Archive for September, 2011
Posted on September 16th, 2011 by Mark Stopa
I’m not an FBI agent or criminal detective, nor do I pretend to be. That said, I’ve watched enough TV shows like Criminal Minds and CSI to know that when criminals conspire to commit a crime, they usually get caught, and when they do, they all turn on each other faster than bees on honey. The phenomenon of two people getting arrested for the same crime and having the incentive to throw each other under the bus for their own benefit is so common that it has a name – the Prisoner’s Dilemma.
Given all of their criminal misconduct, it should hence be no surprise that the banks have begun turning on each other, filing suit against each other regarding fraudulent practices in the mortgage industry. Like the Prisoner’s Dilemma, these criminals (cough, I mean banks, cough) are looking out for themselves, even if it means throwing other banks under the bus.
All of the diligent reporters who have been covering foreclosure issues (several from the St. Pete Times, Shannon Behnken of the Tampa Tribune, Kim Miller of the Palm Beach Post, David Streitfeld of the New York Times, etc.) – make sure you check out the public records in these cases. The banks know their own misdeeds more than anyone, so I’m quite certain there will be some interesting information disclosed in these cases.
Mark Stopa
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Posted on September 14th, 2011 by Mark Stopa
One of the most frustrating aspects of foreclosure defense is how plaintiffs’ lawyers and even many judges act like all foreclosure defense lawyers do is delay. With all due respect, I don’t delay – I defend.
Ironically, it’s often the plaintiffs and their lawyers who delay, not the defense. To illustrate, I just recently received an ex parte Order where, having already granted a motion to dismiss with leave to amend, the Tampa Court granted a 60-day extension of time, ex parte, for the Plaintiff to amend its Complaint.
An extension of time isn’t a big deal, even ex parte. But 60 days? Seriously?
Respectfully, I’m tired of being accused of delay, of being curtly told I have 10 days to file an Answer, of being deprived of hearings, of being threatened with sanctions, etc., only to keep seeing plaintiffs get away with delays like this. Hence, I wrote this letter to the Court.
Hopefully, judges will start to realize it’s not the defense who is delaying (certainly not in my cases, anyway) – it’s the banks and their lawyers that don’t want to prosecute cases.
Mark Stopa
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Posted on September 13th, 2011 by Mark Stopa
Suppose I get drunk, drive, get into an accident, and seriously hurt an innocent pedestrian. Suppose I hurt the pedestrian so badly that the damages to which he is entitled equal $1,000,000. If that happened, would I have to pay $1,000,000? Before you answer, think about insurance. If my liability insurance pays the claim, and/or his insurance covers the claim, such that he is paid $1,000,000 from insurance, do you think he’d still get to collect $1,000,000 from me? Of course not. No matter how heinous my conduct, he would have been made whole by the $1,000,000 payment from insurance, and he cannot collect more than the amount he’s been damaged.
It may be that an insurance company has a right to subrogation from me, i.e. an insurance company has a right to get reimbursed the $1,000,000 from me, but as between me and the pedestrian, no money can change hands.
If this sounds odd to you, then this is a dynamic that has transpired countless times in courtrooms throughout the United States. Every lawyer and every judge knows that a personal injury plaintiff cannot collect twice if he/she has already collected from an insurance company – the double recovery is barred under the law under a doctrine called “unjust enrichment.” That defense is just what it sounds – a plaintiff cannot be unjustly enriched by a double recovery. In other words, the law lets a plaintiff recover the amount of its damages – nothing more, nothing less.
This same dynamic should exist exactly the same way in mortgage foreclosure cases. Many times, when a homeowner takes out a mortgage, there is an insurance policy in place if the homeowner defaults. Often, this results in an insurance company paying the bank in full. Hence, if the homeowner defaults, and an insurance company pays the bank in full, the bank has no right to collect again.
That may sound odd, but it’s the same principle of law as my personal injury example. If the homeowner defaults, and still owes $250,000, and the bank collects $250,000 from an insurance company, then the bank doesn’t get to go to court and foreclose on the homeowner or collect more money. As between the bank and the homeowner, the bank has been paid in full, and any additional recovery would be barred by the doctrine of unjust enrichment.
