Strategic Defaults – Miami Real Estate Attorney Blog

Growing Number of Underwater Homes in Miami are Causing Many to Walk Away from their Homes

Almost half of all single-family homes with a mortgage in South Florida are currently under water. An underwater home loan is one where the loan balance is greater than the fair market value causing the homeowner to be upside down on the mortgage.

The State of Nevada leads the country in underwater homes, and Las Vegas leads the country. The State of Florida ranks third in the country, and Jacksonville, Tampa and Ocala have the highest percentage of underwater homes in the state.

Since the housing market peaked in 2006, thousands of homeowners have seen their home equity disappear while home prices decreased more than 50%. Because of the decline in home prices, coupled with the loss of home equity, many homeowners have stopped paying their mortgages and simply turned the home over to the bank.

When facing an underwater mortgage, as well as higher property taxes and home insurance, walking away from your home could be extremely tempting to homeowners.

However, walking away from your home does not come without consequences, and often times those consequences are negative.

It is imperative that you understand both the pros and cons associated with walking away from your home. The negative implications could haunt you for years. But the positive ramifications may set you free financially.

There are also often times many alternatives available to you in an effort to avoid foreclosures. Indeed, one such potential option may be to explore the government’s newly enacted and revised re-finance program, i.e. HARP.
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Consider Your Options.

At Alvarez & Barbara, LLP, we represent buyers, sellers, lenders, borrowers, and developers with real estate matters. This experience allows us to understand legal issues from various angles to effectively advocate our clients’ interests. No matter what you or your business’s real estate needs are – think of Alvarez & Barbara, LLP, and contact us for a free consultation.

Short Sales are Dominating South Florida’s Real Estate Market While Lenders Roll Out Incentives that could pay Homeowners up to $20,000

Short sales are dominating South Florida’s market. From April to June of this year there were 5,940 short sales in Palm Beach, Broward and Miami-Dade County. That is an increase of 15% from the first quarter.

It should also come as no surprise that these short sales are coming at a significant discount. The discount is often times at least 30% lower than non-foreclosed properties.

However, the short sale process can often times be a maddening one that takes a lot of time. Indeed, it takes on average 501 days to complete a short sale in South Florida.

It is in large part due to that delay that South Florida was not listed on Realty Trac’s top 10 markets for buying short sales.

But banks are realizing the benefit of short sales. Consequently, many banks are launching programs to pay homeowners thousands of dollars to help with moving costs if they agree to sell for less than they owe on the property.

Bank of American just launched a pilot program in Florida that could pay homeowners up to $20,000 for short selling their homes instead of letting them fall into foreclosure. Chase and Wells Fargo have also announced a similar plan.

While banks often times hand homeowners a few thousand dollars if they leave the properties in good shape after foreclosure. That plan is called “cash for keys”. Additionally, homeowners are also entitled to $3,000 of government money if they complete short sales through the Home Affordable Foreclosure Alternative (HAFA) program.

Banks are also now offering incentives above and beyond those. As such, the banks are offering money in an effort to push through short sales and avoid the lengthy and often times costly foreclosure process.
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Consider Your Options. Contact Us Today.

If you are on the brink of foreclosure, need a real estate attorney, or just need to assess your legal rights, please contact our office today.

Call us today toll free at 1-866-518-2913 or at 305-263-7700.

New Study Reveals that Those Who Have Strategically Defaulted on their Mortgages See Their Credit Scores Recover Faster Than Others

Good news for those who have strategically defaulted on their mortgages and are worried about their credit. A new study is set to be released which reveals that people who default on their mortgages, and not on other debts, are not as risky as once thought. Let’s hope lenders will take this into account when looking at someone’s credit history.

A strategic default is a decision by a borrower to stop making payments on a debt despite having the financial ability to make the payment. A Wall Street Journal report recently estimated that 1 in 5 mortgage defaults are “strategic”. Indeed, many are anticipating that the next wave of foreclosures will consist of more and more individuals seeking to walk away from homes that are currently underwater.

