Archive for December, 2010

When foreclosure lawsuits are frivolous

Florida’s Second District Court of Appeal issued a very significant ruling today that helps frame the arguments for many foreclosure cases in Florida.  Here’s the backdrop …

A Hillsborough County judge appropriately dismissed a foreclosure lawsuit because the bank lacked standing to sue.  Having prevailed in the lawsuit, the defendant moved for attorneys’ fees under Fla. Stat. 57.105, asserting the bank and its lawyers knew or should have known the lawsuit lacked the requisite legal or factual support.  In layman’s terms, the defendant alleged the lawsuit was frivolous, and since the bank’s lawyers knew it, the lawyers and the bank should pay the defendant’s attorney’s fees.  When the Hillsborough judge denied a fee award, the defendant appealed. 

The Second District reversed the Hillsborough judge’s order, finding the lawsuit was frivolous and the defendant should have been awarded attorneys’ fees (from the bank and the bank’s lawyers).  Why is this so significant?  Well, it’s not easy to get attorneys’ fees against a lawyer as a sanction.  Fla. Stat. 57.105 sets forth the circumstances where it can happen, but judges (who are lawyers themselves) typically don’t like awarding sanctions under the statute. 

The point here, though, isn’t about attorneys’ fees.  The point is that the Second District is saying that certain legal principles in foreclosure cases are so well-established that the banks and their lawyers subject themselves to sanctions if they contend otherwise.  This is earth-shattering news because, candidly, these are arguments that Florida foreclosure defense attorneys make on a regular basis.   

The fact pattern in this case was one I see often.  The bank filed suit for foreclosure and to re-establish a lost note.  As the case progressed, the bank could not prove it was the owner or holder of the Note.  The note was lost (and hence not in the bank’s possession), and an Assignment of Mortgage had not been recorded in the Hillsborough County Public Records as of the date the Complaint was filed.  Essentially, the bank could not prove it had standing to foreclose as of the date the lawsuit was filed.  In the words of the Second District:

Because J.P. Morgan did not own or possess the note and mortgage when it filed its lawsuit, it lacked standing to maintain the foreclosure action. See Bank of N.Y. v. Williams, 979 So. 2d 347, 347 (Fla. 1st DCA 2008); Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885, 886 (Fla. 4th DCA 1990). It follows that when J.P. Morgan filed its mortgage foreclosure action, it knew or should have known that its action was unsupported by the material facts necessary to establish the claim.

Based on these facts, the Second District concluded not only that the foreclosure lawsuit was appropriately dismissed, but that the bank and its lawyers were deserving of sanctions, i.e. payment of attorneys’ fees to the defendant!  This is huge news, so much so that it will impact my arguments in court on a daily basis.  Now, every time I have a case with this fact-pattern (and I have many), I’m going to tell the presiding judge not only that dismissal is required for lack of standing, but that the law is so well-established in this regard that appellate courts have required sanctions for the bank filing the suit in the first place.  Again, the point isn’t about sanctions or attorneys’ fees, but to make judges realize that the law in this arena is clear, and foreclosures can’t happen upon such facts.  I assure you – judges will open their eyes when they realize an appellate court issued sanctions against a lawyer. 

So what are the facts?  Well, this is the fact-pattern I’ll be looking for: (1) a foreclosure lawsuit where plaintiff is not the original mortgage holder; (2) no assignment of mortgage as of the date the suit was filed; and (3) no indorsement to plaintiff/indorsement in blank as of the date the suit was filed.  When presented with such a fact pattern, Florida courts should – no, *must* – dismiss foreclosure lawsuits.  

One note – notice how the Second District emphasized the bank’s lack of standing “when it filed its lawsuit”?  This is no coincidence.  There is a well-established line of cases holding that a plaintiff cannot acquire standing to foreclose after filing suit.  Hence, if the plaintiff obtained an indorsement/assignment after the suit was filed, and did not have the indorsement/assignment beforehand, dismissal is still required, even if the original note is in thecourt  file.  The Second District did not explicitly say dismissal is required even if the original note is in the file, but that’s what they mean when they talk about the bank not having standing “when it filed the lawsuit.”  It doesn’t matter if the note shows up afterwards – it matters if the bank had the note when it filed suit.  


Mark Stopa

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Florida – the Epicenter of the Foreclosure Crisis

When I talk to friends in other states, they often can’t understand the extent of the foreclosure problems in America.  As I saw this map, I realized why – the impact in Florida is greater than just about anywhere else.  Think about those figures – nearly one in five houses in the biggest portions of Florida are in foreclosure. 

To everyone who thinks the courts should just keep “pushing through” foreclosures, let me ask you this – what is Florida going to look like when banks own 20% of all real estate in Florida? 

Leading Democrats such as Senate Majority Leader Harry M. Reid (D-Nev.) whose state was hit hard by the real estate downturn, have called on lenders to halt foreclosures.

