rent if you can in order to avoid having to make a huge payment when the moratorium ends.
What is a covered property?
Good question. The moratorium applies to most federally assisted rental housing programs administered by the Department of Housing and Urban Development, the Department of Agriculture, and the Department of Treasury including:
Public housing
Section 8 Housing Choice Voucher program
Section 8 project-based housing
Section 202 Supportive Housing for the Elderly program
Section 811 Supportive Housing for Persons with Disabilities program
Section 236 multifamily rental housing
Section 221(d)(3) Below Market Interest Rate housing
HOME
Housing Opportunities for Persons with AIDS
Section 515 Rural Rental Housing program
Sections 514 and 516 Farm Labor Housing program
Section 533 Housing Preservation Grants
Section 538 multifamily rental housing
Low-Income Housing Tax Credit
The eviction moratorium applies to tenants whose owners mortgages are backed by Fannie Mae or Freddie Mac. That is great news, but finding out if you live in building that falls under this definition was a real challenge.
Until today. That’s when Fannie Mae and Freddie Mac launched websites that make it easier for renters to find out if they live in a covered property. You may access the Freddie Mac site here: https://myhome.freddiemac.com/renting/lookup.html?utm_medium=email&utm_source=govdelivery
You may access the Fannie Mae site here: https://www.knowyouroptions.com/rentersresourcefinder?utm_medium=email&utm_source=govdelivery
In addition, both Freddie and Fannie have set up hotlines for tenants who have questions or need support. You can call Fannie at 877-542-9723. You can reach Freddie at 800-404-3097.
And if you still have questions and can’t get the answers or help you need contact DannLaw by emailing [email protected] or calling 877-475-8100 to schedule a no-cost consultation. We’ll be here to help throughout the COVID-19 crisis.
If there is one thing homeowners, consumers, and small business owners need from the federal government, their banks and mortgage servicers as they attempt to make sound financial decisions in the midst of the coronavirus crisis is reliable information.
Of course, that’s exactly what they’re not getting.
So in this ninth edition of DannLaw’s Covid-19 updates I’ll try once again to fill the knowledge gap and clear the confusion surrounding the multiple aid packages that have been enacted by Congress and the Trump Administration. Don’t be surprised if I revisit some topics we’ve addressed in the past because, and I’m sure this won’t come as a shock, many of the problems that have made it difficult for Americans to access the help they deserve and desperately need still haven’t been fixed.
Let’s start with what is quickly becoming a textbook example of a good idea gone bad: the Paycheck Protection Program (PPP). If you had the time and/or the inclination you could spend days watching and reading media stories detailing the botched rollout of the PPP. As we noted in an earlier update, the bankers responsible for accepting and submitting loan applications to the SBA favored existing clients over non-clients and bigger borrowers over small ones because bigger loans generate—wait for it—bigger fees for the banks.
This left many smaller and/or minority owned businesses standing on the sidelines as bigger companies quickly sucked up the $350 billion in available aid. Among those doing the sucking were well-capitalized firms and entities including Ruth’s Chris Steakhouse, Harvard University, the Los Angeles Lakers, Shake Shack, and Nathan’s Famous Hot Dogs.
A reasonable person might believe that the feds would address the problems afflicting the program before beginning to hand out the additional $350 billion in PPP funding appropriated by Congress at the end of April.
A reasonable person would be wrong.
Today, the government is still unable to provide definitive, reliable information that will enable business owners to determine if they should even bother applying for assistance. We still don’t know who is entitled to participate in the program, what the terms of promised forgiveness will be when the time comes to pay the money back, or if all borrowers regardless of size will be treated fairly.
As if all that weren’t confusing enough, the IRS just threw a new stick in the works by ruling that small business owners whose loans are forgiven can’t take tax deductions for associated wages and other expenses.
The Wall Street Journal notes that without the deductions, the program will help companies survive but it becomes a wash from a tax perspective, limiting its potential value. Employers will get tax-free income if their loans are forgiven but lose the associated deductions.
Senator Chuck Grassley, one of the authors of the PPP program said he was disappointed by the IRS ruling. “The intent was to maximize small businesses’ ability to maintain liquidity, retain their employees and recover from this health crisis as quickly as possible. This notice is contrary to that intent,” he said.
