Archive for October, 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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Challenging Service of Process by Publication

It’s terribly frustrating when a judge denies a Motion to Dismiss in a foreclosure case, not just because it’s a lost hearing, but because an Order denying a Motion to Dismiss cannot be appealed until the end of the case.  No matter how wrong the trial court may be, the Florida Rules of Appellate Procedure simply don’t allow an appeal of an Order denying a Motion to Dismiss until after a homeowner files an Answer and after the Court enters a Final Judgment of Foreclosure. 

(As an aside, this is why there are no appellate decisions which set the standard for courts to apply in foreclosure cases.  From a procedural perspective, it is very difficult to get this issue in front of the appellate courts.  This is also why there is such a wide variety of opinions among judges on how to rule on Motions to Dismiss.)

Anyway, the inability to appeal a Motion to Dismiss is one reason I like Motions to Quash Service.  You see, unlike a Motion to Dismiss, if a Motion to Quash Service is denied, a homeowner can appeal the ruling right then, without waiting until the end of the case.  After all, challenging service of process is also a challenge to personal jurisdiction (as the court has no jurisdiction over a defendant without valid service), and the Rules specifically authorize appeals regarding personal jurisdiction without waiting until the end of the case.  See Fla.R.App.Pro. 9.130(a)(3)(C)(i).  As a result, if a trial court improperly denies a Motion to Quash Service, then a homeowner can challenge that ruling in the appellate court. 

Why does this matter?  It matters a lot.  I see a lot of foreclosure cases – at least 1 out of 10, perhaps more like 1 out of 5 – where service is done improperly.  There are all sorts of technical issues here, but probably the most common circumstance is when the process server for the bank tries once or twice to serve a homeowner with personal service (i.e. hand-deliver a copy of the Summons and Complaint), is unable to do so, and resorts to service by publication (i.e. publishing the existence of the lawsuit in the local newspaper). 

I’m currently in the middle of drafting appellate briefs on this precise issue, setting forth the many circumstances where service by publication is improper, and I’ll post the briefs when I’m finished.  For now, though, I’ll simply cite Fourth District Court of Appeal’s decision in Blanco v. Bank of New York, hot off the presses:

We reverse the trial court’s order denying the Defendant’s Verified Motion to Quash Service by Publication, Vacate Default, and Final Judgment, because the Plaintiff failed to make a diligent effort to personally serve the defendant before serving process by publication.  See Miller v. Partin, 31 So. 3d 224, 228 (Fla. 5th DCA 2010) (stating that “the test to be applied is whether the plaintiff reasonably employed the knowledge at his or her command, made diligent inquiry, and exerted an honest and conscientious effort appropriate to the surrounding circumstances to acquire the information necessary to enable the plaintiff to effect personal service on the defendant. 

What should you take from this?  Simple.  If you were served by publication, the plaintiff’s process server had to make a diligent effort to serve you personally, and only if they didn’t, then service should be quashed.  The law is so clear in this regard that the Blanco court adhered to it even though the homeowner did not challenge service until after the foreclosure judgment had already been entered.  The case was over, the bank won, the foreclosure was finalized, but the court said “not so fast – service was invalid, the case must start over.”

One word of caution – it is very easy to waive defenses like service of process and personal jurisdiction by not asserting it in a timely or appropriate fashion.  Hence, I strongly urge you not to try this on your own.  Hire a competent foreclosure defense attorney to assert all valid defenses, including deficient service.

Mark Stopa

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Occupy Wall Street – It’s About Anger, not Jealousy

I’m sick and tired of reading critiques of the Occupy movement from people asserting the 99% are envious of the rich.  These protests aren’t about jealousy, and they’re not about people looking for handouts.  Mainstream America is tired of watching the 1% get rich by stealing, cheating, lying, defrauding, and various other nefarious acts. 