Personally, I’m tired of seeing banks get unjustly enriched to the expense of mainstream America. It’s time this stopped. It’s time everyone asked, in every foreclosure case, “was this debt paid by an insurance company?” If the answer is “yes,” then the bank’s requested foreclosure should be denied.
This article is a good start to stopping the banks’ unjust enrichment. But we all need to spread the word about this dynamic to make it stop. After all, if we can all agree that personal injury plaintiffs don’t get to collect twice (and I know all lawyers and judges agree with that), then banks shouldn’t get to do so, either.
Mark Stopa
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Posted on September 11th, 2011 by Mark Stopa
I’m so tired of watching banks’ lawyers seeking and obtaining relief from judges, ex parte, without notice and without hearing, especially when that relief is on significant issues in the lawsuit.
In one case I’m defending, for example, a Tampa judge recently denied a Motion to Dismiss without hearing and without explanation, even though the Note attached to the Complaint is in the name of a different bank, the Note has no indorsement, and there is no Assignment of Mortgage.
Sadly, I’m used to well-taken arguments like that getting rejected. My bigger concern is that I’ve been defending the case based on the plaintiff’s lack of standing for two years, yet the bank’s lawyer submitted an Order to the judge, without my knowledge, changing the plaintiff from Chase Home Finance, LLC to Fannie Mae. Worse yet, the judge signed the Order, without notice, without hearing, and without me even knowing the Order had been submitted!
This triggers two significant thoughts.
First, how appalling is this process? I mean, seriously – do I even need to elaborate here? How can a bank lawyer change the plaintiff, ex parte, when the identity of the plaintiff is the very issue being litigated?
Second, it seems to me like my client is entitled to attorneys’ fees for having prevailed on all claims brought by the initial plaintiff, Chase Home Finance, LLC. A homeowner’s entitlement to attorneys’ fees is well-established when a bank voluntarily dismisses a foreclosure case or when the court dismisses it without leave to amend. I realize an Order changing the plaintiff isn’t the same thing, but it’s close. Here, for instance, Chase Home Finance, LLC is no longer bringing any claims against my client, even though my client spent the last two years defending such claims. As between Chase and my client, that’s basically the same as a voluntary dismissal.
From a bigger-picture perspective, my hope is that pushing this argument will force changes to this rather obvious lack of due process. It’s time that banks’ lawyers stop seeking ex parte relief on significant issues in contested foreclosure cases, and it’s time that judges stop awarding that relief ex parte. If it takes some fee awards to make everyone realize that ex parte orders changing the plaintiff should not be a part of normal procedure in foreclosure cases, then so be it.
Here is the motion I filed on this issue.
Mark Stopa
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Posted on September 10th, 2011 by Mark Stopa
My distaste for banks is well-known, but recently I’ve begun thinking that insurance companies are just as slimy.
You see, in addition to foreclosure defense, I also represent a small handful of companies that perform attic restoration work. Raccoons, opossums, and bats cause damage in attics of homes on a regular basis. Many homeowners don’t realize it, but these damages are typically covered by homeowners’ insurance.
To illustrate, check out this video. It’s an Allstate commercial (one in its series of “Mayhem” advertisements), where it advertises its services by showing a man pretending to be a raccoon causing damage in an attic.
In light of this commercial, you’d think it’s pretty darn difficult for Allstate to deny coverage when a raccoon causes damage in an attic, right? Yet in a case I’m litigating right now, that’s exactly what Allstate is doing. A homeowner had damages to its property caused by a raccoon, and Allstate is refusing to pay for it, saying the damages aren’t covered.
Is this disgusting or what? They’re advertising this as a covered item, trying to induce homeowners to get insurance with Allstate, then when the homeowner makes a claim, they deny coverage.
Personally, I’m so sick of watching rich, corporate institutions (banks and insurance companies) try to screw over middle class America to their own financial betterment. And make no mistake, that’s exactly what insurance companies do – intentionally deny claims they know to be covered, hoping homeowners will presume the insurance company is right and not complain (enabling it to get away without paying).
So when you see situations like this, FIGHT BACK. It’s the only way things will change in our country.
Mark Stopa
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Posted on September 10th, 2011 by Mark Stopa
September’s edition of the AARP Bulletin discusses how delinquent homeowners throughout the country are staying in their homes given the snail’s pace at which foreclosures are processed. I am quoted in the article, as is a client of Stopa Law Firm, Chuck Light.
