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Archive for November, 2010

Beware of title problems as foreclosure sales resume

Shannon Behnken of the Tampa Tribune covered the story about Fannie and Freddie resuming foreclosure sales the right way – by reminding everyone: (1) flooding the market with properties will further drive down real estate values; and (2) there are significant concerns about the validity of title being conveyed by properties in foreclosure sales.  

Here’s the article:

TAMPA – Mortgage giants Fannie Mae and Freddie Mac have lifted their ban on selling foreclosed homes, which could potentially double the number of these homes available for sale in the region.

That could be good news for home buyers who now have a lot more options. But flooding the fragile real estate market with distressed homes will further push down prices, some industry leaders say, and make it more difficult for traditional home sellers to compete.

Some question whether buyers will even want the foreclosed homes.  With allegations of foreclosure fraud still unsettled, can buyers trust they’re getting these homes free and clear? Do they have to worry that later – even years later – the previous homeowner could sue to get the house back?

“If you pick a random case, the chances are good that there won’t be a title problem,” said Mark Stopa, a Tampa foreclosure defense attorney. “But I wouldn’t be surprised if there are 50,000 cases in Florida where the previous homeowner would have a valid claim to void the foreclosure.”

Fannie and Freddie together hold about half of the foreclosed homes in Florida. Both of them halted sales of foreclosures in September, amid revelations that servicers were signing key foreclosure documents without reading them or verifying the information was true, as required by law.

There also are accusations that some firms hired to serve homeowners with lawsuits failed to notify them. Some homeowners say they thought they were working on loan modifications with their lenders only to find out later that the home was already sold in foreclosure.

In those cases, foreclosure defense attorneys say, judges could reverse foreclosures, causing title problems for buyers who purchased these homes.

Stopa is representing two former homeowners who are suing to get their homes back. In both cases, the plaintiffs say they weren’t given the chance to defend themselves in court.

In one case in Pinellas County, Michael D. Carlson has asked a judge to undo a foreclosure judgment against him from 2008. He says he didn’t know about the foreclosure proceeding on his Dunedin rental home until he went to check on the house and found the bank owned it.  Bank of America sold the home more than a year ago to another family, Stopa said, and they had every reason to believe they owned the foreclosed property free and clear.

The Carlson case represents “the perfect storm” and a home buyer’s worst nightmare, said, Peter Murphy, a consultant with Tampa-based Home Encounter, a real estate consulting firm and brokerage that tracks local real estate trends.  Buyers can never be sure there won’t be a challenge to the title, Murphy said, but title insurance should protect them from liability.  “Now that doesn’t mean they’ll get to keep the house if there’s a challenge to the title and, yeah, that’s unnerving,” he said.

Home sales in the Tampa-St. Petersburg-Clearwater area plummeted 25 percent in October, compared to a year ago. Real estate agents said the foreclosure moratorium was partly to blame because some pending deals fell through.

Putting the homes on the market all at once will cause home prices to drop, but Murphy said he thinks it’s better to get it over with now.  “If you wait, neighborhoods and homes will further deteriorate,” he said. “I don’t think homes will fly off the market, though, because people are fearful as to what will happen in the economy.”

Vernon Taylor, president of the Greater Tampa Association of Realtors, said he’d “be nervous to buy a foreclosed home.”  “Buyers don’t want to go through this hassle and find out later they have a problem,” he said.  Even so, Taylor agreed with Murphy that it’s best for the market to work through the inventory now, not later.

Mark Stopa

www.stayinmyhome.com

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Strategic Default – real stories from real homeowners

The following is a comment posted on this website from a frustrated homeowner, in response to my blog about Strategic Default and Depleting Savings / Retirement Accounts.  I think the comment contains a powerful message, so I posted it here, below.

The entire comment is worth reading, but check out this sentence in particular:

I can see no reason for me to use the last few dollars of my savings after having depleted my retirement, in order to satisfy a bank that cannot and will not produce the note, has placed me in a mortgage that is impossible to maintain and illegal, and continue to pay for a property that by the preplanned ponzi scheme perpetrated by the banks, is continually decreasing in value.

