Archive for December, 2012

Merry Christmas, Floridians

I really want to wish all homeowners in Florida, and across the USA, a Merry Christmas.  The best way to do that, though, isn’t with words … it’s to post some Orders.  So here you go.

Order Granting Summary Judgment

Order Granting Summary Judgment

Order Granting Summary Judgment

Order Granting Summary Judgment

In each of these cases (all decided within the past few days), the bank argued that it complied with the conditions precedent to foreclosure set forth in paragraph 22 of the subject mortgage by sending the homeowner a letter.  Each time, however, I argued that the content of the letter was insufficient.  Each time, the court agreed, dismissing the case.

As I explained recently in this blog, it is insufficient for a foreclosure plaintiff to show it sent the letter required by paragraph 22 of a mortgage – the letter actually has to say what paragraph 22 requires it to say.  Where the letter doesn’t say the required terms, there is an excellent argument that the plaintiff did not comply with conditions precedent to the filing of the lawsuit, requiring that the case be dismissed.

The reasons the letters are inadequate can run the gamut.  In two of the Orders I posted, the letter was found to be inadequate because it advised the homeowner that he/she could “bring a court action” instead of specifying that the bank would pursue “foreclosure by judicial proceeding.”  This is becoming a common argument in foreclosure cases, and most judges agree – there is a big difference between telling a homeowner “you can sue us if you don’t want to be foreclosed” instead of “we will sue you to foreclose.”

But that’s hardly the only problem with these letters.  In one Order I posted, the letter said the homeowner “may” have the right to reinstate after acceleration.  In another, the letter did not specify what the homeowner had to do to cure the default, telling the homeowner it had to pay charges and expenses without identifying the amount of those monies.  In both instances, the judge found the letter insufficient and dismissed the case.

Let this be another illustration is that there are almost always valid, legitimate ways to defend foreclosure cases.

Merry Christmas, Floridians.  May you all enjoy the day with family and friends – in your homes.

Mark Stopa

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Knowing the Way to the Second DCA

About a month ago, I wrote this blog, explaining why I filed a Petition for Writ of Prohibition in Florida’s Second District Court of Appeal (after a local, circuit judge denied my motion to dismiss for lack of prosecution).  My point was to highlight the importance of making jurisdictional allegations in foreclosure cases and, where necessary, pursuing appellate relief.  Well, shortly after filing the Petition, the Second District ruled, and I lost.  Or did I?

In its Order, the Second District ruled that my petition was “dismissed without prejudice.”  In that sense, it certainly seems, at first blush, like I lost.  After all, the Second District did not grant any relief, and dismissed my petition.

However, anyone who regularly practices in the appellate courts knows it was more complicated than that.  The Second District could have dismissed ‘with prejudice,” which means the Court considered the arguments in the petition and rejected them.  Instead, the court dismissed “without prejudice,” meaning the Second District was allowing me to bring the arguments at the end of the case.

Meanwhile, I filed this Motion for Rehearing or Stay Pending Appeal in the lower court, explaining why the Motion to Dismiss for Lack of Prosecution should have been granted.  At the hearing on that motion, my opponent argued that I had already gone to the appellate court, and lost, so the lower court should rule the same way and deny the motion.  He was pretty confident in that position, and it probably seemed like a good argument.  “Judge, you ruled in the bank’s favor the first time on this motion, and he lost in the appellate court, so you should rule the same way now.”

It sounds right.  But it’s not.  The bank’s lawyer obviously didn’t realize that an Order from the Second District which dismisses a petition for writ of prohibition “without prejudice,” does not mean that I lost on the merits, it means the Second District thought I should bring the appeal at the end of the case.  At the hearing, it was certainly fun to be able to make that distinction.  In fact, the way I see it, the Second District’s dismissal without prejudice showed it may have liked my argument on the merits, because it could have dismissed ”with prejudice,” and prevented an appeal at the end of the case, but it chose not to do so.

Anyway, upon making these arguments on rehearing, guess what?  I won.  Motion granted, case dismissed.

