A few months ago, we began to sit down and figure out what the direction of the Firm would be, moving forward, as we’ve grown since 2010.  And we began to realize a few things:

1. The area of Bankruptcy law is getting more crowded in New York City as more and more attorneys are coming into the practice and each website slowly begins to look almost identical to one another.

2. Many people were (are) coming to us and complaining about problems with receiving a loan modification even when their lender told them to stop making payments (thus ruining their credit). Now these same people face foreclosure in New York.

3. We like doing work for the most underprivileged in our New York City area but realized we could do more.

4. I like donating money to charity.

So, over the next year, here’s our plan:

While I’ve no doubt that you like reading the blog (except the emails I receive that say  ”I don’t like reading your blog.”) I overwhelmingly hear about how much you prefer our videos. So, we’re going to give you more of that.  In early 2012, we’ll roll out a video page that, I think, is unlike anything you’ve seen before on a law firm’s website.  As always, we’ll ensure that the videos are clear and understandable.  But we also realize there is not a “one size fits all” approach to either Bankruptcy or Real Estate, and so our videos will be more tailored to you.  Personalized.  They’ll answer questions directly.  Why?  Because there is so much out there on the internet, and the last thing you want is to research for hours and fail to find anything that address your particular situation.  In other words, I think we can do it in a different way that will be more easier, more direct, and more appealing for you.

Another issue we’ve identified is how many people across New York City have been victimized by their own lenders when it comes to loan modifications. I say victimized sincerely.  Client after client complains about listening to their own lenders advice on not making future payments, to their detriment.  We hope to change that.  In 2012, we’re going to substantially expand our presence in Foreclosure Defense in New York City.  It’s one thing if “Loan Mod USA “(fictional name) tricks someone into believing they can reduce their principal and payments.  It becomes quite another when the very bank that financed your home is telling you to take steps that hurt your credit score, and then foreclose on that home.  We hope to change that, and we believe we will. Look for a Gershburg Foreclosure Defense site in January 2012.

I’m perhaps most excited to address #3 and #4 above.  Ever since I established this practice five years ago, I believed it was imperative that I give back to the community in the form of Pro Bono work.  The reason?  I basically learned the practice of Bankruptcy through doing volunteer work at the Brooklyn Bar Association.  Each time I did a pro bono case I felt as if I was doing something good for the Brooklyn community.  Is it cliche and cheesy?  Maybe, but it was and continues to be, quite important for me.  Having said that, at the time of this blog, the Brooklyn Bar Association has 30 open Pro Bono Bankruptcy cases waiting to be filed.  I’ve called them and said that my firm would personally take on each one of them in 2012.  We hope to bring the open case load down to 0 by December of 2012.  Why?  Because it’s important for us and it’s the right thing to do.

This year, we’ve been able to donate money to the Wounded Warrior Project, an amazing organization that helps develop programs for  severely wounded  Vets come back home.  Also, in conjunction with the Street Academy for Financial Literacy and an absolutely amazing organization, Pencil.org, we’ve been able to bring Financial Literacy programs to a middle school in Brooklyn, and we are eager to expand this, with Pencil’s help, to several schools across Brooklyn in the coming year.  We’re teaching kids the value of a dollar and how to save it.  We’re teaching them about credit and debt and the relationship they have.  And we’re teaching kids good money habits that can transform their lives as they grow older.

In addition, the communities where our offices are located (one in TriBeCa and one in Sheepshead Bay) are incredibly important to me.  I’ve lived and worked in both areas and they are close to my heart.   In 2012, we ‘ve pledge to donate up to 10% of the profits of Daniel Gershburg, Esq., P.C. to various charities working in both areas (email us if you know of worthwhile charities in either community). Beyond that, we’re putting even more of an emphasis on doing volunteer work .  In fact, starting in 2012, our staff they will receive paid days off for doing volunteer work at the charity of their choice.