If you’re in the position of having to deplete savings/retirement monies to pay a mortgage on a home that’s already underwater, I’d think long and hard about this entire comment and this sentence in particular.  As you do, bear in mind – these aren’t my words.  These are the words of a frustrated Florida homeowner.  Unfortunately, he’s one of many who have shared horror stories like this with me.   

 

I have tried for 4 years to negotiate with the servicer on my mortgage. Initially I asked them to waive the pre-pay penalty so I could sell the house without having to pay to do so. I was denied on the basis that the pre-pay penalty was 3 years at 3.5%. in 2007 the property values fell so drastically that I again asked my lender to recast the note and lock in the rate, since they had put me into a flex pay mortgage which I was not informed of until I noticed the principle increasing when I made what I thought was the required mortgage payment. They refused telling me I would have to requalify and based on my current working situation, being 1099 my income would not support the refinance, plus all the fees added on to a mortgage that was already higher than the value of the house.
In September of 2010 after almost depleting my savings and 401K. I again approached the servicer firstly requesting they produce the note, since in looking over my loan package, I had not been given one single copy of any document I supposedly had signed. All the documents were blank. They replied telling me I would need to submit a total of $185.00 for them to produce a note that I should have been given at signing. I refused. In october I received along with this letter requesting payment, a letter from the servicer, telling me my interest rate had dropped to 3.5% from 4.25% and the index had been reduced by half, yet my mortgage payment had increased by $115 per month! Immediately I called them assuming there had been a mathematical error. I was informed they had recast the note (as the docs which I don’t have indicate it can be done every 5 yeears) and shortened the term in order in increase the payment thereby increasing profitablility! I was completely outraged. I’m 60 years old and struggling to make a payment as it is and in reality I am no longer in any type of good health to maintain their property. Up to that point, I was current. I informed them I would no longer be making any payments as I had recast my budget and it was no longer financially feasible for me to be paying them for the privilege of maintaining their property. Henceforth, they could pay ME to maintain it or it could simply fall into disarray. I had been postponing moving back to Canada to take care of my aging mother and a sister who is terminal in the effort to take care of this house. Now I am moving back to Canada, I’ve rented the house, and I’ve strategically defaulted on my mortgage. I can see no reason for me to use the last few dollars of my savings after having depleted my retirement, in order to satisfy a bank that cannot and will not produce the note, has placed me in a mortgage that is impossible to maintain and illegal, and continue to pay for a property that by the preplanned ponzi scheme perpetrated by the banks, is continually decreasing in value.
I will need an attorney I am sure, and I will certainly call on Mark for this service. I am impressed! It is refreshing to see there are attorneys out there who truly defend and represent their clients and expect the letter of the law ot be adhered too.
Thank you for this blog..I will be calling your office on monday!

Mark Stopa

www.stayinmyhome.com

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A Short Sale is not a cure-all

This article from USA Today addresses a common misconception among homeowners facing foreclosure and the public at large.  Quite simply, even if you sell your home in a short sale, that may not be the end of your problem.  In Florida, like many other states, if you owe $250,000 but your home sells in a short sale for only $150,000, you still owe the remaining balance (called a deficiency) to the bank.  

There are exceptions, of course.  After all, the bank may agree to waive the deficiency and accept the short sale price as payment in full.  However, most short sale contracts are not set up this way.  In fact, most contain language that enable the bank to pursue the deficiency at a later date.

With this in mind, homeowners should think about what they are accomplishing by consenting to a short sale.  If the bank can pursue you for the deficiency, I’d argue you gain nothing at all by consenting to a short sale.  In fact, I believe you hurt yourself, as: you lose any leverage you may have had to negotiate with the bank (ownership of the home).  

I don’t want to pick on realtors, but many realtors either don’t know the full ramifications of a short sale or don’t care.  After all, they get their commission regardless of whether the homeowner remains on the hook for a deficiency.  

This are not hypothetical concerns.  I’ve seen this dynamic at play in my foreclosure defense practice, and USA Today is writing about it.   