I’ll never know for sure why I won the argument the second time where it didn’t win the first.  After all, the judge was the same, and the argument was the same, so why the different rulings?  Maybe I presented the argument better the second time.  Maybe I argued more coherently or persuasively.  Or perhaps the judge realized that I knew what I was talking about when it comes to appellate matters and that not following the law risked reversal on appeal.  Again, I’ll never know for sure.  However, one theme I’ve often seen/felt/experienced is that I get better results before judges who realize I know my way to the Second DCA.  Maybe that’s just my perception, and maybe it’s just a coincidence, but it sure feels like the threat of an appeal (“threat” isn’t the right word, but it’s the only one that comes to mind) makes a difference.

For those looking for case cites on dismissals for lack of prosecution, here is the Order of Dismissal I’m submitting to the Court for entry.

Mark Stopa

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Foreclosure Defense in Miami-Dade

I don’t know Matthew Bavaro, a fellow foreclosure defense attorney who practices in Miami.  However, the story he posted on his blog today struck a cord with me, as it’s eerily similar to an experience I had in Miami a few weeks ago.  At this point, it’s time – perhaps past time – that I shared my experience and voiced my concerns.

I had a trial scheduled in Miami, and when I arrived in court, it was apparent that dozens of other trials had all been set for the same time, before the same judge.  While it’s never ideal to have to sit around and wait for your case to be called, it gave me the chance to watch other cases.  Wow, what a nightmare.  As each trial started, the judge made an unsolicited “offer” to defense counsel of a 120-day sale date, advising the defendant that if he/she did not take the deal, the “offer” would be off the table after the trial.  That was the judge’s routine procedure – without hearing any evidence, or knowing anything about the facts of the case, the judge was essentially telling the homeowner “you better consent to judgment and accept a sale date in 120 days or I’m going to rule against you and set an earlier sale date.”

Punishing homeowners for going to trial.  Wow.  Just … wow.  That alone is nuts.  Candidly, I told that story to a local judge (not a fellow defense attorney – a local JUDGE), and he couldn’t believe it.  There is no circumstance – none – where a judge should be taking it upon himself to tell a defense attorney that he is going to lose at trial and he should accept the judge’s deal, and that’s precisely what this judge was doing.

Can you imagine this in any other context?  How about a criminal case … judge tells the defendant “you better accept this plea, as if you go to trial, I’m going to rule against you and impose a harsher sentence.”  Totally nuts.

Anyway, it only got worse from there.  As the “trials” proceeded, they weren’t trials at all.  Nobody even sat at counsel table.  Instead, the judge forced everyone to stand, right in front of the bench, for the trial.  Clearly, the judge wasn’t intending that the “trials” last very long, not even allowing the homeowners or their lawyers to sit down.

As the trials went forward, to my amazement, it was typically not the plaintiffs’ attorneys who were asking the questions, but the judge himself!  Yes, instead of forcing the plaintiffs’ lawyer to question the witnesses and prosecute the cases, the judge took it upon himself to prosecute the cases from the bench.  That didn’t just happen once or twice, either – it was the judge’s routine.

The combination of what I observed – the judge trying to coerce defendants into settling, then prosecuting the cases for the plaintiffs – convinced me that I could not get a fair trial.  So when my case was called, I moved to disqualify the judge.

Once he saw my case was going to be contested, the judge immediately pushed my case to the end of the docket.  Hence, I kept watching the same broken record, one “trial” after another.

Finally, it got to my turn.  Before the “trial” started, I finished my motion to disqualify the judge.  I explained in detail the facts set forth above and how they caused me a well-reasoned fear that the judge could not be fair and impartial.  Motion denied.

Then I moved to continue the trial so I could file a written motion to disqualify.  Motion denied.

Then I moved for a stay pending appeal, as I was entitled to have the appellate court rule on whether the judge could preside on the case before the trial proceeded.  Motion denied.