Transunion, one of the largest credit reporting agencies, conducted research which shows that those who only default on mortgages are less likely to default later on new car loans or credit cards than are people who have defaulted on their mortgage and some other loan at the same time.

The study also revealed that mortgage-only defaulters saw their credit scores rebound faster than people who have defaulted on multiple loans. This includes people who have filed for bankruptcy.

This research is valuable to lenders because mortgage-only defaulters are certainly going to be a major part of the market in the future. This is a result of many homeowners who have elected to make “strategic defaults”, which is when a homeowner who could afford to pay their mortgage defaults because their home’s value tanked. Another study shows that strategic defaulters have better credit histories than other mortgage defaulters. It also showed that strategic defaulters are savvy about credit.

Today’s current real estate market, and ongoing foreclosure crises, presents all sorts of issues that must be properly navigated. There are many factors contributing to Florida’s nation leading delinquency rates. They include a weak job market, weak economic recovery, and a major drop in home prices. Consequently, Florida’s housing market remains unsettled in large part due to the continued foreclosure crises.

Our Miami foreclosure defense lawyers have assisted many homeowners in buying enough time to reach the solution that is right for them. There are many alternatives to foreclosure, and often times it just takes proper planning to properly navigate against the potential pitfalls. Help is often available to those who seek it.

“Underwater” Homes Continue to Dampen South Florida’s Real Estate Market Leading to More “Strategic Defaults” and Foreclosures

The term “underwater” typically refers to the situation where a borrower owes more on their home than their home is worth. According to news reports, Florida is behind only Nevada and Arizona with the amount of homes with negative equity, or that are currently “underwater.”

Nearly half of all Florida homeowners had mortgages that were “underwater.” Specifically, more than 2 million mortgages out of 4.5 million are currently underwater. Additionally, an almost 200,000 more were near negative equity.

The high number of loans that are “underwater” is an increasingly disturbing trend in South Florida. The reason being is that may individuals with a loan that is “underwater” have decided to “strategically default” on their loan.

What is a ‘strategic default’? It is a decision by a borrower to stop making payments on a debt despite having the financial ability to make the payment. The large financial firm, Morgan Stanley, for example, recently made the calculated decision to give up five San Francisco towers it purchased at the peak of the booming real estate market.

Many individual borrowers are also turning to the same strategy used by Morgan Stanley, and others, and are seeking solutions to the problems brought in by the unstable real estate market. And the reason ‘strategic defaults’ are becoming so popular are for a number of different reasons.

For instance, many homeowners are unable to sell their homes without bringing tens of thousands of dollars to the closing table. Consequently, many of these owners just give up and walk away. This, in turn, triggers more foreclosures and, ultimately, price declines.

We have been successful in defending many foreclosure cases when given an opportunity to develop a plan to properly defend the foreclosure.

If you are on the brink of foreclosure, need a real estate attorney, or just need to assess your legal rights, please contact our office today.

Call us today toll free at 1-866-518-2913 or at 305-263-7700.

Our Miami Foreclosure Defense Lawyers Are Fighting to Save Your Home – Know Your Rights

It’s every homeowner’s nightmare — losing your home to foreclosure. But it does not have to happen. With a strong advocate on your side, it may be possible to keep your home and even get a lower mortgage payment.

Alvarez & Barbara, LLP, is a team of experienced and aggressive foreclosure defense attorneys. We use the legal system to help people save their homes — and we can stand up for you.

Many people wait too long before getting legal help. They delay in the hope that they can turn their financial situation around. If you are behind on your mortgage payments or are having trouble making your monthly payments, you need to take action now. The sooner you call us, the quicker we can start working to save your home. Get help today to assert your rights in these difficult times.

Asserting your rights will not only give you the chance to save your home; it may also increase the amount of time that you have in your home.

Consider these rights that homeowners have during foreclosure:

•You have the right to be notified of the foreclosure. Lenders must give you written notice that they plan to foreclose on your home.

•You have the right to stop foreclosure by paying off all of the past due amounts you owe on your home mortgage.

