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Posts Tagged ‘Jacksonville’

Foreclosure Mills Pad the Bills

Have you ever wondered why banks sue “unknown tenant 1, unknown tenant 2, unknown spouse of John Doe, and unknown spouse of Jane Doe,” in addition to the homeowners?  Sometimes, these individuals are necessary in a foreclosure case.  For instance, if the property in foreclosure is a rental property, then the tenants must be sued and served with process.  

Often, though, as the Tampa Tribune explains, banks and their lawyers know there is no need to sue these parties, but they do so anyway – just to pad the bill.  And who receives that bill?  The homeowner, of course.  Incurring expenses that don’t need to be incurred just to pass on an expense to homeowners – ya gotta love the foreclosure mills.

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Judges Cannot Prosecute Foreclosure Cases; My Solution

Several days ago, I blogged about the flawed procedures being utilized in foreclosure cases in Brevard County, precipitating this Motion to Disqualify Judge.  Since filing that motion, I’ve continued to reflect on the issues addressed therein, and I remain comfortable with my position.  In my eyes, the issue boils down to one inescapable conclusion:

Judges cannot prosecute foreclosure cases!

Today, the Brevard judge agreed with my argument and issued this Order Granting Motion to Disqualify.  The Order is quite vanilla, but it contains a phrase that I find telling.  The judge notes that “from Defendant’s perspective,” the Motion to Disqualify is legally sufficient and requires disqualification.  The key phrase, of course, is ”the Defendant’s perspective.” 

From the Defendant’s perspective, when a judge takes it upon him or herself to set a hearing in a case that the Plaintiff has chosen, for whatever reason, to let stagnate, the judge is siding with the Plaintiff.  A judge may argue (and may truly believe), that all he/she is doing is advancing the case forward, without bias towards one party or the other with regard to the hearing being scheduled.  Particularly in foreclosure cases, though, it’s the mere advancement of the case, at the judge’s initiative, that reflects the bias.  After all, the Plaintiff is seeking relief in the case; the Defendant is not.  Hence, when the judge is advancing the case, sua sponte, the judge is necessarily helping one party to the detriment of the other. 

Let’s put it this way … If a case is languishing, whose job is it to advance the case forward, towards judgment?  The Plaintiff.  Undoubtedly, the Defendant has no obligation in this regard.  I’m not saying the Defendant can stall; I’m saying the Defendant has no obligation to accelerate the case if the Plaintiff lets it stagnate.   

Some people reading this may argue I’m a slimy foreclosure defense attorney who’s just trying to delay foreclosure lawsuits.  Not so.  My concern is ensuring the system is fair for my clients.  Lest you doubt that a judge setting a hearing on his/her own initiative is unfair, consider this:

I’ve represented Plaintiffs and Defendants in hundreds if not thousands of lawsuits throughout my career – all types of lawsuits, not just foreclosure cases.  Other than recently (in the context of foreclosure cases), I can’t ever recall a judge setting a hearing on his/her own.  It’s just not done.  For example, I’ve filed dozens of lawsuits for Plaintiffs against insurance companies, seeking monetary relief.  I think most of my litigation clients would tell you that I litigate those cases aggressively, but, on occasion, for one reason or another, some of those lawsuits have languished a bit.  When that happens, do you think there’s ever been a time when a judge took it upon him or herself to set a hearing?  Of course not.  Do you think the judge ever tells the insurance company or its lawyer that they need to accelerate the case?  Yeah, right.  Never happens.  As the Plaintiff’s lawyer, if I don’t set a hearing, the hearing never gets set, and the case stagnates.  That’s just how it works.  The insurance company has no obligation to advance the case forward (and risk entry of an adverse judgment sooner), nor would I expect them to.  My client wants affirmative relief through the court system; it’s my duty to move the case forward to obtain that relief. 

My point, essentially, is this – when this is how it works in litigation files, why should foreclosure cases be any different?  Because the homeowner (allegedly) has not paid?  Because the judge perceives the Plaintiff will win?  Because the Judge has a lot of cases on his/her docket and wants to remove the backlog?  Respectfully, that’s the rub.  If a judge is setting a hearing on his/her own initiative, for any of those reasons, it reflects a bias that should not be present among the judiciary.  Judges should treat my clients just like they treat insurance companies when I represent Plaintiffs – without any preconceived notions of who is going to win the case and without any agenda as to how quickly the case moves forward.

