Archive for August 13th, 2011

Mortgage Modifications by Non-Lawyers

I was perusing Facebook today and came across a non-lawyer in the Palm Beach area who “guarantees” loan modifications for clients, promising to reduce monthly payments by half and offering a money-back guarantee if he doesn’t come through. 

If you’re one of thousands of Florida homeowners facing foreclosure, this may sound really appealing.  However, there are two inescapable, insurmountable problems for this person, both of which should make you turn the other way and RUN if you encounter any non-lawyer offering such services.   In other words, there are two reasons this is a SCAM (regardless of the results people like this say they’ll provide):


1.  Under Florida Statute 501.1377, it illegal for any non-lawyer to charge up-front fees for a mortgage modification

Here is a link to the entire statute, but in case you don’t want to read the entire thing, here’s what subsection 3(b) provides:

In the course of offering or providing foreclosure-related rescue services, a foreclosure-rescue consultant may not … solicit, charge, receive, or attempt to collect or secure payment, directly or indirectly, for foreclosure-related rescue services, before completing or performing all services contained in the agreement for foreclosure related rescue services.

Lawyers are exempt from this requirement under Fla. Stat. 494.00115(1), but there is no way that any non-lawyer can get around this statute.  Quite simply, it is against the law for any non-lawyer to take up-front fees in connection with a mortgage modification. 

Some non-lawyers have tried to convince lawyers to work with them to circumvent this law, i.e. a lawyer and a non-lawyer in the same company, but aside from stealing trust money, that might be the quickest way for any lawyer to get disbarred.  No reputable lawyer would associate with a non-lawyer in this context.

This law has been in effect since 2008, so at this point, no non-lawyers should be doing loan modifications with up-front fees. 

Please don’t fall prey to this scam.

2.  Non-lawyers cannot represent Florida homeowners in court. 

Even if non-lawyers are trying to get a loan modification, they cannot defend the foreclosure lawsuit or stop that lawsuit from proceeding.  Hence, if the loan modification doesn’t happen (as it typically doesn’t), then the non-lawyer cannot stop the bank from prosecuting the foreclosure case or obtaining a Final Judgment of Foreclosure. 

This is where so many homeowners have gotten screwed.  In fact, this is why the Florida legislature enacted Fla. Stat. 501.1377.  Too many Florida homeowners thought they were going to get a loan modification based on promises from a non-lawyer, then didn’t realize until it was too late, i.e. until they had already gotten foreclosed, that the modification was never coming. 

For some of you, these may sound like basic concepts.  If so, that’s great.  However, I was and remain very concerned that the man I encountered on Facebook apparently has “hundreds” of clients.  Yikes.  He tries to make himself sound reputable, but breaking the law isn’t my concept of reputable. 

Don’t fall for this trap, folks.  Non-lawyers cannot charge up-front fees for loan modifications, and a “money-back guarantee” doesn’t change that. 

If you’re being sued for foreclosure, your best chance at getting a loan modification is to retain a competent foreclosure defense attorney, make sure you’re defending the foreclosure lawsuit against you, and negotiate for a modification while you’re defending the lawsuit.

Mark Stopa

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Pay Your Association Dues!

I recently received an email from a fellow foreclosure defense attorney, lamenting how his clients were foreclosed, and their home sold at a courthouse auction, even though they were current on their mortgage payments.  The problem wasn’t any nefarious activity by banks (first time for everything, eh?), but their failure to pay their homeowners’ association dues. 

Through some sort of oversight, these homeowners failed to pay their HOA dues for some time.  What they didn’t realize was that their homeowners’ association could sue them for foreclosure for failing to pay these dues and that, once the HOA prevailed, the court would hold a foreclosure auction/sale in much the same way it does when a bank forecloses! 

What does that mean, in layman’s terms?  Those homeowners still owe the note/mortgage, and even though they’re current on their payments, they no longer own their home.  In other words, failure to pay HOA or dues can cause a homeowner to lose their home!  The same goes for condominium association dues – failure to pay those can result in a foreclosure (regardless of the status of the mortgage).

I’m seeing more and more of this in recent months (typically with unrepresented homeowners), and it’s an absolute travesty.  I suppose it’s one thing for a homeowner to be foreclosed on a home worth $200,000 because they can’t pay a mortgage of $350,000.  But it’s quite another thing for a homeowner to be foreclosed on a home worth $200,000 because they don’t pay HOA dues of $2,000. 

At this point, we all know how mortgage foreclosure lawsuits work.  For a variety of reasons, it’s quite possible to continue living in your home for many months/years, even if you’re behind on mortgage payments and even if a mortgage foreclosure lawsuit is pending. 

