I don't envy the folks over at Treasury and HUD who, month after month, are forced to report lackluster statistics on the Administration's mortgage bailout and find something positive to say about them. Unfortunately they painted themselves into a corner by inventing a "Housing Scorecard" this summer, which only forces them to report more troubling numbers.

So today (Friday), they released the report on July's numbers, including the mortgage bailout status, and, as per usual, began their reporter conference call with a pep talk on housing. Dr. Raphael Bostic, an assistant secretary at HUD, cited three reasons that we should feel good about housing.

1. "More stability in terms of prices than we've seen before the Administration initiatives were started" and "improving expectations offering some hope that we are moving to a more positive environment."

2. Historically low interest rates that "will be an important incentive and tool for people to access housing and home ownership in a very affordable way."

3. A lot of things the Administration has done outside of the mortgage bailout "have touched a significantly larger number of people than the number of people who have gone into foreclosure."

Numbers 2 and 3 are fair enough, but I, and another reporter on the call who got to ask the question first, took issue with Number 1. Yes, home prices are not in freefall, as they were before the current administration took office, but I'm not sure where they're seeing "improving expectations." All I'm seeing are reports of double dips in home sales and prices, and increasing concern that the struggling job market will push more borrowers into foreclosure.

When asked about that, Dr. Bostic replied only to the first part, about prices being better now than two or three years ago. He declined to answer the question: Where exactly are you seeing data that things are improving now?

Administration officials seem to want to point to all the other programs and incentives out there that have and are stabilizing the housing market. It's not just HAMP (Home Affordable Modification Program), they argue, but the FHA, the Hope Now industry program, the home buyer tax credits, and the government-induced low interest rates that are saving housing, they claim.

Still, the reason everyone focuses on HAMP and criticizes its results is that HAMP is the direct bailout that we the taxpayers are paying for. And it's only getting bigger with new short-sale and principal writedown programs coming this fall. It's just possible that we feel we're not getting what we're paying for, or, even worse, we see that those who are getting what we're paying for either still can't make it work or simply don't deserve it.

When pushed on the poor housing outlook, Dr. Bostic, whom I always considered to be quite the straight shooter in his previous life as an academic and economist, admitted, "I'm not suggesting we are in happy land, where everything is rosy and positive." He concedes that there are "rough patches" out there, and that they are being "ever vigilant" to try to improve the situation.

According to NOSSCR, Social Security Forum, Volume 32, Number 5: May 2010 Edition, Albany is ranked 64th in terms of national ranking by the Social Security Administration for their processing times of Social Security Claims.  The approximate average processing time is 418 days, which means from the date of your claim of filing an appeal it takes 418 days to process the hearing date and ultimately a decision.

 According to the Consumer Bankruptcy News,   Vol. 20 Issue 15; July 1 of 2010, Consumers have reduced their credit card debt by more than 13% in the end of 2008, the article sites June 2010 Consumer Credit Report released by the Federal Reserve Board. 

According to the Capital Region Business Review, Vol. 37 Number 15: Bankruptcy filings in the Northern District of New York are up nearly 4% from January through June compared to the year prior of 2009. 

                According to The New York Times dated June 19^th, 2010, titled “Peddling Relief, Firms Put Debtors in a Deeper Hole” by Peter S. Goodman, the article portrays a business model that debtors who engage in debt settlement, some for “profit” and some “not for profit” agencies, who claim to settle debts actually put debtors into a deeper financial hole.  According to the article, the settlement companies typical harvest fees of 15 to 20% of the credit card balances before they actually even reduce debts.  The article further indicates that the state attorneys general from New York to California and consumer groups such as the Better Business Bureau say “the settlement industry’s proceeds come at the direct expense of finically troubled Americans who are being fleeced of their last dollars with dubious promises.”  Peter S. Goodman states “Consumers rarely emerge from debt settlement programs with their credit card balances eliminated, these critics say, and many wind up worse off , with severely damaged credit, ceaseless threats from collection agents and lawsuits from creditors.” 

                One attorney general from West Virginia, Norman Googel; Assistant Attorney General, indicated “The industry’s not legitimate.”  The article further outlines that folks send their monies to these debt settlement companies thinking their situation has been resolved and their debts are getting settled but they will find themselves getting sued by the creditors ultimately. 

                In my experience of an attorney of nearly 20 years I find that every year I get many clients that have been in a debt settlement model and believe bankruptcy is a more legitimate and effective way of dealing with their debts.  Very rarely do any of the debt settlement plans come to completion with all debts actually being settled.

United State Supreme Court has made its first major pronouncement on the Means Test in its decision in Hamilton v. Lanning, decided June 7, 2010.  The court holding is that the Means Test is not the absolute factor in determining the amount a debtor has to repay in a Chapter 13 Bankruptcy.  The court does uphold the requirement that the 6 months of income prior to filing must be considered, but that is not the end of the story.  Information known at the time of filing that indicates the debtor’s income will be either more or less reflected in the Means Test and can be taken into consideration to determine the proper Chapter 13 payment.  The court’s decision can help Trustee’s seek a higher payment when the income is expected to increase, as for example when a debtor takes on a higher paying job right before filing bankruptcy. The decision can help debtors with having less income going forward than is shown in the Means Test, as happened in the Lanning decision, the debtor had a onetime source of income during the 6 months prior to filing. 

While the court decision involved a Chapter 13 Means Test, the court’s reasoning should also apply for a Chapter 7 Means Test in a situation that a Means Test does not accurately reflect a debtor’s income going forward. 

Congress had set up the Means Test with the idea that it would be a ridged test leaving little room for court interpretation.  Eight justices of the Supreme Court found that Congress could not have intended such a result of strict application of the Means Test because “a mechanical approach would produce senseless results that we do not think Congress intended.”  Only Justice Scalia, believes that Congress intended ridged tests regardless of the absurdity of the result.    

According to the Consumer Bankruptcy News Volume 20, Issue 12, the Congressional Oversight Panel (COP) report for April 2010, the Making Home Affordable initiative and the Home Affordable Modification Program have been largely unsuccessful.  The Department of Treasury reports that only 168,708 mortgages have been modified through the Loan Modification Program despite the fact that President Obama indicated 7 to 9 million families would restructure their finances or mortgages through the program.  President Obama also stated about 3 to 4 million home owners would be able to modify their mortgages to avoid foreclosure. 

In my experience as a practicing attorney, the Loan Modification process has been difficult and at times nonexistent for clients that I have represented .  The Congressional Oversight Report says that for every borrower that bordered foreclosure there were 10 families that lost their homes.  In a related story according to Consumer Bankruptcy Reports, Volume 20; Issue 12, for the first 3 months in 2010 foreclosures were up 7% from 2009.  In the same first 3 month period this is a rather small quarterly number considering that 2009 was one of the worst years for foreclosures.  The same report indicated that bank repossession was up 36% as compared to the same first quarter of 2009 and that this would not help home prices.