Orlando Foreclosure Defense

Pop quiz hot shot. There’s a DC-9 jet landing just outside of Mexico City, the landing crew refuse to let soldiers near it because of a “dangerous oil leak,” what do you do? Well first you should be suspicious when you hear something like that, especially in Mexico. (Where do you think the X-Files came up with their saying “Trust No One.” A day trip to Tijuana will provide that sort of life lesson.) Next you should search the plane, so you can help out with this “dangerous oil leak.”

Luckily for all of us the Mexican military did search the plane and found 128 black suitcases filled with cocaine. A total of 5.7 tons of cocaine was found on the plane at a value of $100 million. (5.7 tons! I’m not an aviation expert, but how did they even get that plane to fly?)

This story isn’t that noteworthy for the amount of drugs seized, as I am sure the Mexican military get huge drug busts at least once a month, however it is noteworthy because of the DC-9 jet. That jet that the smugglers used was purchased from laundered money transferred through two US banks, Wachovia and Bank of America.

Wachovia has admitted that it failed to monitor its currency exchange houses, and that some of the cash was used to buy four jets that have shipped 24 tons of cocaine into Mexico. Wachovia has also admitted that it didn’t do enough to monitor for elicit funds during its handling of over $378 billion in currency exchanges between 2004 and 2007.

The federal prosecutor who is handling the case characterized Wachovia’s conduct as a “blatant disregard for our banking laws.” He went on to say that Wachovia’s conduct gave “cocaine cartels a virtual carte blanche to finance their operations.”

It is absolutely shameful that a bank like Wachovia, who is a primary player in the mortgage business, has been mixed up in laundering drug money and indirectly financing a brutal drug war south of the border. Where is the accountability? Who is in charge? Reading this story just adds to the gray hairs. (The irresponsibility of banks no longer surprises me. I’m looking forward to the day when the news breaks that a 12 year old successfully got a loan of $17 million to finance his start up professional tether-ball league.)

http://www.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug-cartels-admitted-in-wells-fargo-s-u-s-deal.html

“Grab life by the horns,” I know its an abused cliché and whenever you hear it you roll your eyes, but there is solid logic behind the saying. We should all manage our lives as efficiently and effectively as possible. There should be no shame in living your life like a private company, the company of you. The benefit of conducting your life in this way is being able to act coldly and calculatingly, with the bottom line always in mind.

This mentality has served thousands of corporations well, and has allowed them the flexibility to get out of poor business deals without feeling bad about it or without any sort of social stigma. So why is the government trying to legislate a double standard between corporations who can strategically default without any recourse and private individuals who they feel shouldn’t be able to without penalties.

The House of Representatives recently passed a measure that would give the Federal Housing Administration the flexibility to shore up its finances by barring government backed loans for borrowers who had strategically defaulted. This measure still has to pass the Senate and many feel that even if that were to happen it would be unenforceable. However, it is troubling to see that congress would be willing to go to such lengths to punish private individuals when no such course of action has been taken against big businesses.

This sort of double standard is yet another example of how strategic defaulters are being demonized for doing something that banks and corporations have been doing for years. There are no punishments for these banks and corporations; congress has not made any attempts to deny these companies tax deductions or bailout money for strategically defaulting. So why should private individuals be treated differently?

Individuals should be afforded every benefit that a company has when it comes to strategic defaults, and should thus be free to execute their personal finances in a way that benefits them the most. Punishing strategic defaulters for making economically sound decisions makes no sense.

Most people think of mortgages as they functioned thirty years ago. A prospective homeowner goes to the bank, takes out a loan and pays the bank a mortgage payment every month. In thirty years, once the loan is paid off, the bank gives the homeowner a satisfaction of mortgage and everyone is happy.

This was before the rise of modern securitization, pooling and bundling shemes where mortgages were traded, sold, transferred, raided and pillaged- these are the same schemes that have left our economy in shambles.

I also hear many people express the belief that banks do not want their homes when they are discussing the current foreclosure crisis. They mention that banks are not in the business of owning and selling real estate. They discuss how their home is worth so much less than what is owed on the home, and assume that any bank must be suicidal if they proceed to obtain a judgment for foreclosure.