Here’s the article…

PHOENIX — Some former homeowners who went through short sales to avoid foreclosure are finding they are still in debt to their lenders.Because the short-sale concept, which allows people to sell their homes for less than they owe, is designed specifically to help homeowners avoid having to pay their lenders more money, some sellers have been careful to negotiate their deals so the lender, by contract, can’t later seek payment. Those who haven’t done so are at risk.

“I know that there is a great deal of confusion and uncertainty about this issue,” said Michelle Lind, general counsel for the Arizona Association of Realtors. In Arizona, many people thought they were covered by a law that bars lenders from seeking payment from a borrower after foreclosure if a bank cannot sell a property for as much as was owed.

“The law is unclear,” she said, “and there are many variables that factor in.”

Tricia Goldblatt sold her Phoenix home through a short sale last year after losing her job as an executive assistant at an engineering firm. A few months ago, she started receiving calls from a collection agency.

“They are telling me I owe $10,000. I did a short sale to get out from under my mortgage,” she said. “I don’t have that money. I had to move in with my mom.”

Goldblatt said she thought the documents for her short sale specifically stated her liability for both her first and second mortgage would be terminated. But the collection agency said it bought the note on her home-equity loan from her lender and wants to be paid.

Home-equity loans, or second mortgages, appear to be the biggest pitfall.

Plunging home values in across the country left many homeowners unable to sell their homes for enough money to cover what they owed on their first mortgages, let alone a second mortgage.

Some can work out deals to close their second mortgages. Often, lenders who issued a home-equity loan will accept $2,000 to $5,000 to let the homeowner walk away from the debt.

Other lenders seek to recoup more of the debt, requiring sellers to sign promissory notes to pay a portion later.

But many sellers think that once the short sale is completed, they are free of liability. That’s when the unwelcome calls can begin.

There usually is a lag between a short sale and when a lender will try to collect on unpaid debt or sell it to a collection agency. It was almost a year after Goldblatt’s short sale when she was contacted by the collection agency.

Many real-estate agents working with homeowners on short sales refer them to lawyers or make sure the deal calls for the dismissal of all the debt related to the house. The sales require more paperwork and negotiations and are still relatively new to many agents. And, with short sales at record levels nationally, lenders are continuously updating their guidelines.

“It’s tough to figure out who owes what to whom in a short sale,” said Margie O’Campo De Castillo, a Phoenix real-estate agent. She said she advises sellers to visit a lawyer before closing their deals.

Real-estate agents and attorneys say some lenders are forgiving all portions of mortgages not covered by the home’s resale. But homeowners shouldn’t count on it.

“But it’s still important to get it in a signed contract,” said Kevin Kauffman of Keller Williams Arizona Realty.

“My warning is that short sales are very dangerous for the seller,” said Diane Drain, a Phoenix real-estate lawyer. “They must get legal and tax advice from someone who does not profit from the short sale.”

Mark Stopa

www.stayinmyhome.com

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Reversing a Foreclosure – Invalid Service of Process

I’ve spoken about reversing a Final Judgment of Foreclosure for invalid service of process on this blog on multiple occasions.  In fact, I have hearings coming up in two different cases (one on Monday morning in Jacksonville) with this precise issue.  Hence, I’m pleased to read the following decision from Florida’s Third District Court of Appeal, which reversed a Final Judgment of Foreclosure for invalid service.  (Hat tip to www.4closurefraud.org for pointing this out to me.)

If you think this argument may apply in your case, bear in mind the two critical facts at play here: (1) the homeowner was never served; and (2) the homeowner never filed any papers in the case and otherwise did not defend.  When those two facts both apply, a Final Judgment is void and can be vacated at any time, even years later.  

Here’s a link to the opinon.

Mark Stopa

www.stayinmyhome.com

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Fannie and Freddie … “Move along, nothing to see here.”

Kimberly Miller of the Palm Beach Post has been on top of the emerging foreclosure stories as any reporter in the country.  Here’s her article today on how Fannie and Freddie have resumed foreclosure sales, essentially ignoring the pervasive fraud and title problems with which we’ve become all too accustomed.  …

By Kimberly Miller; Palm Beach Post Staff Writer

Fannie Mae and Freddie Mac gave the go-ahead this week to restart sales of their foreclosed properties, which had been on hold since September when it was revealed that flawed or fraudulent court documents may have been used to repossess homes.

