Miami Foreclosure Lawyer Blog

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