• You have the right to discuss the foreclosure with your mortgage company. If you are unable to pay what you owe on the house, you may be able to negotiate alternative payment options (a loan workout/loan modification).

• You may be able to privately sell your home to pay back mortgage debt. However, selling your home may not discharge the remaining debt you owe on the home (if it sells for less than you need to pay back the loans).

• You have a right to contest the foreclosure process. Did the mortgage company properly notify you? Is there evidence of predatory lending?

• If your home is sold, you have a right to any money that comes of the sale that is not necessary to pay back your mortgages and late fees.

• You have a right to hire an attorney. Sometimes, the best defense against foreclosure is a Miami foreclosure attorney.
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We have been successful in defending many foreclosure cases when given an opportunity to develop a plan to properly defend the foreclosure.

If you are on the brink of foreclosure, need a real estate attorney, or just need to assess your legal rights, please contact our office today.

Strategic Defaults are Under Assault by Bank of America, and others, and May Lead to a Rise in Deficiency Judgments

Many financial institutions, including Bank of America, are planning on getting tougher with those who do not try in good faith to work out a deal with the bank but who have the capacity to pay.

Proposals that are currently floating around, and being pushed by Fannie Mae, and others, include trying to encourage distressed homeowners to find alternatives to foreclosure by banning those who walk away from their home from getting new loans to purchase a home for seven years. Put differently, if it is determined that you stopped making mortgage payments despite having the capacity to do so, you may be banned from getting a new loan for up to seven years.

Another weapon that many financial institutions have in their arsenal to combat strategic defaults is the pursuit of a deficiency judgment. A deficiency judgment occurs when the financial institution has not only taken the home back, but has also sold the home. However, the proceeds of the foreclosure sale were not enough to cover the full amount of the original mortgage. That difference between the foreclosure sale, and the original mortgage, is often referred to as the deficiency.

If a bank, such as Bank of America, suspects that the borrower simply walked away from the mortgage despite having the financial capacity to pay, the bank will likely have an increased incentive to pursue the borrower and seek recovery of the deficiency by way of a deficiency judgment. It should be emphasized that if a deficiency judgment is properly recorded, it could remain in effect for up to 20 years in the state of Florida. That means that the bank could have up to 20 years to recoup each and every penny, plus interest, of the deficiency judgment.

It becomes important to consult with an experienced foreclosure defense attorney to understand your rights. We have been successful in defending many foreclosure cases when given an opportunity to develop a plan to properly defend the foreclosure.
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If you are on the brink of foreclosure, and need to assess your legal rights, please contact our office today.

Miami Foreclosure Defense Lawyers: How the Foreclosure Process Is Initiated & Developing a Plan to Defend the Foreclosure

In Florida, unlike many other states, banks must utilize the court system in all foreclosures. In other words, if a bank wants to take your home, they must file a lawsuit against you. As a result, the foreclosure process may actually afford the homeowner with additional opportunities, and time, to remedy the situation.

It should be noted that many Florida banks hired several high-priced lobbyists recently in an effort to persuade our legislators to implement non-judicial foreclosures in Florida. Fortunately, the high-priced assault on homeowners, and their legal rights, in Florida failed. Therefore, foreclosures in Florida will continue to move through our judicial system.

It is therefore important to consult, and hire, an experienced foreclosure Defense attorney to defend your rights. An experienced foreclosure Defense attorney will be able to assess and evaluate what defenses you may have during the foreclosure process, and aggressively advocate your positions in the foreclosure.

For instance, the very first thing that a bank must do to formally initiate a foreclosure proceeding against you is to properly file a foreclosure complaint. Recent changes to our Florida Rules of Civil Procedure mandates that the banks must provide certain verification, under the penalty of perjury, that they actually own the note in question in order to properly file a foreclosure complaint. Failure to do so may result in the dismissal of the bank’s case against you.

Additionally, often times banks are required to send you written notification of the default at least 30 days prior to the filing of the foreclosure lawsuit against you. Failure to adhere to this condition precedent may result in the dismissal of the bank’s lawsuit against you.