I think how the ending of the article is a wonderful indication of the service that Stopa Law Firm strives to provide to homeowners throughout Florida. Mr. Light, a retiree, is quoted as saying he “doesn’t have anyplace to go.”
Florida’s retirees have been devastated by the housing crash, often to no fault of their own. I’m thrilled to help elderly homeowners like Mr. Light, stay in their homes and avoid foreclosure.
Here is the article. …
The last time Ruben Martinez paid the mortgage on the modest Staten Island, N.Y., home he shares with his wife, daughter and grandchildren, George W. Bush was beginning his second term as president in 2005. Boomers Charles and Jill Segal stopped paying their loan nearly four years ago, even though they continue to live in their five-bedroom home in Palm Beach County, Fla.
And Florida retiree Charles Light is still holding on to his three-bedroom home in the scenic Gulf Coast community of Cape Coral, as well as a five-bedroom residence in the town of Bartow. It’s been almost two years since he made a mortgage payment on either one.
With the nation’s foreclosure system all but paralyzed after an avalanche of loan failures and “robo-signing” scandals, many delinquent homeowners are defying lenders and staying put. Instead of packing up and slinking away, they’re living for free, sometimes for years. They’re hiring lawyers to challenge their cases, and many are winning reprieves or causing the process to stall even further.
“They go into a perpetual state of limbo where nothing happens or the case goes very slowly,” says Light’s attorney, Mark Stopa.
The extraordinary delays are hampering hope of a housing market recovery and pushing this year’s troubles into next year, says Rich Sharga, senior vice president at RealtyTrac, which tracks foreclosure data. The logjam also has kept thousands of new cases from being filed.
“The system’s broken,” he says.
With about 4 million loans currently in some stage of delinquency, lenders and lawyers say nonpaying owners are living in moderate to lavish communities across the country.
Often, banks are not pushing to go to foreclosure. They seem to be in no hurry to add to their swollen inventory of repossessed homes, which now stands at a near record 862,000 nationwide.
Also contributing to the gridlock is intense scrutiny by regulators stemming from the scandals in which banks cut corners and falsified documents to rush homeowners to foreclosure. Until their cases are resolved, owners can legally remain in homes they would’ve lost long ago in normal times.
“The [banks’] paperwork was so messed up in so many cases that it’s mind-boggling,” says Florida lawyer Peter Ticktin, who represents the Segals. “The delay is huge.”
Americans harbor mixed feelings about their nonpaying neighbors. Some are sympathetic to their financial plight. Others see them as freeloaders who are gaming the system, an insult to the millions of working homeowners struggling to pay their mortgages on time. In Miami, Francisco Permuy and other residents of his condominium building face higher homeowner association fees to cover for nonpaying owners who continue to live in the building. “Some people are very angry,” he says.
Not paying can give troubled borrowers a chance to get back on solid financial ground. “I say take advantage and save $20,000, $30,000, $40,000 or more in order to go live somewhere else, or buy a house outright,” says Stopa, whose law offices are in Tampa. He says that despite homeowners’ clamoring for help, many banks never provided any. Now, he says, “homeowners are doing what is in their own best interest.”
Bankers say the cost of living for free will ultimately result in higher interest rates shouldered by people who had nothing to do with these delinquencies. “It will be factored into all mortgages so future borrowers will be paying more,” says Bob Davis, executive vice president at the American Bankers Association.
Delinquent borrowers say they have few options. They cite job loss, collapsed real estate values and subprime mortgages that reset to unaffordable heights.
Martinez, 58, says he would happily trade places with a working, paying homeowner. “I don’t like how I’m living. It’s embarrassing to me,” says Martinez, who lost his job six years ago and fell behind on his mortgage. The bank demanded a $7,000 payment. He offered $3,500; the bank wanted the entire amount.
“What was I supposed to do? If I could strike a deal with my lender, I would,” says Martinez. “People who feel it’s unfair, they’re entitled to their opinion, but they should make sure they have the facts before they make a judgment.”
Borrowers like Martinez face serious consequences that could last for years. Bank-imposed fees, interest and fines covering the time the home goes unpaid continue to drive up the mortgage principal. Moreover, once a foreclosure goes through, banks can file suit for the balance unless there’s been a negotiated settlement.
