Archive for October 29th, 2011

Strategic Default, Then Buy a House Down the Street

I received a fantastic question from a reader, and it’s worth blogging about. 


We purchased a house back in 06’ for 185k (still owe 170k)….houses are selling for 80k on my block now. If I buy a house on my block for 80k and move to it, can I “walk-away” from the one I bought in 06’?,, in doing so I will save more than 50% on my monthly house payment and will be able to pay the house off in 7 years.
I will really appreciate an advice on this situation.
Thanks in advance.

My Answer:

There is nothing stopping you from buying the house down the street, moving in, declaring it your homestead, and defaulting on your current mortgage.  Obviously, your current mortgage company would sue you at some point, but, frankly, the only reason you should care is the potential for a deficiency judgment (i.e. the possibility you’d owe the bank $90K more, even after getting foreclosed – 90K being the difference between what it’s worth and what you still owe). 

So how much does the potential deficiency judgment matter? 

First off, Florida has homestead protection, so, no matter what, you can buy another house, move in, declare it your homestead, and live securely, knowing that house is protected.  You’d just need to do so before the foreclosure on your current home is finalized.

The bigger concern is whether that deficiency judgment would impact your life in other ways.  Whether it’s worth the risk depends on your situation.  Generally, I think it is worth the risk, but, again, it depends.  For instance …

If you don’t have a lot in the way of income/assets, you may eliminate this deficiency through bankruptcy, if not now, then in the future.  If that’s your scenario, then this approach probably makes sense.

If you’re approaching retirement, don’t have a lot of income/assets, and are just looking for a house you can live in the rest of your life, then a deficiency judgment doesn’t mean much – it’s probably little more than a piece of paper.  In that case, this approach also makes sense. 

If you’re willing to take the gamble of trying to get the bank to waive the deficiency, or hope it never pursues it, then it makes sense.  Some people are more tolerant of risk than others.

It makes less sense for people who are younger and have a lot of other income/assets.  You’d hate to employ this approach, get foreclosed, get a deficiency judgment entered, and have the bank start taking your other assets. 

If you’re in that latter category, my suggestion would be this.  Buy the house and prepare yourself for that worst-case scenario (even if it means setting aside the monthly payments or the entire deficiency amount in a separate account).  If the worst-case scenario unfolds, and you wind up owing the deficiency, then, well, you knew it was possible and you prepared for it.  If it doesn’t happen, and you avoid a deficiency, then you will have drastically improved your financial situation, as that money you’ve set aside will be yours to keep and you’ll have eliminated a huge liability (the 90K deficiency).  In a way, if you can view it like that, there’s no downside – it’s only upside.

Mark Stopa

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Comparing Hillsborough’s Dismissal rate to other Florida counties

My colleague, foreclosure defense attorney Matt Weidner, just re-posted the Foreclosure and Economic Recovery Status Report which came out a few months back, openly wondering how Hillsborough County could have had only 226 foreclosure cases dismissed in the 12-month period from July 1, 2010 through June 30, 2011. 

This got me looking closer at the report, and something really, really jumped out at me. 

Take a close look at page 3.  Do you see, not only that the Hillsborough court dismissed just 226 cases, a very low number compared to other counties, but also that it entered 6,530 summary judgments? 

Think about that ratio for a minute.  226 dismissals versus 6,530 summary judgments.  That’s 29 summary judgments for every dismissal – a ratio of 29:1. 

Now look at the other counties on the chart.  Do you see any other counties with that type of ratio?  I sure don’t – there aren’t any. 

In the Seventeenth Judicial Circuit (Broward), the ratio is less than 2:1. 

In the Fifteenth Judicial Circuit (Palm Beach), the ratio is approximately 1:1. 

In the Twelfth Judicial Circuit (Manatee and Sarasota), there were more dismissals than summary judgments! 

In the Sixth Judicial Circuit (Pinellas and Pasco), the ratio is 4:1. 

Incredibly, 4:1 is the highest ratio of any county in Florida other than Hillsborough, and the ratio in Hillsborough is 29:1. 

