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Banks Pushing Deficiency Judgements Against Many Borrowers in Miami

underwater.jpgIf 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.

Changes Made to Rules of Procedure Alter Foreclosures in Miami and South Florida

fl sup ct building.jpgThe Florida Supreme Court recently issued an opinion amending the Florida Rules of Civil Procedure and adopted several new forms to be used in connection with foreclosure cases filed in Miami-Dade County, and the state of Florida as a whole.

The most significant change is the amendment to Rule 1.110(b) of the Florida Rules of Civil Procedure. That rule was amended by the Florida Supreme Court to now require that all residential foreclosure complaints be verified. Verification requires that a bank representative sign the lawsuit under penalty of perjury attesting that all facts within the lawsuit are true to the best of the lender’s knowledge and belief. This new change is aimed at addressing the “lost note” defense, and potentially eliminating that defense all together.

Indeed, the Florida Supreme Court noted that this new requirement is being implemented in order to “(1) to provide incentive for the plaintiff to appropriately investigate and verify its ownership of the note or right to enforce the note and ensure that the allegations in the complaint are accurate; (2) to conserve judicial resources that are currently being wasted on inappropriately pleaded ‘lost note’ counts and inconsistent allegations; (3) to prevent the wasting of judicial resources and harm to defendants resulting from suits brought by plaintiffs not entitled to enforce the note; and (4) to give trial courts greater authority to sanction plaintiffs who make false allegations.”

The other changes made by the Florida Supreme Court include a change to the necessary affidavit of diligent search and inquiry, a form used by banks when they are unable to find or serve the lawsuit on the borrower. And an effort to have all motions to cancel the and re-schedule foreclosure sales uniform in an effort to potentially streamline the foreclosure process.
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These are significant changes to the legal foreclosure landscape. Therefore, if you are served with foreclosure papers, please contact our office today.

Foreclosures & ‘Strategic’ Defaults on the Rise in Miami

foreclosure.jpgAs 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.

Prominent Miami Developer Takes on the Banks Stemming from Foreclosure Fallout

miami beach.jpgAs reported in the South Florida Business Journal, prominent Miami developer, Richard Meruelo, has filed suit against Ocean Bank seeking $9 million in damages after he and his family members were hit with foreclosure actions.

As our attorneys previously discussed, many banks have taken a very aggressive approach to this very prominent family and their many real estate projects. In the latest chapter of their ongoing legal saga, Mr. Meruelo filed suit against Ocean Bank alleging that Ocean Bank should not have loaned $12.4 million dollars to them to buy land in Golden Beach while then turning around and refusing to give him a construction loan. The Golden Beach property is now under foreclosure, with Mr. Meruelo listed as a guarantor.

This latest lawsuit alleges that Mr. Meruelo’s family had more than $130 million in loans on multiple projects with Ocean Bank dating all the way back to 1984. However, Mr. Meruelo, and his family, including his brother, Homero F. Meruelo, have been hit with numerous foreclosure lawsuits over the last two years. That includes an ongoing fight with a different bank that pulled the financing on renovations that were underway with the Grand Bay Hotel in Coconut Grove, and a fight to enforce a settlement agreement regarding that case.

“As the relationship grew, Ocean Bank exerted increasing influence over the investment activites of the Meruelo family,” the complaint alleges. “Over time, Ocean Bank exercised control over their investments because it could unilaterally restrict credit or refinance or extend terms of existing loans.”

It turns out that back in 2006, Mr. Meruelo informed Ocean Bank of his plan to purchase two lots in Golden Beach, divide them into three lots and build beachfront homes on them. Ocean Bank executives visited the site, and approved the purchase of the lots. As a result, Mr. Meruelo purchased the Golden Beach lots for $17 million, including a $12.35 million loan from Ocean Bank.

According to the Complaint, Ocean Bank had agreed to fund future construction costs estimated at $12 million, and this was agreed upon before the deal closed. However, the Complaint alleges that Ocean Bank violated internal policies, which requires that construction financing be in place before lending on vacant land. Moreover, it is also alleged that Mr. Meruelo never would have purchased the property if Ocean Bank had not agreed to make the construction loan.