However, just like the mortgage securitization and trading schemes, there is more that meets the eye when it comes to what the bank wants. There are reinsurance agreements, reimbursement agreements and a host of offerings by the Treasury, FDIC and Federal Reserve designed to cushion the blow that this housing crisis has dealt to the banking industry.

The video link below represents one individual’s opinions on behind the scenes dealings between the banking industry and government. Please feel free to email us if you have any information or ideas on what is going on behind the scenes.

Everything is not as it seems. Just start digging a bit and you will find yourself tumbling down the foreclosure rabbit-hole.

Indymac and One West Video Link

Its an interesting question, can you undue a foreclosure sale? The answer is yes, but a more interesting question is why would you want to prevent this? Well that’s a little trickier to answer. You might be a bit perplexed at this juncture so let me explain things.

There is this interesting case were Wells Fargo filed a mortgage foreclosure action against the homeowner for failing to keep up with the payments. The homeowners never filed any answer to the foreclosure, so Wells Fargo got a final summary judgment in their favor. Then before the foreclosure sale, Wells Fargo filed a motion to cancel the sale, because the parties had entered into a loan modification agreement.

So far this story isn’t that interesting, except that the court denied the motion to cancel the sale. This case takes a further twist when after the foreclosure sale, in which Wells Fargo bought the property for $100, the court denied an unopposed motion to vacate the sale. Another way of looking at this whole case is that the trial court wasn’t too interested in the parties working things out.

As you can imagine Wells Fargo appealed to the 5th District Court of Appeals. The 5th DCA was probably scratching their heads like I was when they reviewed the case, so they did the logical thing and asked the trial court to explain their denials.

The explanation that the trial court came back with, was less than convincing in the eyes of the 5th DCA. The trial court reasoned that because Wells Fargo didn’t attach a copy of the modification agreement to their motions, then that provided the court with a basis to deny the motions. The 5th DCA bashfully pointed out that a copy of the modification was never necessary, and that there was no basis to deny the motions.

Don’t worry this story has a happy ending because the DCA reversed the trial court, thus restoring balance to the force (law).

In this bloggers humble opinion, central Floridas biggest city needs a new identity. The latin fever that has swept most of the country, needs a permanent imprint on Orlando. A name change needs to reflect the true feel of the city, while also showing to the rest of the world that it is a true international city. The best way to do that is by borrowing the name from one big city and applying it to Orlando, but with a twist. Thus, I have come up with REO de Orlando, rolls of the tongue doesn’t. Say the name to yourself a couple times, and you get a wonderful mixture of images from the real Rio and Central Florida, its a Mickey and samba fusion that no one can deny!

The name REO in our case has a slightly different meaning than Rio de Janieros, but just slightly. While their Rio, is translated to river, our REO stands for Real Estate Owned. (We might as well embrace our standing in the home foreclosure mess while we capitalize on a name change.)

New numbers from the Orlando Regional Realtor Association have shown that two thirds off all central Florida home sales were distressed sales, with REO sales accounting for half of the total sales activities. The exact percentages break down as follows, 46% were REO listings, 31% were short sales, and 31% were traditional sales.

The ORAA has not been too surprised with the amount of the market that REO homes have taken up, but has been surprised with how well they have been selling. The ORAA chairman of the board, Kathleen Gallagher, has said “foreclosures are selling quickly, especially in the lower price ranges that are attractive to first time home buyers.”

The best news out of the enitre report is that there seems to be more demand for these foreclosed properties, which the ORAA believes is a sign of slow progress to the entire Central Florida housing market.

This name change can work, and it would serve a dual purpose of increasing tourism while serving as an ever present reminder of the economic mess we were in.

Judges can be an interesting lot, they have so much power and influence, and yet are often reserved. However, one thing is very clear, when a judge wants to drop the hammer it can come down with a furious anger that will leave everyone in the radius shell shocked.

Such an event occurred recently when a Miami-Dade Circuit Judge wiped out a $207,000 mortgage, when all the homeowner was looking for was a loan modification! Now your first question might be what argument did the attorney make to get such a result, but that isn’t the question you should be asking, instead you should be asking what did the plaintiffs due to upset the judge that badly?