Then, before the trial began, I argued the plaintiff should not be allowed to introduce certain exhibits into evidence because plaintiff failed to provide copies to me before trial, as the court had ordered.  The judge asked the plaintiff if that was true and counsel admitted it was.  The judge asked if counsel had an excuse and he had none.  The plaintiff was stuck – they violated an order and failed to provide me documents that I was entitled to receive before trial.  But instead of punishing or penalizing the plaintiff, the judge ordered the trial was continued so plaintiff could provide me the documents.

I immediately interjected, telling the judge I did not ask for a continuance.  The judge seemed surprised, asking me what I thought the remedy should be.  I explained that the trial should proceed, but the plaintiff should not get to use the exhibits it failed to provide to me.  That would mean, of course, that the plaintiff could not prove its case (and that I would win at trial), and the judge made it clear that wasn’t an option.  So the judge again ruled the trial was continued.

How frustrating.  The plaintiff screwed up, but I was being forced to come back again on a different day (from Tampa).  So I explained how I had traveled to the trial from Tampa, and that I was prepared, so if I had to come again because the plaintiff screwed up, then I should get fees for having to do so.  Motion denied (technically, deferred ruling until after the case was over, but basically denied).

These are the facts, as they transpired, as they would appear on a transcript.  What the transcript won’t reflect, however, is the indescribably nasty way the judge treated me.  The hostility of his tone.  The anger in his voice.  HOW DARE I come into his court and ask for – no, insist upon! – due process in a foreclosure case.  The hostility was so apparent, I felt compelled to say, as the trial was ending “let the record reflect that the judge is staring at me with an incredibly nasty stare,” or words to that effect.

At that point, the judge was truly irate, inviting plaintiff’s counsel to comment about the judge’s demeanor.  That prompted me, of course, to ask why the judge was questioning the factual basis of my motion to disqualify him.  Then the judge smiled at me, waved, and said “have a nice trip back to Tampa, counselor,” in the most condescending tone I’ve ever heard – not just in a courtroom, but ever.

Read Matthew Bavaro’s post.  This isn’t about me, and it’s not about Mr. Bavaro.  This is about a court system that is repeatedly and systematically causing experienced, reasonable attorneys to believe there is nothing close to due process or fair trials transpiring in foreclosure cases in Miami right now.  Perhaps most alarming is that the judge with whom I had my bad experience was NOT the judge before whom Mr. Bavaro had his.  In other words, the issues in Miami aren’t limited to one judge – multiple judges are causing these concerns.

I get that the judges wear the robes and get to make the rulings.  They have the authority, and no matter how much I disagree with the rulings, they have to be respected.  I get that.  And I’m not suggesting that anyone not respect the judges and not follow their rulings.  However, when the judges don’t follow the law, and act in ways that make it clear they aren’t comporting with requirements of due process, it’s up to us, as advocates, to do whatever possible – within the law and professional ethics – to compel them to do so.  We aren’t doormats – we’re advocates.  Even when it’s uncomfortable, we have to act as advocates for our clients.

I left Miami that day with a continuance.  In virtually every other case, the Plaintiff got a foreclosure judgment, often with little or no opposition.  I talked to several otherdefense  attorneys about the process, and though most shared my concerns, most of them were afraid to say anything or do anything about it (for fear of upsetting the judge).  I’m sorry, but being a doormat isn’t the answer.

From what I understand, the senior judges in foreclosure cases get paid $300/day.  I’d very much like to think that the Miami judges aren’t rushing through trials in this manner because they’re trying to get through the work day faster.  Whatever the motive, however, it’s time – probably past time – that defense attorneys act as advocates and help the judges understand that the processes being described by Mr. Bavaro and myself are wrong.

Mark Stopa

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Deeding your House? SCAM!!

Twice this week, I’ve had clients approach me seeking advice about companies that were promising a free house.  Here’s a summary of their “pitch”:

Let our team of lawyers fight the foreclosure.  We’ll win, get the case dismissed, and eliminate all mortgages, allowing you to have the house free and clear. 

Now for the fine print:

Sign a deed conveying title to your house into this trust, and begin paying a monthly fee while our lawyers fight the case.

Folks, if you’ve never listened to me before, listen to me now.  THIS IS A SCAM.  Please don’t fall for it.

