Take the Bonus and RunIn January 2013, the Federal Trade Commission (“FTC”) published a study titled “The Structure and Practices of the Debt Buying Industry.”  The full report can be found here. It makes very interesting reading, and confirms a few things I’ve always suspected.

The reason this information appeals to me is that in some instances, homeowners involved in some form of distressed housing event, such as a short sale, are unable to get the lender or servicer to waive the unpaid balance of the debt, i.e. the difference between the lender’s net recovery in the short sale and the full amount of the debt due [often including thousands of dollars of accrued interest].

When asked by clients what they should do, I tell them the decision is theirs…but to me the choice is clear. Here’s why: Continue reading “Pssst! Wanna Buy Some Unpaid Mortgage Debt – Only 4 Cents On The Dollar!”

Question Mark (2)Today we are seeing more seller carry-back real estate transactions.  These are the transactions in which, for various reasons [usually having to do with the buyer’s lack of access to bank financing], a seller agrees to carry back a security interest for some of the purchase price.

Example: Buyer, emerging from an earlier short sale or other distressed housing event, finds a property he would like to purchase today.  The seller owns the property free and clear of any bank loans.  Even though his consumer credit record is stellar, our buyer has one black mark on his credit report – the distressed housing event. As a result, he is unable to secure bank financing at today’s rates, and is unwilling to obtain a “hard money” loan [i.e. a private loan at an astronomic interest rate and on draconian terms, including a harsh prepayment penalty]. He proposes to pay the seller 20% down in cash, and asks that the seller carry back a security interest on the property for the next five years, as he rebuilds his credit score so that he can qualify for a prime rate loan.  Continue reading “Seller-Carried Trust Deeds vs. Land Sale Contracts: Which to Use & When?”

DecisionEver been overwhelmed at all the laws, rules, and regulations affecting what might otherwise be a simple residential real estate transaction? Ever wished there was a place you could go to find everything you needed in one place?  Now you can! Enjoy! [Go to link here]




Taxing Matters(Disclaimer – The following post is for informational purposes only.  I am not a tax lawyer or CPA.  In all cases of debt cancellation, readers are strongly encouraged to seek competent advice from a tax professional familiar with their specific situation.  The material below is a summary only.  For specifics consult your tax advisor.)

One of the basic rules of tax law is that cancellation of debt is a taxable event. For the lay person, cancellation of debt is the same as forgiveness of debt.   It makes no difference how the cancellation occurred.  It could be voluntary – through a short sale or deed in lieu of foreclosure, or certain loan modifications – or involuntary – through a foreclosure.  In the tax lawyer’s lexicon, “cancellation of debt” is referred to as “COD” – like the fish – just harder to swallow.

However, with the housing  and credit crisis forcing many people into foreclosure and pre-foreclosure events that resulted in significant debt cancellation, the Mortgage Debt Relief Act of 2007 was enacted.  Subject to certain exceptions, this law permits taxpayers to exclude taxable income arising from the discharge of debt on their principal residence.  It also applies to certain loan modification events where the debt is either forgiven, or restructured in a significant manner, such that it triggers a taxable event.  For many taxpayers, this new federal law was a “codsend,” if you will.

Here are some of its main features: Continue reading “QUERIN LAW: Tax on Cancellation of Debt in Distressed Housing (2013)”

Introduction. After three years of counseling folks in the throes of making a distressed housing decision, I have to honestly ask myself if loan modification today is a prudent, wise, or productive endeavor.  Regrettably, in most – though not all – cases, the answer is an emphatic “No.”  Of the many consumer advocates, attorneys, and counselors out there, I may be in the minority.  But I suspect that of the many consumers who have gone through the modification process, I am in the majority. Continue reading “The Myth of Lender Modification”

Background.  The Big Banks, their excesses, and the stories of their rapacious greed, are slowly receding into the rearview mirror of memory, like an Elm Street nightmare. We all know how it ended; the federal government bailed them all out to the tune of $445 billion.  Some accepted the money begrudgingly, saying they were forced to take the medicine although they weren’t really sick.[1]

Clearly, the Big Banks have suffered huge reputational damage over the last few years – and rightfully so.  But there was another player during these years that – except for those who have followed the story of the Financial Crisis – seems to have gone relatively unnoticed in the public eye; probably because the word “bank” is not found in its name.  The company is American International Group, or “AIG”.  Interestingly, the name and acronym give no hint of its core business.  It is an insurance company!  That’s right, insurance; quite possibly the world’s most boring, dry, unsexy and uninteresting profession, second only to statisticians.[2] Continue reading “AIG – Hapless Victim or Reckless Ingrate? (Part One)”

