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DannLaw Covid 19 Update 16–and hopefully our last

student loan debt

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The End of Covid Forbearance is here. Time to rework your loan. 

DannLaw founder Marc DannMortgage forbearance and other programs made available to homeowners during the COVID-19 pandemic are about to end. That means millions of homeowners are or will soon be pursuing loan modifications or other work out options with their lenders. Karen Ortiz, Roberto Rivera, and DannLaw’s highly experienced and knowledgeable legal staff are here to help families navigate the complicated process and select the payment structure that best meets their needs. Please contact us to arrange a no-cost, no-obligation consultation by calling 216-373-0539 or completing our contact form.

Changes at DannLaw

We are sad to announce that Attorney Whitney Horton is leaving DannLaw after being a valuable member of our team for more than seven years. If Whitney has been working on your case, a notice of substitution of counsel will be filed in the next few weeks. Whitney Kaster, who was at DannLaw before the pandemic is returning to the firm on Monday April 24. Attorney Kaster will work me and Emily White on foreclosure defense matters and with Brian Flick on Consumer Protection cases.  In addition, Amanda Severt who has been our administrative assistant has been promoted and will now work as a paralegal assigned to foreclosure cases and state court litigation.

 Student Loan Changes

The U.S. Department of Education is making changes to the Income Based Repayment program for Federal Student Loans that should enable lower income borrowers to fulfill their obligations faster and qualify for Public Service or other Loan forgiveness programs sooner. You may read about the changes here. Richard Cordray who served as Ohio Treasurer and AG before being named the first director of the Consumer Financial Protection Bureau and is now in charge of Student Loan Issues at the DOE drafted and implemented these significant improvements.  

Foreclosures Are Ramping Up 

Along with forbearance and other relief programs, foreclosure stays are ending.  That means hundreds and perhaps thousands of new judicial foreclosure actions will be filed in Ohio, New Jersey and other states. We have the experience, expertise, and knowledge needed to save your home.

Remember this important point: The filing of a foreclosure lawsuit is the beginning, not the end of the process. Please reach out to DannLaw or another attorney as soon as you know a foreclosure action has been filed against you. If you’ve been served with a foreclosure complaint you have a short time–28 Days in Ohio–to retain a lawyer and file an answer. The vast majority of people who retain us because they want to stay in their home are able to do exactly that.

In addition to defending the foreclosure action, we conduct a thorough investigation to determine if your mortgage loan servicer has followed all applicable rules and laws that govern mortgage lending. If we discover violations, we can bring and pursue claims against the mortgage company. Our foreclosure clients pay an affordable monthly payment into our trust account to cover the fees that we earn in their cases. We offer a free consultation. If you or anyone you know has been sued for foreclosure please contact us here, or call us at 216-373-0539. To schedule an appointment with me visit calendly.com/mdann.

 Regulation F Changes the Game for Debt Collectors and Consumers 

 The CFPB has enacted new strict rules that govern the manner in which debt collectors may contact you by mail, email, text, telephone or social media. You can read about the new regs here. In addition, Credit Reporting Agencies will no longer report most medical debt. This should help consumers improve their credit score. If you believe a debt collector has made a misrepresentation to you or contacted you by phone, letter, text, or email at an inappropriate time you may be entitled to financial compensation. Please feel free to contact us to discuss your situation.

 Data Breach Cases

Multiple courts have selected DannLaw to serve as Class Counsel in data breach Cases. A data breach occurs when a company fails to properly safeguard its customers’ personal information. Our legal staff devotes considerable time and resources to pursuing and securing just compensation for the inconvenience, expense, and aggravation data breach victims endure.

I have a new perspective on that today. I’ve been ensnared in multiple data breaches. Someone obtained my personal information and “took over” my bank account. I’ve spent 20 hours sorting out payments, ACHs and was forced to visit my bank three times. I have a renewed passion to ensure that companies who allow breaches to occur are held accountable for their actions.  If you are notified that your information is at risk due to a breach, contact us immediately so we can take all available legal steps to secure just compensation for you and other data breach victims.

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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.

By

Attorney Emily White - Managing Partner The Dann Law Firm
Atty. Emily White, Director of DannLaw’s Student Loan Practice Group.

At DannLaw we devote considerable time and attention to one of the most challenging areas of consumer law: student loans. That’s why we are particularly pleased and proud to announce that we recently scored an impressive victory for a client in Common Pleas Court.