If you don’t understand the distinction, consider how America reacted when Steve Jobs died.  Jobs was an insanely rich CEO of one of the country’s biggest corporations.  Was mainstream America jealous of him or spewing hatred or anger at his success?  Absolutely not.  In fact, quite the contrary – for several days after his death, Jobs was universally lauded as if he were Mother Teresa.  The praise was so over-the-top it made me wonder … “Why?”  As I see it, mainstream America respected Jobs because he earned his money fairly and honestly and provided the country with a valuable service …. something all too rare in today’s society of Wall Street crooks.  

The 99% aren’t jealous of the rich, and they aren’t looking for handouts.  Most Americans fully respect our system of capitalism.  All we ask is that the rich earn their money honestly. 

If this still doesn’t make sense, check out this article from Matt Taibbi, who makes the point quite well – Americans don’t mind rich elitists; we just don’t like fraudsters.

Mark Stopa

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Accessibility of JAs – More Proof Florida Courts Need Help

Not too long ago, when I called a judge’s assistant, I’d get a friendly voice on the other end of the line.  I could discuss just about anything – scheduling issues, proposed orders, hearings … whatever.  Judicial assistants often went out of their way to be helpful.

Nowadays, this dynamic is totally different.  If I call a judicial assistant today, I’m almost certain to get voicemail.  Often, that voicemail message directs the caller *not* to leave a voicemail, as it won’t be returned.  Other times, voicemails go unreturned for days at a time, if at all.  The days of JAs going out of their way to be helpful are over. 

If it sounds like I’m being critical of JAs, I’m not.  I’m firmly convinced it is impossible for judicial assistants to do their jobs in the way they did just a couple of years ago, no matter how hard they try, because of the indescribable amount of work thrust upon them.  The Florida court system is like a 5-pound trash bag that’s already filled with 5 pounds of trash, yet nobody wants to hand court personnel a new bag – they just keep telling JAs to stuff more into the existing bag, acting like it’s never going to burst.   

I wish Florida’s lovely governor, Rick Scott, could understand what this dynamic is like (presuming he cares).  I wish he knew what it was like to have a phone hearing scheduled, have opposing counsel refuse to call you for the hearing, to call the court to try to participate in the hearing, and to not be able to get anyone to answer the phone.  Does that sound like a functioning court system to you – a hearing proceeds in one side’s absence because court personnel are so taxed they can’t answer all of the phone calls? 

I wish Rick Scott knew what it was like to try to set a hearing and to be unable to get through for days at a time because he can’t get a JA to answer the phone.  Is this what our court system has come to? 

Again, this is not an indictment of court personnel or staff.  This is an indictment of a governor who has no concept of the resources necessary for a court system to function.  This is a cry for help – a plea to get more staff in place for Florida’s courts.  If that sounds outlandish, then answer me this – do you think Rick Scott has inadequate staff at the Governor’s mansion?

Mark Stopa

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Congressional Reform Act of 2011

Now more than ever before, the people are responsible for the character of their Congress.  If that body be ignorant, reckless, and corrupt, it is because the people tolerate ignorance, recklessness, and corruption.  If it be intelligent, brave, and pure, it is because the people demand these high qualities to represent them in the national legislature. … If the next centennial does not find us a great nation … it will be because those who represent the enterprise, the culture, and the morality of the nation do not aid in controlling the political forces.

With our nation in turmoil and the Occupy Movement in full force, you might think the above quote is attributed to a modern political figure.  You’d be wrong.  That’s a quote from James Garfield, the 20th President of the United States, in 1877. 

Read it again.  Fascinating, eh?  It’s also an excellent segway into the elements of the Congressional Reform Act of 2011, which is making waves on the internet as a way to fix the problems inherent in the U.S. Congress and our government as a whole …

1.    No Tenure / No Pension.  Congressmen collect a salary while in office and receive no pay while out of office.

2.    Congressmen (past, present, and future) participate in Social Security.  All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with  the American people. It may not be used for any other purpose.

3.   Congressmen can purchase their own retirement plan, just as all Americans do.

4.   Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.

5.   Congress loses its current health care system and participates in the same health care system as the American people.