Brokers received memos Wednesday from the government-sponsored enterprises saying that the homes could once again be marketed and sales finalized on properties already under contract. Fannie Mae’s letter explains that evictions and lockouts are still suspended on its properties.

In South Florida, the move releases thousands of houses for sale that were removed from the market earlier this fall, leaving buyers and Realtors in limbo. 

Brokers were encouraged in Fannie’s letter to contact buyers who chose to cancel delayed contracts to see if they are still interested.  “I’ve already sent e-mails to clients who opted out,” said Bill Richardson, managing broker for the Keyes Company in Boca Raton and president of the Realtors Association of the Palm Beaches. “I had numerous people put on hold, and some of them canceled because it was very uncertain when the auditing process would be done.”

A Lake Worth broker said she received a similar memo from Freddie Mac on Wednesday, but a Freddie spokesman said he could not confirm it today because too many people were off for the Thanksgiving holiday.

Amy Bonitatibus, spokeswoman for Fannie Mae, said the decision to move forward with the sales was made after a review of property acquisitions, including those handled by the Plantation-based foreclosure firm of David J. Stern.

Fannie Mae and Freddie cut ties with the firm last month after former employees, one of whom had been fired, gave sworn statements to state investigators about wrongdoing at the company such as forged signatures on foreclosure documents and the hiding of flawed files from auditors. The Stern firm is one of four so-called “foreclosure mills” in Florida under investigation by the state attorney general’s office.

“Fannie Mae remains committed to ensuring that borrowers are treated fairly in accordance with the legal process and to allowing new homebuyers to close on transactions in a timely manner,” Bonitatibus said.

But some homeowner advocates said there are still too many unanswered questions about whether foreclosures have been handled legally. Concerns about obtaining a clear title are legitimate, said Tampa-based foreclosure defense attorney Mark Stopa.

The foreclosure paperwork problems already have led at least one former homeowner to challenge his foreclosure in Pinellas County. The man’s home, repossessed in 2008 by Bank of America, has since been sold to a family who has had to hire an attorney to defend their title to the property.

“There are still legitimate questions about the validity of title to these homes,” Stopa said. “Unfortunately, too few people in positions of authority care. The fraud is there and we all know it, but too many people think it’s easier or better to ignore it than fix it.”

Fannie Mae and Freddie Mac own or guarantee about half of all U.S. mortgages, or 31 million home loans worth more than $5 trillion.  About 12 percent of Fannie Mae loans in Florida are delinquent, while Freddie Mac has 17 percent of its Florida mortgages in arrears.

The embargo on selling foreclosed properties likely added to last month’s slump of existing home sales, which dropped 12 percent in Florida compared to September and 21 percent compared to October 2009.

Mark Stopa

www.stayinmyhome.com

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Trust

This was a comment from a reader that I thought was worth a post all to its own:

What do we do when TRUST is irrevocably broken?? I’m not talking about the trusts that r stealing the americans assets at record speeds either. How can we ever TRUST a bank to give us the mortgage product we signed up for? How can we ever TRUST our justice system to ever look out for WE the PEOPLE and NOT just WE the banks who brought massive fraud not only against the american people but our court systems, our clerks filing systems, our credit (is all over the world-literally) and even “our” congress and senate? How can we ever believe anything they say or do? Its all been only serving the bankers and their subsideraries. How is this allowed to continue to happen— or IS everyone that corrupt? How do we ever TRUST again? How will we ever believe in a system that chopped up all of our mortgages into pieces and sold them without authority and got insurance coverages to boot? How in the world will we ever be able to trust any one of authority ever again?? How!? So perplexed, disgusted and disappointed in our entire system….where do we possibly go from here???

Debi P. Boynton bch florida

Something to ponder as you have a Happy Thanksgiving with family and friends in your homes.

