Archive for April, 2013

Motions to Dismiss in Foreclosure Cases

In the foreclosure-world in which we now live, motions to dismiss are widely viewed with disdain.  They’re a pest.  An annoyance.  They accomplish nothing but delay.  I don’t feel that way, of course.  I think motions to dismiss are an important aspect of foreclosure defense, as they, when used properly, ensure a plaintiff has stated a cause of action in its complaint and otherwise done what it’s supposed to do upon filing suit.

Unfortunately, many plaintiffs and, yes, judges, see motions to dismiss purely as a stall.  You see, so long as the motion to dismiss is pending, the homeowner need not file an Answer, and without an Answer in place, the case isn’t “at issue” under Fla.R.Civ.P. 1.440 and can’t be set for trial.  Hence, a motion to dismiss prevents a trial from being set.

Those pesky motions to dismiss.  We need to get rid of those.  There are trials to set and dockets to clear! 

I’m glad the good judges in Hillsborough and Pinellas don’t share this mindset, as it has annoyed and frustrated me for a long time.  Unfortunately, there has been little opportunity to do anything about it, either, as there is virtually no case law from Florida’s appellate courts on the circumstances in which a motion to dismiss in a foreclosure case should be granted.  The problem is procedural.  You see, when a motion to dismiss is denied, that ruling cannot be appealed until the end of the case.  But once the case reaches its end, the homeowner isn’t concerned with appealing whether the foreclosure plaintiff stated a cause of action as much as whether the plaintiff was entitled to foreclosure.  So if/when the appeal is ultimately brought, nobody talks about whether the plaintiff stated a cause of action, but whether foreclosure was permitted.  As a result, case law on the circumstances in which a motion to dismiss is warranted in a foreclosure case is virtually non-existent.

That changed a bit recently, and I think it should change the way motions to dismiss are viewed throughout Florida.

On April 22, 2013, Florida’s First District Court of Appeal issued a written opinion in Wells Fargo Bank, N.A. v. Bokatka, Case No. 1D11-3356 (Fla. 1st DCA 2013).  At first blush, the opinion seems unfavorable to homeowners, as the lower court dismissed the foreclosure suit with prejudice and the First District reversed that ruling.  Dismissal with prejudice was wrong.  Ugh.

If you look closer, however, the court made it clear that the motion to dismiss was properly granted, it just shouldn’t have been granted with prejudice.  Take a look at this language from the opinion:

In this case, we do not fault the trial judge for dismissing the bank’s initial complaint, which facially created a contradiction between who the bank alleged was the owner of the note (the bank) and whom the attached note and mortgage identified as the owner (Option One). Putting aside (for the moment) the parties’ attempts to interject or examine materials outside the pleadings, dismissal without prejudice was appropriate simply to allow the bank an opportunity to amend its initial complaint to address this discrepancy and to fortify its allegations and attachments (perhaps with the allonge and some of the items the bank presented in support of its motion to vacate and set aside).

Mortgage foreclosure cases have many factual permutations—such as the many ways that ownership of notes can be established—that do not lead to simplistic judicial resolution at the frontend of litigation.

This language is important.  Every plaintiff’s attorney and every judge who thinks a motion to dismiss is just something that gets denied so a case can be set for trial should re-read that last sentence:

Mortgage foreclosure cases have many factual permutations – such as the many ways that ownership of notes can be established – that do not lead to simplistic judicial resolution at the frontend of litigation.

I want every foreclosure defense attorney and every pro se homeowner to bring this case to every motion to dismiss hearing.  That sentence needs to be shown to every single judge who adjudicates motions to dismiss.  Every one.

When a foreclosure plaintiff alleges in its Complaint it is “entitled to enforce” the Note and Mortgage, point to that sentence.

When a foreclosure plaintiff alleges in its Complaint it is the “holder” of the Note, but the Note attached to the Complaint is payable to a different entity and does not contain an endorsement, point to that sentence.

