Archive for October, 2010
Posted on October 31st, 2010 by Mark Stopa
One of the under-reported stories of Foreclosure-Gate is the ability of homeowners facing foreclosure to retain a foreclosure defense attorney, live in their homes without paying their mortgage, and either save their money or spend their money on something besides their mortgage. In some states, such as Florida, the period of time where such homeowners can live for free could be many months or even years. I’ve seen this phenomenon in place for quite some time, hence the name of this website – www.stayinmyhome.com.
Reasonable people can argue about the morality of living in one’s home without paying. That said, with each new story of foreclosure fraud by banks, there is less and less of a stigma for homeowners employing such an approach. To illustrate, here is today’s article in the Wall Street Journal:
The mortgage-foreclosure mess could prove expensive for banks and investors. But in some states, it will also prolong an unintended economic stimulus: free housing for millions of defaulters.
Across the U.S., banks are running into problems foreclosing on homes because of flaws in their paperwork. Their main transgression involves the use of so-called robo-signers, bank employees who signed foreclosure affidavits without properly checking the required loan documentation. Major loan servicers—including Bank of America Corp., J.P. Morgan Chase & Co. and Ally Financial Inc.’s GMAC Mortgage—have at least temporarily stopped some foreclosure sales as state attorneys general probe their practices and loan servicers check to make sure their papers are in order.
The problems will be expensive for banks, and for investors in mortgage bonds, in terms of added processing costs and lost interest income. But for the millions of U.S. homeowners who have stopped making mortgage payments or who are already in the foreclosure process, the upshot is that they’ll get to stay in their homes a bit longer. Given that they’re not paying rent, that time has value.
Defaulters living in their homes are getting a subsidy worth about $2.6 billion a month, according to a Wall Street Journal analysis based on mortgage data from LPS Applied Analytics and rent data from the Commerce Department. That’s 0.25% of U.S. personal income, roughly equivalent to the benefit top earners receive from Bush-era tax breaks.
The longer defaulters stay in their homes, the longer the stimulus lasts. The average borrower whose home is in the foreclosure process hasn’t made a payment in nearly 16 months, according to LPS.
In most places, the foreclosure delays are unlikely to amount to more than a couple more months of free rent, says Ivy Zelman, chief executive of housing-market consultancy Zelman & Associates. But she says it could be six or more months in states such as Florida and New York, where the legal bottlenecks are most severe.
“In places where people get an extra month or two, it probably doesn’t have much effect,” Ms. Zelman says. “But in states where it lasts longer, it’s probably stimulative.”
It’s hard to know how much of that money will find its way into the economy through consumer spending. Some defaulters sock away their mortgage payments, in hopes that they’ll strike a modification agreement with their bank and get current again. Others have lost their jobs and hence most of their income, though the free housing might allow them to make purchases they otherwise would have to forgo.
Yolande Walker, who lived for two and a half years in her three-bedroom home in the Las Vegas suburb of Henderson, Nev., after defaulting on her $1,700-a-month mortgage payments in 2008, said the free housing helped her make ends meet after she lost her job as a commercial-loan processor. “I was able to make my car payment and keep from losing my car, and I was able to pay the utilities,” said the 50-year-old Ms. Walker, who finally lost the home to foreclosure last month. She is still looking for work, and says her unemployment benefits are scheduled to run out in December.
Some homeowners who have defaulted on their mortgage payments are cashing in by renting out their homes. Joe Mayol, a real-estate agent in Palmdale, Calif., estimates that in his area about two-thirds of houses with defaulted mortgages are occupied, and half of those by renters. “People are getting money out of these houses,” he said.
Ms. Zelman says her research suggests defaulters do spend much of the money on consumer services and goods. “People are taking what they would have been spending on a mortgage and spending it somewhere else,” she says.
To be sure, while the free rent might help some people through periods of unemployment, it’s not particularly encouraging to people who keep paying their mortgages, and it’s not going to drive a recovery. It’s also painful for local governments and school districts, which typically can’t collect property taxes from defaulters. The foreclosure troubles can also add to uncertainty in the housing market and delay its return to healthy growth.
“I don’t think that’s the kind of consumer recovery we want, if the only reason they’re spending a bit more is that they’re not paying their other bills,” said Joseph Carson, director of global economic research at AllianceBernstein in New York.
Another question is what might happen in the housing market if banks caught up in robo-signing controversy can’t put as many foreclosed homes up for sale. By taking some supply off the market, it could help support prices at a time when demand has been exceedingly weak.
Given the number of foreclosed homes that have already piled up in their inventory, though, banks already have more ready-for-sale houses than the market can bear. As of September, banks owned nearly a million homes, up 21% from a year earlier. That alone would take 17 months to unload at the most recent pace of sales, and doesn’t include the 5.2 million homes still in the foreclosure process or those whose owners have already missed at least two payments.
Meanwhile, banks and investors suffer. It’s hard to estimate how much it will cost to fix the paperwork problems. But the interest they could earn on the money from selling all the homes they own, together with the ones attached to delinquent mortgages, amounts to more than $10 billion a month.
Still, at least some of the banks’ loss is the borrowers’ gain.
