Archive for May 12th, 2011

Strategic Default – a First-Hand Account

Below is a comment I received in response to a blog.  I’m fascinated by the sentence “If enough homeowners keep paying, the banks win.”  It makes a lot of sense, no?  Think about it:

If enough homeowners keep paying, the banks win.

Here is the comment…

If more people in California walked away from negative equity, banks would start offering REAL modifications, adjusting to current market value (which is in fact the value of the assets on their books), but it suits them to retain what they know are falsely elevated values. If enough homeowners keep paying, the banks win.
My condo bought in 2005 with no downpayment is $150,000 underwater and would take 16 years to have any equity at all, even if the market rises by 2% per year. I can pay and have been paying all along, cherishing my 800+ credit score, but I’m finally doing the math and realizing it makes no sense. For more than two years I’ve tried to get BOA to modify it to a fixed rate (no change in principal) and they have refused because it’s not more than 31% of my salary. The business sense of their decision baffles me, because now I’m walking away in a non-recourse state and we BOTH lose. I lose the home I love and they’ll have to sell it well below even the current value. I’ll be renting for 7 years, just down the street.
To the person who compared this to a car loan. Car loans don’t contain clauses that require the bank to take the car as full payment.
To those who think I’ll celebrate “beating the system”. You haven’t been with me on all the nights I’ve cried over the struggle to choose between a rock and a hard place. I choose not to spend 16 years underwater.
One irony: In 2005 when I (newly graduated) assumed I’d spend a few years saving for a downpayment, BOA sent targeted fliers to my office OFFERING me a no-down 100% mortgage and explaining why this made much more sense (tax-wise) than renting. Had I taken the $900,000 home loan they were willing to allow, I would now qualify for the modification. Alas, I chose the $550,000 home I could afford. No help for me now.
I’m out. And not sure I EVER want to re-enter the housing market.

Mark Stopa

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Foreclosure Trial in Lee County

I was in court for today’s trial for less than an hour, but it was such a bizarre experience that I found myself taking notes to document the details.  As I told my bright associate, Philip Healy, on our return trip, it was nothing like a “normal” trial, i.e. a trial in a non-foreclosure case, but I guess there’s nothing “normal” nowadays, especially in Lee County. 

Anyway, the day started with 108 different cases being assigned a number and all parties/attorneys “checking in” with the clerk to announce their presence.  Incredibly, 108 cases were to be tried, all at once, before just two judges! 

When the judge arrived, he started by asking that anyone who thought their trial would be more than a couple of minutes stand up and say so (apparently with the intent that these “contested” cases be moved to a different room with a different judge).  Incredibly, I was just one of two people to stand up.  “Really?” I thought to myself.  “Just two people think their case will take more than a couple of minutes?” 

When I announced “Number 53,” a local attorney who is not counsel of record who I had never seen before announced himself as opposing counsel, saying the bank was seeking a continuance.  Before I could respond, the judge said that motion would be adjudicated by the other judge.  The local attorney said he couldn’t leave that room yet, though, as he was counsel in several other cases which were still to be called up.  So I found myself waiting and watching the other cases get “adjudicated.” 

Next up was an attorney from one of the foreclosure mills; she must have had 15 cases set for trial.  One by one, she repeatedly announced that voluntary dismissals had been filed in most of those cases.  In others, she sought a continuance, which, when unopposed, was granted.  As she concluded, the judge stated (and I wrote it down, I was so troubled):

“Do we give her some sort of award for resolution attorney of the day?”

This prompted applause from two of the clerks seated to the judge’s right. 

As I felt like I was in some bizarro-world, up marched a Florida default attorney.  Philip knows her, and it’s clear she’s fairly green, yet it appeared she was handling all of the FL Default cases – I’d estimate 25 or so.  Clearly, though, she wasn’t about to try 25 cases.  One by one, she announced her intentions to the court with these cases.  Many of them were voluntary dismissals.  No explanation was given; no rationale provided – just a voluntary dismissal.  In others, she sought a continuance, which, when unopposed, was granted without argument. 

