Strategic Defaults – Page 2 – Miami Real Estate Attorney Blog

Will the BP Oil Spill Cause Florida to Surpass Nevada and Arizona in Foreclosure Filings?

Florida remains number three (3) in the country for number of foreclosure filings, according to national statistics reflecting foreclosure filing in May. Nevada and Arizona were the only states that had more foreclosure filings than Florida in the month of May.

In May, one in every 174 Florida properties were in danger of falling into a foreclosure. The May foreclosure rate was actually higher than the foreclosure rate in the month of April. In April, one in every 182 Florida properties were in danger of falling into foreclosure.

However, it should be noted that in South Florida saw fewer foreclosure this past May as compared with May of last year. But the worst is far from over regarding the foreclosure crises, especially for those with adjustable rate mortgages. Now, and as will be discussed below, the recent disaster in the Gulf of Mexico, and massive oil spill, may impact future foreclosure filings as well.

On the other hand, while May saw less foreclosure filings this year as compared to last May, it still brought a spike in foreclosure filings as compared to April of this year. Put differently, there were more foreclosure filings in May than in April of this year. Overall, there were 7,700 foreclosure filings with one in every 127 properties receiving a foreclosure notice in South Florida.

The ongoing foreclosure crisis in South Florida may be further fueled by the oil from the Gulf of Mexico, especially if that oil makes its way onto South Florida’s beaches in a hurricane storm surge, or other natural catastrophe. If that were to happen, many homeowners would be faced with the difficult prospect of having to sell depressed property in a region that is beset by natural catastrophe.
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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.

Mortgage Crises Continues For Those With Adjustable Rate Mortgages in Miami and Beyond

The worst of the real estate meltdown is far from over. While the economy is showing tenuous signs of recovery, unemployment rates remain at staggering highs. With this backdrop, millions of homes will likely go to foreclosure this year, and more so this year, than in years past, as many risky adjustable rate mortgages written in 2005 are about to be reset, and yet others explore “strategic defaults.” If you are currently facing foreclosure, or need additional information regarding your home mortgage, please contact our office today.

As we previously reported, there are multiple factors that typically drive foreclosures. Those factors include the overall economy, unemployment, and a host of other reasons. However, two new factors will likely fuel additional foreclosure filings for the rest of the year, and beyond.

First, many adjustable-rate mortgages will be reset during the course of the next few months. Many prospective home purchasers agreed to exotic mortgages in an effort to purchase homes that they likely would not have been to afford otherwise. In an effort to purchase that dream home, many home purchasers agreed to financing deals that provided for low monthly payments for a few years. But after that, the mortgage would readjust with a higher interest rate. And now, we are starting to see the next wave of adjustable mortgages reset which is about to further complicate the ongoing foreclosure crises we are experiencing here in South Florida.

Second, not only will unemployment and adjustable mortgage resets drive-up foreclosure filings here in South Florida, but many more people may opt to push forward with a foreclosure by way of a “strategic default.” As we previously explained, a strategic default is when a homeowner voluntarily decides to stop paying their mortgage because their home is worth less than their mortgage. In other words, the home is “under water” and the borrower believes that a strategic default may yield a better deal for them by requiring the bank to address the borrower’s concerns by way of a foreclosure.

The next chapter in the foreclosure crisis here in Miami, and beyond, will not only impact lower income borrowers who typically purchased mortgages they could not afford, often at the advice of pushy, and sometimes fraudulent, banks and brokers. But what we will soon start seeing, and what our firm has already begun to handle with much success in Miami, and beyond, is foreclosures starting to mount for borrowers who have prime mortgages that are solidly middle-class, upper middle-class and even the rich and famous.
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The foreclosure crisis is an ongoing problem that impacts all segments of our society, and individuals of all walks of life. If you, or a loved one, are facing foreclosure, or are in need of a consultation with a real estate attorney regarding your rights, please contact our office today.

South Florida Real Estates Sales Are Up As Foreclosures Steady

According to the National Association of Realtors, sales of existing homes and condos in Miami-Dade, Broward and Palm Beach county rose 27% in April.

