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.

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.

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.

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.

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.

The internet has proven a useful tool in unloading foreclosed property in a quicker fashion than the old way of doing things. Online bidding on foreclosed property has allowed more people to get involved in the process from the comfort of their own home. It has also expanded the audience of potential buyers from local residents to anyone who has access to the internet.

As nice as this online bidding system has been it has also opened up many pitfalls for the novice buyer. One problem in particular is that the way that the website is set up does not indicate whether they are bidding on a second lien or an ownership interest in a condo. With the bidding it can seem like the buyer is getting a great deal for an ownership interest in a condo when in fact they have spend thousands to take the place of a second lien holder, and essentially wasted their money. Their interest in the condo can be wiped out once the primary lien holder forecloses on the property.

Essentially under this bidding system that doesn’t disclose if its a secondary loan or not people are paying a premium for a worthless secondary lien. The entire listing is very deceiving in that it shows the address of the property, Google satellite views, and a property appraisal, all of which is standard and can confuse the bidder into thinking that they are bidding on the primary mortgage. This is a classic example of “buyer beware”, those bidders who head into this complex world should not do so without doing their due diligence.

The obvious solutions would be to do one of two things. First these listings could have a more thorough description of what the bidder is actually bidding on, with a detailed description of whether its a primary ownership interest that they are bidding on or a secondary lien. The second way to address this problem is to just not place secondary liens in the system to bid on. Neither is likely to happen as the Clerk of the Court is content with the current system.

The best advice for any newcomer to the foreclosure game is to do your homework when looking to bid on a property and be skeptical of sweet deals because if you are one of only a handful of people bidding on a property then chances are most people know something you don’t.

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.

In this volatile real estate market and recession economy, many homeowners are faced with the difficult decision of choosing between filing a bankruptcy and defending a foreclosure. Unfortunately, the dominant thought among most attorneys is that bankruptcy is the proper remedy to address foreclosure. Our law firm handles both foreclosure defense and bankruptcy, so we have the benefit of seeing both sides of the coin.

For many individuals with extensive consumer debt or medical debt, as well as debt relating to real estate, bankruptcy is an option. (however, one should never forget the power of negotiating debts).

For those individuals who are mainly dealing with debt relating to their real estate holdings, it is often a poor decision to file a bankruptcy prior to defending a foreclosure.

For those individuals trying to save their homes or real property, a Chapter 7 bankruptcy will do little to save a home, except briefly delay a foreclosure case. In fact, Chapter 7 is designed to liquidate debt. For those individuals considering Chapter 13 bankruptcy, they will be met with an often difficult and lengthy repayment plan. Bankruptcy judges are not endowed with the authority to modify mortgages; therefore, Chapter 13 is often not helpful to homeowners.

A clearer way to protect a home is to pursue one of the many foreclosure alternatives including loan modification, reinstatement, or refinancing. Often these alternatives take time and may take skilled legal advice. While in the process of pursuing foreclosure alternatives, property owners may be sued for foreclosure. A skilled foreclosure attorney can help defend the foreclosure and advise borrowers regarding foreclosure alternatives.

Many people are not interested in saving their homes. Perhaps they have no equity or are upside down, where they owe far more than the property is worth. Perhaps they do not have the financial means to qualify for a loan modification, reinstatement, or refinancing. Or perhaps they are simply tired of the system- they are fed up with dealing with banks. Many people fear a deficiency judgment more than anything else. A deficiency judgment may arise where a borrower’s property sells at a foreclosure auction for less than the amount that is owed on the loan. In such a scenario, the borrower could be held responsible for the difference owed or the “deficiency” amount.

While the potential for a deficiency judgment is a valid fear for homeowners, there are tools and options that will avoid a deficiency without filing bankruptcy. First, the homeowner may enter into a short sale, where the bank approves the sale of a home for less than the amount owed. In a short sale, the bank forgives the difference owed and the borrower is relieved of any liability.

Another solution to avoid a deficiency judgment is a “deed in lieu of foreclosure.” In a deed in lieu scenario, the borrower turns the deed over to the lender in lieu of foreclosure; this means that the lender promises they will not file a foreclosure or seek a deficiency judgment against the borrower. A deed in lieu avoids a deficiency judgment, without the need to file bankruptcy.

Finally, for those individuals already facing a foreclosure lawsuit, a skilled foreclosure lawyer should be able to defend foreclosure cases and negotiate a favorable “consent judgment.” In such a consent judgment, the borrower consents to the entry of a foreclosure judgment in exchange for the banks promise and guaranty to waive any deficiency against the borrower. Many of our clients want us to time the entry of such a consent judgment so that they are able to get the maximum time in their home. This arrangement affords our clients the maximum use of their property and also allows our clients the opportunity to pursue other options as they see fit, including loan modification or reinstatement. There is a great deal of value for those borrowers that choose to pursue a consent judgment- the borrower essentially walks away from the property without owing money to the lender, and without having to file a bankruptcy.

While not every homeowner may be able to pursue a loan modification, short sale, deed in lieu or consent judgment, these are excellent options to avoid debt and avoid filing a bankruptcy. Moreover, while borrowers pursue these options they are able to continue living at the property, or renting the property to tenants. This usually means that money is saved or money is earned. Finally, if these foreclosure options do not work out in the long run, bankruptcy is always a failsafe option- it can always be filed if everything else fails.

The Kramer Law Firm defends foreclosure and represents individuals in bankruptcy throughout Florida. For more information on mortgage foreclosure defense, please visit http://www.mykramerlawfirm.com/Foreclosure-Defense-Overview/Foreclosure-Defense.shtml. For information concerning bankruptcy, please visit http://www.mykramerlawfirm.com/Bankruptcy-Overview/Bankruptcy.shtml. The above article is not intended as legal advice and should not be taken as such. Always consult with an attorney of your choosing concerning any legal questions that you may have.