As I watched, I was struck by the randomness of it all.  There seemed to be no rhyme or reason why some cases were being dismissed, whereas others were proceeding forward.  One defense attorney didn’t seem to mind, as she left the courtroom with the case against her client having been dismissed without her having to say one word. 

FL Default didn’t dismiss all of the cases, though.  For some, they asked for a continuance.  For others, the judge instructed counsel to submit a Final Judgment ex parte

One exchange between the FL Default attorney and the judge bothered me so much I wrote it down.  The attorney asked for a continuance because she did not have the original note, saying it was still with David Stern’s office.  (Apparently, Stern is the go-to excuse for any mill that is missing evidence.)  However, the judge wasn’t going to be deterred by missing evidence.  Realizing the defendant was not present, the judge said it made “no sense” to amend the pleadings when the defendant was not present at trial and that there were “other ways” to win at trial when the plaintiff did not have a lost note.  Apparently, the attorney didn’t get the hint, so the judge spelled it out for her: “Prepare an affidavit of lost note and submit it to me, along with an affidavit of fees and costs and an ex parte judgment packet.” 

I was horrified.  Was this a judge?  Or the supervisor of Florida Default Law Group (counseling the young attorney on how to prosecute the case)? 

A few cases later, the same attorney asked for a continuance.  A fellow foreclosure defense attorney objected.  The judge then said, not to the entire courtroom but not trying to keep it quiet, either, that if a defendant opposed a continuance that the court would enter a dismissal.  The judge then dismissed that case. 

I was stunned.  Remember, I was one of two people who stood up at the beginning, and the judge said the motions for continuances in those cases would be heard by the other judge.  But sensing the opportunity, that attorney and I both walked up to the front of the line and announced our case numbers.  The other attorney also had a FL Default case, so he went first, saying “Judge, my situation is exactly the same.  They are seeking a continuance, I’m opposing it.  And this is the third request for continuance.”  With very little argument, the judge dismissed that case. 

I was next.  I said “Case 53, I’m in the same situation, judge.”  The judge asked the local counsel the reason for the continuance.  He said it was a VA loan (without explaining why that meant they needed a continuance).  Before I could get into my many arguments against a continuance (he was not counsel of record; in fact, there was no counsel of record, and the motion for continuance did not even come close to complying with Rule 1.610), the judge announced he was dismissing the case. 

The fill-in attorney then said he would file a notice of voluntary dismissal without prejudice, to which I responded “it’s too late, trial has started, and the judge has already dismissed the case.”  The judge interjected “it doesn’t matter, you’re the prevailing party,” not realizing that an involuntary dismissal under 1.420(b), as opposed to a voluntary dismissal without prejudice, should operate as an adjudication on the merits, i.e. a dismissal with prejudice.  But that wasn’t the time for that fight.  Figuring I could submit a written Order, I gladly left, having prevailed at trial in a foreclosure case. 

As I left, I felt a warped sense of justice.  My client’s Motion to Quash Service and Motion to Dismiss had never been heard, yet we had to attend three docket soundings and a trial, all of which were clearly premature.  The procedure was totally perverse.  Yet the court had pushed the case so quickly that even the Plaintiff wasn’t prepared to proceed, prompting the request for a continuance and the dismissal. 

What was perhaps even more bizarre, though, was how the court automatically presumed the case must be dismissed merely because the continuance was denied.  In a normal situation, where a continuance is denied, the next thing that happens is the Plaintiff tries the case!  Here, though, it was so clear the Plaintiff was not prepared to try the case that the judge automatically parlayed the denial of a continuance into a dismissal. 

Was this brilliant lawyering?  Not really.  Rather, this was another illustration of what I’ve been saying for a long time – if you fight foreclosure, and defend your case, you never know what good things may result.

Mark Stopa

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