Our client had been sued by National Collegiate Student Loan Trust (NCSLT), his private student loan lender. The company secured a $42,781.02 judgment against him in 2016 when he did not appear for a hearing on the case. There was just one problem: he failed to appear because he never received notice that NCSLT had filed the action against him. That’s because the company sent the notice via certified mail to his father’s home where he had not lived for four years. His father signed for the letter but never told our client about it.

After being retained to represent the debtor, Atty. Emily White, leader of DannLaw’s student loan practice group investigated, discovered NCSLT’s mistake and filed a motion to vacate the judgment. The motion was granted by the presiding judge who ordered the company to return the $15,000 they had already collected from our client.

This case illustrates three points we make in the student loan section of Dannlaw.com:

First: Don’t ignore notices you receive from a court. While our client didn’t ignore the summons sent via certified mail, NCSLT’s ability to secure a $42,781.02 judgment against him illustrates what can happen when a debtor does not appear at a hearing.

Second, while getting out from under private student loan debt may seem like a hopeless cause, there are a number of effective defenses we can use to protect borrowers from lenders and debt buyers. This case is a perfect example: someone at NCSLT made a technical error, we found it, proved it, and won.

Third, the civil justice system is a beautiful thing when it is administered by competent ethical jurists. We argued our case, the judge made the correct ruling, Our client gets his money and future back, and justice is served.

If you’re struggling with private student loan debt, contact Atty. Emily White to arrange a no-cost consultation. She’ll be happy to evaluate your situation and determine if we can help. We can’t guarantee a positive result, but we can guarantee we’ll do our best to make things better.

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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 mdann@dannlaw.com

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 intake@dannlaw.com.

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 intake@dannlaw.com 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 bflick@dannlaw.com  We are here to listen, to advise, and to help.

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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 mdann@dannlaw.com.

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 ewhite@dannlaw.com.

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 intake@dannlaw.com

By

Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyNow that we’ve had additional time to review the CARES Act, we would like to share some clarifications and observations along with advice about how to deal with bills and other financial obligations that may be coming due on April 1.

Here are some things to consider about paying your bills:

1. Pay your bills if you can. You should take advantage of options that allow you to delay making payments if you need to, not just because they are available.

2. If you don’t have enough money to make your mortgage payment and pay your other bills, please consider the following factors before deciding how to allocate the funds you have:

3. First, consider the amount you owe on your home relative to its value. This is known as the loan to value ratio. 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.

As we noted in earlier updates, borrowers whose loans are “federally backed” can apply for up to 12 months of forbearance. But remember, forbearance is not forgiveness. At the end of the forbearance period you will owe the payments you did not make and you will most likely need to modify your loan. At this time, there is no way to determine what the terms of such modifications will be. In addition, if you pay taxes and insurance via your mortgage and the servicer has paid those costs on your behalf, your escrow payment may well rise substantially when the forbearance period ends. In either case, you could be looking at steep increases in costs when you begin making payments again.

4. If you are unable to pay your mortgage you are entitled to suspension/forbearance under these circumstances:

  • Your mortgage is “Federally Backed” and covered under the CARES Act which provides a 60-day suspension and 12 months of forebearance;
  • You live in New Jersey, California, New York. These states have issued blanket orders suspending mortgage payments.

5. If the investor and/or loan servicer that holds your mortgage is not legally obligated to offer suspension or forbearance you should contact them to determine if they are offering programs that will help you manage your payments. Consider taking advantage of them if they make sense for you.

6. Although the CARES Act prohibits negative credit reporting in the short term for borrowers who were not behind on their mortgage or student loans when the Covid-19 pandemic began, creditors are not prohibited from reporting negative information during and after the crisis. If you rely on credit you should take steps to prevent your hard-earned credit score from dropping.

7. Remember: NOTHING prohibits many creditors from pursuing debt collection during this crisis. Do not ignore legal notices you receive. If you do, a creditor could obtain a judgement that will enable them to garnish your wages and attach your bank accounts. Keep control of you finances by communicating with your creditors.

8. If you are married or cohabitate, it is important for you to talk to your spouse or partner about finances. Be open, honest and transparent about your debts and thoroughly discuss the options and choices available to you. Don’t add to the stress associated with the Covid-19 emergency by concealing financial problems from your loved ones until it is too late to deal with them. This is especially true if one person is primarily responsible for  paying the bills. In our experience, being less than forthcoming about your financial situation can be a relationship killer. Don’t let it happen to you.

9. If you are not going to pay a bill, please inform your creditor or mortgage servicer in writing. You should also ask them if they are offering programs or plans that will help you manage your debt.

Communicating with your creditors in writing is important for three reasons:

Reason 1: Employees at most companies are now working at home which means it could take hours to a, reach them and b, discuss the situation which means you may miss a crucial scene on Tiger King.

