Posts Tagged ‘Mark Stopa’
I’m sorry I haven’t posted much in recent days. You see, I’ve been really busy procuring summary judgments for some of my clients. No, not summary judgments of foreclosure (against my clients) … summary judgments in my clients’ favor. Summary judgments as in … case over … case dismissed … you lose, bank – do not pass go, do not foreclose, and do not collect any money. Obviously this doesn’t work every time, but as the Orders below reflect, it certainly works sometimes.
What are the arguments? How have I been able to do this? Well, take a look at the Orders, all of which are also accessible via public records:
Order Granting Summary Judgment
Order Granting Summary Judgment
Order Granting Summary Judgment
Order Granting Summary Judgment
Order Granting Summary Judgment
Order Granting Summary Judgment
Order Granting Summary Judgment
Essentially, there are two arguments … two ways (at least) I believe homeowners can argue they’re entitled to summary judgment and the outright dismissal of a foreclosure case.
The first is predicated on a topic I’ve posted about many times – a plaintiff’s obligation to prove not just its standing to foreclose, but its standing to foreclose as of the time it filed suit. There are many recent cases which have illustrated this proposition of law, reversing summary judgments of foreclosure entered for the banks when they failed to prove the requisite standing at inception. My favorite, though, is McLean v. J.P. Morgan Chase Bank, N.A., 79 So. 3d 170 (Fla. 4th DCA 2012). The reason I like McLean so much is because that case makes it clear that the remedy when a foreclosure plaintiff cannot prove standing at the inception of its lawsuit is the outright dismissal of the case – without prejudice and without leave to amend. In other words, it’s not just that a plaintiff can’t win a foreclosure lawsuit without proving standing at inception; where the plaintiff cannot meet this burden, the defendant must prevail. In the McLean court’s words:
if the evidence shows that the note was endorsed to Chase after the lawsuit was filed, then Chase had no standing at the time the complaint was filed, in which case the trial court should dismiss the instant lawsuit and Chase must file a new complaint.
Following McLean, the argument for summary judgment is rather simple. If the Note attached to the Complaint was not endorsed, and there is no assignment of mortgage in the court file, but an original note with an endorsement and/or an assignment of mortgage shows up later, then the homeowner files a motion for summary judgment asserting this chronology. If the bank goes to the summary judgment hearing without evidence that it had an endorsed note or an assignment of mortgage before suit was filed, then summary judgment for the homeowner is proper.
But wait, one might argue. Isn’t it the moving party’s burden at summary judgment to conclusively disprove the non-existence of factual disputes, i.e. to conclusively prove the bank lacked standing when it filed suit? And isn’t that a high burden? Yes and yes. However, if a homeowner proves that the note attached to the Complaint lacked an endorsement, and that there was no assignment of mortgage before the suit was filed, then the homeowner has done just that. The burden would then shift to the foreclosure plaintiff to present some evidence that it had an endorsed note and/or an assignment at the time the lawsuit was filed. If it cannot, then the homeowner should prevail.
Sound too good to be true? Read this and this. So you’re aware when you’re making these arguments, among the local judges who have granted summary judgment in my clients’ favor on this argument: Honorable Amy Williams (St. Petersburg), Honorable Lynn Tepper (Dade City) and Honorable Robert Foster (Tampa). Obviously the facts of each case can vary, but it’s worth noting that these good judges were willing to look beyond the fact that a homeowner was alleged to be in default and strove to uphold the law.
The second basis for summary judgment is predicated on the bank’s failure to comply with a condition precedent to the filing of the lawsuit. A condition precedent is just what it sounds like – something a bank must do prior to filing a lawsuit. You see, many mortgages in the cases with which I deal (and the majority of mortgages in Florida) have a provision in them, typically in paragraph 22 of the mortgage, which requires the lender provide written notice to the homeowner of any alleged default and an opportunity to cure that default prior to filing suit – what I call a “notice and cure letter.” This paragraph typically spells out certain provisions which must be set forth in the letter, often like such:
22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the property. The notice shall further inform the Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure.
As a nice touch, paragraph 22 of most mortgages is written in bold, creating a good argument that the parties obviously intended for that provision to carry great weight in the scope of the contract.
So how can a homeowner use this to obtain summary judgment? Read paragraph 22 closely; there are a variety of ways. The simplest is when the homeowner shows the “notice and cure” letter required by paragraph 22 was not sent, and the bank can’t prove otherwise. When that happens, then summary judgment is proper. Also, if the letter was sent, but it did not say what paragraph 22 required it to say, then summary judgment would also be proper.
To illustrate, take a look at this Order Granting Summary Judgment, where the Court explained that the “notice and cure” letter did not specify what was necessary to cure the default (as the letter indicated that additional monies in unspecified amounts were owed above and beyond that set forth in the letter, leaving the homeowners guessing as to the amounts necessary to cure the default) and the letter did not indicate that failure to cure the default would result in a “foreclosure by judicial proceeding.” Mind you, those are just a few of the ways a letter could be deficient. Just off the top of my head, here are a few things I look for when I’m evaluating if a letter complies with paragraph 22:
– Was the letter sent to the homeowner’s correct address?
– Was at least 30 days’ notice provided (bearing in mind that if the notice is sent by mail, the homeowner obviously didn’t receive the letter on the day it was dated, though that may not matter depending on how “notice” is defined in the mortgage)?
– Is there some admissible evidence from the Plaintiff that the letter was actually sent (as opposed to merely being filed in the court file by plaintiff’s counsel)?