In May 2008, Ocean Bank agreed to a modified cease and desist order with regulators that severely restricted its construction lending and ordered it to get tougher on problem loan. Like many banks that agreed to such orders, Ocean Bank was prevented from extending or renewing credit to borrowers with troubled loan.

This case is further illustration of the problems many individuals are in today because their bank failed to live up to its obligations. If you are in a similar situation, or if you feel short changed by your bank, please contact our office to discuss your options.

Miami & National Banks Taking a Different Approach to an Old Problem

Sinking-home-219x300.jpgHow to get borrowers to pay?

With foreclosures filings on the rise in Miami, many Miami, Florida and national banks are taking a different approach to the on going foreclosure crisis here in South Florida in effort to get their borrowers to pay the monies that are owed to back to the banks.

It used to be the norm that debt collectors would call borrowers at all hours of the day and practically insult and scare them into paying. But with the growing financial crises in our community, such heavy handed tactics were increasingly yielding less and less results for the Miami and South Florida banks.

As a result, a trend is developing. As reported in the Miami Herald, many South Florida banks are taking a new and “nice” approach in an effort to hopefully secure payments from the borrowers that have fallen behind.

For instance, SunTrust, here in Miami, has courted struggling borrowers with care packages and $200, while West Palm Beach-based Ocwen Financial Corp. helps connect homeowners with food banks, employment services and even suicide hot lines through a nationwide social service referral company.

This new “nice” approach to dealing with borrowers that owe banks money is just another example of how the current economic down turn has led many South Florida banks to think of new ways to address an old problem – how to get its borrowers to pay. “Banks spent billions of dollars in branding, establishing a name, and it all got blown to smithereens in minutes,” said Sylvia Ayalon, an analyst at the Consumer Mortgage Audit Center in Fort Lauderdale. “The traditional banking method was, `You owe me money; pay up or else.’ Now they have to rethink; they can’t be the big bully on the block.”

Today, banks are becoming more cognizant of the fact that in this economy there are many factors that have led to a foreclosure. Often times, it is the loss of a job. As a result, many Miami banks are now contracting with mortgage referral services, and job banks, in an effort to help their struggling borrowers land back on their feet.

“People don’t just need help with housing counseling anymore,” said MortgageKeeper President Rochelle Nawrocki Gorey. “They need help with their budget, unemployment, job training, résumé writing, groceries.”

This housing crash is more complicated than prior periods of economic unrest. Unemployment coupled with bad loans and underwater mortgages have significantly contributed to the economic meltdown both nationally, and locally. If you are facing this situation, or need further advise regarding the ongoing housing crises, please contact our office today.

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.
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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.

South Florida Home and Condo Sales Rise

According to the South Florida Business Journal, sales are up. Sales are up in the entire State of Florida, and in South Florida. However, and while the news regarding the increased sales pace is positive, prices have yet to follow as foreclosures and short sales continue to dominate the housing market both statewide and locally.

West Palm Beach was the exception in the try-county area. Not only did it see a jump in home sales by 23 percent – 843 homes from 685 the previous year – but the median price rose 8 percent, to $246,100 from $228,100.

In Miami, the median price slid 4 percent, to $197,500 from $205,600 from the previous year. However, homes sales rose 17 percent, to 649 from 556.

It should be noted that this trend was experienced not in South Florida, but statewide and nationwide. The National Association of Realtors latest outlook anticipates a rise in home sales in late spring, which should help to absorb inventory. Increased pending sales is a positive sign for home prices, which are continuing to stabilize.

The newly extended homebuyer’s tax credit program coupled with the high inventory of real estate, thanks in large part to the ongoing foreclosure crises, are the catalysts that are driving the current upswing in real estate sales.
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Please contact our office today to discuss the current real estate trends and to determine what you’re current real estate needs are, and if we could be of any assistance to resolve those issues for you.