Orlando Foreclosure Defense

It is getting harder and harder to keep up with all of the clever terms analysts have been coming up with in the foreclosure game. This new one, Jingle Mail, is clever and pertains to a particular sort of phenomenon, the commercial walk away. Jingle Mail, refers to when the commercial property holder sends the keys to the property to the mortgage holder, instead of making their monthly payments, even when they can afford to do so.

The reason why these commercial property holders are walking away is no different than the reason many homeowners are walking away, the loan is more than the property is valued. The biggest difference is that the values are not in the tens of thousands, as many homeowners face, but in the millions. A perfect example of the commercial strategic default occurred when Taubman Centers, Inc., walked away from the Beverly Hills Center when they stopped making interest payments on the $135 million mortgage, because the value of the property had fallen down to $52 million. The chief executive, Robert Taubman said, “we don’t do this lightly,” but it would be clear to anyone with any sort of business sense that this was the right move.

This brings me to the hypocrisy that the banking industry, and much of the public, has when an individual homeowner strategically defaults, opposed to a business. The banks tell us that the individual is duty bound and obligated to make payments when they can afford it, but they accept that a business will walk away from a multimillion dollar property in the same situation because “its business.”

In fact the system is complacent in allowing commercial property owners an easier time to walkaway because often the loan is nonrecourse. Which means that often the most severe penalty is the forfeiture of assets and cash flow they generate. The double standard goes deeper, as the industry is willing to accept a catastrophic 2014, in which $1.4 trillion of commercial real estate debt will come due and of those properties 52% will be under water. Of those under water the debt-analysis company Trepp LLC expects many to walk away.

Trying to guilt homeowners into paying their mortgage when it no longer makes any economic sense, is the last card that mortgage holders can play and it is slowly starting to fail as many are treating their lives with the business savvy of a major corporation.

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).

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

Normally when some one has to give up their home through a short sale or just gave back the deed to the lender, they would suffer a hit of having to wait up to four to five years before they could re-qualify for financing to buy another home. Instead Fannie Mae wants to reduce that time to as little as two years. In a recent bulletin to lenders Fannie Mae said it was relaxing rules that prevented those that participated in a short sale or a deed in lieu of foreclosure from obtaining mortgages for up to five years.

There are some strings attached to this in order to qualify in two years. In order to qualify in two years most borrowers will need to put a minimum of 20% down, if they can only put down 10% then the wait could move back up to four years. And if they put down less than 10% the wait could be even longer. Those that can show that there were “extenuating circumstances” (like a loss of employment, divorce, or health issues), then they might be able to qualify for a new loan within two years. Fannie Mae isn’t helping out everybody, as those who lost their home to foreclosure will still have to wait a mandatory five years.

Before anyone can get to the point of how much money down they can put there is one substantial hurdle they must clear, they must be able to meet Fannie Mae’s rehabilitation requirements. In order to qualify for a new mortgage Fannie Mae wants borrowers to reestablish their credit sufficiently to get a passing score on the companies automated underwriting system. However, according to the bulletin, Fannie Mae wont consider applications with non-traditional credit.

This is great news for those who qualify and allows many people who have been able to recover a faster path to becoming a home owner again. These changes are set to take effect on July 1, and it will be of great interest to many annalists to see the impact it will have on the sluggish housing market.

One of the key principals of any business is to listen to your customers when they express concerns or suggestions. This sort of input has led to all types of changes in the market place, from the cardboard sleeve that wraps around a cup of coffee to full size spare tires in cars. Companies listen because customers express real life experiences with their products and these experiences give them valuable information that could never have been anticipated in a think tank setting.

This concept has not been lost on our federal government because they now want to hear from the public to gather suggestions as to how to fix housing. The government wants the public to provide comment to questions that will be published in an upcoming release of the Federal Register. While the idea is sound many of the questions are open ended and I am not sure who exactly they had in mind to answer some of them.

Here are a few examples of the government questions:

How should federal housing finance objectives be prioritized in the context of the broader objectives of housing policy?

What role should the federal government play in supporting a stable, well-functioning housing finance system and what risks, if any, should the federal government bear in meeting its housing finance objectives?

Should the government approach differ across different segments of the market, and if so, how?

How should the current organization of the housing finance system be improved?

How should the housing finance system support sound market practices?

What is the best way for the housing finance system to help ensure consumers are protected from unfair, abusive or deceptive practices?

Do housing finance systems in other countries offer insights that can help inform US reform choices?

The questions are designed to focus on what the housing finance system should accomplish with a big picture view. While it is a good step in hearing out the public on many of these issues, one hopes that this questioner is not a veiled attempt to make it look like the public’s views are being considered when in actuality the government has already decided what directions to take.