– Does the letter specify the amount necessary to cure the default, or does it make reference to additional, unspecified charges as to the amounts owed, leaving the homeowner in the dark as to the total amount he must pay to cure the default?
– Does the letter apprise the homeowner that a “foreclosure by judicial proceeding” may result if the default is not cured, or does it tell the homeowner that it may initiate a legal action? Many of the letters I’ve seen do the latter, and not the former, and several judges in Florida have found the letter deficient on this basis. In fact, Judge Amy Williams granted a summary judgment in one of my cases based on this distinction earlier today.
– Does the letter inform the homeowner of the right to reinstate after acceleration?
– Does the letter inform the homeowner of the right to assert in the foreclosure proceeding the non-existence of a default or any other defense to acceleration and foreclosure?
In my view, even if the bank satisfied some or most of these obligations, a homeowner should still prevail in a foreclosure lawsuit if the bank didn’t comply with all of them. Yes, all of them.
But that’s crazy, you say. The homeowner is in default, so the bank should win. This paragraph 22 stuff is so technical – would a judge really care about this? Fortunately, yes. This argument may be technical, especially if a letter was sent but it did not contain all of the requisite language. However, this is what the homeowner and the bank negotiated in their contract when the mortgage was entered. The fact that the banks drafted these mortgages, and paragraph 22 is usually bolded, make it all the more appropriate to hold the banks to the terms of their own contracts.
Though homeowners need not prove prejudice to prevail on this issue, there was/is a good reason for judges to enforce the terms of paragraph 22. Quite simply, under the terms of these mortgages, every homeowner is entitled to an opportunity to cure any default before facing foreclosure on his/her home. That’s the point of the letter, and the point of paragraph 22 – to ensure the homeowner knows about the alleged default and can fix it before facing foreclosure. Where the letter didn’t comply, the homeowner is deprived of that chance, and that’s simply not fair.
If you feel bad about making this argument, don’t. Frankly, one of the reasons I love making this argument is because insurance companies have been using it to screw honest homeowners for many years. You see, when homeowners make a claim for money under an insurance policy, insurance companies often deny coverage – not because there’s no coverage, but because that’s what they do to make money – deny coverage and force the homeowners to go to court. Then, once facing a lawsuit, insurance companies love to defend that suit by complaining that the homeowner failed to comply with the conditions precedent set forth in the policy, namely submitting to a proof of loss or an EUO (examination under oath). There are many cases where courts have ruled against homeowners, and in favor of insurance companies, not because insurance company was correct in denying coverage, but because the homeowners didn’t do what they were supposed to do before filing suit. See Goldman v. State Farm Fire Gen. Ins. Co., 660 So. 2d 300 (Fla. 4th DCA 1995); Edwards v. State Farm Fla. Ins. Co., 64 So. 3d 730 (Fla. 3d DCA 2011). While I hate how insurance companies have been able to do this, I love being able to use this case law in support of my arguments in foreclosure cases. After all, Florida courts have been requiring parties to comply with conditions precedent in a contract for many years, and have consistently granted summary judgments where they failed to do so. Though some might argue otherwise, there is no reason to treat foreclosure cases any differently. Hence, where a bank didn’t comply with the terms of paragraph 22, the court should dismiss the lawsuit for failure to comply with conditions precedent.
Sound too good to be true? Read this, this, this, this, this, and this. Among the judges who have granted summary judgment, and/or dismissed a foreclosure lawsuit based on this argument, are Honorable Lynn Tepper (Dade City), Honorable Amy Williams (St. Petersburg), Honorable Robert Foster (Tampa), Honorable James Barton (Tampa), Honorable Donald Evans (Tampa), Honorable John Schaefer (Clearwater), Honorable Walter Schafer (New Port Richey), and Honorable J. Rodgers Padgett (Tampa). Again, the facts of each case may vary, but you should rest assured that there are good judges in Florida willing to follow the law even if some would argue that dismissing a foreclosure lawsuit where the homeowner hasn’t paid his mortgage is inequitable.
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Here’s a well-written article from Lita Epstein of AOL…
The growing popularity of strategic default can’t be denied. Forty-eight percent of homeowners surveyed say they would consider a strategic default — also known as walking away — if their home were underwater, in the latest research done for RealtyTrac and Trulia. That’s up from 41 percent in May. Yet the banks still seem to be in denial that a strategic default wave may be building.
Strategic default is when a borrower makes the strategic decision to stop paying his mortgage. Since it takes 1½ to 2 years to foreclose on a home in most states, the borrowers then use the cash that would have gone toward paying their mortgage to pay off other debts and improve their own financial position.
Rick Sharga, senior vice president of RealtyTrac, says there’s $300 billion worth of adjustable mortgages expected to reset in the next 12 to 15 months. That will increase monthly mortgage payments by $1,000 on homes already underwater by 30 percent to 50 percent. He thinks its “tough to make an economic decision to stay in that situation.”
“Some families, who like their neighborhood and their kids are in a stable school environment, will likely stay in their homes, even if the mortgage payment goes up, if they can afford it,” Sharga explains. There’s another group of people, mostly young couples, “who don’t have an emotional attachment to the location.” For them it’s more an investment decision about keeping a roof over their heads. They will ask themselves whether they can live more cheaply in a rental, since they don’t expect their home to regain enough in value in the next 10 to 20 years.
“We’re a more mobile society,” Sharga says. “People just don’t have the same emotional ties to their home as in the past.” He also thinks there is a “visceral anger toward lending institutions,” which is driving some of this movement toward strategic default. People watched as the banks got their bailouts, but they’re not willing to share in the loses of the general public by offering principal reduction. Interestingly, men (57 percent) are more likely than women (40 percent) to consider strategic default as an option for dealing with negative equity, the survey found.