So, why am I telling you all of this?  First, because I think it’s time we did this.  I’m incredibly happy with our website, but it’s time we do something different…again.  I think that law firms and social media and tech are a great combination. In fact they’re so great that everyone is doing it. In fact so many people are doing it that you can’t tell the difference anymore.  Everyone is on Facebook and Twitter and LinkedIN and that’s fine. But this blog has never been here to scream “Look at us, we’re great!”; That’s unethical.  This blog and site were designed to serve a purpose, which was to make finding the information you need easier for you while you search at work.  We hope to do that with our new video page.  We hope to do that with our new Foreclosure Defense Page.  And, most importantly, we hope to do that by doing things you can’t possibly do online.  We hope to do our part in changing our communities.

I wish you the very best in this holiday season and the New Year.

-Daniel

The first and most important step in stopping foreclosures across the Country is to deal with unemployment crisis.  Nothing else matters unless this changes (or Oprah says “You get a house for free and YOU get a house for free, and YOU…).  This sounds pretty simple, but for some reason, we can’t seem to grasp it.  My clients want to pay for their stuff.  They never come to me to file because they don’t want to pay for their stuff or they want to take advantage of the system.  To the contrary, they’ve likely paid idiotic debt collectors for years (at exorbitant interest rates) because they feel they have a responsibility to try and pay their debts.  The problem isn’t that their mortgage interest rate is too high.  That’s just absurd.  The problem is that many of them are now unemployed or underemployed.  We’re not at 9.1% in this Country.  Thats a mytth.  When you count the number of unemployed and “underemployed people” I would guess we’re likely closer to 17-20%.  You don’t fix housing until you fix that.  You can’t bring the interest rate of a mortgage down by 1% and expect it to change anything at all.  These people need decent paying jobs.  They need money.  Not disposable cash.  But a consistent paycheck, so that they can pay their mortgages.  If you ask someone if they want to pay $2400 for their home or $2516, they’ll obviously pick the former.  But if you ask them if they want to pay $2516 but also have a job that pays them, I’m pretty sure they could care less about the $100 difference.  You cannot put bandaids on someone’s arm when they’re internally bleeding.  You’re wasting time (and band-aids).

To effectively deal with the Housing Crisis, we also have to take definitive steps at addressing our emotions and move forward.  What we’re doing now is a little Waltz.  Dancing around the issue.  Sprinkle some mortgage relief here, maybe some there, and that’s it.  And everything still stays the same.  As I mentioned, we have two camps; they have to make peace or learn to move on.  Unless the guys in the room who think that the people who paid for homes they couldn’t afford deserve relief, we’ll get nowhere.  I understand the mentality.  I get it.  I think it’s much more complicated, but I get it.  But we need someone to reach across and say “Yes, a lot of people messed up and got caught up in the craze, but we need to move beyond this, otherwise nothing gets better.”  Half the Country bought into the notion that Real Estate prices will always go up.  But this Housing crisis has played a tremendous role in the surge of Bankruptcies, and the inability of a family to right their lives.  If you’re stuck paying for a home you can’t afford, you have two choices.  You keep paying and hope you’ll find more money (horrible idea) or you walk away and threaten the property values of your neighbors (horrible idea).  We just have to say “bad idea” and move on and forgive a ton of mortgage principle and fix this thing.  Otherwise we’re going to be pointing fingers at each other while we watch property values continue to drop or stay stagnant.

Unless this Administration, or Congress, or even the private sector, figures out a way to refinance these homes and reduce the principal owed on them, nothing changes.  These interest rate reductions will help close to no one.  It’s a joke.  If we want to effectively deal with the problem, then let’s deal with it.  But if you’re going to tell me that reducing already historically low interest rates for people who barely make enough to keep the lights on, will do anything long term, then I have something to sell you.

I can tell you that many of my real estate clients are first time home/apt/condo buyers.  They have tons of questions, and thats normal.  I can also tell you that many of these clients are not aware of just how much closing costs can run on an average purchase.  Say, for example, you, like tons of of people out there, have just had an offer accepted on a new construction condominium in Greenpoint, Brooklyn.  You’re purchasing for $500,000.  The closing costs can literally add anywhere from 3-6% on top of that price.  But heres the thing.  MANY of these costs are completely negotiable.  In a new construction, typically the developer will try and make you, the purchaser, pay the New York City and New York State transfer taxes, which could be thousands of dollars.  You can negotiate that.  The Seller can have you try and pay THEIR own attorneys fees.  You can negotiate that out.  The Seller can try and have you pay for a re-imbursement fee for filing the Offering Plan (a document thats required to be filed with the New York State Attorney General when building new construction).  You can negotiate that out.  You can literally cut your closing costs by 50% if we just take charge and attempt to get many of these fees reduced.