Meanwhile, the borrower’s credit score nosedives, making it difficult to get future financing for a home, car or any other big-ticket item.
Early in the housing crisis, foreclosures moved through the system relatively quickly, taking just months from the first default notice to eviction. Today, the process in some states can take three years or more.
In New York, where Martinez lives, it takes an average 858 days for banks to foreclose. At that pace, lenders would need 84 years to clear their inventory, according to Herb Blecher, a senior vice president at LPS Applied Analytics, which tracks real estate data. Homeowners in New Jersey can live “mortgage-free” for an average 728 days while banks complete the process; in Florida it’s 853 days.
In the hard-hit Las Vegas area, where one in every 19 homes received a foreclosure notice this year, attorney Jacqueline McQuigg says lenders “start the foreclosure process but they don’t want to finish it. That never would’ve happened years ago.” But she and other lawyers say that lenders are better off having owners occupy the properties rather than risk the vandalism, mold and general neglect that can come with vacancy.
The Segals, in their 50s, have no plans to move out. They can’t sell and pay off the mortgage. They owe about $519,000, but the property is worth about $270,000. Their foreclosure case is pending.
Light, 80, faces a similar quandary. The $6,000 he was paying for mortgages for both houses exhausted his savings. Yet he doesn’t want to sell because he owes much more than the homes are worth. In March, he won the foreclosure case against one of his homes — the lender’s paperwork was ruled deficient. The lender can seek foreclosure again, but the process would start all over.
“I retired comfortably in 2000 and felt I had plenty of assets to sustain me,” Light says. “The real estate crash devastated me. I’m determined to stay in my house and maintain it rather than let it deteriorate like hundreds of others around here.”
“I don’t rest easy about this,” he says, “but I don’t have anyplace to go.”
Mark Stopa
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Posted on September 8th, 2011 by Mark Stopa
I receive questions like this from Florida homeowners on a regular basis, so I thought this question and my response were worth posting:
Q: We are currently more than 1/2 upside down on our mortgage. Would a short sale be better for our credit than a foreclosure? We don’t want to rent forever. How long do you think we would be able to buy another home after a short sale or a foreclosure?
My Answer: The difference in your credit between a short sale and foreclosure is negligible in my view and not what should be driving this decision. If you’re that far underwater, your objective, in my view, should be to not have to pay a deficiency.
It’s one thing to be foreclosed; it’s another to be foreclosed and still owe hundreds of thousands of dollars to the bank. For example, if you owe the bank $300,000 and your house is worth $120,000, then you’ll still owe the bank $180,000 even after being foreclosed (unless the bank agrees not to pursue such payments from you). Want to talk about something that will ruin you financially – that is it!
It sounds to me like your goal should be to defend the foreclosure case, save money while the case is pending, try to avoid a deficiency, and use the money you’ve saved to try to buy a new house. For example, if the bank agrees to waive the $180,000 deficiency, and you save $30,000 while the foreclosure case is pending, then you can take $30,000, pay it towards a $120,000 house that is identical to the one you own now, and have $30,000 in equity.
If you’re still adamant about a short sale, remember this – when you agree to a short sale, you have to leave the home you’re living in (and pay to live elsewhere). Obviously, if you’re paying to live elsewhere, that will make it harder to save money to buy a new home. It may be worth doing if you’re avoiding a big deficiency, but if you’re not, then a short sale makes no sense whatsoever.
How long it takes you is a product of how much you’re able to save and what type of house you want to buy.
The good news is that it’s a tremendous buyer’s market (and probably will be for years to come) – especially if you have cash.
Good luck, and let me know if you need more information.
Mark Stopa
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Posted on September 8th, 2011 by Mark Stopa
One of my biggest frustrations as a foreclosure defense attorney is watching judges take it upon themselves to prosecute foreclosure cases that banks seem perfectly content to let languish.
