All the reports in the media regarding the foreclosure crisis have centered around the fall in house values and continued unemployment. There is, however, another looming crisis out there no one is talking about yet, except for Credit Suisse. There are millions of loans out there known as "Option Arms" or adjustable rate mortgages. After a set time period (typically a couple of years), the interest rates on these underlying mortgage products reset or recast and adjust to the prevailing prime-rate plus several percentage points based upon the specific mortgage terms. Most of these resets are expected to occur between 2010-2012 where nearly $1 trillion worth of these Arm's will readjust during this period.

While interest rates are remaining low and inflation remains subdued, many mortgagors that pay these Arms have not refinanced to a fixed rate mortgage product because they are taking advantage of the lower rates that now exist. Lower rates of course means lower monthly mortgage payments.

The fear, however, is that interest rates will begin to tick up before mortgagors are able to refinance to a fixed rate mortgage product and homeowners in this predicament will no longer be able to afford their monthly payments. Even those homeowners intending to refinance may no longer be able to because of the loss of home equity and income. Once these resets occur, it will be like 2007 all over again.

Batten down the hatches as round 2 is coming!

Sales of new homes unexpectedly fell last month (January), even though economists thought sales would increase. This is yet another sign that the home purchase tax credit is not reigniting demand. These numbers also give credence to the notion that the economic recovery is still in its early stages. What is robbing demand for new homes is a new wave of foreclosures that is flooding the market with supply. Simple economic theory holds that when supply is increased, prices fall. This fact, coupled with the decrease in demand caused by job loss, hard to find credit, and low consumer confidence all translates to a long arduous recovery in the housing market. The decrease in demand and increase in supply also equates to a decrease in the average selling prices of homes nationwide.

It will take several years for the housing market to finally correct itself. Record default rates continue and will impose a giant hurdle for any housing market recovery. As mortgage default rates increase, so do foreclosure rates, so do supply rates, and so does the decline of the average selling prices for homes. This year alone, RealtyTrac, Inc., estimates that over 3 million homes will be repossessed by banks. Borrowers suffering from job loss, depreciation in the value of their homes, and an inability to sell, will add to those foreclosure numbers. Based upon the statistics, expect to see further decline in new home sales and a continued decrease in home sale prices.

Right now is a good time to buy, but a bad time to sell. Keep in mind, however, depending upon which section of the U.S. you find yourself, changes in demand or supply may vary. For example, in Maryland home markets situated near U.S. Military installations will see a spike in demand for housing as the Military completes its base realignment initiative (BRAC). In those markets, sale prices will remain stable or increase as military personnel stream into Maryland in search of housing.

Nationwide, however, the situation looks bleak. A recovery in the job market and a dwindling of the foreclosure supply must occur before we see a rebound in the housing market. By my estimates, it will take another 3 to 5 years before a sense of normalcy returns to the housing market.

With the onslaught of foreclosures currently in the pipe line, homeowners are pursuing many avenues in an attempt to limit the damage of a foreclosure that will be caused to their credit, their pocket books, and their lives. When loans aren't being modified, when defaults occur after a modification, or when no one will buy your home for what it is worth, many homeowners are seeking to "short sell" their homes to avoid a foreclosure sale. What is a "short sale" anyway? A "short sale" is when a homeowner sells their home for less than what is owed on the outstanding mortgage balances. In order to effectively and properly "short sell" a home, the bank holding the mortgage rights must agree to accept an amount less than what is owed. The agreement by the bank to accept less than what is owed, however, is fraught with peril and uncertainty. Typically, agreements entered into between banks and homeowners regarding short sales are often times silent as to the treatment of the deficiency balance that will exist after a short sale. For example: if a homeowner owes $100,000 on their mortgage, but through a short sale agreement the bank is willing to accept only $80,000 from the short sale, then a deficiency balance of $20,000 owed to the bank will arise. Short sale agreements are typically silent to the treatment of the remaining deficiency balance.