I can totally understand the judges’ desire to eliminate the high volume of cases with which they are dealing.  The answer, though, isn’t for judges to exceed their role as neutral arbiter and act as prosecutor.  The solution is to change to the rule on lack of prosecution. 

Fla.R.Civ.P. 1.420(e) is currently set up in such a way that it’s virtually impossible, as a practical matter, for a case to be dismissed for lack of prosecution.  For such a dismissal to be entered, (1) there can be no activity in the court file at all for 10 consecutive months; (2) the Plaintiff must be notified of the lack of record activity; (3) there must be no record activity in the ensuing 60 days; (4) an interested party must seek dismissal; and (5) there can be no “good cause” to prevent dismissal.  Under this standard, cases can languish forever.  I can file a Notice that I’m going on vacation for Christmas, and the 10-month clock starts all over again.  Respectfully,that’s crazy, particularly vis a vis foreclosure cases. 

If the judiciary wants cases to move quicker, it’s time for the Florida Supreme Court to implement an amendment to this rule.  How about something like … if six months have passed with no record activity in a foreclosure case, then, boom – automatic dismissal.  If that sounds too harsh, then give the Plaintiff a chance to prove good cause after six months.  The point isn’t how the rule is amended; the point is that some amendment is necessary to ensure that foreclosure cases progress at the pace the judiciary desires.  In other words, what I’m suggesting is this:

Judges, don’t prosecute foreclosure cases just because the bank has let those cases languish.  Instead, convince the Florida Supreme Court to amend Rule 1.420 so it’s not so impossible to dismiss a foreclosure lawsuit for lack of prosecution. 

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Wells Fargo admits more mistakes in foreclosure affidavits

As if we needed more proof that the banks’ foreclosure procedures are fundamentally flawed, Wells Fargo just announced it is re-doing affidavits in 55,000 foreclosure cases, as the original affidavits, executed by robo-signers, were flawed.  Lest you think 55,000 improper foreclosure filings is not a big deal, bear in mind – that’s just what Wells Fargo is admitting, based on its own, internal investigation.  If Wells Fargo is admitting to 55,000, you can bet the problem is far more widespread.

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The Cost of a Loan Modification

In this article, a reporter estimates the cost of a loan modification under HAMP to be $54,757.  If you follow his math, which seems well-reasoned enough to me, that’s actually a conservative number.  Anyway, think about that for a minute:

Our government is paying $55,000 for every loan modification under HAMP.

There must be a better way.

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Strategic Default and Bankruptcy – Where is Florida Headed?

The ongoing and systematic refusal by banks to enter meaningful loan modifications with homeowners will have long-term consequences that the average American cannot yet imagine.  Just try to picture it…

Imagine your typical American family.  Married couple, two kids.  Earn $40,000 per year.  Own a house worth $150,000 but owe $250,000.  Have two cars, a small amount of savings/retirement money, and $10,000 in unsecured debt (credit cards).   The numbers can vary, but you get the picture – your typical, middle-class family that’s making ends meat but not much else. 

There’s a strong argument to be made, for such a couple, that it’s in their best interests to strategically default, i.e. stop paying on their mortgage, defend their ensuing foreclosure lawsuit, and file a bankruptcy (Chapter 7 or Chapter 13, depending on their circumstances).  Each situation is different, but in all likelihood, this would drastically reduce or eliminate their credit card debts, drastically reduce or eliminate the deficiency on their mortgage (the $100,000 difference between what they owe on their home and what it’s worth), enable them to save money while their foreclosure case is pending, and give them a “fresh start” if/when the foreclosure is finalized. 

For instance, suppose the foreclosure lawsuit were to take a year to conclude (a conservative estimate in light of recent reports out of Palm Beach that the average case takes 18 months), and their mortgage payment was $1,500 per month.  With those figures, this couple would accumulate $18,000 in savings, merely by not paying their mortgage while the foreclosure lawsuit was pending ($1,500 x 12 = $18,000).  If they completed a bankruptcy, they could keep this $18,000 if/when the foreclosure case was over.  The $250,000 debt on the house?  Poof – gone (or substantially reduced).  The $10,000 in credit card debt?  Poof – gone (or substantially reduced).  Sure, this couple would lose their house, but what was the house really worth anyway?  As I see it, and I suspect most accountants would agree, losing a house worth $150,000 when you owe $250,000 means you eliminated a $100,000 liability.  Hence, the liabilities are gone, but the $18,000 – that’s the couple’s money to keep. 