When a foreclosure plaintiff asserts it has authority to prosecute the case on behalf of the owner of the Note, but does not specify who the owner is, point to that sentence.

These are the types of issues that motions to dismiss are supposed to resolve.  Foreclosure plaintiffs should have to clarify these ”factual permutations” in their complaints, as the “judicial resolution” of such issues is not “simplistic.”

Legalese aside, I hope the First District’s opinion will make everyone realize motions to dismiss in foreclosure cases should be treated the same way as all homeowners should be treated – with respect.

Mark Stopa

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Bank-Induced Default: The Next Wave of Foreclosure Defense

For years, I’ve listened as homeowners walked into my office with the same story.  “The bank told me to default to be eligible for a loan modification, but when I stopped making payments, the bank refused to give me a modification.”

I have always believed this is a defense to foreclosure.  I even have a term for it – “bank-induced default.”  But don’t take my word for it.  Read Florida’s case law on the matter.  See La Boutique of Beauty Academy, Inc. v. Meloy, 436 So. 2d 396 (Fla. 2d DCA 1983) (“because the mortgagee, by its own conduct, led appellees to believe acceleration would not occur following a late payment … we affirm the order granting summary judgment for the mortgagors”); Dale v. Jennings, 107 So. 175 (Fla. 1926); Kerber v. Chadan, Inc., 364 So. 2d 1264 (Fla. 4th DCA 1978).

In my view, the law in this regard is clear.  When a bank leads a homeowner to believe acceleration/foreclosure won’t occur after a default in payments – as it does when it tells a homeowner to default in order to get a loan modification – then it should not be able to foreclose.  The Meloy case is particularly eye-opening.  There, the Fourth District affirmed a summary judgment for the homeowners where the bank led the homeowners to believe a foreclosure would not occur after the default.  Yes, a summary judgment for the homeowners … foreclosure case over, homeowners win, just like that.

That, however, begs the question.  Even if a homeowner is able to “win” with this defense, what does that “win” mean?  The bank can’t foreclose in that lawsuit, that seems clear.  But what happens with the mortgage?

Let me dispel your immediate thought.  No, I don’t think this gives a homeowner a free house.  The fact that the bank wrongly declared a default shouldn’t give a homeowner a mortgage-free house.

So what, then, happens to the mortgage?  If it doesn’t go away, can the homeowner resume payments?  This is where it gets tricky.

In the bank’s view, the homeowner can’t resume making normal, monthly mortgage payments – not without paying all of the late charges, attorneys’ fees, and default interest since the alleged default, not to mention the monthly payments that accrued since the last payment was made.

In the homeowner’s view, doing that would be ridiculous.  Why should a homeowner who was wrongly declared in default have to pay default interest, late charges, and attorneys’ fees where those charges would have been unnecessary if the bank hadn’t wrongly declared the default?

Judge William Levens of Hillsborough County recently encountered a fact pattern like this and crafted a really interesting solution.  His Final Judgment not only denied a foreclosure, but it required the bank to reinstate the mortgage as of the date that payments stopped being accepted.  All default interest, late charges, attorneys’ fees – POOF, GONE.  The homeowner could resume making monthly, mortgage payments today as if the mortgage were never in default.

Great result, huh?  I thought so, and that’s why I blogged about it nearly a year ago.

Now is when it gets really interesting.

The bank didn’t like that result, so it appealed to Florida’ Second District Court of Appeal.  Today, the Second District issued a written opinion which reversed part of Judge Levens’ ruling but affirmed the rest.  Significantly, the appellate court affirmed the judge’s ruling that the mortgage should be reinstated retroactive to the date that the bank wrongly stopped accepting monthly mortgage payments.

