Miami Foreclosure Lawyer Blog

Its not funny to Miami and South Florida homeowners fearing foreclosure who owe more on their mortgage than their home is worth. Being upside or underwater on your mortgage can wipe out your savings, force you out of your house and leave you with a deficiency judgments. Strategic default, walk away, but don't give up. You need competent counsel with prior bank experience to get through this difficult time.

Stephen Colbert explains the difference between your mortgage and your word.

More than half of all homeowners fearing foreclosure in Miami and South Florida are underwater on their mortgages and facing deficiency judgments. One Law School Professor says the smartest move is to walk away and don't feel guilty about it. Loan Modifications aren't working. Short sales put you out of your home. Banks won't reduce principal balances. Strategic defaults are increasingly becoming the best financial decision for some borrowers.

Brent T. White, a University of Arizona law school professor, wrote new academic paper entitled "Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis."

 His conclusion was that the 15 million U.S. homeowners underwater on their mortgages should stiff their lenders and take a hike.

 Many would save hundreds of thousands of dollars that they "have no reasonable prospect of recouping" in the years ahead. Plus the penalties are nowhere near as painful or long-lasting as they might assume.

Professor White explains that while "credit scores get whacked when you walk away, "one can have a good credit rating again -- meaning above 660 -- within two years after a foreclosure" as long as you stay current with other creditors. 

Better yet, homeowners can "strategically" default and make preparations for a few years of limited credit.
In Florida, many lenders may decide that it is not worth the legal expense to pursue walkaways, or our firm may be able to find flaws in the mortgage documents, disclosures or underwriting to challenge the original contract.



Professor White's main point is that people let their emotions get in the way of clear financial thinking about mortgages. Most owners are too worried about feelings of shame and embarrassment after a foreclosure, and ignore the powerful financial reasons for doing so. They often fall prey to "the social control of the housing crisis" -- pressures and messages continually sent to consumers by the "social control agents," namely banks, government and the media. The mantra that these agents -- all the way up to President Obama -- pound into owners' heads, White said, is that "voluntarily defaulting on a mortgage is immoral."

The other side of the coin for homeowners is that Banks set the rules during the housing boom, handing out home loans with no down payments, no income checks and inflated appraisals. Now that property values have dropped 20% to 50% in many areas, banks have been slow to modify troubled mortgages and reluctant to reduce principal debts.

 Only when homeowners cut through the emotional fog and default strategically in large numbers, White argues, will this inequitable situation be seriously addressed. 

 The best chance many will have is to hire aggressive, competent counsel to fight for their financial freedom.

Professor advises underwater homeowners to walk away from mortgages - latimes.com.pdf

Underwater and Not Walking Away- Shame, Fear and the Social Management of the Housing Crisis.

Miami and South Florida has a new trend to add to record levels of foreclosures, delinquencies and loan losses. Many distressed homeowners are choosing strategic defaults or walkaways. Surprisingly, borrowers with good credit are more likely to walk away from home underwater than a subprime mortgage borrower.

A "strategic default'' occurs when a borrower abruptly and intentionally stops paying mortgage. Using a massive sample of 24 million individual credit files, researchers found homeowners with high credit scores are 50 percent more likely to walk away than lower-scoring mortgage borrowers. Many who chose a strategic default understand the consequences of what they're doing. They are clearly sophisticated. They usually are selective about payments they make. For instance, they often pay home equity lines until they bail on their first mortgage and many draw down more cash on the equity line.

Recently, the national credit bureau, Experian, identified the characteristics and debt management behavior of homeowners who bail out of their mortgages. They found 588,000 strategic defaults nationwide in 2008, more twice the number from 2007. Eighteen percent of all serious delinquencies lasting over 60 days are strategic defaults.

Strategic defaulters go from perfect payment histories to no payments at all. Most distressed borrowers try to keep paying their mortgage after they've fallen behind. They want to save their homes, not dump them.

If you are considering a strategic default, know your credit scores will be severely hit. Many see it as the only practical solution to deal with their negative equity. Strategic defaults are found everywhere that home values boomed and cratered since 2006. In Florida last year, the number of strategic defaults was 46 times higher than in 2005. In other parts of America, defaults were about 9 times higher in 2008 than in 2005.

There are dangers in trying a strategic default without strong foreclosure defense counsel. You will lose points on your credit score and may ultimately get hit with a deficiency judgment. The best advice is to fight back against the bank to make sure they have reason to waive the deficiency and let you walk away.