The answer is simple, they didn’t do what the judge wanted them to do. Defiance has its price and for the plaintiffs it was having the debt canceled. This whole case started when the bank was granted a foreclosure sale on the homeowners condo. After this a problem arose when the bank lost the note, and so the judge ordered the bank to post a $414,000 bond to indemnify the homeowner in case another lender filed a claim against the condo.

As you might have guessed the bank never posted the bond, and then moved forward with a foreclosure sale. The defense tried to stop this by arguing that the bank did not follow a court order. The judge agreed and brought the hammer down on the plaintiff by dismissing the foreclosure case with prejudice, canceled the mortgage, and returned title to the condo to the homeowner.

The part of the whole proceeding that the court could have charged admission to see, was when the judge dressed down the attorney for the plaintiff. The judge is quoted as saying, “Some day, this foreclosure crisis is going to be over, and you need to decide what kind of lawyer you are going to be.” She went on to say, “Because at the end of the day, you are responsible for your client’s compliance with court orders.” The attorney tried to apologize and said that this was all a misunderstanding of the order, but the judge had none of that and stated, “I don;t want apologies… I want performance. I want responsible attorney who meet the basic standards of know what … is going on in their files.”

The whole article is linked below, its definitely a good read and serves as a wonderful example of what not to do when a judge tells you to do something.

http://4closurefraud.org/2010/05/25/whoa-florida-judge-wipes-out-homeowners-207000-mortgage/

I was trying to think of a wittier title, but then I thought that I should just channel the inner Englishman in me and came up with “Poor Form.” I feel it aptly applies to a recent foreclosure mess that could cost some lawyers a few penalties. The general surroundings of this particular foreclosure case are very common and standard, bank isn’t getting paid and wants to foreclose on the home. It is with the little details that gave the lawyers for the bank problems, details like who actually owned the note.

When the attorneys for the bank initially brought suit they did so with US Bank as the named plaintiff. The problem is that US Bank never owned the note, and to make matters worse the attorneys for the plaintiff then tried to fix things by naming the real mortgage holder, HSBC Bank as the plaintiff, but falsely claimed that it was the successor to the original holder US Bank.

You don’t have to be a lawyer to know that giving false information to a court isn’t a good idea, you could say that its frowned upon. You know frowned upon the same way that dumping your car in the middle of the Everglades, lighting it on fire and then claiming it was stolen so you can get the insurance money is frowned upon.

The judge on the case said that the whole mess could stem from just sloppy preparation, but that doesn’t mean that the attorneys will avoid fines. Additionally, this whole mess up doesn’t mean that the homeowners are off the hook either, because the real mortgage holder can still file suit. This situation does serve as an example of what can happen when these large firms take on thousands of cases.

The defendants attorney has taken a more cynical view of the situation claiming that, “this happens all the time in various forms.” He went on to say, “they will do whatever they have to do … without regard to the truthfulness of what they are filing.”

Who to believe in this matter is tricky, but the hard and fast rule is you don’t present false information to the court, and even if you didn’t mean to its still poor form. A link to the whole article is down below.

http://jacksonville.com/news/metro/2010-05-25/story/foreclosure-foul-could-cause-court-penalties-lawyers

You might be asking yourself what is PACE? I know I did. It stands for Property Assessed Clean Energy, and its a federal initiative aimed at reducing the high upfront costs that home owners encounter when they are trying to make energy saving retro fits to their homes. Under the program the homeowner borrows money from their local government to pay for the retro fits and will then have to repay the local governments over a 15 to 20 year period through a special assessment that is added to their property taxes. The local governments fund the program by selling municipal bonds to local developers.

So far it sounds like a pretty rock solid plan. Homeowners get to modernize their home, electrical consumption goes down, more trees are saved, and local investors make a little money. The only problem is that Fannie Mae and Freddie Mac have concerns.

Their concerns stem from the fact that under this program PACE liens become senior to existing mortgage debt. Fannie and Freddie have gotten so concerned that they have sent letters out to banks that reminded them that they cant purchase loans that have senior liens on them.

Additionally, these letters are suggesting that Fannie and Freddie wont allow borrowers with PACE liens to refinance their homes or sell their homes until the lien is paid off.