Read the appellate court’s ruling for yourself:

At the conclusion of the foreclosure trial, the trial court found that Kraz had not been in default under the terms of the loan when BB&T declared the default.  Having reached this conclusion, the trial court denied BB&T’s request to foreclose on the property, and it set about creating an equitable remedy that would return the parties to the financial positions they would have been in had the improper default not been declared. As part of that remedy, the trial court reinstated the loan, ordered BB&T to write off the default interest and late fees it had charged …

Wow.  It’s one thing for one circuit court judge to make a ruling like this.  Useful, yes, but the extent to which it can be used in other cases is arguable.  However, when the Second District makes this ruling, it is binding law for every circuit judge in Florida.

Yes, it’s now binding precedent that when a bank wrongly declares a default that a foreclosure should be denied and the parties returned to the positions they were in when this happened.  I don’t want to call it a “bombshell” (I think Weidner has that term trademarked), but this is a really, really big deal.

How many cases can this impact?  As I see it, thousands.  Maybe tens of thousands.  In my experience, there are untold thousands of homeowners who were induced to default under promises of a loan modification, and all such homeowners can use this argument to not only contest foreclosure, but to ask that they be returned to the position they were in at the moment the homeowner stopped making payments.  That means not only that the bank can’t foreclose, but that all late charges, default interest, and attorneys’ fees are eliminated, and the homeowner can resume making normal, monthly mortgage payments.

One notable aspect of the Second District’s ruling … the fact that three years has passed without the homeowner making monthly mortgage payments is not relevant.  Think about that for a minute.  There’s no obligation to get current.  Just begin making payments again, as if it were three years ago.

Can this concept work for everyone?  Undoubtedly not.  Many homeowners were not the victims of “bank-induced default.”  But many were.  And now that we have precedent from a Florida appellate court, it’s time to start pushing the envelope on this defense, over and over again.

Any homeowner who was duped to stop making payments under the auspices of a loan modification (only to ultimately realize the modification never came) … I can’t guarantee this defense will work, but you sure as heck better try.  And if you want to bring your case to my firm, then, well, I hope you see I’m well-versed in the argument.

Mark Stopa

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Homeowners as Plaintiffs … A Tough Lesson

Banks often do some really despicable things … breaking into houses, violating various federal and state laws … I could go on and on.  Nonetheless, I almost always avoid the temptation to file suit on behalf of homeowners.  In my view, there’s an enormous difference between fighting to defend a foreclosure lawsuit as a defendant and initiating a lawsuit as a plaintiff.  Today, I received an absolutely heartbreaking email from a prospective client, and while her situation is truly awful, it’s a good way to illustrate why I am so firm in my beliefs on this issue.

You see, no matter how egregious a bank’s actions may be, if you’re a homeowner facing foreclosure, you probably don’t have a lot of money.  That’s why you’re in foreclosure – times are tough.  Unfortunately, banks know this.  Hence, the cold, hard reality is that if you file a lawsuit as a plaintiff against a bank, the bank will use your lack of finances against you.  Your inability to pay to fight shouldn’t matter – anyone should be able to seek relief in court if they were wronged.  In reality, though, this makes all the difference.  The moment you file that lawsuit, the bank will hire a silk-stockings law firm that bill by the hour with the primary objective of outspending you and outlasting you.  Your case might appear great on the merits – “the bank broke into my house” – but if you can’t afford to take that case to trial, then what will it matter?  In my view, if you start down this path, you invariably wind up spending a bunch of money you can’t afford to pay, only to, eventually, run out of money.  So then you’re out of money and still haven’t finished your case.

Occasionally, when I’ve expressed this fear to clients, they responded by asking if I’d take the case on a contingent fee.  While I understand the thought, my time is limited.  If I can spend untold hours on one case, or spend that same amount of time representing lots of homeowners facing foreclosure, the choice is easy.  I’ll forego the one case to help as many as possible.

Please read this email from a prospective client.  I’m sharing it with her consent as a way to help homeowners realize this is a trap they should avoid.  You might think you have a great case, but if you’re filing suit as a plaintiff against a bank, the chances of the bank being able to outspend you and outlast you are quite high.

