Posted on April 24th, 2012 by Mark Stopa
The Florida Supreme Court is currently deciding whether a plaintiff should be able to voluntarily dismiss a pending lawsuit when a defendant is seeking sanctions for fraud on the court. I’ve been following the arguments and the briefs being filed, and I’m struck by what I just read from The Mortgage Bankers Association.
In the first issue of its brief, MBA argues (stay with me, it’s important, so I’m quoting it):
Initiating radical change in the applications of Rule 1.420 and Rule 1.540(b) could convert the mortgage debacle, from which Florida is slowly recovering, into a widespread financial crisis. … [Not allowing a plaintiff to voluntarily dismiss a lawsuit in the face of a claim for sanctions for fraud on the court] would impact general credit and lending practices, just as the fragile real estate finance industry begins to rebound from a severe economic downturn. If the [banks] face potential revocation of voluntary dismissals, lending practices in Florida could come to a grinding halt. The threat of sanctions would force lenders either to prosecute technically infirm cases, rather than cure defects in a new proceeding, or risk being prohibited from re-filing, after faulty documents have been corrected. Such unduly harsh procedural impediments would deprive lenders of the ability to collect their loans or apply collateral to satisfy these obligations. Without the ability to collect on defaulted notes, lenders would be unable to make new loans and refinance indebtedness in this State. The economic impact could be devastating to the State of Florida.
Let me get this straight. According to the MBA, not allowing banks to dismiss foreclosure cases when a defendant is claiming “fraud on the court” would cause a “widespread financial crisis,” cause lending to come to a “grinding halt,” prevent lenders from collecting their loans or making new loans, and be “devastating” to Florida.
Those are some incredibly strong statements, so much so that I can’t help but wonder …
If those would be the consequences, just how pervasive must the foreclosure fraud be?
Think about it. If the fraud isn’t pervasive, there’s no way the Florida Supreme Court’s ruling (no matter which way it rules) could possibly have the consequences the MBA is suggesting. The fact that the MBA is this concerned should speak volumes about the magnitude of foreclosure fraud in Florida.
If you doubt the existence or pervasiveness of foreclosure fraud in Florida, don’t listen to me or a consumer advocate. Simply read the MBA’s own brief.
Mark Stopa
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Posted on April 24th, 2012 by Mark Stopa
I’m estatic. I just talked to a client who read this blog, followed my advice, and now owns a house outright. Sound too good to be true? I disagree. It’s been a while since I’ve discussed this issue, so let’s revisit the topic …
Through my years as a foreclosure defense attorney, I’ve encountered countless homeowners who share the same type of story. Unemployment or underemployment led to financial problems and a mortgage default. Not wanting to go into foreclosure, these homeowners pulled monies out of a 401(k), IRA, or savings account to stay current on the mortgage. Eventually, though, the savings were gone, yet the monthly mortgage payments still kept coming. As a result, the homeowner had no money, yet was still facing foreclosure anyway.
The client with whom I spoke today read this blog (which I wrote back in 2010), realized his savings were dwindling, and didn’t let himself fall into this trap. Instead, he took his remaining $50,000 in savings, saved money while he didn’t pay the mortgage on the house he was living in, and purchased a home, outright, for cash. He has now moved into that house and declared it his homestead. As a result, guess what? Even if the bank forecloses on his old house, and even if it gets a deficiency judgment, it can’t take his homestead, which he owns outright. In fact, even if he loses his job later on, and has to declare bankruptcy (to eliminate the deficiency), he can still keep his homestead, free and clear. All of the money remaining in his 401(k) and the college plans for his kids – that remains in place, too, safe from creditors.
In my view, this is the perfect way to handle this type of situation. Instead of spending all of his savings, having nothing, and getting sued for foreclosure on the house in which he’s living … basically, winding up with nothing … he used his savings (and the money saved while not making payments on his old house), bought a new house outright, moved in, and declared it his homestead. Instead of nothing, he has a house that he owns, free and clear.
Think about how much different this man’s financial future will be simply because he strategized in this manner. No matter what, he has a house. No matter what, he has money saved for retirement and his kids’ college. All it took was the realization that continuing to make monthly mortgage payments on a house he couldn’t afford was not a long-term solution.
If there was one thing I wish more homeowners realized, it was that this approach is almost always better than depleting savings accounts to make monthly mortgage payments the homeowner simply can’t afford.
Mark Stopa
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