Think about that for a minute, and ask yourself… with 20 judicial circuits in Florida, why does Hillsborough have such an astronomically higher ratio of summary judgments to dismissals than every other circuit in Florida?  Simply from a statistical standpoint, an outlier like this cannot be a coincidence … can it?

Mark Stopa

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Appellate Brief – Motion to Quash Service

I blogged previously, here, about how a Florida court denied a Motion to Quash Service in one of my foreclosure cases (sua sponte, without notice, without a hearing, and without case citations)In my view, the issue was clear – the bank served my client via publication when it should have done so via personal service, and my client did not waive that defense by filing a Notice of Appearance and Motion for Extension of Time. 

The other day, I saw an appellate court decision which reversed an Order denying a Motion to Quash Service in a foreclosure case, and I blogged about that, here

Today, I prepared my Initial Brief from my appeal of the Order Denying the Motion to Quash, and I’m posting it (without the cover page, table of contents, etc.) for all to see. 

What I’ve written in this brief are bona-fide legal arguments on issues that I see regularly in foreclosure cases.  Quite simply, banks resort to service by publication far too frequently, typically without justification.  This is a valid defense to foreclosure and one that, if the trial court judges will not honor, we should all be willing to bring to the appellate court.  After all, unlike an order denying a motion to dismiss, an order denying a motion to quash service is appealable right then – you don’t have to wait until the end of the case.

Mark Stopa

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“Ex Parte”

Ex parte is a Latin term meaning “from (by or for) one party.  According to Wikipedia, an ex parte decision is “one decided by a judge without requiring all of the parties to the controversy to be present.” 

There are very few contexts where ex parte contact with a judge is permitted in the legal arena, particularly if that contact regards a specific case.  Hence, the term “ex parte” has a very negative connotation.  Its mere mention suggests improper conduct by an attorney and, perhaps, a judge.  In layman’s terms, saying someone had an ex parte is sort of like calling someone a wife-beater; there’s no way to spin it nicely. 

I had a hearing recently where I sought to vacate an “ex parte” Order.  The judge agreed to vacate the Order, saying I should have been given a hearing, but made a point of saying the Order was not “ex parte.”  In that judge’s view, an “ex parte” Order happens only when it is submitted to the Court without being copied to opposing counsel, and since I was copied on the proposed Order, it was not ex parte

Respectfully, I could not disagree more. 

Yes, I suppose the judge’s definition is the classic or perhaps most conservative definition.  But suppose an Order is submitted to the Court, without a hearing, on a motion I hadn’t previously seen, and the first time I (as opposing counsel) know the Order was submitted was when I receive a signed copy of the Order in the mail.  Is that not ex parte as well?  I sure as heck think so. 

It’s like the plaintiffs’ attorneys wake up one day and say “I want to change the plaintiff in this case,” but instead of sending me a motion and setting a hearing, or sending me a motion and asking if I object, they just decide to file the motion, send it to the judge, and, somehow, magically, nearly every time, I receive the motion for the first time in the mail after the Order has already been signed.  (If you’re asking me if I think the foreclosure mills wait to send out my copies, the answer is yes.  And they often send things to judges by hand-delivery or overnight mail but send them to me by regular mail.) 

What’s troubling here, of course, is that this conduct happens all of the time in foreclosure cases.  I regularly (at least once a week, often multiple times per week) receive signed Orders in the mail that I did not know had been submitted until after I receive the signed copy in the mail.  And I’m not just talking about the procedure in Hillsborough where Motions to Dismiss are routinely denied without a hearing – I’m talking about plaintiffs’ motions that I didn’t even know had been filed. 

I realize that everyone who works in the foreclosure arena is busy.  There’s lots of paperwork.  However, make no mistake – there is no excuse for foreclosure attorneys to submit orders to the court for entry, without a hearing, without affording the other side a chance to respond.  And every time a judge signs such an Order, it emboldens the banks’ lawyers to continue this misconduct, case after case. 

Personally, I want to see our legal system aspire to a higher standard.  For instance, I love the way hearings are always required in Broward County.  I won’t always win and I won’t always lose, but at least I know things weren’t done ex parte.

Mark Stopa

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