Additionally, and another positive trend, last month’s statewide existing home median price of $140,100 was 1% higher than the statewide median price in April of 2009. While the median price for single family homes also rose, the same can’t be said for condos. Statewide, condo prices fell 1%, to $79,300 from $79,000.

In the tri-county area, Miami saw the smallest increase in home sales in April. There were 594 sales, up 7% from 555 in April of 2009. The median price was up 8%, to $192,000 from $177,000.

There several factors behind these positive numbers. We previously anticipated this news, and discussed many of the many positive factors that are behind the recent news regarding the trends in the Miami, and South Florida, real estate market.

As for some of the reasons behind this trend, they include the following:

• The recent expiration of certain tax credits forced many to buy before the tax credit expired.
• We’re starting to see a stabilization of home prices.
• Home prices are starting to stabilize because inventory levels are starting to fall.
• Inventory levels are starting to fall because foreclosures are being absorbed in the market at manageable levels.

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If you wish to discuss this article, or your real estate needs in general, please contact our office today to discuss further. Our phone number is 305-263-7700.

Increase in Miami Homes Being Repossessed Due to Foreclosures

According to a recent news report, home repossessions increased to record levels and more than one fifth of all U.S. mortgage holders were underwater on their mortgages in that they owed more on their mortgage than their home was worth.

More than 1 in 1000 homes were repossessed by lenders in March. Twenty three percent of owners of homes with mortgages owed more than their home was worth, and that was up from 21 percent in the prior three month period.

Moreover, U.S. home values continue to drop. The values dropped 3.8 percent in the first quarter, and that is the 13th straight period of year over year declines. These trends make it increasingly difficult for home owners with homes underwater to move the homes. Thus, when they fall behind, their options are limited. This makes it more likely that those homeowners will lose their homes in a foreclosure.

The continued high number of homes, and homeowners, underwater will continue to place a downward pressure on home prices. Thus, it is likely that we will see home prices continue to fall a bit more during the course of the next 12 months.

Additionally, banks are repossessing homes at a greater rare. In the first quarter, bank repossessions rose by 35% in comparison to the same period of the prior year. Indeed, repossessed homes now account for 1/5 of all homes currently for sale.
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Please contact our office today to discuss your real estate options during these turbulent times.

Miami’s Icon Brickell Turned Over in a ‘Friendly Foreclosure’

Perhaps no real estate development symbolizes the boom days of the real estate bubble, and the pop heard years later, better than Miami’s very own Icon Brickell.

Icon Brickell was developed by the Related Group, led by Jorge Perez, the undisputed condo king of South Florida. In creating the Icon Brickell, Mr. Perez, and the Related Group, spared no expense. The massive project sits where the Miami River intersects with Biscayne Bay. It is comprised of 1,646 condos, a 28,000 square foot fitness area, an infinity pool the size of a football field, pool deck, sculptured columns, and many other luxuries symbolic of the opulence associated with the height of the real estate boom.

But instead of a defining triumph for Mr. Perez, and the Related Group, the Icon Brickell has come to symbolize the excess of the building boom, and real estate collapse. At the height of the building boom, many condos at the Icon Brickell were listed at over a million dollars. However, and as 2010 began, only 30 of the 500 Icon Brickell units that were ready for closing in December actually closed. Indeed, and what has become rather common in South Florida, many buyers have hired our firm in an effort to avoid closing on their units and secure the return of their deposits. Indeed, our firm has attained some successful results for buyers seeking the return of their deposits from Icon Brickell.

With angry buyers demanding the return of their deposits, rapidly decreasing property values, eroding equity, it should come as no surprise that the senior lenders at Icon Brickell began to call the shots. Moreover, and given the eroding market conditions, the writing was on the wall, and it was only a matter of time before the Icon Brickell was besieged with a foreclosure.