Furthermore your lender charges all types of fees (many of which seem to be redundant, and many of which they cant even explain).  Some of my best clients have been able to call their lenders and negotiate these fees down, or even eliminate them altogether.

Sometimes, attorneys will say that they like clients who just “sign” and purchase, without the hassles of discussing every single fee.  I completely disagree.  I love clients who want every fee explained.  That sounds somewhat crazy, but it means the client is an informed consumer.  That actually makes it easier for us, because we know that were on the same page.  Our whole mantra is “No Surprises”.  The last thing we ever want is to come to the closing table and have our clients say “What in the world is this fee???”  With some negotiating skills and tactics, you can make sure that doesnt happen.

Any questions, as always, feel free to call.

Many of my clients who filed for Bankruptcy purchased more house than they could afford on the belief, which most of us, me included, had that housing was never going to drop the way it did.  Well…it did.  We now have a situation where people are being subsidized into taking on more debt, more house, etc., by offering incentives to purchase.  And while, yes, I can understand that something had to be done to stabilize the market, I nevertheless believe that providing First Time homeowners with cash to be things which cost hundreds of thousands of dollars, irrespective of whether they can afford it, does nothing to get us out of this hole.

Again, Im not an economist (I would work less hours), nor am I a TV talking head (I would spray tan…more), but I can tell you that I meet countless clients on a weekly basis for both Bankruptcy and for Real Estate in New York City.  The common denominator for the Chapter 7 bankruptcy clients in New York City is that they bought and they couldn’t afford it.  They did it because the market gave them the means to do so (through sub prime loans, no money down purchases etc.)  What we are seeing now almost mimics this.  Tax credits which are basically a band-aid, mixed with low mortgages rates, and FHA loans (which, some, including me, have serious reservations about) have the potential to now bring forth another perfect storm onto the market.

My two cents (adjusted for inflation).

Case in point.  My client is selling a co-op apartment in  Brooklyn.  Again, she is SELLING the apartment in Brooklyn, not buying it.  Weve found purchasers who are paying cash.  We have a closing date.  But we cannot close because the bank is unable to send us the stock and lease (analogous in some respects to a deed for a home).  Weve called in approximately 10 times (not a typo) and have been on hold each time for approximately 30 minutes.  Th bank cannot tell us why they cant send us the stock and lease and state that someone will get back to us within 24 hours or 2 weeks.  Can you imagine if you called a friend and they said they would either get back to you later today, or Mid February.  Unless this was your mother in law where youd be happy to wait the 2 weeks, you would not be pleased.  We were not pleased.  Also the bank cant communicate with the proper department because that department doesnt have phones.  The dept has live people, and computers, but no phones.  Again Id like to emphasize all we are currently looking to do is pay the bank lots of money but the bank is saying “We know, and wed love to take the money, but we cant take the money, we dont know why we cant take it, and we dont know when we could tell you why we cant take it, but someone may or may not be able to tell you why we cant take it within 2 weeks.”

On another closing, the bank appraised a home for a certain sum and said “Youre ok to close.”  They then came back the following week and re-apraised the house for $50,000 less.  Lets again use a real life example.  I come to you and tell you Id like to buy your Mercedes, and that Id be willing to pay you $20,000 for the car and tell you I’d like to meet you the following week to pay you.  You agree.  The following week I show up announced and say “Let me look at the car again” and after looking at the identical car I tell you I will pay you $14.32 right now on the spot.  Absurd no?  Well folks welcome to 2010, the year when the recovery will hit.

In business, companies are always obsessed with bottom lines, and thats normal.  However, when you’re looking to buy a home in New York City and the lender is telling you that they’re telling you that they dont have phones, there is something wrong.  No business can recover financially if they are acting completely irrationally.  You may be reading this and thinking that there is something more to the story.  Something is missing because it doesnt make sense.  I wish there was.  Our firms Manhattan Real Estate practice has shifted in that we now do so much more on a daily basis for our clients than we ever have just to get them into the homes they wanted.  There really should be no discussion of a bottoming of the market in New York City without discussing why we’re stuck here now in the first place.