Now imagine the foreclosure case takes two years instead of one.  Again, no way to know for sure, but given what I’m seeing in Florida, it’s certainly within the realm of possibilities.  In that event, the couple would have $36,000 when the foreclosure lawsuit ends in two years.  Think about that.  $36,000 cash and little or no debt (depending on the type of bankruptcy), and all you had to do was defend your foreclosure case and file bankruptcy!  And it’s all perfectly legal! 

With this example in mind, who wouldn’t want to strategically default?  I realize there are strong moral arguments not to do this, but let’s put aside morality for a moment and view this purely from a purely financial perspective. (That’s not terribly unreasonable, since that’s what the banks typically do.)  Isn’t it clear this couple would be better off by strategically defaulting on their mortgage, defending the foreclosure lawsuit, and filing bankruptcy?  In other words, isn’t it better to eliminate most or all of your debt, save up money, and have $18,000 or $36,000 or whatever amount in your pocket, and start fresh, than to owe $100,000 more on a house than it’s worth and credit card debt?  Heck, in today’s economy, $18,000 or $36,000 (or whatever amount you were able to save) could buy you a house, free and clear.  As such, it may be possible to convert your $250,000 mortgage into a free and clear house by doing nothing except strategically defaulting on your existing mortgage, filing bankruptcy, and retaining a competent foreclosure defense attorney to defend your foreclosure lawsuit. 

Now the staggering thought – there are literally millions of Florida homeowners in this type of situation.  Sure, there are plenty of Floridians who aren’t realistic candidates for bankruptcy because they have too many assets, too much income, or both.  In today’s economy, though, such people seem to be few and far between.  As such, what percentage of Florida homeowners could strategically default, stop paying their mortgage, file bankruptcy, and be better off?  40%?  50%?  More? 

Now, try to imagine what our country’s financial system will look like if this happens.  Imagine half of all Floridians with a mortgage – or half of all Americans with a mortgage – go into default.  If that happens, what will our financial sector look like?  Will big banks even exist?  What will property values fall to?  What will our court systems look like?  These are staggering questions for which there is no clear answer. 

Now a tough question – should the typical Florida homeowner care?  In other words, to what extent should homeowners continue paying their mortgages for the “good of society,” even to their own detriment?  Undoubtedly, there are arguments to be made on both sides of this issue as well.  Given society’s “me first” attitude, though, I’m confident many people will disregard the impact on society and embark on this path.  Hence:

As things now stand, millions of homeowners will choose a strategic default.

Avoiding this consequence should be the primary objective of the U.S. government.  Quite simply, our government must step in and do something to ensure that everyone doesn’t have the incentive to strategically default.  Our economy and financial sector as a whole will not be able to function if so many Americans have the incentive to stop paying. 

How does one go about this?  The problem, in my eyes, goes back to the absence of meaningful loan modifications.  People have the incentive to default because they see that a bankruptcy court would eliminate or reduce their debt and nobody else, i.e. the banks, is willing to do so.  Using the example above, if the banks reduced the mortgage to $150,000 or even $175,000, maybe that homeowner would have some incentive to keep paying.  Suffice it to say that to fix this looming crisis the government must implement some type of loan modification program that will work on a massive, widespread level.  Absent that, our country is headed down a path of “stop paying, file bankruptcy, defend the foreclosure, and come out on the back end far better off.”

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Explaining Judge Rondolino’s Order – a case study on the issues we face

If you’ve ever wondered what “foreclosure fraud” is all about or how a homeowner could possibly have legitimate defenses to a foreclosure lawsuit, take a close look at the Order of Dismissal from Judge Rondolino. 

The Plaintiff in this case is Deutsche Bank National Trust Company, as Trustee Under the Pooling and Servicing Agreement Dated as of May 1, 2001.  However, the Note and Mortgage attached to the Complaint are in the name of Maxwell Mortgage, Inc.  The Note contains no indorsement, and there is no allonge, no assignment of mortgage, and no other documentary evidence reflecting a transfer of the Note/Mortgage from Maxwell to Deutsche.  Hence, on the face of the Complaint, Deutsche has no basis to obtain a foreclosure.

After Judge Rondolino dismissed the case the first time, Deutsche filed an assignment of mortgage.  However, the assignment was not created until after the lawsuit was filed, and Florida law does not enable a plaintiff to acquire standing after filing suit.  See Progress Exp. Ins. v. McGrath Community Chiro., 913 So. 2d 1281 (Fla. 2d DCA 2005).  To circumvent this deficiency, Deutsche contends the Note was transferred to it before the suit was filed (even though the written assignment was done after) by some sort of “equitable assignment.”  However, as Florida law requires the pleading of facts, alleging an “equitable assignment” is insufficient without specifying the time, place, and manner of transfer.  In other words, where the written assignment post-dates the filing of the lawsuit, how could the “equitable transfer” have taken place beforehand? 