Mark Stopa

www.stayinmyhome.com

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The Ethics of Foreclosure Defense

I’ve been stewing about this article, wherein a retired judge questions whether foreclosure defense is “unethical,” for a few days now.  I think that assertion is totally absurd, but I see no need for a lengthy retort.  Instead, I’ll sum it up like this…

The justice system in the United States allows murderers to go free (in certain circumstances) when evidence is obtained pursuant to an illegal search.  The Defendant could have murdered someone – and everyone in the courtroom, including the judge, knows it – yet he walks free because of a violation of his constitutional rights. 

Let’s pause and think about the lawyer who files the motion to suppress the evidence based on the illegal search.  Is he acting unethically?  Personally, I could never file that motion.  However, I suspect every judge sitting on the bench would agree the answer is “no” – filing that motion is the defense lawyer’s job. 

With that in mind, how could anyone say that defending a foreclosure case is “unethical.”  I’m not putting murderers back on the streets – I’m helping homeowners who’ve been screwed over by the banking industry.  If vile criminals can exercise their right to counsel, then certainly homeowners can as well. 

I suppose I can see how the “lack of standing” defense that foreclosure defense lawyers routinely assert in foreclosure lawsuits is similar to the motions to suppress filed by criminal lawyers, as one could argue that the defendant was “guilty” in both instances and “got away with it” on a technical violation.  The difference, though, is that if I win a foreclosure case based on a standing defense, a murderer doesn’t get to roam free – instead, a bank that’s screwed over homeowners for many years gets a dose of its own medicine.

Mark Stopa

www.stayinmyhome.com

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Lee County – It’s Time to Change your Foreclosure Procedures

I’ve spokenly openly and candidly on this blog on many occasions about the need to change the perverse judicial procedures that permeate some of our courtrooms in Florida.  Nothing has gotten my gander up more in this regard than the perverse judicial procedures employed in Lee County, Florida (the Twentieth Judicial Circuit, based in Fort Myers).  I realize “perverse” is a strong word, but that’s the only word that comes to mind for what’s happening in Ft. Myers

Here are the facts.  In foreclosure lawsuits in Ft. Myers, judges (typically Judge Carlin) routinely enter an Order setting a docket sounding, right after the case is filed.  These Orders are entered sua sponte (meaning on the court’s own initiative, without having been requested by either party), and they specifically provide that summary judgment will be entered at that hearing, failing which the case “will” be set for trial.  These Orders also impose a discovery cut-off, usually the day of that hearing, meaning the parties cannot take discovery thereafter.  Essentially, the judges have taken it upon themselves to litigate an entire foreclosure lawsuit in the span of a few months.

Here’s the first problem.  A case cannot be set for trial until it is “at issue,” under Fla.R.Civ.P. 1.440.  This means that if a motion to dismiss is outstanding, and the homeowner has not filed an Answer, the case cannot be set for trial.  See Precision Constructors, Inc. v. Valtec Constr. Corp., 825 So. 2d 1062 (Fla. 3d DCA 2002); Bennett v. Continental Chemicals, Inc., 492 So. 2d 724 (Fla. 1st DCA 1986) (en banc).  (En Banc means that every judge on the First District joined in the decision – a rarity in appellate cases.)  In Ft. Myers, the judges routinely find the case is “at issue” and ready to be set for trial, even when the Motion to Dismiss has yet to be heard – a very basic legal error. 

In my eyes, this is more than just a technical problem.  When a judge is sua sponte saying a case will be set for trial, even though the Motion to Dismiss has yet to be heard, he’s making it clear that he’s already decided he’s going to deny the Motion to Dismiss.  Think about it this way.  If a Motion to Dismiss is granted, then, unless leave to amend is granted, there is no trial at all!  By setting a trial before the motion to dismiss is heard, the Ft. Myers judges are foreclosing the possibility that the Motion to Dismiss would be granted – without having heard the Motion to Dismiss on the merits!  Under basic law, judges cannot pre-judge a case in this manner. 