Jon Maddux, one of the founders of You Walk Away, has seen a 45 percent increase in the number of people signing up for his service in 2010 over 2009. He expects 2011 to be even bigger year for his company. The web traffic to his website has jumped 20 percent in December 2010 versus December 2009.
Sharga thinks the banks may still be living In some state of denial. He thinks there is “wishful thinking in the banking community” that strategic default won’t grow in popularity. He believes the only way to stem the tide is for the banks to consider principal reduction programs to give an incentive to underwater borrowers to stay in their homes.
The banks must face the “harsh reality that there is about $1 trillion sitting on their books” in property that has lost value. Sharga explained that $1 trillion number comes from an executive of JP Morgan Chase who testified before Congress that it would cost the banks between $900 billion and $1 trillion to “right size” the market values of the mortgages on the books.
He thinks banks should consider modifying the loans of underwater borrowers so that the payments are based on the home’s current market value. Any difference should be set up as a balloon payment that can be partially earned out as the homeowner continues to make on time payments. That way both the borrower and lender share in potential losses in the future. That gives the borrower an incentive to stay in the home and pay the mortgage on time.
Another inventive incentive is being promoted by the Loan Value Group called the Responsible Homeowner Reward. Right now only a few banks have signed on to the program, but Frank Pallotta, executive vice president and managing partner of the Loan Value Group (LVG), says more and more lending institutions are showing interest. LVG has commitments in excess of $1 billion of face value of mortgages with rewards ranging in size from 10 percent of the unpaid balance to as much as 30 percent. LVG signs nondisclosure agreements with the banks that do sign on to the program, so he could not divulge which banks are currently working with him.
The way the reward program works is that if your home is underwater LVG works with the borrower to get details about the current value and the borrower’s current financial situation. Using this information it then works with the bank to come up with a reward specific to the borrower’s situation. The reward is then set aside in an account that the borrower can earn as he makes on time payments over a two to five year period depending on the terms. Then the reward sits in a reserve account and is given to the homeowner when he pays off the mortgage, sells the home or refinances the home. After the borrower earns his reward, he can lose it if he becomes delinquent more than once in any 12 month period. This gives the homeowner an incentive to pay on time even if underwater.
Pallotta thinks that “if the banks decide to do nothing they do it at their own peril.” He said by their “doing nothing it is a proactive decision” to enable strategic default. He sees a “lack of connection between the servicer and the borrower.” His company works to improve the communications between the two and come up with a win/win solution for both.
Will banks begin to consider principal reduction for underwater borrowers to stem the tide of strategic default? No one knows that answer for sure, but there are good solutions for the banks to consider and companies out there ready to help them. Yet while the Obama administration supports principal reduction as an option for struggling borrowers, the regulator for Fannie Mae and Freddie Mac does not, according to recent reports.
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There is a rule of procedure in Florida that enables a plaintiff to dismiss a lawsuit, voluntarily, at any time. The case can be on the eve of trial, after years of work and preparation, and the plaintiff can dismiss the case (and there’s nothing the defendant can do about it). The parties can be entering a hearing on a defendant’s motion for summary judgment, which the plaintiff realizes will be granted, and the plaintiff can dismiss the case (and there’s nothing the defendant can do about it). In both instances, yes, the case is over, and yes, the defendant has “prevailed,” but if the dismissal is without prejudice, the plaintiff can re-file the exact same lawsuit at any time in the future.
In a recent foreclosure case, the fairness and practicality of this rule was put to the ultimate test. The underlying facts were the classic example of foreclosure fraud. You can read the entire opinion here, but here’s my Cliff Notes version. The plaintiff lacked standing when it filed suit for foreclosure. A bright foreclosure defense attorney began proving as much. Rather than admitting their lack of evidence, the bank and its lawyers created a fraudulent assignment of mortgage. Instead of accepting the assignment as gospel, the homeowner’s attorney challenged its veracity and began pushing for sanctions for fraud on the court, seeking some extreme but appropriate (on these facts) remedies, including dismissal with prejudice and, essentially, elimination of the mortgage.
Undoubtedly realizing they were caught in a fraud, the bank and its lawyers voluntarily dismissed the case. Then they prepared a new assignment and filed a new lawsuit, acting as if the fabricated evidence never existed. The homeowner’s attorneys pushed back, asserting they shouldn’t be able to dismiss the case and sweep the fraud under the rug.
So that was the issue before the appellate court – can a bank, when confronted with damning evidence of fraud on the court, fabricating evidence, and foreclosure fraud, simply dismiss the case, create a new assignment, and re-file (essentially sweeping its own misconduct under the rug)?
Florida’s Fourth District Court of Appeal recognizes the significance of this question. That’s why all of the judges on the court joined in the opinion (making it an en banc opinion, which is rare, as opposed to the standard three-judge panel), and certifying the question to be of great public importance to the Florida Supreme Court. The judges also acknowledged the pervasive nature of fraud in foreclosure cases, ruling “many mortgage foreclosures appear tainted with suspect documents.” Unfortunately, however, all but two of the judges ruled that the bank could dismiss its case, and re-file, despite the rather obvious fraud on the court and fabrication of evidence.
I readily acknowledge there are technical, legal arguments to be made in support of such a ruling. As I said at the outset of this blog, there is legal precedent for the court’s ruling. However, I find the decision to be a travesty of justice. Think about it. What is the court saying via this ruling?
