Archive for January, 2012

Bank United Offering Deficiency Waivers, Cash for Keys

I’m pleased to report that I received settlement offers from Bank United today in three different foreclosure cases.  Each offer entailed: (1) a deed in lieu of foreclosure; (2) a deficiency waiver, and (3) $3,000 cash for keys, given when the homeowner vacates the home and leaves it in broom-swept condition.  Perhaps better yet, each offer was totally unsolicited and did not require any financial disclosures.

Bank United is a small bank, so its cases constitute a small portion of my caseload and foreclosure cases in general.  However, this is another illustration that if you defend your foreclosure case, and force the bank to prove its entitlement to foreclosure, then the bank may get frustrated, give up, or simply decide it’s better to settle.

Also, I’ve been arguing for a long time that financial disclosures are not required for a deficiency waiver, and these settlement offers are another illustration of that.  Banks may want financial information, but they don’t need it.  Hence, if a bank is forcing you to provide financial information so it can “evaluate” whether to give you a deficiency waiver, you should think twice – it may well be evaluating your financial situation so it can better assess how to collect from you.

Mark Stopa

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More Innocent Homeowners Getting Sued

This story, by Shannon Behnken, which aired last night on Bay News 9 and is published in the Tampa Tribune, is the most recent example of how the foreclosure crisis can harm innocent Floridians, even as the persons responsible get off scot-free. 

A Florida couple has been named as Defendants in a mortgage foreclosure case because, when they sold the property eight years ago, the legal description in their deed was wrong by one letter – and multiple sales later, the same mistake kept being made.  The title companies who issued title insurance in the face of this mistake are nowhere to be found – the first one is apparently out of business – so this couple, who haven’t owned the home for eight years, are left to defend the case for themselves.  Even though real estate professionals caused this mess, this couple has to ensure, all on their own, that the bank doesn’t obtain any monetary relief against them and that the lawsuit does not affect their credit.

Is Bank of America willing to help make this situation easier for these innocent parties?  Of course not.  A stipulation that the bank was not seeking money relief, coupled with a representation that the debt (which was not their debt, mind you) would not be reported to credit bureaus would have done wonders.  But the bank would have none of that – it had no comment.

Mark Stopa

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Foreclosure Fraud, the Double Standard

Pam Bondi, Florida’s Attorney General, just filed suit against two foreclosure rescue firms, asserting MGD Management and CRS Marketing promised homeowners they could live in their homes for three years, payment-free, but provided such homeowners no services.  Lest there be any ambiguity, I’m appalled at this type of misconduct, and I’ve spoken out about it previously, including  here and here.  Quite simply, it’s disgusting to promise help to distressed homeowners, take their money, and do nothing, and anyone who does deserves punishment. 

At the same time, though, I’m bitterly disappointed that the Attorney General is only taking such actions against those who side with homeowners.  In my eyes, an enormous double standard has emerged in the foreclosure industry, one where consumer advocates are punished with more frequency and more severity than those on the bank side.  To illustrate, consider this …

Just days prior to Bondi’s announcement that she was suing MGD Management and CRS Marketing, Bondi announced that she was appealing the Fourth District Court of Appeal’s ruling which quashed a subpoena in which Bondi attempted to issue to Stern.  What’s wrong with that, you ask?  Isn’t that a pro-consumer?  Well, appealing the denial of the subpoena may sound nice, but I see it as 100% lip service to consumer advocates, for three reasons: 

1.  An appeal will take many months, maybe longer.  How much time is Bondi going to take to “investigate” Stern and other foreclosure fraudsters?  And how many foreclosures will happen in the interim? 

2.  The entire concept of appealing this ruling is silly.  Undoubtedly, Bondi can take action if she chooses merely by issuing a new subpoena!  Bear in mind, the Fourth District opinion doesn’t say that Bondi can’t sue Stern or that she can’t investigate Stern, merely that she can’t issue an investigative subpoena pursuant to the Florida Unfair and Deceptive Trade Practices Act.  (The subpoena was also deemed overbroad, which is an easy problem to fix via a new subpoena.) 

