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.

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.

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.

“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.

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

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.

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.