Banks, you can commit foreclosure fraud. You can fabricate evidence. If you get caught, simply dismiss the case, fix your evidence, and re-file a new lawsuit (without penalty).
Everyone knows foreclosure fraud is a huge problem in Florida courts. Even the judges in this decision acknowledge as much. Hence, this ruling is yet another illustration of how nobody in a position of authority is willing to do anything about it.
One aspect of the ruling that I can’t get out of my head is where the court says, in certifying the question as one of great public importance, that if the sanctions this homeowner sought were available after a voluntary dismissal, it would “dramatically affect the mortgage foreclosure crisis in this State.” I have this horrible, nagging feeling that is what’s driving the court’s ruling. The judges realize there is fraud (as all of us do), but they don’t want to “dramatically affect the mortgage foreclosure crisis” in Florida, so they issue a ruling that basically lets the banks get away with fraud. In other words, as I read the ruling, what I see is “we don’t want every homeowner in Florida to be claiming fraud, and clogging up our court system, so we’ll let the banks get away with fraud for the sake of the system.”
Maybe I’m wrong. I’d like to think I am. Time and time again, though, I’ve seen Florida judges be presented with an opportunity to uphold justice, to disavow fraud, and to prove they won’t tolerate fraud by big banks. Yet time and time again, Florida judges don’t avail themselves of the opportunity to send such a message. Respectfully, what does this say about our court system? Our system of justice?
We will administer justice, unless it’s inconvenient, or creates a backlog on our dockets, in which case we’ll turn the other cheek for the sake of the system.
The irony here is that if Florida judges made strict rulings disavowing fraud then it would help the very system with which they are so concerned. To illustrate, suppose banks knew they would be harshly sanctioned for foreclosure fraud. Eventually they’d realize (at least in theory), that they can’t engage in that fraud, so they’d prosecute cases the right way. If that happened, foreclosure defense lawyers like me would have less to talk about in defense of homeowners, as banks were prosecuting cases correctly. But lawyers like me virtually always have defenses to assert, often fraud, because banks routinely engage in fraud, often because there is no punishment for their having done so. And hence the cycle continues, on and on. Banks commit fraud, homeowners complain about it, judges won’t sanction it, banks commit more fraud, homeowners complain more, etc., etc.
Imagine if Florida somehow passed a law that legalized armed robbery. Do you think there’d be an increase in armed robbery? I do. Most people, for moral reasons, would still refrain from it. But if armed robbery were legal, more people would commit it. Foreclosure fraud works the same way. Without a deterrent, more banks will do it. Hence, where homeowners are prevented by law from robbing a bank, it seems that banks are somehow protected by our laws from robbing homeowners.
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Charles Canady, the Chief Justice of the Florida Supreme Court, is concerned about the lack of sufficient funds for Florida courts. He’s quoted as saying:
We’ve seen a drop in the filings. It relates to these (robo-signing) problems. That has affected our revenue and it’s something that’s very much a concern.
Maybe I’m reading that wrong, but is the Chief Judge somehow suggesting the “robo-signing problem” was a good thing, as it resulted in more foreclosure filings and the fees resulting from them?
Anyway, I think the solution for the courts is simple – when appropriate, dismiss cases!
When a bank lacks standing at the inception of a foreclosure lawsuit, dismiss the case!
When a bank files fraudulent foreclosure affidavits, dismiss the case!
When a bank fails to state a cause of action, then fails to amend within the time limits permitted, dismiss the case!
When a bank fails to properly verify a complaint, dismiss the case!
If Florida judges started dismissing foreclosure lawsuits (when permitted by law, of course), and forced banks to re-file, then the increased filing fees would help fix these budgetary concerns. Oh, and it would keep homeowners in their homes, help prevent foreclosures, and show Americans that judges are willing to follow the law and not just “push through” foreclosure judgments.
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It’s sometimes difficult to explain, in layman’s terms, how a foreclosure defense attorney can assist homeowners who are behind on their mortgage. Sure, most Americans are aware, at this point, how attorneys such as myself force the bank that is suing to prove it is the “right” bank, i.e. force the bank to prove it owns and holds the original note and mortgage. As I see it, though, a better explanation of how I help my clients comes through an understanding of the Florida Rules of Civil Procedure.
Generally speaking, there are only two ways a bank can “win” a foreclosure lawsuit in Florida (as required to foreclose on a Florida homeowner). First, the bank can prevail on a motion for summary judgment. This is when there are no material facts in dispute and the bank is entitled to judgment as a matter of law. Nearly 100% of foreclosure cases are adjudicated this way, typically after a bank presents an affidavit supporting its position and the homeowner presents no conflicting affidavits.
Second, the bank can win at trial.
When a competent foreclosure defense attorney handles a file, it is often, quite candidly, not terribly difficult to defeat a motion for summary judgment brought by the bank. Yes, some cases are harder to defend than others, and no, I’m not saying summary judgment is impossible. However, in my experience, most homeowners have sufficient defenses to preclude a foreclosure via a motion for summary judgment. To understand why that is so, try not to get bogged down in legal jargon. Instead, think about it like this. For a bank to obtain a foreclosure via summary judgment, the judge must accept all facts asserted by the homeowner as true (even if the bank disagrees with those facts) and, based on the homeowner’s version of the evidence, must conclude whether the bank is entitled to a foreclosure. See Fla.R.Civ.P. 1.510.