I tried to warn consumers about these slimeballs a few months ago.  Please heed my warning.  Just don’t do it.  And remember – it is neither helpful or necessary for any Florida homeowner to deed their house to anyone, for any reason, as part of foreclosure defense.

Mark Stopa

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The Impact of Mortgage Insurance

Without question, the biggest untold story in the foreclosure crisis is mortgage insurance.  Understanding how it works goes a long way in understanding why homeowners can’t get reasonable settlements in foreclosure cases.

Many homeowners, when they take out a mortgage, have to pay for Private Mortgage Insurance, or PMI.  The concept is simple – if the homeowner defaults, the mortgage company is protected, as an insurance company will pay the mortgage in full.

For years, I’ve been bothered at the concept that banks can keep foreclosing on homeowners even though I know that, at least on some percentage of mortgages, there’s an insurance company paying the bank in full.  As I explained here, banks shouldn’t get to collect twice.

How does this dynamic work in the real world?  I found out today the hard way.

I represent a client who has title to a property, subject to the mortgage, but wasn’t the borrower.  Trying to think outside the box, I asked opposing counsel if the bank was interested in accepting a partial payout in exchange for releasing the mortgage or selling the note/mortgage to my client.  I thought the concept was reasonable – there was no “moral hazard” since my client wasn’t the borrower, and the bank should cash out now so as to avoid fighting me in court.

What was the response I got?  Nope, can’t do it.  Well, the bank can do a deal, but it won’t.  Why?  Because there’s mortgage insurance.

The way this perverse system is set up, the insurance company will pay the bank in full, but only if the property goes to foreclosure sale.  If/when the property doesn’t sell for the insured amount at the sale, then the insurance company’s obligation to pay the bank is triggered, and the bank gets paid in full.  If, by some chance, the property sells for more than the insured amount, the insurance company doesn’t have to pay, but the bank collects from the proceeds of the sale.

In both scenarios, the bank gets paid in full … so long as the foreclosure sale goes forward.  And there’s the rub.  The bank can sell the note/mortgage, or the bank can satisfy the mortgage for less than the full amount.  But doing that would eliminate the bank’s ability to collect mortgage insurance … unless the insurance company consented to the bank cashing out without holding a sale.  Predictably, the mortgage company refuses, hoping the property will sell for more than the insured amount at the foreclosure sale, so the insurance company won’t strike a deal with my client.

This is the dynamic with many, many foreclosure cases.  Banks could settle with homeowners.  But why would they?  There’s an insurance company just waiting to write them a check after the foreclosure sale.  And if by chance a third party pays more than the insurance amount, the bank collects from the proceeds of the sale.

So if you’re wondering why banks refuse to make what seem to be reasonable business decisions, wonder no more.  There may well be an insurance company footing the bill … once the foreclosure sale takes place.

Isn’t America grand?  Banks get paid in full while homeowners can’t get reasonable deals because of the perverse dynamic between banks and insurance companies.

Mark Stopa

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Authority of Servicer to Settle

My friend and colleague Matt Weidner just posted an eye-opening blog describing how a servicer had settled a foreclosure lawsuit by agreeing to waive any deficiency, yet the plaintiff’s attorney argued that Fannie Mae, as the owner of the Note, could still pursue the deficiency if it so chose.  It’s a shell game, really – making a settlement with a homeowner, then saying, “ha, ha – we offered you something in the settlement, but now you get nothing.”

As Matt explained, the judge was understandably upset.  This is, quite frankly, one of the reasons I love arguing that courts should do everything in their power to limit the ability of servicers to prosecute foreclosure cases.  There are just so many problems here.  Does the servicer actually have the authority to foreclose?  How do we know?  If we settle, is a written settlement agreement with the servicer binding?

Read the transcript Matt posted.  This is why judges shouldn’t allow foreclosure complaints to be verified by servicers, much less foreclosure lawsuits to be prosecuted by servicers.

