Florida Homeowners on the Brink of Foreclosure Should Educate Themselves on their Defense Attorneys

underwater home.jpgAn interesting article recently ran in the Miami Daily Business Review regarding the dangers of knowing enough about your attorney before the attorney is hired.

Daniel and Alisa Cianciotto are a South Florida couple, who like many others in Miami, fell behind on their house payment and eventually defaulted on their loan with Aurora Loan Services. Aurora then filed a foreclosure which prompted the Cianciottos to retain a foreclosure defense attorney, John Watson. In February, the Cianciotto’s became aware that Watson also represents a Littleton, Colorado based Aurora in foreclosure suits against homeowners like them.

“I was completely devastated,” Daniel Cianciotto said. ” I felt like I was tricked and scammed. I never would have signed up with him if I knew he had anything to do with representing Aurora. These people are trying to throw me out of my house.” Watson claims that Aurora was not his client, but his brother’s law firm’s, who he shared office space with.

This case has enticed a debate as to whether a conflict of interest exists when a lawyer hired to fight foreclosure is also represented by the homeowners’ lender. Warren Trazenfeld, a Miami lawyer who specializes in attorney malpractice law, says that for the same law firm and its of-counsel lawyers to represent borrowers defending against foreclosures when the same law firm represents lenders foreclosing on the borrowers is “an absolute conflict”.

In fact, a Florida Bar article states that “before forming an ‘of counsel’ relationship, a firm should consider the fact that the ‘of counsel’ lawyer is treated as a firm member for conflict of interest analysis.”

Watson withdrew from the Cianciottos case and returned their $1,000 retainer after they filed a motion for disqualification. Still, the Cianciottos insist that Watson should be investigated, despite having a clean disciplinary record and no complaints related to conflicts of interest.

This case clearly illustrates how challenging the foreclosure legal process can be for homeowners with limited knowledge of the system. Please contact our office today to discuss your rights in a foreclosure, and other pending real estate needs.

Florida Mortgage Servicers Profit with Foreclosures

Thumbnail image for miami 001.jpgAs reported by Bloomberg News, foreclosures are proving to be more profitable to mortgage servicers than Obama’s mortgage modification program.

The Treasury Department will begin this month to pay companies, including those here in South Florida, that collect mortgage payments and examine pleas for assistance a stipend of $1,500 for approving the sale of homes for less than the loan balance. This practice is known as a “short sale.”

The servicers will also get $1,000 for each completed modification under the government’s year-old mortgage modification program, and additional stipends over three years if borrowers stay current on their payments. These stipends can add up as there are currently 4.6 million homes that have payments more than 90 days overdue.

However, Diane Swonk, chief economist of Chicago-based Mesirow Financial, doesn’t think these stipends will be enough of an incentive for the mortgage servicers, who earn more money by foreclosing on a defaulted loan.

The current number of permanent loan changes through the government’s Home Affordable Modification Program (HAMP) seems to agree with Swonk’s rationale. There have only been 227,922 permanent loan changes and 780,951 trials as of March. HAMP “has made very little progress,” according to a report by Neil Barofsky, special inspector general for the Troubled Asset Relief Program.

HAMP’s lack of success may be due to servicers earning approximately $10,000 or more on a foreclosure of a $200,000 mortgage. “Servicers can easily make 10 times any of the government stipends being offered by simply foreclosing on the house,” Glen Russell, a real estate attorney in Fall River, Mass. said.
According to Alan White, a law professor at Valparaiso University in Indiana, the only silver lining for the government program is that companies may “make more money in the short term through a foreclosure, but they could possibly make more money in the long term with a modification.” This is only the case if they are confident the mortgage will stay current, because servicers are paid between one-tenth of a percentage point and half a percentage point of the loan’s balance for administering the accounts. However, with more than 4 million defaulting loans currently in the market, there may not be enough servicing infrastructure to handle it all and produce a higher number of permanent modifications. “The servicing industry was designed to deal with only 100,000 to 200,000 defaulted loans a year”, said Paul Miller, a bank analyst at Friedman Billings Ramsey & Co. “There is not enough servicing infrastructure to handle the onslaught of loans,” he said.