Many supporters of PACE are concerned that if Fannie and Freddie still hold this view that the program will effectively be killed. They believe that because Fannie and Freddie control about two thirds of all the mortgage lending, and practically control what goes on with the market. Critics have their concerns as they believe that the program does little to ensure that borrowers can repay their loan.

What will happen with PACE? It looks like the writing is on the wall, if Fannie and Freddie don’t like it, then its as good as dead. I think PACE is a victim to bad timing, had it come out six years ago I’m sure it would have been a reasonably successful program that would have helped with our mounting energy problem.

Public perception can be a hard thing to break, once a popular view is established the public is typically unwillingly to change their view on this perception. Some popular ones are that, “carbs are bad”, “politicians are corrupt”, and my favorite “Revenge of the Sith is better than Return of the Jedi.” Many are comfortable with broad assessments of people and situations, and to a degree many public views have their merits.

A newer public perception deals with how many view strategic defaulters. Ask your average person about how they feel about someone who can pay their mortgage, but has decided not to, so as to save themselves money, and they wouldn’t have kind things to say about them. Certainly, many would call them cold and calculating, or that they should honor the contract that they signed because to not do so is dishonest. Simply put, there is strong negative public perception of strategic defaulters.

That perception could be ready to change, as there is new research that has gone into the motivations of strategic defaulters. The findings are surprising and show an emotional complexity that most people have not considered. The research by Brent White, an associate professor of law at the University of Arizona, has found that the decision to strategically default is mostly motivated by emotion and not from financial considerations.

He found that these borrowers, “feel great anxiety about their financial situation, are overwhelmed by a sense of hopelessness and are angry” about how the lenders are refusing to help or that the government is not taking any action. He also found that many of these people are fearful with proceeding with a strategic default because of the social stigma that attaches with those that foreclosed on, and often go to great lengths to avoid the default option.

Mr. White also found that many strategic defaulters were more likely to default if they knew someone who had already done so. Additionally, in his research Mr. White has found that many strategic defaulters feel frustrated and angry with a system that they perceive to favor those who were not responsible with their money, and feel “left out while the less deserving get help.”

Overall these strategic defualters shouldn’t be ashamed for what they are doing, often they are making a sound financial decision that is in their best interest. Large companies walk away from bad investments all the time in order to survive and make their business work, why should the individual be any different. The idea of paying full value for something that is now only half value, is absured.

The foreclosure market is headed toward a devastating scenario, according to the State Foreclosure Prevention Working Group. They have cited to disturbing trends in the market including the rise of delinquent mortgages outpacing servicer outreach and loss-mitigation efforts.

Attorney General Rob McKenna said, “programs to help prevent foreclosure are jammed up, while 60 percent of delinquent borrowers aren’t getting any help. Servicers must do more.” Some of the more disturbing findings of the market include: Six of 10 seriously delinquent borrowers are not even involved in loss mitigation efforts, both loss mitigation and foreclosure efforts are backlogged with the average time to complete a loan modification for some servicers is more than six months, and most modifications result in payment reductions but principal reductions are rare.

With these findings the State Foreclosure Prevention Working Group has proposed some recommendations to avoid future trouble, including: Servicers should suspend foreclosure proceedings on any loan involved in the loss mitigation process because in some cases homeowners have lost their homes while being told they are being considered for a loan modification, loss mitigation programs must be improved to prioritize principal reduction in areas of significant home price declines, the HAMP program must increase transparency and reduce paperwork in order to reach its potential, and both servicers and the U.S. Treasury should provide better options to keep unemployed homeowners in their homes.

The proposals make good sense and would certainly help the foreclosure industry, the first recommendation in particular would help alleviate many heartaches and confusions. The situation in which a home owner is going through the complex and laboursome process of trying to get a loan modification only to later be foreclosed on is inherently unfair.

Many in this situation are following the instructions of their mortgage holder in an attempt to do the right thing and get a manageable loan modification, they are often assured that this is the way to avoid foreclosure. Being foreclosed on after going through the process of trying to get a loan modification sends the wrong message to millions of people in a similar situation.

It tells those people that there is no point in trying to work things out or being proactive with the mortgage holder, because when the process is over it just ends up being a waste of time. With these suggestions comes the hope that business and an industry changes its ways, these recommendations are a start to hopefully a less painful year than 2009.