Strategic default - 09_20_2009 - MiamiHerald.com.pdf

Good foreclosure defense lawyers in South Florida are warning clients about deficiency judgments. Whether you live in Ft. Lauderdale, Pinecrest, Miami Beach, Coconut Grove or Coral Gables, homeowners considering a strategic default should be mindful. The real danger in a foreclosure is that Miami Judges are granting deficiency judgments.

When a home is underwater or upside-down, a foreclosure sale price is far less than the loan balance. In Florida, lenders can apply to the Court for a deficiency judgment after a foreclosure up to five years later. The judgment amount is the difference between the loan and the market value of the home on the day it sold at a foreclosure auction.

Judgments are good for 20 years. Judgment holders can force people into court every year to disclose their finances. They can seize bank accounts, assets, garnish wages, even the family dog (its considered property under Florida law). ,

Quietly, many investors are buying up these deficiency judgments at pennies on the dollar. These investors tend to be very aggressive and look to recover a higher rate of return than the larger institution. They are willing to put the effort in," said Jeff Baum, formerly with SunTrust Bank's unit handling residential mortgage-backed securities.

Once a deficiency judgment is awarded, it is often sold to debt collectors. A bank will walk away rather than spend money to collect a debt that will force the borrower into bankruptcy. Many lenders are saying "So, why not sell it for 25 cents on the dollar?"

The best way a homeowner or borrower can protect themselves is hire strong foreclosure defense counsel to negotiate a waiver of the deficiency judgment.

http___www.dailybusinessreview.com_news.pdf

Miami and South Florida homeowners fighting foreclosure or upside down on their mortgage may have a way out. Judges around the Country are holding banks trying to foreclose to their burden. TILA, HOEPA, RESPA are words Banks don't want to hear. Many judges have lost patience with lenders. The days of a quick foreclosure sale and whopping deficiency judgment have changed some. A strong defense to foreclosure can make the difference in avoiding financial ruin. You need qualified counsel with prior bank experience to fight for you. Barakat, Jacobs & Associates are trial lawyers who negotiate from strength.

The law in Miami, Coral Gables, Kendall and Pinecrest is the same throughout South Florida and NY - The bank has to prove they own the note to foreclose. In October of 2009, New York Bankruptcy Judge Robert D. Drain held PHH Mortgage failed to meet its burden to foreclose on a home in White Plains, and wiped out the $461,263 mortgage debt on the property. The pen is mightier than the mortgage, especially when applied to a court order. The reason for the result: if the lender can't prove ownership of the promissory note, borrowers have leverage, and "may even be able to stay in their homes mortgage-free."

Securitization is the reason notes have gone missing since the housing boom. Large pools of bank loans were bundled and sold to scores of investors. However, no one was watching the henhouse and the notes, were never adequately tracked or recorded. In some cases, that means nobody truly knows who owns what.

According to a transcript of the Sept. 29 hearing in the White Plains case, The Bank's counsel said: "In the secondary market, there are many cases where assignment of mortgages, assignment of notes, don't happen at the time they should. It was standard operating procedure for many years." Judge Drain rejected that argument, and ruled he had "more than 50 percent doubt that if the debtor paid this claim, it would be paying the wrong person."
Fair Game - If the Lender Can't Find the Mortgage - NYTimes.com.pdf

At 13%, Miami Gardens has the second highest foreclosure rate in Florida, a state with 23% of homeowners either in foreclosure or delinquent on their mortgage. Time Magazine just ran a story on how Miami Gardens City Councilman Andre Williams is taking the Banks to task. Banks targeted borrowers in Miami Gardens with subprime, often predatory loans, knowing their clients could not afford their mortgage payments.

Councilman Williams is demanding lenders do more to help South Florida homeowners avoid foreclosure. If a lender has a branch in Miami Gardens, the new legislation punishes banks that start foreclosure proceedings without offering a loan modification.

There is no jurisdiction for local government to run oversight on banks. Councilman Williams' ordinance would test whether a lender filed more foreclosure actions in Miami Gardens that loan modifications offers over a period of time. If so, Miami Gardens would pull its accounts or other business from that bank.

To date, Banks have modified only 9% of over 3 million mortgagees at risk of foreclosure. The relief can come in the form of interest rate or principal balance reductions. President Obama's Making Home Affordable Program made $75 billion available to 38 major home lenders in the US for that purpose.

Councilman Williams is running for U.S. Congress. The Miami Herald editorial said that Banks should help distressed homeowners or Congress should consider changing bankruptcy laws to permit judges to reduce the principal balance of home mortgages. So, if Councilman Williams can't get his law passed in Miami Gardens, perhaps he can wins a seat in Congress and make it happen.