To explain how this standard works, I like to use a traffic light analogy. Suppose it’s a personal injury case and the plaintiff’s lawyers line up 10 witnesses, all of whom say the traffic light was red at the time of the accident. Now suppose the defendant presents one witness, himself, who says the light was green. Even though the plaintiff has many more witnesses, the judge is required, at summary judgment, to accept what the defendant says – the light was green – and to rule accordingly. This is a high legal standard, and it’s a big reason why it’s so hard for banks to obtain a foreclosure via summary judgment when the homeowner retains counsel. Essentially, the homeowner just needs to find one material fact in the bank’s case with which it disagrees to prevent summary judgment. When that happens, the bank is left with just one option – trial.
If you’ve watched Law and Order or a similar lawyer show on TV, a trial may not seem like a big deal. Let me assure you – trials don’t happen like you see on TV. In fact, in my experience, banks don’t like to go to trial in foreclosure cases, even if that’s the only way they can get a foreclosure. I won’t speculate about banks’ motives too much, but I strongly suspect the banks are afraid of losing at trial and the precedent/fallout that would ensue. With media coverage of foreclosure cases how it is, can you imagine if a big bank like Bank of America went to trial against a homeowner who hadn’t paid his/her mortgage in two years and lost? Homeowners throughout the country would be emboldened not to pay their mortgages and to push cases to trial. To put it differently (and forgive me if this sounds sexist, but it’s a comparison with which I can related since I have a little sister) … going to trial for a bank is like a big brother getting into a fight with his little sister. Why do it? If you win, you’re supposed to win – you’re bigger, and she’s a girl. If you lose, then, good grief! You lost a fight to a girl! Rather than risking that humiliation, isn’t it better to avoid the possibility altogether?
Hence, there are only two ways a bank can “win” a foreclosure case – summary judgment and trial – but summary judgment is hard to get and banks typically don’t want trials. So what happens? Foreclosure cases often languish. Banks file them, but when homeowners defend those cases with an experienced foreclosure attorney, the cases often progress at a slow rate. The banks’ lawyers have so many other cases, it’s easy for them to ignore these cases and work on others.
Personally, I don’t see anything wrong with this dynamic. When I represent plaintiffs in lawsuits against insurance companies, I have to work to push the case towards judgment, and if I don’t, the case languishes. Do you think anybody is helping me move the case forward if I don’t work on that file? Heck no! That’s just how it works – when you’re the plaintiff, and you want a remedy through the court system, it’s your burden to prosecute your case towards judgment; if you don’t, you don’t get that remedy. Foreclosure cases operate the same way – the banks want relief, so they must prosecute their cases towards judgment; if they don’t, then they don’t get a foreclosure (and the homeowner remains in his/her home while the case is pending).
Many Florida judges don’t like this dynamic. They see cases languishing and, in an ongoing effort to reduce the backlog of cases from their docket, they sometimes take actions to advance cases towards judgment. Lee County in particular is notorious for this, setting cases for trial right after they are filed. I’ve already expressed my dislike for judges acting in this manner at length, so instead of rehashing that, let’s evaluate this issue from a procedural perspective.
Under established law, a case can only be set for trial (in a foreclosure lawsuit or any other type of case) if it is “at issue.” This means, in layman’s terms, that all motions to dismiss filed by the homeowner have been denied and the homeowner has filed an Answer to the Complaint. (It’s more complicated than that, but that’s the simple explanation.) See Fla.R.Civ.P. 1.440.
If a foreclosure case has not progressed to that point, i.e. where it is “at issue,” yet the judge sets it for trial anyway, then the judge is committing legal error that should be reversed on appeal. It may seem hard to believe, but if a judge sets a foreclosure lawsuit for trial prematurely, and the bank wins at trial, the appellate court would/should reverse that foreclosure. It doesn’t matter if, substantively, the bank was perfectly entitled to foreclosure – from a procedural perspective, the trial was set prematurely and should not have taken place. See Bennett v. Continental Chemicals, Inc., 492 So. 2d 724 (Fla. 1st DCA 1986) (en banc); Precision Constructors, Inc. v. Valtec Construction Corp., 825 So. 2d 1062 (Fla. 3d DCA 2002).
If you’re defending a foreclosure lawsuit and the bank or the judge is trying to set it for trial prematurely, make sure you cite Rule 1.440, Bennett, and Precision Constructors. Respectfully let the judge know that he/she will be reversed on appeal, even if the bank is otherwise entitled to foreclosure. That may sound harsh, but these rules of procedure are in place for a reason, and it’s incumbent on everyone to follow these rules in all lawsuits, including foreclosure cases.
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Kim Miller of the Palm beach Post openly wonders, in this article, why nobody in Florida is doing anything in response to documented problems in the foreclosure process. To illustrate, we’re all familiar with the Florida Attorney General’s power point presentation, appropriately titled “Unfair, Deceptive, and Unconscionable Acts in Foreclosure Cases.” The problem, of course, is that if the foreclosure fraud is this well-documented, why aren’t there any negative repercussions for anyone? Unfortunately, as I see it, nobody will do anything. The AG, despite its investigation into the foreclosure mills, has done nothing. The Florida Bar has done nothing.
But don’t take my word for it – read the article.
By Kimberly Miller, Palm Beach Post Staff Writer
Fed up with the foreclosure chaos, the New Jersey courts demanded that banks prove the integrity of their home repossession systems or face shutdown. To demonstrate the need for the Dec. 20 order, New Jersey cited flaws in six Florida foreclosure cases, including three in Palm Beach County, as examples.
In Nevada and Arizona, attorneys general last month sued Bank of America for a dual-track foreclosure system that offers homeowners hope with a loan modification, while at the same time taking away the home in court. Called deceptive and labeled consumer fraud in the lawsuits, the practice is also prevalent in the Sunshine State. And on Friday, the Massachusetts Supreme Court issued a bombshell ruling against banks’ ability to foreclose on homes – a decision could reverberate nationwide.
