Archive for October 17th, 2010

Wall Street Journal – the impact of foreclosure moratoriums

The Wall Street Journal called me last week, trying to gauge the uncertainty homeowners feel given the “moratoriums” in place by many banks.  I’m quoted in the article as telling clients there’s “some uncertainty about the impact,” and that’s true.  Foreclosure defense attorneys and homeowners alike really have no way to know for sure how long the moratorium(s) will last, what these banks are going to do next, or how the judiciary is going to respond to ever-increasing proof of foreclosure fraud.  This picture encapsulates the uncertainty pretty well:

That said, I agree with the overall tone of the article – these temporary moratoriums won’t have much impact, especially in the long-term.  Sure, a foreclosure sale will be cancelled here and there.  The problem, though, is that when nobody is policing the banks, there’s only so much they’ll do to police themselves.  As I’ve been saying for a long time, meaningful change will require action by the government and/or the judiciary.

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This cartoon sums things up nicely.

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Foreclosure mills emphasize speed over accuracy – the impact on homeowners

I’ve read lots of good articles about the foreclosure crisis, but this one really caught my attention.  I totally agree with one point in particular:

The main problem … was that banks were not paying lawyers and the other workers by the day or by the hour, but by the case.  Thus, the way to make money was not to do a good job, but simply to get the job done.  … One instance of unusual business was David J. Stern’s law firm in Florida. Instead of charging by the hour, 12 people took care of 12,000 cases for $1,300 per case. The one law firm alone took care of more than 70,000 cases in 2009, a large portion of the two million total cases. Much like many other firms, Stern’s had no organization and was essentially a factory line to get as many cases done as possible daily.”

I’ve seen this phenomenon at play in my foreclosure defense practice on a daily basis, and I assure you – this is a bigger deal than people realize.  After all, when you’re paid a flat amount per case, as the foreclosure mills are, you have a huge incentive to compromise accuracy for the sake of speed.  I’m not saying that’s right – if you’ve read this blog, you know I think it’s wrong – I’m saying I recognize the financial incentives for the foreclosure mills.  At $1,300 per case, speed matters; accuracy doesn’t.  As I see it, this is a huge reason for the foreclosure fraud that’s permeated our courts.  


If you’re a prospective homeowner and think the fee structure of the banks’ lawyers doesn’t impact you, then, respectfully, you’re mistaken.  Yes, it matters in the sense that it’s more likely there will be mistakes on your file, but there’s more to it than that.  Think about it.  If you have a foreclosure defense attorney such as myself defend a lawsuit, and the bank’s lawyers are getting paid a flat fee (the same fee they get if a case is uncontested), do you think those lawyers are going to be excited about getting into a big legal battle with me over your case?  Or do you think they’re more inclined to set your file aside and work on an uncontested case?  In my eyes, the answer is clear – if you hire an attorney to defend your case, and that attorney has a reputation for fighting vigorously for homeowners, the bank’s lawyers are more likely to set your file aside and pick up a different file.  After all, why spend hours of work for $1,300 when the foreclosure mills can “push through” an uncontested foreclosure with minimal or no opposition (then ask the bank for another file)?  As I see it, this dynamic is yet another compelling reason to retain a competent and well-respected foreclosure defense attorney.

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Strategic Default – the stigma is going away

According to a is recent study by the Chicago Tribune, half of all Americans deem it acceptable to stop paying a mortgage the homeowner can afford to pay, i.e. strategically default.  Clearly, the stigma with strategic foreclosure is going away.

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Florida – one state, two court systems

Today’s article in the Washington Post does a fantastic job of encapsulating the two vastly different ways that foreclosure cases are being handled in Florida courts.  In some circuits, like the Twelfth (Sarasota/Manatee) and Sixth (Pinellas/Pasco), most judges seem intent on ensuring fairness.  In others, though, like the Twentieth (Lee), Seventeenth (Broward), and Fifteenth (Palm Beach), the judges, well, as one foreclosure defense attorney quoted in the article put it – “they are the robo-signers!”  There are exceptions within each circuit (and I’ve seen some bad procedures in the “good” counties), but, generally speaking, the Washington Post is spot-on in its breakdown.  This disparate treatment of foreclosure cases is a trend that I’ve noticed for many months, so much so that it’s often hard for me to believe these counties are part of the same court system.  How can judges in the same state treat foreclosure cases so differently? 

I’ve already given several examples in this blog of what I perceive to be improper procedures utilized by judges, and I will be posting more such examples in the coming days.  As I continue on this process, I’d be remiss not to mention judges who are doing it correctly.  For instance, I’m pleased to read the quote from Pasco Judge Lynn Tepper, who says “I’m not there to grease it, to let anything slide.  We need to be making sure these are done right.” 

Think about that for a moment.  There’s nothing “over the top” about that statement.  This judge isn’t saying “I feel sympathy for homeowners – I want them to get to stay in their homes.”  She’s not saying “the banks are crooked and need to be punished.”  She’s saying:

“we need to [make] sure these [foreclosure cases] are done right.” 

That’s all that most homeowners and foreclosure defense attorneys are asking – do it right.  Isn’t that reasonable?  Why am I not reading quotes like that from every judge?  All too often, the judges are saying, essentially, ”you can’t expect me to review the court file before I finalize a foreclosure.”  I wish such judges realized, when they say such things, they’re encouraging the foreclosure mills to perpetuate the same abuses that got us into this mess.  After all, do you think the mills are going to take the time to do cases the right way if judges don’t make them (and don’t even review the files)?

I sincerely hope the Judges in Lee, Palm Beach, Broward, Hillsborough, and other such counties take a hard look at how things are being done in the Twelfth and Sixth Circuits.  There’s a right way and a wrong way, and spending “a few seconds” per file is wrong.

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