Some critics believe that HAMP is simply delaying the unavoidable. According to Laurie Goodman, senior managing director at Amherst Securities Group LP in New York, approximately 7 million homes may still end up in foreclosure in the next three to four years even with the government programs. Her prediction is that some of those foreclosures will be by borrowers who re-defaulted after getting a modification. At the end of 2009, 48 percent of mortgages modified in the second quarter had missed at least on payment. This will only increase servicers profitability as they will then be able to proceed with a foreclosure and make-up their money when the property is sold.

Therefore, please contact our office today to discuss your legal options if your home is on the verge of foreclosure.

New Mortgage Aid Program May Lead to Fraud in South Florida

foreclosure.jpgAs reported by the Associated Press, the Obama administration is implementing significant changes to the $75 billion Mortgage Aid Program that will potentially provide some much needed homeowner relief here in South Florida. These same changes, however, may also cause vulnerable homeowners to become innocent victims of fraudulent and criminal schemes. Therefore, it becomes important to retain the services of a reputable professional.

In response to the current real estate collapse here in South Florida, and other parts of the nation, the administration has added an incentive program for mortgage lenders which will encourage them to reduce the amount borrowers owe, providing “underwater” homeowners with some relief. The administration aims to prevent three to four million foreclosures by encouraging mortgage lenders to lower the monthly payments for many here in South Florida. In addition, through this new program, unemployed homeowners may have their mortgage payments cut by thirty-one percent of their income for three to six months.

Clearly, through these changes, the administration is attempting to aid struggling homeowners on the brink of foreclosure, especially those here in South Florida. But some critics are skeptical that the administration has not done enough to prevent fraud.

“Criminals feed on borrower confusion, and frequent changes to the programs provide opportunities for experienced criminal elements to prey on desperate homeowners,” inspector general Neil Barofsky wrote in a quarterly report issued April 20, 2010. Critics such as Barofsky believe that the administration has not done enough to warn borrowers about potential schemers tricking borrowers to pay upfront for modifications that never materialize. The critics also point out weaknesses to the mortgage incentive program due to the lack of an appraisal requirement to determine a home’s value. This could potentially open the flood gates for mortgage lenders to fraudulently qualify for incentive payments. The Treasury Department officials have responded by insisting that they will initiate a public service campaign to warn borrowers against fraud.

It is therefore important to trust your real estate needs to a trusted professional. If you are in danger of losing your home, contact our office today to discuss your options.

More Relief from the Federal Government for South Florida Homeowners

The USA Today reported that the Obama administration’s initiative to help homeowners obtain modifications of second mortgages is getting off the ground. The program is aimed at overcoming the impediment to permanent modifications of first mortgages.

The government’s second mortgage program, called 2MP, offers incentives to borrowers, mortgage services and investors to modify second mortgages. Here is how it works:

– If the first loan is modified under HAMP, and the servicer of the second loan is the same as the first, then the servicer must offer to modify the second loan.

– Servicers can stretch the term of the second loan to 40 years.

– Second lien lenders must defer the payment by the same proportion as that of the 1st.

– The second loan also must have been originated on or before Jan 1, 2009, to be eligible for a modification.

Generally, modifying a mortgage with a second lien can be more difficult because of the additional parties involved. While this program is expected to reach up 1.5 million homeowners who are struggling to afford their mortgage payments, there are an estimated 19 million residential junior liens, with an average balance of $57,000 as of January, according to First American Core Logic. Moreover, up to 50% of at risk mortgages have second liens, according to the Treasury Department. “First lien holders holders become more reluctant to do principal reduction because of the second lien”, says Jack Schakett, loss mitigation strategies executive at Bank of America.