Archive for June 1st, 2011

An Argument for Strategic Default

Hat tip to friend and colleague Diana Cessna for this eye-opening quote:

“In the seven years before its peak in July 2006, the home-price index surged 155 percent. Since then, it’s fallen 33 percent. During the Great Depression, prices fell 31 percent. It took 19 years for the housing market to regain its losses after the Depression ended.” Do homeowners still think they have a chance to “wait out” this market?

If you view the real estate market in this light, strategic default seems like the only reasonable option for many homeowners.  I mean, if it takes 19 years for the housing market to regain the losses it’s suffered, as it did after the Great Depression … I shudder at the thought.

Mark Stopa

Posted in Main | 1 Comment »

Florida foreclosure cases to slow down

As this article in today’s Orlando Sentinel explains, foreclosure cases in Florida are about to slow down given the end of rocket dockets and senior judges. 

I don’t want it to sound like I like this, as I don’t.  The under-funding of Florida’s court system is terrible.  However, if this i how the system operates, then there’s no avoiding the fact that this is another good reason why homeowners facing foreclosure shouldn’t give up, but should defend their case. 

Here’s the article. …

Florida’s foreclosure pipeline is expected to clog again, further delaying the state’s real-estate recovery, when a special judicial program sometimes called the “rocket docket” comes to end June 30.  The financially challenged Legislature did not renew the year-old, $6 million program, which pays retired judges $350 a day to chip away at the backlog of 462,339 foreclosure cases overwhelming the state’s court system.

Starting July 1, Florida courts will have to absorb 310,770 backlogged foreclosures while taking on new mortgage-default cases and balancing their regular caseloads.  For the thousands of Central Florida homeowners who face losing their houses, the new reality of foreclosure court is that the process will likely take more time. At the same time, those cases may get a more thorough vetting from sitting judges than they would have from retired justices.

State Circuit Judge Frederick Lauten said Orange County’s judicial-foreclosure staff, which heard or dismissed about two-thirds of its 39,700 backlogged cases, will be cut in half starting in July. The diminished staff should be able to continue cutting into the backed-up caseload, but it’s unclear whether it can handle an expected surge in foreclosure filings, he said

“At the current level, we think cases can proceed with some speed,” Lauten said. If foreclosures spike again, the court system may have to go back to the Legislature for some relief, he added.

Before the state funded extra help for foreclosure cases, “we were hanging on for dear life,” Lauten said.

In Seminole County, the court system used the state foreclosure funds to pay four judges to each hear about 100 cases one day a month. Though that may sound like a lot of cases to work in a day, homeowners showed up in only about 10 percent of the cases, and the rest went quickly into final judgment, said Tara Culver, a judicial assistant in Seminole County.

Starting in July, Seminole will dovetail its foreclosure cases into the regular docket of the civil judges, said Circuit Judge Alan Dickey, incoming chief judge for the circuit, which includes Seminole and Brevard counties. He said he also would be taking on some of the foreclosure cases.

The retired-judge program didn’t work as intended, Dickey said, because mortgage servicers and lenders had to slow the process to more thoroughly vet documents after some cases were hurt by illegal or missing documents.

Throughout the state, courts chipped into the mountain of foreclosures cases largely by dismissing those that had stagnated for at least two months. Florida courts dismissed about half of the 150,000 foreclosure cases in the pipeline from July 2010 through the end of March, according to the most recent report by the Office of State Courts Administrator .

One judge said the term was “goosing” cases so that they would either move forward or get dismissed.

Many of the “goosed” cases that ended up being dismissed, though, will likely be refiled as mortgage servicers deal with the questionable paperwork.

“It’s all kicking back up again,” Culver said. “We’ll know more as we get back into it.”

For months, the four-county Orlando metropolitan area showed monthly declines in the number of foreclosure filings. But in April those legal actions increased by 18 percent — perhaps the first sign of a long-anticipated increase in foreclosure activity, according to the California-based real-estate-research company RealtyTrac.