There are many ways to skin a cat.  Bondi doesn’t have to limit herself to an investigative subpoena under FDUTPA.  Instead, Bondi could file suit (just like she did against MDG Management and CRS Marketing), or she could issue a subpoena under some other statute/law.  By failing to do so, and instead continuing to chase the rabbit down this one trail, Bondi has made it clear that, as far as the banks go, she’s more concerned with creating the impression that she’s doing something rather than actually doing something.

3.  Perhaps most significantly, how much “investigating” does Bondi need to do against Stern?  I mean, seriously … how much “investigating” does anyone need?  Bear in mind, virtually everyone in the foreclosure industry knows Stern committed fraud and other misgivings on a massive, widespread basis.  Stern’s own clients fired him, then refused to pay his invoices.  For many months after Stern abandoned his pending cases, refusing to even withdraw as counsel in thousands of pending foreclosure cases, attorneys from both sides would identify cases that Stern had handled to Florida judges as “an old Stern case” … the implication being there were problems/errors with the file.  I heard that phrase many, many times – and not once did I ever hear anyone, including a judge, ask “what does that mean?”  Everyone knows. 

If that’s not enough, take a close look at the lawsuit filed by DJSP Enterprises against Stern and his law firm, which asserts Stern engaged in a systemic and ongoing pattern of:

systematically falsifying and/or backdating pertinent legal documents, submitting such documents to the courts, routinely misplacing and losing original key documents, filing foreclosures with inaccurate and/or incomplete documents, prosecuting foreclosure cases without obtaining proper service of process …

cutting corners in the foreclosure process without following the rule of law …

systematically operating in an unlawful manner …

intentionally perpetuating a fraud on the courts by, inter alia, systematically filing forged documents, forging signatures on such documents, fraudulently backdating documents, improperly notarizing and witnessing documents, fabricating documents, signing affidavits without reviewing or verifying the information combined therein, filing foreclosures with inaccurate and/or incomplete information …

direct[ing] employees to purposefully overlook glaring inaccuracies in foreclosure pleadings and to essentially rubber stamp computer generated documents without reviewing or verifying the accuracy of the documents …

order[ing new attorneys] to sign legal filings and pleadings without reading them … As a result, false and inaccurate documents were routinely executed and filed with the courts in an effort to hasten foreclosure proceedings and illegally obtain final judgments of foreclosure …

incentiviz[ing] these unscrupulous and unlawful practices by giving their employees bonuses and extravagant gifts for churning out the highest number of foreclosure cases in the least amount of time …

Mind you, those claims aren’t being brought by me or a homeowner looking for a free house … this lawsuit was filed by Chardan 2008 China Acquisition Corp., better known as the company to whom Stern sold his back-room, “non-legal” foreclosure operations.  That sounds shady (and it is – what “non-legal” foreclosure operations could be done in foreclosure cases on this level?), but, personally, I can hardly fathom a better source of information than the company that’s been running Stern’s operations.  Who knows Stern’s fraudulent schemes better than his co-conspirators?  Yet Bondi still wants to waste time appealing an investigative subpoena under FDUTPA … seriously? 

Do you see the double standard yet?  Fraud by consumer advocates gets met with lawsuits, but massive, widespread, admitted fraud on the bank side … known by everyone involved … gets ”investigated” down a rabbit trail for months on end, ad infinitum.   

As if that’s not bad enough, this is the same David Stern that is still a member in good standing with The Florida Bar.  Respectfully, I will never understand that one.  This is an attorney who has a prior disciplinary history, who abandoned thousands of cases without withdrawing, who was fired by his own clients for fraud, whose employees testified they were ordered to commit fraud as a regular part of their jobs … and who walks around free to practice law per The Florida Bar.  How can that be?  Seriously, I’m asking – how can that be? 

Meanwhile, Erin Cullaro is now on a Bar grievance committee, where she will help The Florida Bar evaluate the misconduct of other Florida attorneys.  Mind you, this is the same Erin Cullaro who was just fired by the Attorney General’s office after a huge scandal where her signature was forged repeatedly, apparently with her consent, as part of the help she provided to the foreclosure mills in prosecuting foreclosure cases.  Call me crazy, but Erin Cullaro isn’t the person who should be evaluating the misconduct of others. 