In Hillsborough County, for instance, a new Administrative Order authorizes judges to adjudicate motions in foreclosure cases without a hearing. Unfortunately, many judges see this as a “free pass” to deny homeowners’ motions, and grant motions for the banks, without notice, without hearing, and without explanation. It’s ironic, actually – many consumer advocates complained about the senior judge system, but, candidly, I greatly preferred the senior judge system, at least in Hillsborough, to what we have now. When the senior judges were in place, at least homeowners got hearings. At least homeowners felt like they were being heard. Now, it’s rare, at least in Hillsborough, that anyone even pretends that homeowners’ arguments are being considered. It’s pushing a boulder up a mountain just to be heard.
Meanwhile, in Manatee County, a new Administrative Order requires that homeowners set hearings on their motions as the motions are filed, and some judges have threatened sanctions for failure to comply. As a litigator (and not just a foreclosure defense attorney), I find this procedure terribly misguided, particularly since it only applies in foreclosure cases. To illustrate, when I sue an insurance company and it responds with a motion to dismiss, do you think there is any procedure requiring the insurance company to set its motion for hearing right away? Heck no. I represent the plaintiff, so if I want to advance the case to judgment, I have to set the motion to dismiss for hearing. That’s standard fare in the court system. Yet, in foreclosure cases in Manatee County, when a homeowner files a motion to dismiss, he/she is required to set the motion for hearing. Why? Because the courts are concerned that foreclosure cases aren’t being adjudicated quickly enough? I’m sorry, but that’s not a good enough answer, for two glaring reasons.
First, why is the court system bending over backwards to push through foreclosure cases but not any other types of cases? Are banks somehow deserving of special attention? The entire concept (that a special procedure would be employed only in foreclosure lawsuits, to the systematic betterment of one side) is, respectfully, offensive. Judges are supposed to call balls and strikes, like an umpire in baseball, not employ widespread, systematic procedures for the benefit of banks.
Second, when are the courts/judges going to realize that the only ones trying to move these cases quickly are the courts/judges themselves? Generally speaking, banks aren’t killing themselves to obtain foreclosure judgments and acquire title to properties, especially when competent defense lawyers are throwing up bona-fide roadblocks making it difficult for the banks to prevail. In fact, this article in the St. Pete Times appropriately describes how banks often refuse to take title to properties even after they’ve obtained a foreclosure judgment.
Think about that for a minute. The bank has won the case, all it has to do is set the foreclosure sale and become the high bidder (and take title) or let someone else be the high bidder. But the banks are systematically refusing to go through with these sales.
Respectfully, shouldn’t this be a wake-up call to all of our courts? Why are the courts implementing all of these procedures to accelerate foreclosure cases when the banks aren’t even taking properties? Why are Hillsborough judges refusing hearings to accelerate cases when banks don’t want title? Why are Manatee judges requiring motions be set for hearing right away when banks don’t want title? What, exactly, is being accomplished here? Who is this helping?
I wish I had answers to these questions, but, clearly, there are no answers. Instead, I’m left to lament how I have to prosecute cases when I represent plaintiffs, without any assistance from the courts, yet when I represent homeowners, the courts often take it upon themselves to help the banks prosecute the cases to judgment (even when the banks don’t want title to these properties).
Mark Stopa
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Posted on September 2nd, 2011 by Mark Stopa
For years, I’ve felt like I was on the right side of the foreclosure fight, but I’ve always felt like I was in the minority.
To illustrate, when this article came out in October, 2009, there was lots of backlash. I surivived, but there weren’t a lot of people in my corner (or, if there were, I didn’t know it, because speaking out for homeowners’ rights wasn’t terribly common).
In the two years since, though, a lot has changed. Foreclosure defense attorneys proved that homeowners facing foreclosure have viable defenses and that banks aren’t exactly wearing white hats. As the media helped educate the public about bank misconduct and robo-signing, public sentiment began shifting in favor of homeowners. These weren’t “deadbeats” – this was middle class America, falling victim to the greed of Wall Street.
Yet, on a national level, it seemed nothing was really changing. Recently, for example, I’ve lamented how Eric Schneiderman, the NY Attorney General, seems to be the only political figure pushing for any sort of real punishment for the banks as part of the AG settlement. And Obama certainly hasn’t done anything to hold the banks accountable.
So while I’ve still felt like I’m on the right side, and that our side has gained a lot of momentum, it has still felt like we’ve been in the minority.
Until now.
The New York Times reports that the United States is set to sue big banks for fraud in connection with the mortgage securitization process.