Mark Stopa

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The Foreclosure Mess – Florida Judges Can Do Better

The title of this blog is not my verbiage – it’s the title of the most recent media article that criticizes how judges are handling foreclosure lawsuits in Florida.  The article concentrates heavily on the perverse foreclosure procedures and rulings in Lee County, including the premature “docket soundings” that I’ve blogged about previously. 

I encourage you to read the entire article, but here’s a good synopsis of the total apathy exhibited by some Florida judges in foreclosure cases.  One Fort Myers judge, when confronted with a motion by the bank to temporarily suspend a foreclosure case because it was questioned the accuracy of its own filings, denied the motion! 

Think about that.  This was one of the rare instances where a bank tried to clean up its misconduct, and halt a foreclosure while it evaluated the propriety of its actions, yet the judge basically said “I don’t care – just finish the foreclosure.” 

Respectfully, some judges need the judicial canons by which they are bound.

Canon 1 – A Judge Shall Uphold the Integrity and Independence of the Judiciary

Canon 2 – A Judge Shall Avoid Impropriety and the Appearance of Impropriety in all of the Judge’s Activities

Canon 3 – A Judge Shall Perform the Duties of Judicial Office Impartially and Diligently

Canon 4 – A Judge May Engage in Activities to Improve the Law, the Legal System and the Administration of Justice

Canon 5 – A Judge Shall Regulate Extrajudicial Activities to Minimize the Risk of Conflict With Judicial Duties

Canon 6 – Fiscal Matters of a Judge Shall be Conducted in a Manner that does not Give the Appearance of Influence or Impropriety; etc.

Canon 7 – A Judge or Candidate for Judicial Office Shall Refrain from Inappropriate Political Activity

Mark Stopa

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This is a Foreclosure Cartoon, But I’m Not Laughing

I hate foreclosures.  Whether a home is old or new, big or small, in tip-top shape or in need of TLC … foreclosure stinks.  I particularly dislike foreclosures when the homeowners dutifully paid their montly mortgage payments for 10, 15, even 20 years – only to now be facing foreclosure.  

This cartoon sums up my feelings on that issue quite nicely.

Mark Stopa

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How to Defend Burglary

I am not a criminal defense lawyer, but I think I’ve encountered a foolproof way to ensure clients guilty of burglary never get charged (much less convicted)!  Apparently, all I have to do is explain to the police ”Yeah, my client broke into that home.  But don’t worry.  He works for Bank of America!” 

You see, apparently, being a bank representative gives you immunity to commit burglary in America.  You can steal laptops, IPods, cold beer … even the ashes of the homeowner’s deceased spouse … and there are no criminal charges. 

Okay, enough sarcasm.  In all seriousness, how disgusting is this?  Where are the police?  The State Attorney?  When is someone in a position of authority going to punish lawlessness for bankers just like it’s punished for everyone else in the country?   Is it really that much to ask that the law apply equally to everyone, including bankers?  Sadly, it seems so.

Mark Stopa

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When Loan Modifications Fail, Try Bankruptcy

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.”

Mark Stopa

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Foreclosure Crisis? Recession? Don’t Tell the Banks!

I guess I’ve been wrong all this time.  You see, I’ve been thinking our economy is struggling in the midst of an unprecedented foreclosure crisis.  Apparently, though, nobody has told this to the banks, who are continuing to record record profits and pay out obscene bonuses to high-level executives

I’m not sure who to be more upset with – the banks, for this unconscionable greed (while the rest of America suffers), or our government, for handing out bailout money with no strings attached then sitting by as the banks hoard profits, keep foreclosing, and continually refuse loan modifications. 

It’s ironic, actually.  A little more than two years ago, Obama was accused of being a socialist – of trying to redistribute wealth from the rich to the poor.  Now, Obama is doing nothing as the banks engage in the largest re-distribution of wealth – from the poor/middle class to the rich – in the history of mankind.  That’s what the foreclosure crisis is, folks – the largest re-distribution of wealth in recorded history. 

If that sounds extreme, read the article.  Most telling:  if Wall Street pumped the bonus money given to bank executives into the economy, it would create 3.6 million new jobs and lower the unemployment rate 2.6 percent. 

Where did the banks get all this money again?  Oh, yeah – from you and me and our bailout money. 

Apparently, when they needed help, the big banks were “too big to fail,” but now that they’re back on their feet, the banks are “too greedy to share.”  What a heart-warming thought this holiday season.

Mark Stopa

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Mortgage Modifications CAUSE foreclosure – a first-hand account

In response to my blog entitled “How Loan Modifications Cause Foreclosure,” I received the following comment.  I’m posting it here because I want everyone to see that the issues I blog about are real problems that happen to real people.  So without further ado…

I have a mortgage with Litton Loan Servicing. About 1 1/2 years ago I was having some difficulty paying all my bills. So I called all my creditors and to my surprise they all had options to help me, including my mortgage company, Litton. I never told Litton that I could not pay their bill. I was just looking to see who could help. They encouraged me to apply for a HAMP modification. After several months I got accepted into the trial modification period. I asked them what that was. They said it was the final step that takes no more than 4 months, just make your payments on time and you will be fine. I thought all was well. I made on-time payments. I stayed in touch like they asked. After 7 months of timely payments I called them as I often did to check in. Finally, after 7 months, they said I was denied for some unexplainable reason and owed them $3000 and that my home was in default!