So foreclosure rescue scams get prosecuted and/or sued, while foreclosure fraudsters for the banks get “investigated” without any real punishment.  Stern still has a Bar license, Cullaro not only gets a pass, but she’s on a grievance committee, while foreclosure defense attorneys … well, I won’t go there.  Instead, I will ask … Isn’t it time the double standard for foreclosure fraud gets eliminated, and those who help the banks are met with the same penalties and punishments as those helping consumers?

Mark Stopa

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A Foreclosure “Audit”

My friend and colleague, Matt Weidner, just blogged about foreclosure audits, and this is a topic worth discussing. 

I’ve had a few clients facing foreclosure ask me if they should get an audit.  I even had a couple of clients who procured an audit on their own prior to retaining my firm.  Their intent, essentially, was to convince the court, in defense of the pending foreclosure case, that their Note/Mortgage had already been paid, in whole or in part, at some stage of the securitization process. 

In his blog, Matt opines “the audit has zero value” unless it’s done by someone “qualified as an expert in a court of law.”  I totally agree.  To explain why, let me share a recent experience.  

One of my clients recently told me that he hired an auditor (which he procured prior to retaining me) and that, according to the auditor, his Note/Mortgage had been 85% paid off via the securitization process.  I asked for a copy of the audit, and, weeks later, I received literally dozens of pages of incomprehensive gobbley-gook.  It wasn’t even written in English – it was random numbers thrown together in a completely nonsensical way.  There’s no way any judge could read those documents and see that the Note/Mortgage had been 85% paid.  Heck, I couldn’t read those documents and conclude as much, and neither could my client.   

So I explained to my client that if we were going to get any value out of an audit, then the audit would have to contain a cogent, intelligent explanation showing that 85% of the Note/Mortgage had been paid.  Moreover, we’d have to bring the auditor into court, have him/her testify, and convince the court that he/she should be qualified as an expert. 

The client’s first reaction was to ask “Can’t I just tell the court the Note is 85% paid?”  My response?  “No, that’s not admissible in evidence if you were to so testify, as you don’t have personal knowledge of the payments.  So the Court could not consider your testimony on that issue.”

The client’s follow-up reaction was to express concern that the auditor lived in California, wondering if he could get on the phone and tell the judge the Note was paid.  My response?  ”No, the expert needs to come to court, show the judge his proof, convince the judge he’s an expert in this area, and convince the judge  the Note is 85% paid.” 

With that, we agreed to ask the expert to give us written documentation, which a judge or any layperson could understand, showing the 85% payments.  Additionally, the homeowner was to speak with his “auditor” and make him realize he’d have to testify at trial and be qualified as an “expert.” 

Let’s be clear here.  I have absolutely no aversion to the use of an audit.  In fact, if I can use an audit as a substantive defense in a foreclosure case, I’d be more than happy to do so.  To use the audit, though, I have to bring the auditor to court to testify, and I have to convince the court he/she is an expert.  That’s certainly possible, even if the auditor has never been qualified as an expert by a court previously (after all, there’s a first time for every expert).  My point, simply, is that before any homeowners rush out to pay for an audit, they should be aware of what’s required for that audit to do them any good in their court case. 

I suspect I’m going to get comments from auditors convincing me how their services are worthwhile.  That’s perfectly fine.  I’d love to see samples, but bear in mind – it must be something intelligible, something I could use to convince a judge of your position.

Mark Stopa

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The Ideal Presidential Candidate

Rick Santorum wants to outlaw all birth control, which nearly 100% of Americans use at some point in life, and he nearly won the Iowa Republican caucus.  Santorum lost, of course, to Mitt Romney, who showed just how out of touch he is with mainstream America when he challenged Rick Perry to a $10,000 bet during a GOP debate.  And these are the frontrunners, folks! 

All of this lunacy got me thinking … what would the ideal presidential candidate look like?  It’s not that difficult of a question, really.  A few simple campaign platforms would catapult him/her to the Presidency: 

1.  Have common sense.  Forget left or right, liberal or conservative, Democrat or Republican, I want a Presidential candidate with common sense.  Is that really too much to ask?  Don’t try to outlaw birth control when nearly every American uses it.  Don’t make $10,000 bets when that’s three or four months’ salary for the average American.  Exhibit a little common sense.  Act like a normal person – someone mainstream America can relate to. 