January 29, 2013 was a very bad day for Diane Hathaway.  That was the day she pled guilty to bank fraud, committed in the course of securing her lender’s consent to a short sale of her Michigan manse in Gross Pointe Park.  The home reportedly carried a $1.4 million mortgage with online bank, Ing Direct,[1] and was short selling for $850,000.  Apparently, fearing that the lender would pursue them for the entire deficiency[2], she and her husband decided to claim financial hardship by concealing and shifting assets, including a second home in Florida. Continue reading “Short Sale Fraud – Hard Time For A Bogus Hardship”

“To be forewarned is to be forearmed.”

The term “deficiency” arises in the context of a borrower’s default to their lender.  It refers to the difference between what the lender/servicer recovers, e.g. through short sale, deed-in-lieu-of-foreclosure (“DIL”), or foreclosure, and the total debt owing.  Let’s go through each one, and see how and when the issue is likely to arise:

1.     Short Sales. This is a sale of the distressed property where the net sale proceeds [after deducting costs of sale, such as real estate commissions, escrow, title insurance and recording fees] are insufficient to pay the total indebtedness due, i.e. principal, interest, late fees, and lender advances, such as property taxes and insurance. The difference between the amount recovered and the amount due is the “deficiency.” Continue reading “Borrower Exposure to Deficiency Risk”

In the late 1990s, without a single piece of enabling legislation, the Big Banks, infused with money, ego, hubris and a TBTF attitude, created MERS in order to electronically track securitized loans and avoid public recording fees.   But like Dr. Frankenstein, the Big Banks never fully realized the monster they were about to create.  The foreclosure crisis of the last five years has underscored the flawed logic of the MERS model.

In January 2013, the Oregon Supreme Court will, for the first time, hear oral argument on four certified questions dealing with MERS.  It can only be hoped that after five years of  litigation and millions of dollars in attorney fees, MERS will be quietly laid to rest in the Dustbin of Bad Ideas.  

Herewith, in anticipation of the upcoming ceremony, I reprise an Ode to the star-crossed lovers most affected by the Mess MERS Made

The Note and the Trust Deed had been married for years

The union was good, with very few tears.

They were always together, going hither and yon

But early one morning, the Trust Deed was gone.


Note searched for her lover, nearly out of her mind.

Soon her fears were confirmed – Trust Deed was assigned.

Unwilling to stop, she asked clerks far and wide

“Have you seen my dear Deed?  He must be inside!”


But recorders responded, “Have you not heard of MERS?

We no longer record – we haven’t for years.”

“The best you can hope for,” friends told the Note

“Is to check with the Registry – it’s your last and best hope.”


Then she remembered, with rising alarm

Those 18 small numbers, tattooed on Deed’s arm.

So she rushed to the Registry, and entered the MIN

With hope against hope, she’d see Trust Deed again.


When MERS finally replied, a cold day in December,

She learned Deed was assigned – but not to a member!

“Oh, what shall I do,” the Note softly cried,

“MERS took my dear Deed, but left me outside.”


The months turned to years, then one day through fate,

She saw him by chance – her wayward soul mate.

Her Trust Deed looked terrible; he’d developed a paunch,

Seems he’d wasted away, in some low level traunche.


“Oh Trust Deed, my Trust Deed, return home to me.

Wherever I go, is where you must be.”

But Trust Deed responded, holding Note very tight,

“Dear, the law says once split, we can never unite.”


Now lawyers will argue, with logic askew,

That MERS didn’t cause the split of these two:

“They were just being strawmen – why can’t you all see?

MERS isn’t to blame – they’re just ‘Nominees.’”


But truth is the truth, it cannot be denied,

MERS is the reason, they’re not side-by-side.

OK, I admit it!  I am suffering from chronic MERS fatigue.  Every few days, in some part of the country, MERS gets sued by someone.  Sometimes it involves a pending foreclosure; other times it involves some state or county suing to recover lost recording fees.  And the beat goes on. MERS apologists, aka the Big Banks and their toadies attorneys, appear before one judge or another with arguments so specious as to make intellectually honest lawyers grimace and intellectually dishonest lawyers grin. – PCQ

On Thursday evening, November 15, we learned through the Oregonian, that the Multnomah County Commissioners unanimously authorized the filing of a lawsuit against Mortgage Electronic Registry System, also known as “MERS,” which describes itself as follows: Continue reading “MERS Fatigue”