What kind of help is this?

I could have paid my full mortgage and not ended up in this debt. I do not understand how this is considered help. I have been paying hundreds each month in credit card bills. Meanwhile, my mortgage company is reporting me delinquent. I was worried about my credit when I should have been worried about my house. I could have easily paid my full mortgage. I cant live in a little plastic credit card. Who came up with this plan to help people?

I have spoken to dozens of people, mostly couselors and loss mitigation reps, some nice, some not. None of them suggested that I consider saving my house and not my credit cards! I don’t know who to trust anymore.

The best part… The loss mitigation side of Litton is promising to resolve the mistakes and get me a modification BUT the original mortgage department side of Litton has been pursuing foreclosure and has now told me that my loan is being sold to Green Tree Servicing on January 1st. Green Tree is the company that’s being sued for killing someone with harrassing phone calls. I don’t expect they will work with me and make it all better.

Here was my response:   If you’re facing foreclosure and credit card debt, you are a good candidate for a foreclosure defense/bankruptcy consultation. Give us a call for a free consult.  888-450-1549.  Whatever you do, please don’t give up.  Mark

Mark Stopa

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When is a good time for a Foreclosure Sale?

Apparently, the Broward County courts have realized the holiday season is not an appropriate time to conduct foreclosure sales, as they’ve cancelled all foreclosure sales between now and the end of the year via this Order (hat tip, Matt Weidner and Foreclosure Hamlet). 

For me, this begs two questions.

1.  I’m glad we can agree that foreclosure sales should not be happening over Christmas, but what about Writs of Possession?  A foreclosure sale is horrible, obviously, but it’s the Writ of Possession that forces a homeowner to be removed from his/her home.  Why should those proceed over the holidays?

2.  I’m glad we can all agree that foreclosure sales should not happen over Christmas.  But doesn’t that beg the question – when, exactly, is a good time for foreclosure sales?  Is it really better to foreclose on Florida homeowners in January as opposed to December?  January 3 is somehow a better day to foreclose than December 29? 

The fact that our courts can recognize the inhumanity of foreclosing on homeowners over the holidays, but, all too often, won’t acknowledge the inhumanity of it the rest of the year, disappoints me beyond description. 

Judges, the next time you go to sign a Final Judgment of Foreclosure, think about that feeling in your heart/mind/body that causes you to feel the compassion necessary to not schedule a foreclosure sale over the holidays.  Whatever it is that makes you feel that way – bottle it up and remember it all year long.  After all, if you can realize that foreclosure is traumatic enough that it shouldn’t happen over the holidays, you should realize that foreclosure shouldn’t happen any other time of year, either.

Mark Stopa

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When Strategic Default Makes Sense

I just read a heartbreaking story about a Jacksonville homeowner who has given up everything – literally, everything – to pay his monthly mortgage payments.  You think your life is rough?  This man sold all of his furniture, A/C, tables, stove, refrigerator … now, all he has left are his prepaid cemetary lots. 

Let me get right to the point.  This is sad, but there is a lesson to be learned here.  This is, candily, the best illustration I’ve ever seen of what not to do.  For many months, I’ve tried to explain this to clients, prospective clients, and readers of this blog:

It’s generally not a good idea to deplete your savings or retirement monies to pay your mortgage. 

Let me say that again: 

It’s not a good idea to deplete your savings to pay your mortgage. 

I’ve seen this sort of thing happen sooo many times – a homowner has $50,000 in savings, falls on hard times, and starts dipping into savings to make mortgage payments.  Eventually, $50,000 turns into $25,000, then $10,000, and, using the extreme example above, absolutely nothing. 

I firmly believe, once you find yourself falling down that slope, you must catch yourself and reverse course.  In other words, if you’re slowly depleting your savings to pay your mortgage, then stop paying your mortgage!  If you don’t stop, you may find yourself in the same boat as this homeowner – without any money, without any assets, having paid your last dime to the mortgage company, and still facing foreclosure anyway. 

If that doesn’t make sense, let me ask it this way.  Which is better?  To face a foreclosure lawsuit wih $50,000 in savings, or to face that same foreclosure lawsuit with no savings?  Isn’t it better to have the 50K in your pocket? 

There aren’t many guarantees in the practice of law.  One thing I can guarantee, though, is this.  If you deplete your savings to pay your mortgage, the bank isn’t going to return that savings to you.  Know what they’ll do?  They’ll keep that money and sue you for foreclosure anyway.  So which is better – to get sued for foreclosure with $50,000 in savings, or to get sued for foreclosure with no savings? 

For me, the answer is clear.  So please don’t make this mistake.  Don’t wait until it’s too late.  If you can’t afford your monthly mortgage payments, don’t deplete your savings/retirement to pay.  All you’ll do is leave yourself broke and still facing the same problem, i.e. your inability to make the monthly mortgage payments.

Mark Stopa

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