I’m also deeply troubled at how these Orders impose a two-month period to conduct discovery.  Respectfully, that’s grossly inadequate – so much so that it’s insulting.  Respectfully, I find that offensive.  You see, discovery often takes many months.  You have initial discovery, then follow-up discovery, sometimes with hearings to compel the other side to produce discovery.  At minimum, parties would need six months to take discovery in a typical civil case – and that would be a bare minimum, if we were rushing through it.  Also, a defendant should not be forced to complete discovery prior to a determination whether the Complaint states a cause of action.  After all, if an Amended Complaint is required, the defendant is being forced to complete discovery prior to the date an Amended Complaint is even served.  How can a defendant litigate a case without getting discovery on the operative complaint?  You can’t, and that’s precisely the point – the judges have predetermined that they won’t require an Amended Complaint even without having heard the Motion to Dismiss.  The entire approach is patently ridiculous, but that’s what the judges in Lee County are doing. 

It’s also unfair that these judges are routinely setting these hearings without clearing the date yet refusing phone appearances.  I’ve discussed that issue before vis a vis Orange County, so let’s summarize like this – it’s clear to me that the judges are trying to make it harder for foreclosure defense attorneys to represent homeowners and defend foreclosure cases.  Personally, I won’t stand for that.  Foreclosure is a huge issue in a homeowner’s life.  Homeowners are entitled to counsel.  Widespread conduct that violates the law and is aimed at making it harder to represent homeowners is intolerable in my book. 

Recently, I was so irritated by this procedure (and the unfairness that results from it) that I filed a Motion to Disqualify Judge Carlin.  He denied it, so I am filing this Petition for Writ of Prohibition in the Second District. 

I’m very confident this Petition will be granted.  In fact, this won’t be the first time I’ve convinced the Second District to grant a Writ of Prohibition when Judge Carlin inappropriately denied a well-taken Motion to Disqualify him.  My hope, though, is much bigger than this one case.  I’m concerned about the “big picture” in Lee County.  To illustrate, I urge you to check out the portion of the Petition for Writ of Prohibition (near the end) that I labeled “Analysis:  The Big Picture.”  My point, simply, is this:

The procedures being utilized in foreclosure cases in Lee County are perverse, unlawful, and reflect the courts’ obvious bias against homeowners.  It’s time the Lee County change their procedures, even if it means the Second District tells them to do so.

By posting this blog in this manner, I realize I’m opening myself up to criticism.  That’s not ideal, but at this point I see little alternative.  Also, please realize this – I wouldn’t be writing in this tone unless I was 100% confident I am that the procedures being utilized in Lee County are wrong.  The law is clear – judges can’t set trial and a two-month discovery cutoff when motions to dismiss are outstanding.  It’s time someone stood up and told them to stop.  Also, I’m hopeful that other litigants and attorneys reading this will agree with me and push these same arguments.  It’s past time that the judges in Ft. Myers started treating homeowners fairly, even in foreclosure cases

Mark Stopa

www.stayinmyhome.com

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Wells Fargo – Foreclosing on Dead People

This article is disturbing on a number of levels.  Wells Fargo foreclosed on a home, then sold it to a third party, and only then did the buyers find the original homeowner, in the garage, deceased – apparently for a long time.  Before you write that off as “just one of those things,” consider this quote from the neighbor of the deceased woman:

‘The main thing I think is sad about it is that somebody could have their house foreclosed on and sold out from under them and they’re still dead inside the house. I just think that’s pretty inhumane, and it certainly says we need to change this process somehow, reach out to people a little better than that. At least make sure they’re alive before you sell their house.’

I couldn’t have said it better myself.

Mark Stopa

www.stayinmyhome.com

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Foreclosure News – Mark Stopa, Matt Weidner on MSNBC

Foreclosure defense attorneys Mark Stopa and Matt Weidner appeared today, live, on The Dylan Ratigan Show.

Here is a link to the show.                   

Even with the plethora of media reports in recent months, most Florda homeowners do not defend their foreclosure cases.  That’s an absolute shame.  I really hope stories like this help homeowners realize they can’t give up – loan modifications are going to happen on a widespread basis only if homeowners fight, stand up to the banks, and advocate for change.

Mark Stopa

www.stayinmyhome.com

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