2.  Stop the bailouts.  The bailouts of the American banks were bad enough, but now the Fed is bailing out Europe.  Seriously?  Do you know how much traction a Presidential candidate would gain by speaking out against bailouts – and living up to his/her word?  How about this as a platform … “we’ve spent enough money bailing out everyone else, it’s time to bail out Americans.” 

3.  Side with the 99%.  Here’s the thing about the 1% – they’re only one percent!  If they get pissed off, then, well, it’s only one percent!  I’m not saying I’d actively try to alienate the 1%, but if it’s a question of appeasing the 1% or the 99%, is there really a question?  If I’m guilty of utilitarianism, then so be it, but shouldn’t the President be most concerned about the welfare of the most people?  (To clarify, I’m not a socialist, and I’m not saying money should be divided evenly.  My point is that it’s time to stop catering to the 1% and to be most concerned with the welfare of the most people.)

4.  No more wars.  Saying “no more wars” does not mean I don’t support the military.  It just means the military shouldn’t have to be there in the first place.  After all, how many trillions have we spent on foreign wars in the past decade?  And what, exactly has it accomplished?  I want to see the next President say ”I’m going to save the money we would have spent on wars to help the U.S. economy create jobs and improve the housing market and foreclosure crisis.”  Why is that so difficult? 

If a Presidential candidate did these four things – four very simple things that I drafted up in 20 minutes this morning – then I guarantee he/she would win the 2012 election and be revered for decades to come.  But alas, there is no such person running, which leaves me cold, bitterly disappointed, and wondering … why don’t these Presidential candidates get it?

Mark Stopa

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Who Do the Foreclosure Mills Represent?

I received a motion in today’s mail that appears inocuous but is an eye-opener on many levels.  Butler & Hoesch, P.A., moved to withdraw as counsel and sought a charging lien on the Plaintiff’s recovery in a pending foreclosure case.  The Plaintiff in the case is a securitized trust; Wilmington Trust Company is Trustee.  In its Motion to Withdraw, though, the foreclosure mill makes no mention of Wilmington.  Rather, the mill says it used to represent the servicer, Litton Loan Servicing, Inc. but that Litton has been sold to Ocwen Financial Corporation and that it has no attorney-client relationship with Ocwen. 

Are you confused yet?  Read the motion so you see what I mean.  This foreclosure mill has been litigating a foreclosure lawsuit on behalf of Wilmington, but as far as I can tell, has never represented Wilmington.  Moreover, although the mill talks about its relationships (or lack thereof) with Litton and Ocwen, neither Litton nor Ocwen is a party in the case.  

So who, exactly, is the mill trying to withdraw from representing?  Presumbly Wilmington, the Plaintiff, as that’s the only plaintiff in this case.  But the mill’s own motion makes it clear it has no attorney-client relationship with Wilmington anyway. 

Call me crazy, but shouldn’t the mill have an attorney-client relationship with the party who is prosecuting the lawsuit? 

The unseemly nature of this aside, I see a few significant issues which merit discussion:

First, the Florida Supreme Court requires via Fla.R.Civ.P. 1.110(b) that the Plaintiff verify its Complaint in all residential foreclosure cases.  Given the relationship between the foreclosure mills, the servicers, and the trustees, it seems clear the required verifications aren’t being done by the plaintiffs, but by the servicers.  Many learned judges in Florida before whom I appear have made it clear that verification by a servicer is insufficient – the complaints are supposed to be verified by the “plaintiff.”  Remember, the Rule doesn’t permit verification by a third party, but by “the plaintiff.”  In fact, Shapiro & Fishman moved for rehearing of the Florida Supreme Court’s ruling on this precise issue, and the Court rejected its motion. 

This prompts a significant question – if verification is required by the plaintiff, and the attorneys representing the plaintiff have no relationship with the plaintiff, how on earth can they get the required verification?  Undoubtedly, this is why the mills ask for 90 days or 120 days to get the requisite verification (when complaints are dismissed with leave to amend), as they often don’t even represent the plaintiff prosecuting the foreclosure case!  Literally, the mills are in the position of calling up an entity who they don’t represent and saying “You don’t know me, but I’m representing you in this foreclosure case, and I need you to verify under penalty of perjury that the allegations we’ve raised are correct.” 