As I say this, please realize this homeowner paid over $100,000 in fees.  When a lawyer like me is telling you he’d turn down a case like this – for a homeowner who could pay six figures in fees – that should tell you the extent of my concerns about this type of situation.  For me, there’s more at stake here than fees.  It’s just heartbreaking to know anyone would pay fees like this – from retirement accounts, no less – and now be in no better position than when the problem started.

So let’s keep fighting the good fight – but let’s do it as defendants, avoiding the spending battles the banks initiate when you file suit.  That’s certainly what this homeowner would do if she had it to do over again.

Here’s the email …

Good Afternoon Mr. Stopa,

I am proceeding pro se in three lawsuits – one of them a foreclosure and two others in which I am the plaintiff suing Wells Fargo & Corelogic for their repeated breaking & entering (one done before filing for foreclosure) and continued trespass on my property. The lawsuits are almost four years old. Until recently I was represented, but the attorneys withdrew over continued frustration with the Defendants’/Plantiffs’  non compliance with discovery requests, and my inability to promise them an additional $30,000.00.

I have no discovery, and have paid over $100,000 in legal fees – mostly from my retirement accounts, which my attorneys were aware of. No depositions, except for my own. I now need to subpoena the Corelogic agent who broke into my house twice, and am in need of legal advice. The defendants’ attorneys refuse to produce him (even though they said he could be contacted through their offices) and his Florida Driver’s license has a UPS Store as his address.

The judge refused to stay the upcoming (May) trial in the Corelogic case. I can afford a consultation and limited legal work, but can no longer afford “unlimited” representation. Do you know any lawyer who would talk with me? Someone just starting out and in need of experience?

Even though I feel that my past attorneys took advantage of me (my former attorneys still haven’t returned my 20,000.00 retainer held in trust, from which they will deduct their expenses in withdrawing and their final invoice) I am hoping to find someone who could at least give me limited legal advice. I had filed a Cert Petition with the court of appeal in an effort to quash my attorneys’ withdrawal, but it was denied last week on the determination that I would not suffer “irreparable harm” that could not be remedied on appeal.

Mark Stopa

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Can Anyone Verify a Foreclosure Complaint?

Florida’s Fifth District Court of Appeal just issued an opinion in U.S. Bank, N.A. v. Wanio-Moore which seems to indicate that anyone can verify a foreclosure complaint consistent with the requirements of Fla.R.Civ.P. 1.110(b).  In fact, that person need not specify his/her position or title with that verification, as a mere signature is sufficient.  In the words of the Fifth District, “the trial court erred in concluding that a foreclosure verification must state must state the signer’s position” and “the rule does not require any information about the signer’s positional authority.”

I find this opinion disappointing on many levels.

First off, do you notice how the homeowner represented herself pro se.  Not to criticize pro se representation (okay, I’m criticizing it), but does anyone think this homeowner made the best possible argument to the appellate court, one an attorney with experience on these issues would have made?  I sure don’t.  It’s a cryin’ shame to have important issues like this – impacting many thousands of pending foreclosure lawsuits – decided on an appeal where a lawyer wasn’t even involved.

As for the substance of the ruling, read it.  Do you know what troubles me?  The seeming indication that anyone can verify a foreclosure complaint.  The way this opinion is written, one (at least arguably) need not be an officer, director, employee, or agent of the plaintiff – or have any relationship with the plaintiff at all.  In fact, the signer need not include his/her title or position in the verification at all.  Hence, accepting this literally, one could argue that the bank can go to a local tavern and have a random drunk sign the verification – and that said verification is all that is required by Rule 1.110(b).

Did we already forget the reasons Rule 1.110(b) was created in the first place?  This was the first and only time in the history of Florida jurisprudence that the Florida Supreme Court created a rule of procedure to protect the courts and the public from an industry’s widespread use of false documents.  Are we really at the stage where we can act like any old signature will do – without even clarifying who is signing?