Finally! Vindication! This is the sort of thing we’ve needed – our government, on a national level, saying “yes, the banks committed fraud with these mortgages, and we’re doing something to remedy it.”
Now, it finally feels like we’re no longer in the minority. We’re on the right side of this fight against Wall Street greed and foreclosure fraud, and everyone, except the banks, knows it.
Here’s the article. …
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation.
The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter.
The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims.
The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value.
Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers.
In July, the agency filed suit against UBS, another major mortgage securitizer, seeking to recover at least $900 million, and the individuals with knowledge of the case said the new litigation would be similar in scope.
Private holders of mortgage securities are already trying to force the big banks to buy back tens of billions in soured mortgage-backed bonds, but this federal effort is a new chapter in a huge legal fight that has alarmed investors in bank shares. In this case, rather than demanding that the banks buy back the original loans, the finance agency is seeking reimbursement for losses on the securities held by Fannie and Freddie.
The impending litigation underscores how almost exactly three years after the collapse of Lehman Brothers and the beginning of a financial crisis caused in large part by subprime lending, the legal fallout is mounting.
Besides the angry investors, 50 state attorneys general are in the final stages of negotiating a settlement to address abuses by the largest mortgage servicers, including Bank of America, JPMorgan and Citigroup. The attorneys general, as well as federal officials, are pressing the banks to pay at least $20 billion in that case, with much of the money earmarked to reduce mortgages of homeowners facing foreclosure.
And last month, the insurance giant American International Group filed a $10 billion suit against Bank of America, accusing the bank and its Countrywide Financial and Merrill Lynch units of misrepresenting the quality of mortgages that backed the securities A.I.G. bought.
Bank of America, Goldman Sachs and JPMorgan all declined to comment. Frank Kelly, a spokesman for Deutsche Bank, said, “We can’t comment on a suit that we haven’t seen and hasn’t been filed yet.”
But privately, financial service industry executives argue that the losses on the mortgage-backed securities were caused by a broader downturn in the economy and the housing market, not by how the mortgages were originated or packaged into securities. In addition, they contend that investors like A.I.G. as well as Fannie and Freddie were sophisticated and knew the securities were not without risk.
Investors fear that if banks are forced to pay out billions of dollars for mortgages that later defaulted, it could sap earnings for years and contribute to further losses across the financial services industry, which has only recently regained its footing.
Bank officials also counter that further legal attacks on them will only delay the recovery in the housing market, which remains moribund, hurting the broader economy. Other experts warned that a series of adverse settlements costing the banks billions raises other risks, even if suits have legal merit.
The housing finance agency was created in 2008 and assigned to oversee the hemorrhaging government-backed mortgage companies, a process known as conservatorship.
“While I believe that F.H.F.A. is acting responsibly in its role as conservator, I am afraid that we risk pushing these guys off of a cliff and we’re going to have to bail out the banks again,” said Tim Rood, who worked at Fannie Mae until 2006 and is now a partner at the Collingwood Group, which advises banks and servicers on housing-related issues.
The suits are being filed now because regulators are concerned that it will be much harder to make claims after a three-year statute of limitations expires on Wednesday, the third anniversary of the federal takeover of Fannie Mae and Freddie Mac.
While the banks put together tens of billions of dollars in mortgage securities backed by risky loans, the Federal Housing Finance Agency is not seeking the total amount in compensation because some of the mortgages are still good and the investments still carry some value. In the UBS suit, the agency said it owned $4.5 billion worth of mortgages, with losses totaling $900 million. Negotiations between the agency and UBS have yielded little progress.
The two mortgage giants acquired the securities in the years before the housing market collapsed as they expanded rapidly and looked for new investments that were seemingly safe. At issue in this case are so-called private-label securities that were backed by subprime and other risky loans but were rated as safe AAA investments by the ratings agencies.
In the years before 2007, “the market was so frothy then it was hard to find good quality loans to securitize and hold in your portfolio,” said David Felt, a lawyer who served as deputy general counsel of the finance agency until January 2010. “Fannie and Freddie thought they were taking AAA tranches, and like so many investors, they were surprised when they didn’t turn out to be such quality investments.”