A surge in foreclosures could lengthen the recovery time for Central Florida’s battered real-estate market but would not necessarily affect prices, analysts say.  “The most likely scenario is that we will not see a lot of movement in price either way,” said Daren Blomquist, spokesman for RealtyTrac. “We will see home prices stagnate while the foreclosure issue is resolved and the cases are closed out.”

One good thing for the market is that a slower court process will likely keep foreclosed homes from flooding the market and creating a scenario “where you might see prices fall off a cliff,” he added.

Orlando foreclosure lawyer Matt Englett said that, although cases will take longer, “each case will be heard by a judge who is accountable to the electorate and therefore will usually render more thought-out decisions. This will result in homeowners getting a fair opportunity to be heard in their foreclosure case.”

Taking longer to get through the court system should not add to the legal price tag of these foreclosures because law firms representing banks charge a flat fee for their services, said Englett, whose firm handles thousands of mortgage-default cases for homeowners.

Mark Stopa

Posted in Main | 6 Comments »

Another Double Standard

This article, below, shows how a disbarred foreclosure defense attorney is now facing criminal charges for counseling a client who was foreclosed upon to break into the home and re-take possession.  I’m as big of an advocate as anyone, but this was just over the line, so the criminal charges aren’t a huge surprise.

But here’s my problem.  This is a gross double-standard, as the laws aren’t being applied equally.  After all, we’ve all seen stories of banks breaking into homeowners’ homes (when the homeowners still own them) – where are the criminal charges against those bankers?  Why is it that foreclosure defense advocates are charged criminally for breaking into a home but the bankers aren’t?  Is anyone else appalled at this double standard? 

Here’s the article.

A disbarred foreclosure defense attorney and former homeowner were arraigned for attempting to break into a foreclosed Newport Beach, Calif., home last fall.

Michael T. Pines, 59, of San Diego, and Rene Hector Zepeda, 72, of Newport Beach, are charged with one misdemeanor count each of vandalism, second-degree burglary and the unauthorized entry of a dwelling, according to the Orange County district attorney.

Pines faces an additional misdemeanor count for resisting and obstructing an officer. If convicted, both defendants face a maximum sentence of one year in jail and up to $10,000 in fines, the DA’s office said. They turned themselves into court Tuesday on a warrant and are scheduled for a pre-trial hearing on June 20.

Pines made the national news headlines with the break-in — one of three in which he attended and encouraged the foreclosed homeowners to bust into their former homes, according to court records.

In the disbarment case against Pines, Richard Honn, judge of the State Bar Court of California said Pines views himself “as a modern-day Henry David Thoreau, who encouraged civil disobedience to effect universal societal benefits, including ending slavery and war,” but added, “Respondent is not Thoreau, and his cause is not slavery or war. (Pines) sought a few minutes of fame in front of reporters or the television cameras while he violated the law, or encouraged his clients to do so.”

The disbarment took effect May 1.

Zepeda owned a home in the Newport Coast subdivision at 19 Coral Cay until July 2009, when his lender repossessed the home in a foreclosure proceeding. In 2010, Zepeda retained Pines as his attorney, according to the DA’s office.

Without making any attempt to prove the foreclosure was defective, Pines advised Zepeda that the foreclosure was illegal and instructed him to break in and physically repossess the home.

Pines is accused of contacting the media and a real estate agent hired by the bank as trustee for the home, then in REO status, and informing them that Pines and Zepeda would take possession of the home on Oct. 13, 2010. The agent contacted the Newport Beach Police Department.

On the morning of Oct. 13, Pines and Zepeda went to the house with a locksmith. The police, also there, warned them they could be arrested if they entered the property, which was at that point owned by a lender.

In front of the officers, Pines is accused of instructing Zepeda to ignore the warning. Zepeda and Pines are accused of then breaking a window with the intention of gaining entrance into the house. Both defendants were arrested, cited and released.

Pines is also facing criminal charges in separate cases in Ventura and San Diego Counties, according to the DA’s office.

Mark Stopa

Posted in Main | No Comments »