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.

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.

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.

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.