Orlando Foreclosure Defense

With the endless backlog of foreclosure cases sitting in the system, waiting for their turn in court, the state has finally decided to spend some money to help move things along. Recently a $6 million boost to trial courts and $3.6 million to court clerks has been granted by the legislature to help trim down the backlog of cases. The money is going to be used toward hiring more case managers, general magistrates, and additional senior judges.

The backlog of cases is one of the largest in the country with an estimated amount of 600,000 statewide. The stated goal with this money and additional hiring is to reduce the backlog by 350,000 cases by the end of June next year. Kristine Slayden, who works for the Office of the State Courts Administrator, has stated that, “The Legislature said we’ll never get out of the housing slump if houses are sitting out there vacant. This is going hand-in-hand with managed mediation that has a time frame goal of 120 days in resolving cases.” Additionally Slayden said, “Hopefully, this is providing an opportunity for homeowners to have a voice in what is important: to stay in their homes.”

As a means to supervise the progress of the courts and encourage monthly improvements the OSCA has outlined monthly progress reports that must be followed and reported back to the OSCA. So far one of the speed bumps to the plan has been that lenders are constantly asking to postpone sale dates on foreclosed properties. This has frustrated the OSCA as the increased funds have opened up more dates in the calendar, which the banks are not taking advantage of.

The goal of reducing this backlog by 62% is lofty, but the OSCA is rather confident that this injection of money and resources will be able to help reach that goal. Some counties are already reporting some gains in reducing the backlog in their areas because of previous steps, while others have reported little to no change. While it is commendable that the state is trying to address this problem, it is unlikely that it will be able to achieve their goals because the OSCA is depending on the amount of foreclosures to fall this coming year and that is a rather hopeful expectation.

That headline is the worst nightmare for any law firm, and for three of them in South Florida its a reality. The Florida Attorney General has recently issued a subpoena requesting thousands of papers from attorneys working on foreclosures. This investigation is targeting firms that handle a substantial volume of foreclosure cases for lenders, those firms are the Law Offices of David J. Stern in Plantation, the Law Offices of Marshall C. Watson in Fort Lauderdale, and Shapiro & Fishman which has offices in Tampa and Boca Raton.

Attorney General Bill McCollum has said that the reason for the investigation is that these firms may have presented fabricated documents in court to obtain get foreclosure judgments. The Attorney General has also claimed that these firms actions may have impacted thousands of cases in which the lender received a final judgment against the homeowner.

This whole situation has only just come to the attention of the economic crimes division because attorneys for homeowners brought it to their attention. The director of the economic crimes division, Mary Leontakianakos, has said, “I can tell you having seen some of this paperwork there is clearly some concern.”

The attorney who represents Stern’s firm, Jeffrey Tew, has said, “Every foreclosure is personally supervised by a circuit judge who is there to do one thing: Make sure the rights of the borrower or lender are protected.” In addition to this investigation by the state, Stern has also been sued by a homeowner who has accused them of generating fraudulent mortgage assignments.

This is the second time within the past year that the state has moved to investigate firms that handle foreclosures. As with the first time it will certainly take some time and effort to sort through the thousands of documents that will be involved with the investigation. These sorts of developments bring with it a great deal of anticipation to find out the end result, but as time is the enemy with these investigations it will be some time before we all find out the result. I will certainly keep abreast of any developments in this and hopefully update with a posting.

Its no secret that Central Florida is at the forefront of the housing crisis, and that the area can serve as a measuring stick as to how the whole country is faring in the industry. So, it should serve as some positive news that recent reports are showing that the Orlando metro area has shown a jump in permanent mortgage modifications within the past three months.

In the past three months there has been about 7,800 permanent loan modifications in the metro Orlando area. This is a 65 percent increase from the previous three month period. The latest report also shows that Orlando is in the top of the nation for receiving loan modifications, showing that Orlando has had 15,130 through the end of June.

This recent report has also revealed that many more homeowners are willing to extend the terms of their loan for another decade, in order to secure their modification. The report certainly shows a jump in those willing to accept these terms from only 39 percent who were willing three months ago to 56 percent who are willing now.

Out of the entire US Department of Housing and Urban Development and the Department of Treasury report, the most encouraging numbers were that those who received permanent modifications, the median had $500 a month cut from their monthly payments.

As there was a fair amount of positive news in the report, there were still areas of concern which showed that the industry as a whole is still not moving forward at a quick enough pace to modify loans. An example that the report showed was that Bank of America, which is one of the largest mortgage holders, has only addressed 15 percent of the mortgages that are behind on their payments two months or more. While in comparison, the industry average is at 23 percent for conversions.

While this report is a positive sign that modifications are happening in Central Florida, one can only hope that this report shows the begging of a trend upward in helping out homeowners.

The man of steel is usually busy fighting off aliens, or Lex Luthor, but recently he showed that he is willing to help out a family facing the loss of their home. Now you might not think that Superman saving a home makes for an exciting story for a comic book, and you would be right. I doubt that even the biggest Superman fan would want to read a comic book about Superman’s legal battle to save a family’s home from foreclosure, its just not compelling.

However it is compelling when it actually does happen. You might be expecting that the last Superman actor, Brandon Routh, helped some poor family after hearing their story, but that’s not the case. Instead the comic book version of Superman came to the family’s aid in the strangest way.

A family living in the South was about to lose their home through foreclosure, it was an inevitability, there was no rich uncle to bail them out nor a technicality that could save them. In the family’s cleaning up of the house to start the process to move out they came across a box of old comic books. In that box they found the holy grail of comics, Action Comics #1, also known as the first appearance of Superman.

All along they had sitting in their basement one of the most valuable pieces of Americana pop art. Recent copies have sold at auction for $1 million to $1.5 million. The comic book graders believe that this family’s copy won’t fetch that amount at auction, but they still believe that it can bring it $250,000 at a minimum.

It’s heartwarming to read good news like this and realize that sometimes little miracles can happen. It also teaches a valuable lesson, don’t through away your kids comics; they could save his house one day.

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

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/

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.