When a foreclosure lawsuit has been filed, a process server will typically come to your home to serve you with the necessary legal papers. Often times, the process server may leave the papers on your doorstep when no one was home, or leave it with a housekeeper, or other person, that does not reside at your home. While the aforementioned circumstances certainly present the opportunity to raise a valid defense that you were not properly served with the foreclosure complaint, it is of critical and paramount importance that you respond within 20 days nonetheless. Even if you believe that the papers were not properly provided to you, if you fail to respond within 20 days you will be in a default situation where your defenses may be all waived and it will be difficult for you to assert any valid defense that you may have to defend the case.

Therefore, and upon receipt of the foreclosure complaint, irrespective of the manner in which you received it, it is critical to consult with an experience foreclosure Defense attorney to begin the process and developing a plan to defend the case and save your home. We have been successful in defending many foreclosure cases when given an opportunity to develop a plan to properly defend the foreclosure.
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If you are on the brink of foreclosure, and need to assess your legal rights, please contact our office today.

Miami Foreclosure Defense Attorneys Win Case Against the Bank and Get Attorney Fees Awarded to them too

Our firm recently prevailed in a contested foreclosure dispute after having litigated the case with the bank, and their lawyers, for three years. Not only did we win the case, but we were also awarded several thousands of dollars in attorney fees in doing so that the bank now has to pay our law firm.

The Judge assigned to the case awarded our firm 100% of the attorney fees we requested, and found our attorney fees to be reasonable given the complexities and issues raised in this case. This is just another example why it is important to hire an experienced foreclosure defense law firm to represent your interests.

This victory is also the latest in a growing trend for many homeowners that are actually winning their cases against the banks. Many judges are frustrated by the deliberately slow, and often times sloppy, pace of many banks that are attempting to foreclose. Indeed, the Florida Attorney General Office’s is currently investigating many law firms that actively file foreclosures on behalf of many Florida banks. The investigation centers on allegations of purported fraud.

Moreover, the bank’s efforts to move foreclosures out of the court system, and into a bank friendly, and bank created, foreclosure process, was rejected by our legislators. Additionally, recent changes to the Florida Rules of Civil Procedure that require banks to verify, under penalty of perjury, that the bank filing the lawsuit actually owns the mortgage, coupled with higher filing fees, and mandatory early mediation, all means that the banks have to be much more careful and precise when trying to foreclose on a property.

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If you are on the brink of foreclosure, and need to assess your legal rights, please contact our office today.

Saving Your Home: Alternatives to Avoid Foreclosure

Hugo V. Alvarez will be a speaking at a Foreclosure Clinic sponsored by the Florida Bar’s Consumer Protection Law Committee, in conjunction with the Legal Aid of Palm Beach County. The clinic is scheduled to take place on June 24th from 6pm to 8pm at the Boca Raton Community Center.

Mr. Alvarez will be speaking on alternatives to foreclosure, and specifically discussing (a) options to retain one’s home, while avoiding foreclosure, and (b) options to dispose of one’s home, and avoid foreclosure.

Options to Retain Your Home

1. Payment or Repayment Plan – the quickest method of avoiding foreclosure is to come up with the necessary money to bring the delinquent loan current. In some instances, banks are willing to provide the delinquent borrower with a repayment plan in an effort to bring the mortgage current. This will typically involve an agreed upon time frame in which to make the regular payments, plus a little extra, to repay in the delinquent amount in full over time.

2. Refinance – in the event that you actually have equity in your home today, you may be in a position to refinance your mortgage. Refinancing your mortgage may actually provide you with a lower interest rate, and a lower monthly payment. If you do not qualify for a government-sponsored loan modification, you may also be eligible for a government-sponsored re-financing plan (HARP – Home Affordable Refinance Program).

3. Forbearance – some banks may offer you a forbearance plan. This option typically provides for a temporary reduction or a suspension of monthly payments for a specified length of time, and with an agreement that the amount that was forgiven will be paid back at a later date.