Fannie and Freddie had other reasons to buy the securities, Mr. Rood added. For starters, they carried higher yields at a time when the two mortgage giants could buy them using money borrowed at rock-bottom rates, thanks to the implicit federal guarantee they enjoyed.
In addition, by law Fannie and Freddie were required to back loans to low-to-moderate income and minority borrowers, and the private-label securities were counted toward those goals.
“Competitive pressures and onerous housing goals compelled them to operate more like hedge funds than government-sponsored guarantors, ” Mr. Rood said.
In fact, Freddie was warned by regulators in 2006 that its purchases of subprime securities had outpaced its risk management abilities, but the company continued to load up on debt that ultimately soured.
As of June 30, Freddie Mac holds more than $80 billion in mortgage securities backed by more shaky home loans like subprime mortgages, Option ARM and Alt-A loans. Freddie estimates its total gross losses stand at roughly $19 billion. Fannie Mae holds $38 billion of securities backed by Alt-A and subprime loans, with losses standing at nearly $14 billion.
Mark Stopa
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Posted on September 1st, 2011 by Mark Stopa
For the second time in my years as a foreclosure defense attorney, I opened the mail to find a Florida judge had signed a Final Judgment of Foreclosure, ex parte, without notice and without hearing.
The first time this happened, I blogged about it, here. In that case, a replacement judge did not realize that the presiding judge had ordered a continuation of the summary hearing, then signed the Final Judgment even though nobody attended the previously-scheduled hearing.
This time, it’s even worse.
This time, there was no hearing (cancelled or otherwise). Yet this Final Judgment was signed anyway, with a foreclosure sale set for thirty days thereafter.
Don’t believe this could happen without a hearing? Check the Docket for yourself. There is no hint of any sort of Notice of Hearing on a Motion for Summary Judgment, and I certainly never received such a notice. Quite simply, the case was progressing (or not progressing) normally, until I suddenly, without warning, received a Final Judgment of Foreclosure, with a sale date, in the mail.
This forces some difficult questions … like … HOW THE HELL DOES THIS HAPPEN? How does a circuit judge sign a Final Judgment of Foreclosure without notice and without a hearing? How is a judge even put in a position to sign such a document, i.e. how/why was a proposed Final Judgment of Foreclosure even provided to him (without me being copied)?
I wish I had a good answer to this. I don’t. There is no answer. There is no justification for: (1) the judge having a proposed Final Judgment of Foreclosure, presumably from the opposing attorney, without me knowing about it; or (2) the judge signing this Final Judgment of Foreclosure without notice and without hearing.
My Emergency Motion to Vacate Ex Parte Final Judgment of Foreclosure should have been a slam-dunk; the sort of thing that is granted immediately, upon consent by the bank’s attorney. But it wasn’t. The bank’s lawyers wouldn’t respond to our requests, and the judge wouldn’t vacate the Final Judgment without a hearing (ironic, eh?).
So I set the motion for hearing on an emergency basis, i.e. before the scheduled sale. As the hearing began, the Judge seemed perturbed at the suggestion that this was an “ex parte” Final Judgment. Then, without knowing why it was signed (by a different judge), she tried to defend the process. I was quite disappointed. This was obviously improper (by the opposing attorney, the judge, or both), yet this judge was trying to defend the execution of a Final Judgment of Foreclosure, ex parte, without notice or hearing.
The judge’s “defense” of this procedure was to essentially say that the courts are overwhelmed with paperwork, which I don’t doubt. But is that a good enough answer? I’m not so sure.
I’m pleased to say the judge agreed the Final Judgment should be vacated, and this Order Vacating Final Judgment was entered. However, I’m left with some difficult questions:
1. Why did a Florida circuit court judge sign a Final Judgment without notice or hearing?
2. How was that judge even in a position to do so, i.e. why did opposing counsel submit a proposed Final Judgment to the judge (without copying me) when there was no hearing?
3. In how many other cases has this happened – cases where the homeowner has no counsel – and did the pro se homeowner know what steps to take to get the Final Judgment vacated?
4. Why was the judge’s initial reaction to defend the procedure rather than express outrage? For instance, why wasn’t she asking opposing counsel to explain why a proposed Final Judgment was submitted to the Court?
Unfortunately, I don’t have answers to these questions, as there are no answers. Consider this another sad day in Florida foreclosure court.
Mark Stopa
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