A bit awkward, eh?  Yet that’s the position in which the mills have put themselves (in a large percentage of foreclosure cases in Florida). 

Second, though I’m hesitant to call out others on ethical issues where the answer is not black-and-white, I struggle to see how the mills can prosecute lawsuits on behalf of plaintiffs without the plaintiffs’ knowledge or consent in a manner consistent with The Rules Regulating The Florida Bar.  I’ve spoken with the Bar on this, and given our conversation, I’m not prepared to say it’s impossible, but I will say this.  Personally, I couldn’t imagine appearing as counsel for a party in any lawsuit without that party’s knowledge or consent, much less doing so on a widespread, systematic basis. 

Think about it this way.  An attorney is able to act on behalf of a client because the attorney’s actions bind the client.  Stipulations, representations, court filings, etc. … we as attorneys are, quite literally, agents for our clients.  If a client is going to be bound in this manner, the attorney’s authority to represent/bind the client must be clearly established.  This is why, for example, there are strict rules about how an attorney may appear as counsel, failing which the attorney’s actions don’t bind the client.  See Pasco County v. Quail Hollow Props., Inc., 693 So. 2d 92 (Fla. 2d DCA 1997). 

If these foreclosure attorneys don’t have an attorney-client relationship with the plaintiff, it seems to me they cannot represent the plaintiff at all and should be disqualified from doing so.  After all, how can an attorney bind the plaintiff when the attorney has no relationship with the plaintiff?  Why should any court accept the representations or stipulations of a plaintiff’s attorney when that attorney has no relationship with the plaintiff? 

There must be a better answer than “there are lots of foreclosure cases in Florida, and this is just how it’s done.” 

Third, on the issue of a charging lien, Florida law plainly requires that a charging lien be signed, in writing, by the party against whom the lien is sought.  How does any foreclosure mill expect a court to award a lien in its favor on the recovery of a securitized trust (in this case, Wilmington), when the attorney has no relationship with Wilmington and no signed fee agreement?  Should Wilmington really have to pay some of its recovery to a law firm with whom it has no relationship?  And no signed fee agreement? 

Fourth, you want to know why the Florida Supreme Court’s mediation program failed?  Take another look at this motion.  How can anyone expect to get a binding agreement with Wilmington Trust Company when the attorneys prosecuting this foreclosure case don’t even represent Wilmington?  This is a good illustration why loan modifications and reasonable settlements are so hard to get – the appropriate parties aren’t even at the bargaining table. 

Fifth, when the plaintiff alleges in the complaint that it is the owner and holder of the Note and Mortgage, what exactly does that mean?  Taking plaintiff’s allegations literally, the plaintiff is the owner/holder.  But in all of these cases where the entity driving the suit is actually the servicer, it seems that the servicer is the “holder” of the Note, not the Plaintiff.  Remember, to be the holder, the “plaintiff” must be in “possession” of the Note.  See Fla. Stat. 671.201(21).  Are these plaintiffs really in possession when they don’t even know a case has been filed?  I suppose it’s possible, but when the Note is subsequently put into the court file, how did it get there?  If it’s from the servicer, as I’d think it must since the servicer is the only one who knows about the case, then doesn’t that show the servicer was in possession, not the Plaintiff? And that the servicer was the “holder,” not the Plaintiff?  Actually, no – where the Note is specifically indorsed to the plaintiff, the servicer isn’t the holder, either.  In that situation, the servicer has possession, but the plaintiff has the indorsement, so neither one is the “holder.” 

So what’s the solution to all of this madness?  It’s two-fold: (1) Require verifications by the plaintiff (not the servicer, the plaintiff) and dismiss all cases without it; and (2) Require the foreclosure mills to have attorney-client relationships with the plaintiff (not the servicer, the plaintiff prosecuting the case) and disqualify all attorneys who lack such a relationship.  That sounds harsh, but it’s ridiculous to inundate our courts with garbage pleadings that languish for years without a resolution when the parties prosecuting them don’t even know they’ve been filed.

Mark Stopa

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