The moves by other states to address the foreclosure morass has Florida homeowner advocates and defense attorneys asking why more isn’t being done here. The Florida Attorney General’s Office is investigating four so-called “foreclosure mill” law firms and is part of a 50-state coalition trying to work out solutions with the banks. Also, the Florida Supreme Court assembled a foreclosure task force in 2009 and requires mediation in all homesteaded foreclosures – a program that has logged minimal success in the year since it became mandatory. But as hundreds of homes continue to sell at auction each day and the variations of alleged malpractice mount, critics charge that Florida is burying its head in its sandy beaches, waiting for an ocean breeze to blow the whole thing over.
“This collective turning of our backs and shutting of our eyes is not working,” said St. Petersburg defense attorney Matt Weidner. “I think there is widespread delusional behavior to pretend nothing is wrong.”
And it appears clear something is wrong. Although few dispute that the vast majority of foreclosures are on homes where the borrower has stopped paying the mortgage, a comprehensive presentation given last month by investigators in the Florida attorney general’s economic crimes division meticulously outlines problems in how banks went about taking back those homes.
The report includes pages of allegedly forged signatures, false notarizations, bogus witnesses and improper mortgage assignments. It implicates the banks, their servicers and law firms for contributing to the foreclosure conundrum.
In 2009, Florida had 399,128 foreclosures filed. Between January and October 2010, 224,400 more Floridians received foreclosure notices. The numbers consistently ranked the state in the nation’s top three for foreclosures for much of 2009 and 2010.
“The best thing the state can do to address the foreclosure issue is to create more jobs, put people back to work so they can get back on schedule and pay their mortgage,” said Sen. Garrett Richter, R-Naples, who heard a lengthy foreclosure presentation during a December meeting of the Senate Banking and Insurance Committee, which he chairs.
He empathizes with both struggling borrowers and homeowner associations trying to collect delinquent fees, and believes employment, more than legislation, is the answer to the foreclosure dilemma. “I don’t think we have a massive problem with fraud in the banking industry,” he said.
A spokeswoman for new Attorney General Pam Bondi said the office will wait to see what its law firm investigations find before making a move. But in Florida, even the attorney general’s power to investigate is in question.
A Palm Beach County judge ruled in October that the attorney general’s office doesn’t have the authority under the Florida Deceptive and Unfair Trade Practices Act to investigate law firms . The state has appealed the ruling.
“They all say they are impotent to do anything,” said Mark Stopa, a Tampa-based defense attorney. “Part of why this whole thing has been allowed to continue is because there is very little negative repercussions.”
The Florida Bar says it can investigate individual attorneys only when a specific complaint is lodged, and has no authority to initiate its own query.
Judges are hesitant to point out flaws in foreclosure filings on their own because they say it mars their impartiality, making them an advocate for the homeowner.
Florida’s clerk of court offices are barred from policing the content of the foreclosure cases filed with them, said Sharon Bock, Palm Beach County’s clerk and comptroller.
And in the fall, as bank after bank acknowledged errors, the Florida Supreme Court said it has no power to freeze foreclosures under the state constitution or court rules.
New Jersey has not frozen foreclosures, but six of the nation’s largest lenders are expected at a Jan. 19 hearing to show proof why the courts should not stop their foreclosures.
Florida does not have the ability to follow New Jersey’s lead, said State Courts Administrator Lisa Goodner.
New Jersey’s court administrator is a sitting judge who can issue orders, while Goodner is not a judge and has no such power.
“In Florida, contested and uncontested mortgage foreclosure proceedings must be resolved in the individual trial courts through the normal litigation process,” Goodner said.
Attorney Tom Ice, of Royal Palm Beach-based Ice Legal, said the question isn’t whether Florida can use the exact same mechanism as New Jersey, but whether it can do something to address the problem. He believes it can. “They’ve taken the position that it’s out of their hands,” Ice said of Florida’s Supreme Court. “They don’t have to sit idly by while people make a mockery of the system.”
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I’ve read article after article about the inability of homeowners to obtain meaningful loan modifications, and these stories mirror the experiences I see as a foreclosure defense attorney. In fact, in recent weeks, I’ve come to believe bankruptcy is a more appealing option, for many homeowners, than constantly beating your head against a wall trying to get a loan modification that probably isn’t ever going to happen. If you’re unemployed and/or seriously in arrears, this probably isn’t a close call – a loan modification is so unlikely that bankruptcy is the far more pragmatic option.
Today, I just read an article that concludes the same thing. The article is out of the Pittsburgh Post-Gazette, but the process works the same way in Florida. The point, essentially, is this – if you can’t get a loan modification, bankruptcy may be the next-best option.
Even if you don’t like the sound of “bankruptcy,” there is no harm in calling Stopa Law Firm for a consultation. It’s free, and you may be surprised at how bankruptcy can help you. Some people don’t like the stigma of “bankruptcy,” but in today’s economy, you can’t make financial decisions about what others may think – you should do what’s best for you and your family. Call us for a free consultation to help decide if bankruptcy is the best option for you.
Here’s the article…
Attorneys say bankruptcy court more effective than many loan modification efforts
Monday, December 20, 2010
By Tim Grant, Pittsburgh Post-Gizette
Trying to work with a lender to modify an existing mortgage can be so onerous and complex that many borrowers give up. And it’s not much easier for lawyers who work on behalf of clients facing foreclosure.