How Miami Gardens May Punish Banks for Foreclosures -- Printout -- TIME.pdf

The Miami-Dade Sherriff's department evicted Anna Ramirez, of Homestead, Florida after her home was sold by foreclosure. The only problem was that the Miami Dade Circuit Court Judge, Israel Reyes, had already cancelled the sale so the borrower could accept her approved loan modification.

It all started after Ms. Ramirez defaulted on her $2,159 mortgage payments. She had purchased the suburban Miami home three years ago for $260,000. Her loan was owned by J.P. Morgan Chase, (formerly WAMU) who started the foreclosure process. The house was sold at auction in June for $87,000. However, Ms. Ramirez convinced Judge Reyes to cancel the sale and allow them to work out a loan modification. They ultimately agreed to reduce the monthly payment by $600.

The problem arose after the clerk of court failed to tell the foreclosure sale buyer. That buyer brought out the police in August to finish the eviction. The Ramirez family had only three hours to empty their 3 bedroom, 2 bath house. They even showed the police a copy of Judge Reyes' order cancelling the sale but the police didn't believe them.

The problem was corrected the following day when Judge Reyes ordered the Ramirez Family could move back into their home. Judge Reyes also ordered the Clerk's office to update the docket to reflect the changes. Even the Bank's spokesperson admitted this was a miscommunication and clerical error in the court system.

Foreclosure stopped but family forced out of home HeraldTribune.pdf

There is still hope on the bankruptcy horizon for Miami and South Florida homeowners facing foreclosures and striking out on loan modifications. Senator Dick Durbin and other Democrats in the U.S. Senate are not giving up on legislation to permit federal bankruptcy judges to alter mortgages and keep families in their homes.

This legislation was struck down earlier this year. However, the Senate Subcommittee on Administrative Oversight and the Courts agree that current foreclosure relief efforts are disappointing so far. Both Senators and Experts agree that voluntary loan modification and short sale programs by loan servicers are not helping enough. The door remains open to new leverage that can force Lenders to the table.

The newly revived legislation calls for a bankruptcy judge to modify primary mortgages by a "cramdown" in a Chapter 13 case. In Miami and South Florida, where almost half of the homes are underwater or upside-down, cram down means the bankruptcy judge reduces the principal loan balance to the current value of the home. The legislation also permits Judges to reduce interest rates and extend repayment terms up to 40 years. Chapter 13 currently permits cram downs of almost any loan except the first mortgage on primary residence.

Back in April of 2009, the Senate voted against an amendment to the housing bill that would allow the mortgage cramdown to become law. The vote was only 45-51. Opposition to the bill argues that a bankruptcy cram-down would mean fewer lenders making loans and higher mortgage rates. There is also a strong belief that Lenders should not shoulder the burden of bad investments.

Those in favor of the bill argue these past two years of voluntary loan modifications have not stemmed the crisis. They believe the threat of bankruptcy judges forcing lenders to make realistic modifications is enough to bring them to the table. This would have an immediate effect at no additional taxpayers' expense. The new bankruptcy law would guarantee lenders recover as much as they would by foreclosure.

So far, no lawmaker has reintroduced cramdown legislation since the April 30 defeat. However, Senator Dick Durbin has promised to do so at the first available opportunity.

Homeowners in Miami and South Florida facing foreclosure should understand what they are facing. The Associated Press recently investigated the loan servicing industry which collects payments, approves modifications or short-sales, and represents the Lender. Their reports suggests that many loan servicers do not play by the rules.

The issue is bigger than Miami-Dade county and bigger than Florida. Homeowners facing foreclosure around the country are suing their loan servicers for harrassment, forced placed insurance manipulations and illegal fees. Some loan servicers are accused of delaying the process of loan modifications, short sales and payoffs, and graceful exit (walkaway) agreements to charge more fees and earn more profits.

President Obama has given billions of dollars to major loan servicers like Wells Fargo, Bank of America, Citigroup and JPMorgan Chase to help homeowners in foreclosure. Yet, these companies are being sued for abuses by the very homeowners they are being paid to help. The smaller players in the loan servicing industry, the ones that service subprime loans and loans in default, are some of the worst offenders.

Mortgage loan servicers are middlemen who collect homeowner's payments and send the money to loan owners. They are the link between lenders and borrowers and are charged with negotiating loan modifications under President Obama's $50 billion mortgage-modification program. The Government pays the servicers if the borrower stays current on payments for at least three months after a loan modification.