This sounds problematic, particularly when you think about whether the servicer actually has authority to settle a case.  Frankly, it is problematic.  However, there is a simple solution.  If you’re a homeowner and you settle a case with a deficiency waiver, make sure the Court signs an Order specifying “Plaintiff is not entitled to a deficiency from Defendants,” or words to that effect.  If that order is signed (in a final Order or a Final Judgment of Foreclosure), I believe it prevents anyone from taking the position, later on, that the owner of the Note can still pursue a deficiency.  After all, the Court has already ruled there is no entitlement to a deficiency, so that ruling would be binding on the parties in the future, even years later.  And that Order is recorded in the Official Records of that county for everyone to see.

But what if the company pursuing the deficiency is not the plaintiff, you ask?  Could the “plaintiff” be barred from pursuing a deficiency but some other company, like the owner, still be able to do so?  I think not.  In my view, a signed court Order, along the lines I described, precludes this.  The legal doctrine at play is called res judicata.  It applies not only to the parties in a lawsuit, but to those in privy with the parties as well.  Hence, if a servicer is the plaintiff and the court enters an Order that there is no deficiency, but the owner tries to claim a deficiency at a later point in time, I think the Order which says there is no deficiency would be binding on the owner as well as the servicer.  The owner can’t point to an Order in a case involving the servicer – it’s own agent – and argue that Order does not bind the owner as well.  In other words, you, as the homeowner, could point to the Order and say “the court has already ruled the plaintiff is not entitled to a deficiency, and that ruling is binding.”

What if there is not an Order?  That’s where it becomes more troubling.  If all the homeowner has is a written settlement agreement, I’d be concerned that may not be binding on the owner of the Note.  There are arguments it is, of course, but it’s not a path down which I’d want to travel.  An Order is much better.  In fact, that’s why, when I settle foreclosure cases for clients with a deficiency waiver, I make sure there is a signed court Order which makes it clear the Plaintiff is not entitled to a deficiency.  Getting such Orders for my clients helps me sleep better at night.


Mark Stopa

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Par. 22 Notice – Content Matters!

The wars are continuing on the front lines of foreclosure cases, only with a twist.

As I explained here, it is possible for homeowners facing foreclosure to get their cases dismissed by proving that the bank failed to provide the “notice and cure” letter required by paragraph 22 of the mortgage.  Some plaintiffs’ firms have responded to such motions with affidavits, basically saying “we sent the letter.”  In their view, proof they sent the letter ends the analysis, as it proves compliance with this condition precedent, precluding dismissal for failure to comply with conditions precedent.  Are the banks right?  Does proving the letter was sent comply with paragraph 22, defeating a homeowner’s attempt to dismiss a case?

Hehehe.  Of course not!   It’s not enough merely to send the letter.  The contents of the letter must set forth what paragraph 22 requires it to set forth.  To illustrate, on November 28, 2012, the Second District reversed a summary judgment of foreclosure, explaining:

Although MSMC argues that it provided the Judys with proper notice of default, the notices failed to specify that the Judys committed a breach.  And failure to specify the default as required by the mortgage terms requires reversal because MSMC did not meet its burden in refuting the Judys’ affirmative defense of insufficient notice of default. 

Judy v. MSMC Venture, LLC, Case No. 2D11-1896 (Fla. 2d DCA Nov. 28, 2012).

Bear in mind, specifying “the default” – the issue in the Judy case – is just one of the requirements of paragraph 22.  The letter must also specify (i) the action required to cure the default; (ii) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; (iii) that failure to cure the default by the date specified may result in acceleration, foreclosure by judicial proceeding, and sale of the property; (iv) the borrower has a right to reinstatement; and (v) the borrower has a right to assert in the foreclosure proceeding the non-existence of a default or any other defenses to foreclosure.

By addressing the contents of a paragraph 22 letter, and ruling the contents were insufficient as a matter of law, the Second District has explained that it’s not good enough for banks to merely assert that they sent a paragraph 22 letter.  They must be able to show that the content of said letter comports with all requirements of paragraph 22.  Where the plaintiff does not comply, the plaintiff cannot and should not be permitted to foreclose.  In fact, where a defendant proves the letter does not comply, the case should be outright dismissed for failure to comply with conditions precedent to foreclosure.

Mark Stopa

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