“What we have found is that it’s easier to take someone facing foreclosure into bankruptcy because the modification process has no teeth,” said Alan Patterson, a partner at the Gross & Patterson law firm, Downtown.
“As attorneys, we don’t seem to have the ability to force banks that are foreclosing to modify the terms of their loans,” Mr. Patterson said. “There’s really no one to talk to on the mortgage side to get anything accomplished.”
The federal government has tried to encourage lenders to modify troubled loans in an effort to get the economy back on track, but many borrowers remain mired in red tape even with help of an attorney.
Homeowners saddled with payments they can’t afford are reporting that mortgage lenders are not always easy to deal with: Many of them lose paperwork. Their loan officers are rude. Borrowers can never talk to the same representative twice and sometimes wind up spending all their limited resources making payments to save a house while relying on promises lenders make that don’t come to pass.
“Customers looking to obtain a loan modification and use legal counsel to assist them will find it is extraordinarily expensive,” said Ron Roteman, a partner and business and bankruptcy attorney at Stonecipher Law Firm, Downtown.
The time required to get a loan modification is very lengthy and chance of success are about 50-50.
“Dealing with lenders is very frustrating,” Mr. Roteman said. “It’s very difficult to have a conversation with the ultimate decision-maker. The file seems to get passed from one company representative to another.
“It requires the owner or their attorney to repeat the story every time they talk to someone,” he said. “The whole process is highly undignified.”
In Allegheny County, homeowners facing foreclosure can resolve their problems with lenders through the “Save Your Home” program established in January 2009 by President Judge Joseph James.
Participation in the program cannot start until the lender files a Mortgage Foreclosure Complaint action against the borrower in Civil Court.
When that happens, the sheriff’s department will serve the borrower with the foreclosure paperwork along with an “urgent notice” advising the borrower of the Mortgage Foreclosure Program along with a hot-line telephone number to the Allegheny County Department of Economic Development.
Counseling agencies will contact the borrowers within 24 hours to accept them into the program and schedule a conciliation conference before Judge Michael E. McCarthy, head of the foreclosure division.
Judge McCarthy will sign an order that temporarily prevents lenders from being able to continue the foreclosure process while housing counselors try to help the borrowers to reach an agreement with their lenders.
“I can’t predict the likelihood of a loan modification because it’s really on a case-by-case basis,” Judge McCarthy said. “But at least through the Save Your Home program, a counselor will carefully review your case.”
Edward Mermelstein, a real estate attorney and a partner at Rheem, Bell & Mermelstein in New York, said residential mortgage modifications usually involve a reduction in the borrower’s interest rate or principal loan amount or both.
“Since interest rates have dropped so dramatically in recent years, banks are more likely to entertain a discussion about dropping interest rates,” Mr. Mermelstein said.
“Banks are less inclined to reduce the principal unless there is a compelling reason to do so. One example would be if the house value has dropped so dramatically that it’s below the mortgage amount and the borrower is more likely to walk away,” he said.
As long as a homeowner is still working and earning an income, Mr. Patterson said he is more inclined to help them by filing Chapter 13 bankruptcy on their behalf.
While in Chapter 13 bankruptcy, he said, he could put together a plan that would allow the borrower to catch up on the mortgage arrears and save the house over the course of the plan.
“That scenario only works if the borrower is still employed,” Mr. Patterson said. “If they are not working and can’t make payments, there is no way to save the house even under a loan modification.”
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David Bornstein of the New York Times penned a nice article today called When Lenders Won’t Listen. Here’s the part that really jumped off the page at me…
After describing the injustices experienced by several homeowners in their experiences with lenders, a competing view was presented:
There are those of us who were raised with the idea that if you make a bargain you keep it. If you say you will return something you have borrowed, whether it is a lawnmower from next door or a bank loan, then you do what you have said. … But then I was raised in a different America.
Unfortunately, I fear too many Americans, who remain unfamiliar with the foreclosure process, feel this way (presuming, of course, that position is from a homeowner and not a bank crony who is paid by the banks to sway public opinion by submitting such posts). Anyway, I loved the response of David Bornstein, the author of the article, who wrote:
Not all bargains are made in good faith, however. Borrowers and lenders, it turns out, did not share equal information in many cases. … It was predatory lending that decimated inner city neighborhoods — not anything that resembled fair deals. … [M]any homeowners across the nation did understand what they were signing even if they failed to appreciate the real risks. The difference was that the borrowers made their mistakes one house at a time, effectively as amateurs. The lenders made these mistakes as professionals, dealing with hundreds of thousands of borrowers, and they concealed the cumulative problem even as it was metastasizing. So now we have millions of homeowners who wouldn’t be in distress if not for the fact that they lost their jobs as a result of a recession that was precipitated by the very bankers who are now threatening to foreclose on them.
Wow. What a truly awesome way to describe the impetus for the problems we’re facing.
I urge all of you to forward that paragraph to your family, friends, and neighbors – unless, of course, you just want to forward this entire blog. 😉 From the words of a New York Times columnist, let’s make everyone realize the banks are the bad actors in the foreclosure crisis. After all, the first step to a solution is recognizing the problem – and clearly the greed of the Wall Street Fat Cats was and is the problem.
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Nationwide Title Clearing is making headlines. First, it obtained an injunction against fellow foreclosure defense attorney Christopher Forest, requiring him to remove video depositions of three of its employees from youtube. Why, exactly? Well, from what I can tell, NTC doesn’t want the public to be able to see video depositions of its employees, who apparently testified that they executed hundreds of foreclosure-related documents without reading them and without knowing their contents. How does that give rise to a right to injunctive relief? Honestly, it beats the heck out of me. My best guess, from what I’ve read in the media, is that the employees who testified in these depositions had their personal lives disrupted because of the high level of public outrage at the content of the depositions.