Reason 2: The only records of a phone call will be the notes taken by the creditor, which you will not be surprised to learn, will not be written in your favor.

Reason 3: We can tell you hundreds of stories about creditors who broke promises because they know no record of the promise being made exists.

So, please, please, please, make sure there is a written record of what you promise the creditor and what they promise you. If you are unable to communicate in writing, record the phone calls if it is legal to do so in your state. Ohio and New Jersey are both one-party consent states which means you can tape away.

If you want help thinking through your choices, our lawyers are available for free initial video or phone consultations call 877-475-8100 or intake@dannlaw.com

Clarification on Student Loan Issues

In the last update we incorrectly reported that all Federal Student Loans were covered by the payment holiday. Unfortunately, we were wrong. If you have a Perkins Loan or an FFEL Loan it is not subject to the relief provisions of the CARES Act. In a nutshell, if you have a Federal Student Loan that originated prior to 2005 and you did not consolidate it later, your loan is not protected by the CARES Act at all.

We are particularly concerned about the collection of Perkins Loans. In Ohio these loans are collected by the Ohio Attorney General and have become controversial because outside counsel and debt collectors have used aggressive collection tactics and added exorbitant fees to loan balances. DannLaw attorneys Emily White and Brian Flick recently wrote to Ohio Attorney General David Yost and asked him to protect Perkins Loans borrowers during the crisis:

Because our firm represents people who accrued significant debt while attending Ohio’s state colleges and universities, we are particularly concerned about the impact the ongoing emergency will have on student loan borrowers. Many are saddled with tens of thousands of dollars in debt that will take decades to pay off.  Low income students who received Pell Grants and Perkins Loans are in a more dire position if they are forced to leave mid-semester due to financial, medical, or family difficulties: they must repay their loans and grants immediately.

To make matters worse, the tactics used by debt collectors and outside counsel hired by the Attorney General’s Office to pursue borrowers have become increasingly aggressive in recent years. Those tactics combined with the charges and fees added to balances, including the 30% surcharge outside firms have been authorized to charge since 2017, make dealing with student loan debt difficult during the best of times—and these are far from the best of times.

 In the weeks and months ahead it will become increasingly difficult for Ohioans to pay meet their financial obligations. Governor DeWine, the federal government, and many companies are taking steps to help cushion the blow. I urge you to join them by suspending collection actions and waiving interest and fees for the foreseeable future. I also ask that you consider supporting the creation of a hardship waiver process that will enable Ohioans to deal with the long-term effects of the crisis. At this time in our history, state government should not be the creditor Ohioans fear most.

If you have a chance please join us in urging Attorney General Yost to stand down on collection of Perkins loans and Pell Grants during this crisis by visiting this website: OHLegSupport@ohioattorneygeneral.com.

Clarification on Mortgage issue

 We incorrectly reported that credit reporting would continue on Federally Backed mortgage loans that are subject to suspension or forbearance under the CARES act. That is not correct. If you are current on the loan prior to taking advantage of the suspension or forbearance provision of the Act negative credit reporting is prohibited.

 Stimulus Checks

 One of the most significant features of the CARES Act are the payments of $1200 or more the vast majority of American Families will receive. But the Act does not prevent existing judgment creditors from attaching bank accounts into which the payments will be deposited. Pay close attention to which account the IRS has on record and direct it to an account that is not subject to attachment if you can do so. In addition, as has been widely reported, payments to people who have unpaid child support will be directed to their children.

Scam Alert

Anytime the government engages in significant action like the CARE Act charlatans and scam artists begin cooking up ways to cheat those who are eligible for help as well as those who are not. This happened repeatedly when the Federal HAMP program was created. Here are some bad actors you should avoid:

  1. Anyone who promises to help you access your stimulus money. There is no application for the stimulus money. Make sure the IRS has your accurate bank account and contact information and the checks will be sent directly to you.
  2. Anyone who promises to help you apply for mortgage or student loan assistance. If you are unsure or need help in deciding what to do about suspension or forbearance of mortgage or other debt only seek advice or help from an attorney licensed to practice law in your state.
  3. Anyone other than your lawyer or CPA who offers to help you access Small Business Assistance under the CARES Act.

If you sent money to someone engaged in a scam in order to profit from this crisis contact an attorney or law enforcement agency right away. Ohio and New Jersey have strong consumer protection laws that will enable you to seek and secure damages from cheaters and scam artists.

This information is not, nor is it intended to be, legal advice. You should consult an attorney for advice. We can be reached at 877-475-8100 or via email at mdann@dannlaw.com or intake@dannlaw.com.