There are usually two treatments of the deficiency balance banks have been employing. The first, banks agree to forgive and release the deficiency balance, which absent a bankruptcy filing, is considered forgiveness of debt income. Upon completion of the short sale, the short selling homeowner is issued a miscellaneous 1099 for the amount of the deficiency that has been forgiven by the bank. In our example, the ex-homeowner will now be responsible to report on his current tax year's tax returns the amount of the forgiveness, $20,000 of gross income. The second, banks can also retain the right to pursue the ex-homeowner for the deficiency balance that arises after a short sale. Banks can sue and garnish wages, bank accounts and other property in satisfaction of the deficiency balance. These balances can also be sold to collection companies for pennies on the dollar, while the ex-homeowner still remains liable for the entire deficiency balance.

The only parties that usually win in a short sale scenario is the buyer, whom typically buys the home for less than market value, and the realtor, whom still gets paid their commission for the sale.

The ex-homeowner is usually left with the resulting fall out; forgiveness of debt income or liability for the deficiency balance.

Many times a person can file a Bankruptcy to eliminate the forgiveness of debt income issue and/or any deficiency balance that may result after the sale. This avenue is often the best course for a person in this situation as the bankruptcy not only replaces the foreclosure notation on a person's credit report to one of a discharge status, but also eliminates the possibility of being sued for the deficiency balance. To learn more, contact Antonio Aquia at 410-234-0100.

Although statistics suggest that worst of the foreclosure crisis has hit its peak, there exist certain trends that show other distresses will persist for years. In the State of Maryland in 2009, one in every 54 homes were in some stage of foreclosure totaling 43,248 units. In 2008 a little less, 32,347 home were on the bloc. Although this represents a significant 33.7 % spike in totals, the rate of increase is actually slowing, according to the Daily Record Business Writer. Maryland followed the national trends with a vast majority of foreclosure sales hitting the market in 2007 and 2008.

More alarmingly, however, month-to-month increase in foreclosures, 6,370 in November to 6,768 in December, reveal a trend that these defaults reflect households where breadwinners have lost their jobs. These defaults have already jumped by one third!

These trends are alarming because the loans now in default are A paper loans, typically with fixed interest rates, being paid by responsible borrowers whom have unfortunately lost employment.

Unless employment improves soon, the housing market recovery will be short to take a very long while.

As more and more foreclosed homes hit the market, this will inevitably drive up supply, thus decreasing home values further.

If you find yourself in a foreclosure situation and have exhausted every other remedy available, do not forget that filing a Chapter 13 Bankruptcy can provide you with an opportunity to help you keep your home.

Has your home been foreclosed upon? Before taking any action or inaction, stop and read this article first! If your home has already been foreclosed upon, there may be significant legal problems coming your way. Typically, when a borrower has significantly defaulted on their mortgager loan, banks will normally foreclose on the borrower's loan and sell the borrower's property at an auction in an attempt to recoup some of the monies it is owed. That borrower is then legally responsible for the difference between the foreclosure sale price and the amount still outstanding on the mortgage loan. This difference is known as the mortgage deficiency balance. In addition to seriously damaging your credit, the foreclosing bank then generally has the legal right to pursue the borrower for this deficiency balance. In most cases today, this deficiency balance can be significant. Because of the turmoil wrought by the Great Recession, more and more lenders are exercising their legal rights and pursuing defaulting borrowers for their mortgage deficiency balances owed after foreclosure. To get their money, banks can seize wages, garnish bank accounts and place liens on other assets held by debtors.

These mortgage deficiency balance recoveries have risen 48 percent to a record $1.01 billion in the first nine months of last year compared with the year-earlier period, according to the Federal Depositor's Insurance Corp. (FDIC) that tracks the amounts recovered by banks after mortgage loans are written off. Recoveries on defaulted home-equity loans just about doubled to $392 million from the same time period, the FDIC data shows. This data does not reflect, however, money recovered by trusts that own mortgage backed securities or collection agencies that make money by buying bad debt and acquiring the rights to collect mortgage deficiency balances.