6.   Congress must equally abide by all laws they impose on the American people.

7.   All contracts with past and present Congressmen are void effective 1/1/12. The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.

Mark Stopa

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Problems with Forced Place Insurance

Here’s a link to a story I did with Fox News.  It aired today in the Tampa area.

Mark Stopa

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A Game-Changer on Motions to Dismiss

As a foreclosure defense attorney with foreclosure cases in many different counties before a wide array of judges, I’ve seen a significant difference in opinion, even among judges, about the merits of motions to dismiss in foreclosure cases.  Perhaps the biggest reason for the wide variety of opinions is the absence of case law from Florida’s appellate courts on the issue.  The problem is largely procedural – an order denying a motion to dismiss is not appealable until the end of the case, and by the time a foreclosure case is over, the homeowner’s best argument for appeal likely isn’t whether the Complaint stated a cause of action, but the propriety of the foreclosure itself.  What has resulted is an unusual dynamic where Florida circuit judges have been ruling on thousands upon thousands of motions to dismiss without clear direction from Florida’s appellate courts on what it takes for a bank to state a cause of action and survive a motion to dismiss.  That’s not an indictment of anyone – there just haven’t been appellate decisions that clearly address this standard. 

Suffice it to say I was elated to read this opinion from Florida’s Second District Court of Appeal.  Here is the key language …

On November 18, 2009, U.S. Bank filed another copy of the Note as a supplemental exhibit to its complaint.  In contrast to the copy attached to the complaint that contained no endorsements, this copy contained two endorsements …

We view U.S. Bank’s filing of a copy of the note that it later asserted was an original note as a supplemental exhibit to its complaint to reestablish a lost note as an attempt to amend its complaint in violation of Florida Rule of Civil Procedure 1.190(a).  U.S. Bank did not seek leave of court or the consent of Feltus to amend its complaint.  A pleading filed in violation of Rule 1.190(a) is a nullity, and the controversy should be determined based on the properly filed pleadings.  See Warner-Lambert Co. v. Patrick, 428 So. 2d 718 (Fla. 4th DCA 1983). 

Why is this language so significant?  Think about it.  How many instances are there in foreclosure cases where the note attached to the Complaint contains no indorsement, but the bank later files an indorsement that contains one, then tries to defeat a motion to dismiss by asking the court to consider the subsequently-filed indorsement? 

I see this all of the time – perhaps the majority of cases.  The Note attached to the complaint typically has no indorsement, yet the note filed thereafter does.  When I argue a motion to dismiss, I argue the court must stay within the confines of the “four-corners” of the complaint (black-letter law), which means the court can consider only the note attached to the complaint, not the note subsequently filed with an indorsement.  Bank lawyers, by contrast, want judges to consider the subsequently-filed note, arguing “we filed the original note, indorsed in blank, so we are the holder.” 

I’ve argued the impropriety of this argument before from the standpoint of “standing at inception,” i.e. if the bank lacked an indorsement when it filed the suit, it cannot cure that deficiency by obtaining the requisite indorsement thereafter.  See Progressive Express Ins. Co. v. McGrath Community Chiro., 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.”). 

In its recent opinion, the Second District goes a step further.  It’s not merely an issue of the bank lacking standing at the inception of the case.  The court is not even allowed to consider the subsequently-filed note without the bank amending its complaint.  References to the subsequently-filed note, for pleading purposes, are “a nullity.” 

Everyone should be citing Feltus v. U.S. Bank when arguing motions to dismiss.  It’s time that banks stopped getting away with amending their pleadings via the filing of a note that contravenes the note attached to their complaints without leave of court and without the consent of all defendants.  See Fla.R.Civ.P. 1.190.  In other words, as soon as a bank’s lawyer has to resort to referencing a note that is not attached to the complaint when opposing a motion to dismiss, that shows the bank has failed to state a cause of action and either needs to amend its complaint or suffer a dismissal without leave to amend, as in Progressive.

Mark Stopa

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