Meanwhile, NTC has sued my friend and foreclosure defense lawyer Matt Weidner for libel, asserting he damaged its business reputation by blogging that NTC employees are “robo-signers” that “manufacture evidence” to facilitate foreclosures.
Am I crazy, or does anyone else see the hypocrisy here? Think about it.
On the one hand, NTC wants to sue Matt Weidner for damaging its business reputation by using terms like “robo-signer.” In doing so, NTC wants to take the position that everything is on the “up and up” with how it does business (and it was “defamed” by Matt’s suggestions otherwise).
Meanwhile, NTC is fighting vigorously to shield depositions of its employees from the public, pushing for an injunction requiring Christopher Forrest to remove the video depositions from youtube.
As I see it, if everything is on the “up and up” at NTC, as it wants to allege in the suit against Matt, why is it going to such efforts to shield its the public from learning about its operations? In other words, if NTC is being “defamed” by use of the term “robo-signer,” then why is it unwilling to let the public see testimony from its employees about the manner in which they execute documents?
Let’s put it this way. I don’t know what’s going on behind closed doors at Nationwide Title. It seems to me, though, that if everything were up on the “up and up,” as it wants to contend in the suit with Matt, then it wouldn’t be so hesitant to let everyone see and hear what’s going on at NTC from the mouths of its own employees. Show us the depositions. Explain it to us. If you’re an upstanding, reputable company, open your doors and prove it.
Maybe I’m naive. If it were me, though, and somebody was falsely accusing me and/or my company of “manufacturing evidence” or doing something illegal, I’d do whatever I could to prove my innocence. I’d be talkiing to the media, opening my books and records, explaining my company’s operations – doing whatever I could to reveal the truth. I certainly wouldn’t be going to court to try to shield evidence of my conduct.
If you’re reading this, NTC, consider this a challenge. If your employees aren’t “robo-signers,” then terminate the injunction. Heck, give me consent to post the video depositions on this website. Let the public hear your employees testify – let the public be the judge. If everything is on the “up and up,” I’m sure you’ll have nothing to worry about. If you’re not willing to do that, as the injunction suggests, you can’t blame anyone for questioning exactly what’s going on behind closed doors at NTC.
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According to RealtyTrac (below), America won’t see a rebound in the housing market until 2014. In fact, it’s predicted that things will get worse – and home values will decrease further – before they get better.
From what I’m seeing and experiencing, I totally agree. I’ve read about a “lost decade” before and, unfortunately, we’re in one.
With this in mind, strategic default is becoming a more attractive option for more homeowners. The stigma of strategic default is continuing to lessen, as, candidly, more and more people realize it is a sound business decision for many homeowners.
Here is the article from Reuters…
(Reuters) – The housing market will remain depressed, with record high foreclosure levels, rising mortgage rates and a glut of distressed properties dampening the market for years to come, industry experts predicted on Tuesday.
“We don’t see a full market recovery until 2014,” said Rick Sharga of RealtyTrac, a foreclosure marketplace and tracking service. He said that he expected more than 3 million homeowners to receive foreclosure notices in 2010, with more than 1 million homes being seized by banks before the end of the year.
Both of those numbers are records and expected to go even higher, as $300 billion in adjustable rate loans reset and foreclosures that had been held up by the robo-signing scandal work through the process. That should make the first quarter of 2011 even uglier than the fourth quarter of 2010, he said.
There have been allegations banks used so-called robo-signers to sign hundreds of foreclosure documents a day without proper legal review.
Mortgage rates will start to rise in 2011, further dampening demand and limiting affordability, said Pete Flint, chief executive of Trulia.com, a real estate search and research website. “Nationally, prices will decline between 5 percent and 7 percent, with most of the decline occurring in the first half of next year,” he said.
Interest rates on 30-year fixed rate loans will creep up to 5 percent, and that alone will add $120 per month to the typical mortgage payment on a $400,000 loan, Flint said in a joint news conference.
The two firms released a survey showing a marked deterioration in consumers’ views of the housing market, too. Almost half — 48 percent — said they’d consider walking away from their homes and their mortgages if they were underwater on their loans. That’s up almost 20 percent from when the same question was asked in May. “If that continues it would be an epidemic of strategic defaults,” said Flint.
Roughly 1 in 5 consumers said they expect it to be 2015 before there is a recovery in housing, according to the survey, conducted in November by Harris Interactive. Most respondents said they think recovery will come in 2012 or 2013. Would-be buyers suggested they wouldn’t really get serious about purchasing a home for another two years.
Sharga sees a big glut in distressed properties hitting the market. There are about 5 million loans that are at least 60 days overdue, he said. In the next 12 to 15 months, another $300 billion in adjustable rate loans will reset, and “they will default at pretty high levels.”
“Even with today’s low interest rates, you’re looking at an average of $1,000 or more in mortgage payments on loans that are overvalued by about 30 percent. That is where you will see a high level of walkaways,” Sharga predicted.
Not all markets will share equally in the troubles. Flint said he expects to see improvements in several markets, including Raleigh-Durham, North Carolina; Austin, Texas; Oklahoma City, Oklahoma; Salt Lake City, Utah and Omaha, Nebraska.
Homebuyers who are willing to take risks and buy distressed properties are likely to see discounts of around 30 percent from prices on comparable homes that are not in distress.
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