Deficiency judgments in the 15 years prior to the Great Recession were rare. Banks saddled with a very high volume of foreclosures haven't had the time or the resources to begin collection activity on the deficiency balances that have accumulated since the start of the recession. Quickly but surely, however, that trend is definitely changing and it may signal the next personal financing crisis for middle class Americans that used to own a home. The likeliest candidates to be pursued for deficiency balances are the homeowners that simply walked away from their homes because they were so under-water (owing substantially more to the bank than what their home was actually worth) that they had no hope of ever breaking even on their investment.

Many times a person can file a Bankruptcy to eliminate these deficiency balances. This avenue is often the best course for a person in this situation as the bankruptcy not only replaces the foreclosure notation on a person's credit report to one of a discharge status, but also eliminates the possibility of being sued for the deficiency balance. To learn more, contact Antonio Aquia at 410-234-0100.

Do you think you are the only one contemplating bankruptcy ? Think again! Hundreds of thousands of people are running to the Bankruptcy Court seeking refuge from collector activity, judgments, garnishments, and a slew of other collection tactics. Right now, people are suffering through financial hardship typically caused by diminished income, increased expenses, medical calamity, unemployment, and other financial setbacks that are rendering them unable to continue making their mortgage, car and credit card payments. Many times, if a person could simply eliminate their credit card debt, they could channel those payment savings towards their other high priority monthly bills. Most times, a person in this situation simply needs a breather from the monthly stresses of making the minimum payments on their unsecured credit card debt balances and be able to channel those funds towards their mortgage and/or car payments. Oddly enough, many people are religious in making their monthly minimum payments, but when the balances on those credit card debts never decrease, what is the sense of continuing to make those payments at the expense of saving that money towards your children's college expenses or paying your mortgage payment?

Many times a person can file a Chapter 7 Bankruptcy to eliminate these debts. Other times, a person may be forced to file a Chapter 13, whereby the person would be required to pay back a percentage of what is owed, but at the same time consolidating their monthly payments into one easy payment and denying the ability of their unsecured debt from accruing interest during the course of the case. Although specifically each person's case presents different facts, if you are deep in debt and see no way out, educate yourself about the bankruptcy process as it may help you get back on track and change your life for the better.

Do you think you are the only one contemplating bankruptcy ? Think again! Hundreds of thousands of people are running to the Bankruptcy Court seeking refuge from collector activity, judgments, garnishments, and a slew of other collection tactics. Right now, people are suffering through financial hardship typically caused by diminished income, increased expenses, medical calamity, unemployment, and other financial setbacks that are rendering them unable to continue making their mortgage, car and credit card payments. Many times, if a person could simply eliminate their credit card debt, they could channel those payment savings towards their other high priority monthly bills. Most times, a person in this situation simply needs a breather from the monthly stresses of making the minimum payments on their unsecured credit card debt balances and be able to channel those funds towards their mortgage and/or car payments. Oddly enough, many people are religious in making their monthly minimum payments, but when the balances on those credit card debts never decrease, what is the sense of continuing to make those payments at the expense of saving that money towards your children's college expenses or paying your mortgage payment?

Many times a person can file a Chapter 7 Bankruptcy to eliminate these debts. Other times, a person may be forced to file a Chapter 13, whereby the person would be required to pay back a percentage of what is owed, but at the same time consolidating their monthly payments into one easy payment and denying the ability of their unsecured debt from accruing interest during the course of the case. Although specifically each person's case presents different facts, if you are deep in debt and see no way out, educate yourself about the bankruptcy process as it may help you get back on track and change your life for the better.