I sure don’t think so.  That’s why I filed this Motion to appear as an Amicus and a Motion for Rehearing and Clarification.

Please bear in mind … this was not my case.  Hence, there’s a fair chance the appellate court will deny my motions without explanation.  That said, I just couldn’t sit back and do nothing.  Law is being created adverse to homeowners, and the banks are very good at choosing to go to the appellate courts on those cases where a competent defense counsel is not involved.  As a result, I have to share my views in this manner or else I may never be heard.  But I’m not giving up … and neither should you.

Mark Stopa

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Foreclose Faster, Help Florida’s Economy … Say What?

I’m perusing foreclosure-related stories and I’m struck by a quote by Miami-Dade Circuit Judge Jennifer Bailey, who said:

“There is a consensus across the state that the locked up backlog [of foreclosure cases] is contributing to Florida’s economic difficulties, and the only way out of this is through it … We’ve been charged by the Supreme Court with this funding to move these cases.’’

This quote was part of an article in the Miami Herald discussing the pitfalls of rocket dockets, but let’s put aside those concerns for a minute.  As hard as it might be, forget your concerns about due process and homeowners’ rights and think about the premise of this statement.  A Florida judge is saying there’s a “consensus” across Florida that foreclosures have to be pushed through the system to help the economy.

Do foreclosures HELP the economy?  Really?

Throwing homeowners onto the streets HELPS the economy?

I’m sorry, but I think this is totally wrong.

I understand the rationale behind this position.  “By foreclosing faster, those houses go on the market sooner, and a new buyer will purchase that house.”  In theory, that may sound good.  But has anyone actually checked to see if this works in practice?  I have, and it doesn’t.  You see, middle class families aren’t buying these homes after foreclosures.  Nope.  Instead, the banks are taking title to these properties en masse, as they can outbid anyone since their judgment amounts are so much greater than the properties are actually worth.  Then these properties are sold in bulk to rich investors – hedge funds, basically.

Don’t believe me?  Read this.  Or try googling “Blackstone Florida foreclosures.”  Read the articles yourself.  Blackstone is one of the hedge funds that has bought hundreds of millions worth of foreclosed properties in Florida for the purpose of renting them out.

Really?  That’s why we are foreclosing faster … so the managers of a hedge fund can pocket hundreds of millions more in profits, turning thousands of Florida homeowners into tenants?

Do you know what helps Florida’s economy, in my view?  Foreclosure defense lawyers.  I know, I know … that’s terribly arrogant, even obnoxious.  But hear me out.

Over the past few years, I’ve talked to hundreds, even thousands of homeowners who have been able to save money while their foreclosure lawsuit was pending.  $10,000.  $20,000.  $50,000.  Even $100,000 … by doing nothing except saving money while their foreclosure case was pending.  This is money they can use to get back onto their feet, buy a new home, and restore their lives financially.

Many other homeowners weren’t able to save money despite years of living in their house because they are unemployed or disabled.  These homeowners would literally have nowhere to go if foreclosed, but they got to live in their house because they defended their case.

That’s thousands of homeowners who have accumulated cash they otherwise wouldn’t have, or had a place to live when they otherwise wouldn’t, merely because they defended their foreclosure case.

So you tell me … what helps the economy more?  Foreclosure lawyers like me who help homeowners save money and get back on their feet financially (or stay in their houses when they have nowhere else to go)?  Or pushing through foreclosures faster so hedge funds and rich investors can buy more properties?

For me, the answer here is obvious.

This, more than anything, is why I have so much passion for what I do.  I know foreclosure defense helps people.  I know it changes people’s lives.  I know it improves the economy – certainly more than foreclosing faster so a hedge fund can add another property to its portfolio.

I only wish everyone saw it this way.

Mark Stopa

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