4. Loan Modification – a loan modification is a permanent change in one or more of the terms of the mortgage. It also allows the mortgage to be reinstated, and results in a payment that the borrower can afford. This can include anything from a reduction in interest, adding years to the mortgage (from say a 30 year mortgage to a 40 year mortgage), reduction in the principal amount owed, or any combination of the aforementioned. It should be noted that many financial institutions are provided with financial incentives from the government to modify loans. Additionally, the current loan modification program is not designed to save every home, but only geared toward saving the homes of individuals that can still afford to be in that home.

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Options to Dispose of Your Home

1. Sell the Home – if there is sufficient equity in your home, you may be able to sell your home in today’s market for more than the amount you currently owe on your mortgage. If you can do this, you will actually reap a profit.

2. Short Sale – if your home is “underwater”, i.e. you owe more than the home is worth, then you will have to pursue a short sale if you are interested in selling the home. A short sale is when a bank allows you to sell the home for a contract price that is less than the amount owed on the mortgage. In many instances, however, banks may reserve the right to pursue the difference between the short sale contract price, and the amount owed on the mortgage, from the borrower directly. This is commonly known as a “deficiency”, or “deficiency judgment”. So when trying to sell a home via short sale, it is important to understand whether the bank will continue to pursue the borrower, for monies owed, even after the transaction is completed, especially if the home was “underwater” at the time of the short sale. Don’t assume that just because the bank approved the short sale that they won’t pursue you for the difference after the deal is done.

3. Deed in Lieu of Foreclosure – this is accomplished when the property owner voluntarily gives the property back to the bank in exchange for the bank canceling the mortgage. In other words, the deed is transferred from the borrower to the bank in an effort to shorten the length and costly process of foreclosing on the property. As with a short sale, the bank may reserve the right to pursue any deficiency against the borrower directly even after the deal is done.

4. Tax Issues – all tax issues should be consulted in great detail with a certified public accountant. However, if you lose your home to foreclosure or short sale, where you sell your home for less than you owe, the IRS won’t add insult to injury by counting the difference as income. At least until 2012.

However, there are four major exceptions to the rule:

A. You did a cash-out refinance and splurged.
B. You have a home-equity line of credit.
C. You lost your vacation home or investment property.
D. You owned a multi-million-dollar home.

But again, these are issues to be covered in greater detail with an accountant.

If you are on the brink of foreclosure, and need to assess your legal rights, please contact our office today.

Real Estate Market Losing Steam as Hurricane Season Approaches

Real Estate experts are anticipating that home sales will slow for the second half of the year. This is due in large part to the expiration of the $8,000 tax credit, for first time home buyers, that expired on April 30. However, those that signed purchase contracts prior to April 30th can still take advantage of that tax credit if they complete their transaction by June 30th.

Additionally, other factors will likely continue to contribute to the ongoing sluggish recovery in the housing market. For instance, the economic recovery that is currently taking place is largely a jobless one. In fact, since 2007, when the recession began, South Florida’s workforce has only recovered to about 90% of where it was before the recession began. Since South Florida’s economy was so dependent on the housing market, it will likely take some time for South Florida’s economy to recover given the ongoing real estate crisis that is impacting all of us on a daily basis here in South Florida.

Additionally, another potential problem for our local economy, an economy that is still very dependent on real estate development, is that many lenders are increasingly reluctant to make new construction loans to developers. Now that certain tax credits have expired, coupled with the increasingly sluggish real estate market, builders see stormy days ahead. Indeed, increasingly high unemployment rates, coupled with stringent mortgage lending guidelines, are keeping many prospective purchasers on the sidelines.

All of these factors contribute to the general consensus that our real estate market will continue to struggle to stand on its own without the assistance of government backed programs, like the tax credit for first time home buyers, or a sharp turnaround in the economy as a whole.

In South Florida, with the storm season under way, a natural catastrophe could tip the ongoing real estate crisis into further disarray. If high unemployment rates, and rapidly declining real estate values were not enough, then a strong hurricane directly hitting South Florida and causing extensive damage will only serve to worsen the ongoing real estate crisis here in South Florida.

If you are on the brink of foreclosure, and need to assess your legal rights, especially in light of the recent BP oil spill, please contact our office today.