Borrowers have sued loan servicers for various illegal practices. Charging illegal fees and engaging in illegal collection practices are common complaints. Some loan servicers are accused of foreclosing on homes prematurely and proceeding with foreclosure after agreeing to a loan modification. Others are accused of misleading customers about whether they qualify for a loan modification or the amount of their new payment. In many cases, servicers allegedly told borrowers to stop making payment during the application process and then moved to foreclose.

The government needs the loan servicers because they are the primary link between the investors who indirectly own their mortgages through securities and borrowers. The government program pays loan servicers over $5,500 per loan modification. However, they only get paid after the homeowners make three monthly payments on time.

Under President Obama's program, dozens of loan servicers are now paid to negotiate loan modifications that reduce mortgage payments to less than 38 percent of the borrower's gross monthly income. There are several ways to modify a loan. The servicer may reduce the principal or the interest rate. It can extend the term for repayment. The problem is that any of these options means the loan servicer makes less money.

Loan servicers earn less than half a percent of the value of the loans in their servicing portfolio. The larger the mortgage, the more fees the servicer earns. Loan servicers also make money through late fees and charge hundreds of dollars to foreclosure a mortgage.

Associated Press_ AP IMPACT_ Gov't mortgage partners sued for abuses.pdf

Homeowners facing foreclosure in Miami and South Florida are getting new help from the Courts. In a pilot program, borrowers seeking a loan modification, short sale, short payoffs or graceful exit can negotiate with their lender in mediation before a foreclosure can proceed. The program has already helped hundreds of homeowners save their homes from foreclosure.

The Florida Supreme Court's special task force on residential foreclosures recommends mandatory mediation to ease the crisis overwhelming Miami and South Florida courts. The plan is to force mediation on primary homes so homeowners can negotiate loan modifications and expedite foreclosures of vacant and abandoned properties

Miami-Dade Circuit Court Judge Jennifer Bailey chairs the 15-member residential foreclosure task force which suggests dividing foreclosure cases into three categories: primary homes, also known as homesteads; vacant and abandoned properties; and all others.

Almost half of all South Florida homeowners are underwater on their home. This means they owe more to their mortgage lender than their house is worth. With unemployment rising and foreclosure filings skyrocketing over the past three years, help is sorely needed. Miami-Dade County has seen 29,618 foreclosure cases filed since May, 2009, and Broward has seen 22,306.

While mandatory mediation will be a godsend to homeowners, Lenders are not as happy. The program is considered to costly and will delay foreclosure cases. Especially for those borrowers who may have already been considered and denied help. The plan calls for the lender to bear most of the cost of this mandatory mediation program.

Mandatory mortgage mediation will force the lender to meet with the homeowner, and their counsel, to discuss various settlement proposals. This will avoid one of the biggest problems with loan modifications - Banks and lenders cannot keep up with the demand. Endless waiting on hold and confusing, contradictory procedures make the process frustrating and inefficient. Sitting down with a mediator and your attorney can mean all the difference in avoiding the worst-case scenarios in a foreclosure.

Mediation urged before foreclosures - 08_18_2009 - MiamiHerald.com.pdf

Help from President Obama is on the way for homeowners facing foreclosure in Miami and South Florida. The Obama administration is fighting to get Banks and mortgage companies to act with urgency on loan modifications. Most recently, executives from 25 mortgage companies pledged to reach a new goal of about 500,000 loan modifications by Nov. 1, 2009. However, this falls far short of Obama's original goal of modifying loans for up to 4 million borrowers.

The plan is not without its problems. Many Miami and South Florida Homeowners and their attorneys complain the process of loan modifications is a bureaucratic nightmare. Many say the mortgage companies are doing things the plan plainly prohibits. Many borrowers are hit with upfront fees and given confusing information. There are long delays in the loan modification process which does not stop all lenders from moving forward with the foreclosure process in Court.

There are many reasons why this program is problematic. The loan servicers have hired thousands of new employees who must be trained on new operating procedures. Hundreds of investors have purchased the mortgage-backed securities and many have different rules on how to modify a loan. Not to mention the fact that thousands of borrowers call every day trying to modify their loans.

As of July 2009, the loan modification program has only about 200,000 borrowers enrolled. They were given trial modifications requiring they may timely payments for three months before a permanent modification is approved. The loan servicers are paid $4,500 for every modified loan once the homeowner makes on-time payments for three months. Almost 170,000 borrowers were denied a modification, but the Loan servicers refused to state why they denied the homeowner's application. That is another problem, that the reason for these decisions are not made public and there is no appeals process.

Obama tells mortgage firms to pick up pace - Jul. 28, 2009.pdf