In the simplest way of saying this, lets compare what happened during the mortgage crisis and whats happening now.  During the real estate bubble, individuals were purchasing real estate in lets say the West Village, New York.  And they didnt have any income verification or any money to put down for an apartment.  No problem.  Banks were giving out financing like crazy and so the purchasers would take out 100% financing.  Sometimes they would even walk away from their New York City purchase WITH MONEY in their hand after they purchased a unit for a few million.  We know how the story ends.  It’s not a stretch to say the majority of people who purchased homes in the West Village, Park Slope, Williamsburg, or anywhere in New York City with 100% financing have either foreclosed, are behind in their mortgage payments, or are having issues.

During this bubble, FHA wasnt a word that was used much.  The FHA is basically a government agency that insures the loans private lenders give out, and there were caps on those loans in 2004, 2005, etc.  Here is an explanation from the New York Times:

“F.H.A. insurance was created for minority and low-income families who could not come up with the traditional down payment of 20 percent required by private lenders. Buyers receive loans from government-approved lenders and are required to document their income and assets. They must pay a substantial insurance premium of 1.75 percent of the loan. But in return, their down payment can be as low as 3.5 percent”

So basically the FHA wasnt insuring very many loans then (proportionate to the loans being taken out.)  So if a purchaser just bought a new condo in Union Square New York, and he/she stopped paying, the bank was screwed, and maybe the underwriter of the loan, but not the government.

Fast forward to 2009.  This Manhattan Real Estate Attorney is seeing tons of deals being financed using FHA Loans, for individuals who have very little if anything to put down.  Sound familiar?  Well for the privilege of receiving an FHA loan, which now insures the Private lender that Uncle Sam will step in if the purchaser of that condo in the Financial District defaults, all the purchaser has to do is put own 3.5% of the purchase price.  And guess what?  The credit requirements aren’t too stringent to get a loan.  Lastly, a seller can actually give a concession to help the purchaser pay for the closing costs for his/her shiny new construction closing in Park Slope. Does any of this sound familiar?

Lets go a bit further.  That same New York Times article states:

“At Guarantee Mortgage Corporation, which has 150 mortgage brokers in the Bay Area, Seattle and Portland, Ore., F.H.A. loans have grown to about 15 percent of its business, from less than 3 percent a few years ago.

“”It sure has helped us put a lot of deals together,” said Guarantee’s chief sales officer, Bob Siefert. He predicts that a quarter of Guarantee’s deals will soon be guaranteed by the F.H.A.

Some F.H.A. borrowers here say they have the cash for a full down payment but would rather invest it in the stock market or use it for remodeling.”

And even more troubling, courtesy of the LA Times:

“This year alone the agency has backed nearly 2 million mortgages worth at least $328 billion. It insured 21.5% of all new mortgages last year, up from fewer than 6% in 2007.”

Look here is the issue for me.  If you’re looking to buy a condo in the East Village, and you have money for a downpayment, thats great.  Good luck to you and I’d love to be your East Village Real Estate Attorney.  And for the many people who are using FHA to buy homes they can afford all over Greenpoint Brooklyn, Williamsburg, or wherever, good luck to you too.  But this Manhattan Real Estate lawyer fears that FHA is being overused.  Really, the only distinction between this subprime mess and FHA is about 3.5%.  In other words, where before you could buy a condo in Harlem and finance all of it, now, after everything that weve gone through in the Real Estate market, you could buy a condo, but only finance 97.5%!  Its insanity to me.  Its almost like this is an artifical prop to the real estate market all over New York, let alone the country.  Except the difference is, when people start defaulting on their purchase of a Condo in Brighton Beach, the lender wont be on the hook, we will.

And some more news:  Representatives in Congress are looking at way of INCREASING the amount an individual can borrow to qualify for an FHA loan.  The limits on an FHA backed loan is now about $730,000.00.  Which means the government is insuring every penny of that loan if the purchaser defaults.  This is downright scary in my opinion.