But the IRS doesn’t give a damn about Congress’ intent. That means the House and Senate must vote to overturn the IRS directive. I’m not holding my breath.
What I am doing is talking to lots of frustrated and bewildered business owners who kept employees on their payroll because they believed the PPP would compensate them for doing so. Now it appears many of them may be left on the hook for the costs—costs they could ill afford and would not have incurred if they hadn’t been enticed by what appear to be empty promises.
We’re continuing to investigate claims and search for ways to hold the banks that played favorites during the application process accountable for their actions. If you have faced any of the issues I’ve described or believe you have been discriminated against, please feel free to share your experience with me by emailing [email protected].
Unfortunately, things are also clear as mud for homeowners searching for information about programs that may help them save their homes as the Covid-caused recession deepens. A reasonable person would begin such a search by visiting their mortgage company’s website.
Like the reasonable person who thought the government would fix the PPP, this reasonable person would be dead wrong.
How do I know?
Because the Office of the Inspector General of the United States Department of Housing and Urban Development said so in a recent report:
“Our review of the 30 servicers’ websites, which service approximately 90 percent of FHA loans, revealed that those websites provided incomplete, inconsistent, dated, and unclear guidance to borrowers related to their forbearance options under the CARES Act.” Wells Fargo, Nationstar, PHH/Ocwen, Rushmore, Fay Bayview, M&T, and Lakeview were among the companies singled out for criticism in the report which you can read here.
This lack of clarity is especially aggravating because the FHA is offering real help for borrowers. Anyone with an FHA loan is entitled to a 60-day suspension of payments, followed by another 120 days of forbearance that can then be extended for 180 days. At the end of the forbearance period the actual amount of payments owed will be added to the back of loans at zero interest in what is called a “partial claim” silent second mortgage. Hopefully, scrutiny from the FHA will motivate servicers to make accurate information about forbearance more accessible to the millions of people who need it.
People who have non-FHA-insured mortgages are having an even more difficult time obtaining accurate information about their loans. That’s why we have prepared a simple Request For Information (ROI) letter you can send to your mortgage lender that will help you determine who owns and insures your loan and what relief programs your lender/servicer may be offering.
You can download the letter from our website here. Address it to the RFI/NOE QWR Address and if you can, send it by certified mail so you can prove later that the servicer received it. If you want our help in reviewing the information you receive (or preparing the initial letter) please schedule a no-cost video or phone conference by emailing [email protected].
Once you know all you need to know about your loan, here are important factors you should take into consideration before seeking relief:
To add insult to injury, I’m compelled to note that the Trump Administration is using the pandemic to pervert and subvert the mission of the Consumer Financial Protection Bureau (CFPB). The New York Times just reported that leaders manipulated the Bureau’s research process so they could justify creating a new rule favorable to the predatory payday lending industry. This revelation was closely followed by news that the CFPB was using the pandemic as an excuse to roll back protections for home buyers. The leaders of the National Association of Consumer Attorneys, including DannLaw’s Brian Flick, called out the CFPB in this letter . Here is part of what they said:
“Debt collectors, notorious for their aggressive and abusive conduct, should be closely monitored (and credit) bureaus and furnishers should be made to comply with the Fair Credit Reporting Act at all times. Lenders should be strongly discouraged from making costly, high-interest loans (and the) CFPB should work with all mortgage and student loan servicers to employ practices that would help borrowers stay in their homes or avoid default.”
Finally, I want to assure everyone that DannLaw’s attorneys and paralegals have been and will continue to be available to you during the crisis. We are prepared to use every tool in our arsenal to protect homeowners, consumers and small businesses from abuse by mortgage lenders, creditors and other predators.
If you’ve lost your job, suffered a reduction in income or need guidance about how to keep a roof over your family’s head we acall or email away.
Thanks for reading the update. Be well, stay safe, and remember, we’re all in this together.
I 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.
Many 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:
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:
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:
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]
Join DannLaw founder Atty. Marc Dann as he discusses the provisions of the CARES Act and offers advice on paying bills, dealing with creditors, mortgage forbearance, credit reporting, how to make sure your relationship survives the crisis, and scam artists who are already using the CARES Act to cheat consumers.
https://www.facebook.com/fightforconsumers/videos/553983191907730/?modal=admin_todo_tour