In Curtis O. Rosemann v. Salsbury, Clements, Bekman, Marder & Adkins, LLC , the Maryland Court of Appeals reviewed a decision of the Court of Special Appeals affirming the decision of the Circuit Court of Howard County disallowing the ability of a child support judgment creditor from seizing personal injury settlement funds payable to the child support judgment debtor. According to the facts, the child support debtor became injured as a result of a bumpy airline flight for which she received $30,000 for her personal injury. The personal injury settlement funds were held in escrow at the law firm of Salsbury et al. The child support judgment creditor learned of the settlement proceeds and issued an attachment of the funds held in escrow in satisfaction of the child support arrearages owed by his ex-spouse. Upon receipt of the request for attachment, Salsbury et al., on behalf of its client issued a response to the attachment invoking Section 11-504 b(2) of the Courts and Judicial Proceedings Article claiming that the compensation for this personal injury was exempt and protected under State Law as money payable in the event of sickness, accident, injury or death.

In a 21 page opinion, the Maryland Court of Appeals ruled that the personal injury funds were in fact exempt and protected against seizure even against a child support judgment creditor. The Court took an exhaustive look at Federal law, numerous court decisions, and public policy concerns and finally determined that if the Maryland State Legislature intended an exception to the exemption statute thus allowing a child support judgment creditor to seize funds payable in the event of sickness, accident, personal injury, or death, then the Legislature could have written that exception into the exemption statute, but did not. Since the Maryland Legislature did not expressly provide for such an exception, the Court of Appeals would not become a "super-legislature" and judicially create an exception which did not appear in the original text of the statute and would not "judicially place in the statute language which is not there, in order to avoid a harsh result." The Court also stated that if the situation brought to light by this case is an oversight of the statute, then it is for the Legislature to correct and not the Court.

This is yet another example of the Maryland high court recognizing its bounds and instituting a logical reasoned restraint in interpreting Maryland State Law.

Belsky, Weinberg, & Horowitz, LLC, is proud to announce the designation of Antonio Aquia as "Super Lawyer's Rising Star". Identification as a Super Lawyer involves a rigorous four-step process: (1) Creation of the Candidate Pool Through a Statewide Survey of Lawyers; Evaluation of Candidates by the Law & Politics Research Department; Peer Evaluation by Practice Area; and a Final Selection Process according to firm demographics in the state. Only five percent of all lawyers in the state receive the Super Lawyer designation. This year Antonio Aquia was the only Consumer Bankruptcy Attorney in the State of Maryland receiving this desgnation.  After nearly ten years of hard work, dedication, and loyalty to his firm and his clients, Mr. Aquia has a developed a reputation for bringing professionalism, skillfulness, and reasoned approaches to all of his cases. He also speaks and lectures frequently to other lawyers in continuing legal education courses striving to raise the standard of performance of the Maryland Bankruptcy Bar. As a founding co-member of the Maryland State Bar Association Consumer Bankruptcy Section, Mr. Aquia has always prided himself in giving back to Bar and to the community that has given him the opportunity to do so much. Congratulations on a job well done and an award so deserved, keep up the good work!

As the New Year is upon us, it is time to take stock at the year past and see what changes we can make to ensure a brighter future. Review your last paystubs, w-2's or 1099's, and determine your income for the year and divide it by 12 months to calculate your monthly gross. Next, force yourself to look at the stack of bills you have and determine how much your monthly expenses are. Then ask the following question: Can you continue to go on for another year living pay check to pay check, robbing Peter to pay Paul, while at the same time not saving for your children's education or ever taking a vacation? Banks and credit card companies charge outrageous interest rates on money that will be paid back several times over. The big lenders want you to borrow more, want you to default, want you to be over your credit limit, and want you to pay late, because when these things happen the big bad banks make more money off of you! The real irony here is that these same banks are the ones getting bailed out by your tax dollars. Many consumers, struggling with mounting credit card debt, higher mortgage payments, and higher prices are feeling the squeeze on their wallets. This debt burden, coupled with the loss of jobs, cuts in hours, and cuts in pay have many Americans feeling the pinch.

If you are in this category, then it is time that you consider your options. Perhaps credit counseling, debt consolidation or filing bankruptcy may be the solution to your debt woes. Do something now while you still have an opportunity to save what assets and wages you still have.

If you are contemplating any of these solutions, it is always better to do it sooner rather than later, before it is too late.  Contact the attorneys at Belsky, Weinberg, & Horowitz, LLC, for a free consultation.