Orlando Foreclosure Defense

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.

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.

Its hard to appreciate a mountain when your standing on top of it, sure the view is nice but you don’t get a feel of how big and tall it really is until you step away. The new US housing market was such a mountain, which achieved monstrous heights just five years ago and has now been humbled down in size.

A recent report from the Commerce Department has put into numbers what everyone has already known, we aren’t building new homes at the pace we used to just 50 months ago. In fact activity is at its lowest level since the Second World War.

The report shows that this year we will build 454,000 single family homes, which is just slightly more than the 442,000 we built in 2009. The Department has put these figures into context by showing that the US is producing new homes at a third of the level we did in 2007, when we made 1.3 million new homes, and less than a quarter of the level in 2005, when we produced 2.07 million new homes.

Analysts have compared this report with previous data and have come to the conclusion that this is the longest and deepest housing downturn on record. While that information isn’t too surprising, the fact that many analysts remain hopeful for a coming recovery is surprising. Some view the data a stabilization of the industry, with this years uptick in building as a sign that a slow upswing is on the horizon. Others are maintaining that the market has bottomed out and that in the next year or two the upswing in home building will see sizable increases.

While some are looking at the news with a silver lining, most maintain that this data is troubling. Especially since Wall Street had low expectations to begin with and anticipated numbers of around 730,000 in new homes being built.

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.

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.

Flippers, (not the ones who love your driving), have been both celebrated and despised by the general public. Many feel that flippers are the reason why the housing market went into the tank, while others have applauded them as being shrewd business people. However you may feel about them, there is one couple in south Florida who wants to take them to court.

They are suing the builders of their town home community, they say that it is filled with transients, who party all night, park all over the place, and worse of all have installed unauthorized satellite dishes. (I’ve lived in communities where satellite dishes are banned, and let me tell you, if they find out you have put one up they are hunting you down with a zeal that would make Jack Bauer proud.)

They want to be reimbursed for the purchase price of their home and are also claiming to be suffering from emotional distress, embarrassment, and a loss of capacity for the enjoyment of life.

When the couple originally bought their home in 2004 they paid about $360,000 for it, and it is now valued at $160,000. They feel that part of the reason for the decrease in value is due to the constant flipping of houses in the neighborhood. They claim that perpetual flux that the community was in damaged its reputation, and created an environment in which transient owners would destroy the neighborhood.

Of the 157 lots that were sold in between 2005-2006, 78 were relisted within 18 months. Those numbers certainly support the couples portrayal of a transient neighborhood. The couple claim that the builders had stressed to buyers that they had to stick around for at least 18 months, in order to facilitate a stable community, and are angry that the developer did nothing to prevent this situation from occurring.

The couple say that they feel misled and duped into joining a community of real estate speculators.

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.