Divorce was once simple, noble even, but things change. It used to be a grinding, bloody, take no prisoners affair, an inter family “Battle of Somme”, no one really wins but each side perceives a victory. The one item on every divorce that is the single most fought over property, is the home. Many going through a divorce would rather have their dog go to the other spouse than the home. The goal for most is to keep the house at all costs a sort of “don’t give up the ship” mentality that allows the person who gets to keep the home a sense of victory over the other spouse.

Today the world is upside down as the new norm in a divorce has the spouses fighting over who doesn’t get the house. Its a mad world we live, but there is a reason why these spouses are playing hot potato with their home, its negative equity. Before the housing crisis and in most situations the house was an asset which could be divided between the spouses. The big problem now is that the homes at issue between the divorcing spouses are worth less than the mortgage they are paying on it, and the idea is to not get stuck owning the house when its going to be a financial burden.

“I had some folks that bought a home and then ended up splitting up, and the home hasn’t been worth enough to sell. They ended up renting it for a loss,” said Chris Upham, a Coldwell Banker real estate agent who works throughout the Washington D.C. region.

Once the housing crisis settles and things return to normal so too will divorcing spouse battle to keep the home from the others hands. This period will likely serve as a strange tail to upcoming divorce attorneys, and even possibly serve as the premise for a romantic comedy film in which a divorcing couple rekindles their love through their exploits of tricking the other to take the house.

The housing crisis is a multifaceted monster and one of the biggest facets is negative equity. Simply put, negative equity occurs when the value of an asset (a home) used to secure a loan is less than the outstanding balance on the loan. The common term for people finding themselves in this particular situation is being “underwater.” Those homeowners with negative equity are faced with an aggravating situation in which they are paying back their loan for property that no longer has the value that it had when the loan was created. Many will say to themselves “whats the point”, why should I keep paying for something that in some cases has lost up to half of its value.

As this line of thinking became more wide spread the housing crisis exploded and fueled a combustible environment. Recent numbers are now clearing up the picture as to how bad things have gotten, they show that in 2009 a quarter of all home owners owed more on their mortgage than their home was worth. The future looks grim for home owners who have lost half of the value of their home because it would take ten years at 5% growth to get back to the initial value. The more troubling developments is that there are many people who can afford their loans but are now strategically defaulting on the loan. “People who are vastly underwater will look at what they’re paying compared to what they can rent, and those people are throwing their keys back,” says Daniel Alpert, managing director at Westwood Capital. The numbers from 2009 to 2008 have doubled of those people who have strategically defaulted reaching almost 600,000. The negative equity problem is also hampering our economy in that homeowners dont have an equity in their home to borrow against and use that to invest in other areas whether it be opening up their own business or using it for home improvement.

The Federal Deposit Insurance Corp is currently working on a plan to help those homeowners who are in severe negative equity situations by reducing their mortgage balance. Borrowers would be eligible for a reduction in their mortgage balances if they kept up their payments on the mortgage over a long period. The only down side to the proposed program is that it would only effect mortgages from failed banks which is currently only one percent of outstanding mortgages.

We love the idea of a dream home, a perfect sanctuary from the hassles of work and society, a cozy den that makes all of the struggles in life worthwhile. It is strange how that for some homeowners that dream home becomes a loathsome object and the desire to do it harm boils over and into destructive actions.

Anger, fear, and resentment are powerful motivators in making some homeowners destroy the place they once called home. A foreclosure can do that to some and its easy to understand the desire to destroy something that was once so dear to them. Its an interesting reaction that people have, they would rather destroy the home than let someone else enjoy it; many also vandalize their home so they can teach the lender a “lesson.” Real-estate agents estimate that about half of foreclosed properties to be sold by mortgage companies nationwide have “substantial” damage, according to a new survey by Campbell Communications, a marketing and research firm based in Washington, D.C.

In Las Vegas the vandalism has been carried out with a special brand of venom and rage. Mr. Carver of Prudential Americana Group, who has been in the business of listing foreclosed homes, recounted one recent home that was the perfect example of vicious vandalism, “[l]ight switches, outlet covers and thermostats were smashed. There was what looked to be crowbar damage along the staircase. A large pool of paint had hardened on the living-room carpet. It appeared that someone had dripped motor oil in a trail that wound its way through every carpeted room. The appliances were gone, as were most light fixtures. A cabinet door had been removed and left soaking in a full tub of water. Not a wall was left without a hole the diameter of a closet rod, including the pink child’s room once carefully decorated with a floral wallpaper stripe.” Others have taken a more profitable approach to the destruction of their foreclosed home by selling off the oven, refrigerator, built in microwave, and the dishwasher, all of which are technically part of the home and are not separable.

Banks rarely pursue charges against destructive homeowners; it’s not worth the cost and trouble. Instead banks are now paying foreclosed homeowners to walk away without causing any problems. They have paid out as much as three thousand dollars to some home owners and the practice looks to be continued as the banks are desperate to avoid any unnecessary hurdles in selling off their foreclosed properties.