However, the dynamics are much different with HOA and Condo dues. 

First, the amounts in controversy are much smaller – typically only a few thousand dollars (as opposed to hundreds of thousands).

Second, lawyers for HOAs and condo associations tend to be more aggressive than banks in pursuing foreclosure.  As a result, foreclosures can transpire more quickly. 

Third, it’s harder for lawyers like me to defend lawsuits by HOAs and condo associations.  Quite frankly, there are typically fewer defenses available in these cases.  As a result, these foreclosures tend to happen more quickly.

Combine these dynamics and what’s the result?  It’s almost always a good idea to pay your HOA and condo association dues, regardless of what you’re doing with your mortgage.  After all, you don’t want to be foreclosed over a couple of thousand dollars, particularly since, if you pay those dues, you’ll be able to stay in the home until the mortgage foreclosure suit is over. 

Personally, I don’t like to fight association lawsuits at all, so much so that I often turn away paying clients.  It’s a terrible dynamic.  Once unpaid association dues get to the lawsuit stage, a $2,000 balance quickly doubles, then quadruples, as the association includes late fees, interest, and lawyer fees.  Invariably, I’ve found it better for homeowners to pay these fees, rather than pay me to fight over a relatively small amount of money. 

I realize that many such homeowners are struggling financially, but HOA dues are typically a small price to pay to continue living in a home.  And it’s better to pay sooner, before lawyer fees, interest, and late fees turn a $2,000 balance into $8,000 or more.  After all, if the balance gets too high, you might not be able to pay, and at that point, you risk losing your home no matter what’s happening with your mortgage. 

So what’s the moral of this story?  Generally, especially if you’re living in the home, it’s almost always best to pay your association dues!

Mark Stopa

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The Solution to Court Funding Problems: “CASE DISMISSED”

This article, published on The Florida Bar’s website, explains how Florida courts are again running low on funding, a problem which nearly caused them to shut down earlier this year. 

It’s a shame to see the Chief Justice of the Florida Supreme Court pondering solutions for this problem when, to me, the solution is so obvious – DISMISS MORE CASES!

I’m not suggesting cases be dismissed without a legal basis.  My point is that there are many instances where foreclosure cases can be dismissed without prejudice, requiring the new filing fees that the courts need.  For example …

When banks lack standing at the inception of the case, trying to prosecute a foreclosure when they acquired standing post-filing, the judge should say “CASE DISMISSED” (legal authority, Progressive Express Ins. Co. v. McGrath Community Chiropractic, 913 So. 2d 1281, 1285 (Fla. 2d DCA 2005) (“the plaintiff’s lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed.”)

When banks refuse to comply with court Orders compelling discovery, the judge should say “CASE DISMISSED” (legal authority – Rules 1.380 and 1.420(b))

When banks refuse to attend mediation, the judge should say “CASE DISMISSED” (legal authority – Rule 1.420(b), Rule 1.720(b))

When banks fail to prosecute cases, the judge should say “CASE DISMISSED” (legal authority, Rule 1.420(e)).  In fact, as I explained, here, Chief Justice Canady should realize that the courts’ funding problems would be helped if the Court created a less rigid Rule 1.420(e), as existed for many years until a 2006 Rule amendment.  (Notably, one local judge lamented the Court’s recent Chemrock decision, in open court, just last week, so much so that I was emboldened to write her a letter asking her to express her views to the Florida Supreme Court and request that the Rule be amended, as I’ve opined.)

When banks fail to attend court-ordered case management conferences or pre-trial conferences, the judge should say “CASE DISMISSED” (legal authority – Rule 1.420(b))

When banks fail to state a cause of action, the judge should say “CASE DISMISSED” (legal authority – Rule 1.140(b))

When banks fail to file an Amended Complaint after the prior Complaint was dismissed with leave to amend, the judge should say “CASE DISMISSED” (legal authority – here)

When banks that file suit lack the capacity to prosecute that lawsuit in a Florida court, the judge should say “CASE DISMISSED” (legal authority – Rule 1.120(a))

When banks present fraudulent evidence to the Court or otherwise try to perpetrate a fraud on the court, the judge should say “CASE DISMISSED”

So what is my point here?  Simple.  I feel badly for judges and court personnel (and, for that matter, anyone affiliated with the courts).  The Florida court system is under-funded, and it’s not fair for anyone involved. 

However, it’s wrong that our court system is so dependent on banks filing new cases to recover the filing fees the courts need to function.  Yes, I realize that increased funding is one solution, but another is for judges to have the courage to, where appropriate, say “CASE DISMISSED,” forcing banks who haven’t followed the law to pay a new filing fee.

Mark Stopa

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