If this sounds like a lot of legal jargon, it is.  So here’s what’s really going on, both in this case and many others.

Banks don’t have their paperwork in order.  Banks, in this case Deutsche, file foreclosure lawsuits on a regular basis without the requisite paperwork.  When foreclosure cases go unchallenged, these deficiencies go unchallenged, so the banks generally get away with the deficient paperwork.  When foreclosure lawsuits are contested, by attorneys such as myself, banks and their lawyers often try to fix the problem after the fact.  That’s why I routinely see allegations like those in this case alleging an “equitable transfer,” without any factual basis, before the suit was filed even though the written assignment is dated after suit was filed.  Again, how could an “equitable transfer” have taken place before the suit was filed when the written assignment is dated months after?

Whether these types of allegations are permitted is the issue in thousands of Motions to Dismiss (and, ultimately, motions for summary judgment) in foreclosure cases throughout Florida.  Many judges, particularly senior judges, in their ongoing attempt to “push through” foreclosure cases, have denied Motions to Dismiss by homeowners, enabling Plaintiffs such as Deutsche to get away with conclusory allegations of “equitable transfer” without any factual basis. 

As you can see, Judge Rondolino is not one of these judges.  He believes Plaintiffs, even in foreclosure cases, should have to plead some facts in support of an alleged “equitable transfer” of the Note/Mortgage, particularly when the filing of suit precedes the date of the written assignment.  Obviously, I agree … but there’s more to it than that. 

The issue isn’t just whether Plaintiffs such as Deutsche should have to plead facts in support of the alleged equitable transfer … the issue is whether such facts exist.  Again, how could an “equitable transfer” have taken place before the suit was filed when the written assignment is dated months after?

Given his reference to “incacerative sanctions” (if Deutsche’s allegations are proven untrue), it seems Judge Rondolino shares the same belief that I do – in many of these cases, the requisite facts don’t exist.  In other words, it seems there was no “equitable transfer” before the suit was filed, yet Deutsche alleges otherwise to try to “push through” the foreclosure. 

This sounds complicated, but this is the issue in foreclosure cases throughout Florida.  Is the Plaintiff entitled to foreclose?  Can it establish standing as of the date it filed suit?  Is the bank’s paperwork in order?  Many times, the answer is “no,” and it’s good to see a judge call out the banks on these deficient filings.

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Problems with foreclosure sales – the impact is pervasive

The Associated Press just wrote a terrific story that highlights the extent of the foreclosure problems we’re facing, but from a  little different perspective.   

So You Bought a Foreclosed Home – Now What?

If you’re facing foreclosure, you may think this issue doesn’t pertain to you, as you’re in no position to go out and buy a foreclosed property.  I totally disagree.  This issue impacts all of us.  As the article reflects, and as I’ve been saying for months:

purchasers of properties at a foreclosure sale have legitimate reasons to be concerned about the legitimacy of the title they’re obtaining. 

Everyone is realizing this, and it’s undoubtedly causing would-be purchasers not to go to courthouse auctions and buy.  Well, guess what?  If people aren’t buying properties at a foreclosure sale, what’s the point of the sale?  Essentially, there is none – and there’s the rub.  A sale is supposed to be more than just a rubber-stamp on a title to a bank.  A sale is supposed to be a way to gauge the fair market value of a property, so as to: (1) ensure the homeowner collects the surplus (the difference between the sale price and the amount of the final judgment; or (2) ensure the extent of the homeowner’s deficiency (the difference between the amount of the final judgment and the sale price) is minimized. 

The more I think about it, the more I’m convinced that all of these sales that are being conducted where there are title problems, the homeowners have legitimate grounds to object to the sale.  After all, their chances of having anyone bid fair market value for a home (and getting a surplus or minimizing their exposure for a deficiency judgment) are reduced when everyone questions the legitimacy of title acquired by a foreclosure sale.

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Strategic default – on the rise

In recent weeks, I’ve seen a significant increase in inquiries from potential clients about strategic default.  I’ve blogged about the pros and cons of this in detail, below, but here’s the short version – many homeowners are tired of paying their mortgages when similar houses in the neighborhood are selling for one-third of they owe.  A lot of people just don’t see the benefit of paying $200,000 on a mortgage for a house worth $75,000. 