This week, the Related Group deeded over two 57 story towers back to its lender, a syndicate of lenders led by HSBC, in what is being described as a ‘friendly foreclosure.’ While the Related Group was aggressively offering steep discounts in an effort to entice prospective purchasers to buy, and existing buyer to close, it was not enough to hold back the mounting financial pressure and avoid giving part of the project back to its lenders in a ‘friendly foreclosure.’

This latest chapter of the foreclosure saga playing out daily in South Florida is just another illustration of how foreclosures are impacting our real estate market. It also illustrates that foreclosures are being felt by both the wealthiest of individuals, and the poorest, alike.

Our attorneys have been in the forefront of fighting this fight. If you are faced with the prospect of falling into a foreclosure, or if you would like to assess your options regarding the potential return of your deposit in a condo project like the Icon Brickell, contact our office today.

Banks Pushing Deficiency Judgements Against Many Borrowers in Miami

If pushing you to attain an unaffordable mortgage during the go-go heyday of the real estate housing market was not enough. Today, many banks, like Bank of America, are at it again by chasing depleted borrowers to pay for the deficiency to improve the bank’s bottom line, while further pushing the borrower to the brink of economic collapse.

The bank’s latest tactic seems to be pushing desperate homeowners to accept deficiency judgments voluntarily, or pursuing them in the court system. As reported by CNNMoney, because of the declining real estate market, and difficult times stemming from the Great Recession, many borrowers have run into tough times. Indeed, we recently detailed the many factors that typically give rise to a foreclosure.

As a result, many borrowers can no longer afford their homes. Worse yet, they can’t even sell their homes today for what the homes were worth at the time of purchase. Consequently, desperate borrowers are forced to either short sell their homes, or simply lose their homes outright in a foreclosure sale.

The new problem becomes what to do with the short fall, or deficiency, between what the home was sold for minus the amount of the original mortgage. With the precipitous drop in real estate values, it comes as no surprise that the amount of the deficiency is often tens of thousands to hundreds of thousands of dollars.

Rather than write that money off as a bad loan – a bad loan that often times was pushed onto the borrower by mortgage brokers and banks just looking to make a quick buck – many banks are aggressively pursuing the pennyless homeowner, the homeowner down on his luck, and who just sold his home at a loss, to cover the deficiency. This is often done by way of a deficiency judgment, but can also be accomplished by pushy debt collectors hired by the banks to further bolster their bottom line.

It should be emphasized that this situation could happen to individuals who secured bank approval to sell their home for less than what the home is worth by way of a short sale. Therefore, just because your short sale has been approved does not mean that the bank won’t still pursue you for the deficiency. Thus, it is important to contact our office to address your concerns regarding this issue.

Whether banks can and will pursue deficiency judgements often times depends on many factors. The factors include, but are not limited to, whether there’s a second mortgage or other liens on the property. But if the borrower ignores the problem, or ignores the prospect of a deficiency judgment being entered against them, such failure to act could haunt the borrower for many years. Indeed, a bank could have up to 20 years to collect on the deficiency judgment, plus interest.

Therefore, if you are confronted with this situation, it is important to contact our office today to discuss your options.

Foreclosures & ‘Strategic’ Defaults on the Rise in Miami

As we previously reported, foreclosures are on the rise. But so too are ‘strategic’ defaults.

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. For instance, the large financial firm, Morgan Stanley, 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 reasons we might consider, and for other reasons we might not necessarily consider.

The two primary reasons appears to be (1) negative equity in the property, and (2) a more borrower friendly environment. The second reason should be kept in mind as we consider the current administration’s continued push to encourage more banks to offer loan modifications, and principal reduction coupled with the Fed’s continued policy to keep interest rates low.

A recent Morgan Stanley report reveals that many U.S. homeowners are opting to walk away from mortgages that they can afford, and that these ‘strategic’ defaults are accounting for an increasing share of defaults. About 12% of all mortgage defaults in February were ‘strategic’, and that is up from 4% in mid 2007. The same report indicates that borrowers will likely stop paying their mortgages the higher their credit scores and the larger their loans.

This following report that ran on the NBC nightly news provides a snap shot into this growing trend.

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If you are in a difficult financial situation, contact us today to discuss your options.