Apparently, the increase in strategic defaults is not limited to my practice, as numerous media outlets are reporting the same thing (throughout the country):

http://www.istockanalyst.com/article/viewiStockNews/articleid/4490544

http://starglobaltribune.com/2010/home-mortgage-loan-strategic-defaults-on-the-rise-2081

http://staugustine.com/interact/blog-post/rusty-collins/2010-09-24/foreclosure-exit-strategy

These articles seem to suggest that as many as one-third of all foreclosures are “strategic” in nature.  Apparently, the stigma of going into foreclosure is lessening with each passing day.

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It’s not just Jeffrey Stephan, folks!

Many media outlets seem to be suggesting that GMAC’s decision to halt foreclosures in 23 states, including Florida, is a result of Jeffrey Stephan’s false affidavits. 

This is simply not true.  The issue is much bigger.  To illustrate, attached is an Affidavit and a withdrawal of that affidavit signed by Kristine Wilson, as Limited Signing Officer of GMAC Mortgage, LLC. 

More fallout is coming, but clearly the problem is not limited to Jeffrey Stephan.

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Foreclosure statistics – WHY? (More proof that banks are harming the economy)

A recent article on Yahoo shows that banks foreclosed on 95,364 properties in August, 2010.  Think about that for a moment.  In one month alone, nearly 100,000 homes were foreclosed.  Whenever I see statistics like this, my immediate reaction is to wonder “Why?  What is this accomplishing?” 

Some judges, including Palm Beach County Chief Judge Peter LeBlanc, have tried to justify the increasing number of foreclosure judgments (and the use of foreclosure “rocket dockets” and the use of senior judges) by arguing “it is important to clear the foreclosure cases so that vacant and dilapidated homes can go back on the market, presumably increasing neighborhood property values.”  When I saw this quote from Judge LeBlanc, I blogged about it, below, arguing that banks are harming the economy, not my clients, because banks cause homes to be vacant and abandoned, not homeowners.  If you read today’s Yahoo article closely, you’ll see what I mean.  After all, as Yahoo reports:

“Fewer than one-third of homes repossessed by lenders are on the market”

Ponder that for a minute.  Foreclosures are on the rise, at never-before-seen rates … yet the homes that banks are foreclosing are not being listed for sale.  What does that mean?  Simple –

Banks are causing homes to be vacant and abandoned.

That may sound harsh, but there is no other explanation.  To illustrate, if 95,000(+) homes were foreclosed in August, and banks are listing only 1/3 of those properties for sale, then 60,000 homes that were foreclosed in August are now vacant/abandoned. 

There is no other conclusion that can be drawn here.  The numbers don’t lie.  Banks are causing homes to be vacant and abandoned.  Every time another foreclosure judgment is pushed through, another homeowner is removed from his/her home, causing the home to sit, empty. 

This is what lawyers such as myself and fellow foreclosure defense attorney Matt Weidner have been saying for a long time. 

Why are Florida courts in such a rush to foreclose on homeowners? 

There simply aren’t enough buyers for all of these properties that banks are foreclosing upon, so all that’s happening when courts “push through” foreclosure cases is that homes which were occupied become vacant.  Instead of a family having a place to live, a bank adds another property to its inventory (and that property sits, unoccupied). 

Respectfully, I dare anyone to explain how this helps our economy. 

How does it help for homeowners to be removed from their homes so those homes can sit, idle, unoccupied, not even listed for sale?

How does it help for tens of thousands of homes to become vacant every month? 

I urge judges to ponder these questions when they are asked to sign a foreclosure judgment.  Ask yourself, judges, “am I really helping the economy?”  “Who is being helped here?”  If you don’t think that matters, remember – mortgage foreclosure cases sound in equity.

Where is the equity in foreclosing on another homeowner when that home will sit, unoccupied, without being sold, for months or years? 

I fear that some judges, in their ongoing urge to “clear the backlog” of foreclosure cases from their dockets, are not going to be persuaded by this argument.  If so, then please, at least spare us the argument that Chief Judge LeBlanc made when he told the media that “it is important to clear the foreclosure cases so that vacant and dilapidated homes can go back on the market.”  Respectfully, at this point, we all know that’s simply not true.  In other words, let’s call a spade a spade.  

The only thing foreclosures are accomplishing is filling the bank accounts of fat cat bankers, who are accumulating homes at record rates and waiting to sell those homes so as to maximize their own profits. 

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