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Posted on October 31st, 2010 by Mark Stopa
If you’re evaluating whether to enter a “temporary” loan modification, read this article closely. I’ve spoken with hundreds of homeowners with similar experiences, and it’s not a pretty picture. It’s so bad, I’d argue that most people who can’t afford the normal monthly payments are better off not paying at all.
As it’s Halloween, let’s call “temporary” loan modifications what they are – a trick.
By Cami Joner
Columbian Staff Reporter
Sunday, October 31, 2010
Joseph and Jacqueline Freeman at their Battle Ground-area farm, Friendly Haven Rise. The 10-acre farm and home have been on the brink of foreclosure since 2008, when the Freemans lost income from the farm business. The Freemans operate the farm like a school, where people pay to learn about raising crops and livestock and using tools.
Jacqueline and Joseph Freeman thought they were doing everything possible to keep from losing their Battle Ground house and farm when they obtained a temporary mortgage modification through a federal program in 2009. But despite not missing a single month’s payment during 12 months at a “trial” reduced mortgage rate, the Freemans are worse off now than in late 2008, when their income fell dramatically due to canceled bookings at their farm-school business, Friendly Haven Rise.
Last month, the Freemans received a foreclosure notice from their lender, Wells Fargo, which said the couple’s mortgage is $23,000 in arrears. They feel betrayed by the federal program that was set up to help, Jacqueline Freeman said. “We had no clue we were headed toward foreclosure,” she said. “We thought we were taking part in a national program that was helping people.”
The Freemans are not alone. They are among millions of American home owners who are frustrated with the Obama administration’s Home Affordable Modification Program, or HAMP, a $75 billion federal program that was supposed to be their salvation. Instead, the program appears to be failing droves of homeowners who, like the Freemans, have been drawn into trial modifications that leave them with more principal outstanding on their loans, less home equity and worse credit scores.
Launched in February 2009 with $50 billion from the U.S. Treasury Department and $25 billion from taxpayer-owned enterprises Fannie Mae and Freddie Mac, HAMP promised to help between 3 million and 4 million homeowners modify their mortgages. Twenty months later, only 495,898 U.S. borrowers have received permanent loan modifications, according to a newly released federal report.
In Washington, 9,054 homeowners have been helped with permanent mortgage modifications through HAMP, and another 3,390 are in trial modifications. Many others have entered the program and then exit without receiving a permanent modification. Meanwhile, 17,670 Washington households faced foreclosure in the three months ending Sept. 30. The program and its predecessor, Making Home Affordable, have helped very few troubled homeowners in Clark County, a suburban community where the foreclosure rate is the fourth-highest in the state with one out of every 374 housing units in foreclosure.
HAMP runaround
According to a Vancouver foreclosure counselor, the problem with HAMP is that banks don’t stick with its trial payment period guidelines, which state that temporary help should last no more than three months before borrowers receive permanent modifications to their mortgages. Instead, many lenders stretch trial modifications out for months or years as homeowners deplete dwindling savings accounts in a futile effort to get stable relief.
“I’ve got clients I’ve been working with for over two years that have had no permanent resolution,” said Kevin Gillette, program manager at the nonprofit Community Housing Resource Center in Vancouver.
The agency provided counseling to more than 1,000 local households from Oct. 1, 2009 through Sept. 30, but Gillette said he has few success stories to share. He said the HAMP trial period is supposed to last only long enough to test whether the homeowner is committed to making the modified payment. However, Gillette said lenders often keep taking the reduced monthly payments for six months or longer. “In the end, they deny the permanent modification,” leaving bewildered borrowers wishing they had saved the money instead.
Gillette finds the situation appalling. He blames mortgage banks, which, he said, have little to gain from permanent HAMP modifications and just waste the homeowners’ money and time while keeping them suspended in trial payment limbo. “Why not tell homeowners no, you’re not going to help them and let them go on about their business?” he said.
That might have helped the Freemans, who contacted their lender at the first sign of mortgage distress. They were told they would be eligible for HAMP if they skipped two months’ worth of payments.
“It was actually easier those months,” said Jacqueline Freeman, who used the reprieve to pay off other bills.
Gillette warns his clients not to follow the advice to skip monthly payments, which will immediately put an already-troubled homeowner in mortgage default. “Nobody should be telling anybody this, but they do,” Gillette said.
Though few in the mortgage industry defend HAMP, many bank lenders deny claims that they’re giving bad advice. The challenge, according to a Wells Fargo Bank spokesman, is that a mortgage modification often can’t help a homeowner who’s been caught in the downward spiral of economic recession and unemployment.
“The bottom line is, if you had a job before and now you’ve lost it, even if we modify the loan, with zero income, the customer cannot afford to pay it back,” said Tom Unger, a Portland-based spokesman for Wells Fargo.
Unger said Wells Fargo and other banks often see more success with in-house modification programs that avoid the confusion of the government-driven HAMP. “When the government programs were first announced, people’s expectations ramped up and then the (program’s) rules kept changing,” he said.
Mortgage black hole
The Freemans thought they were benefiting from the trial modification that reduced their monthly payment from $2,150 per month to a more manageable $1,390. Now Jacqueline Freeman would like to know what happened to the total $16,680 they shelled out over the course of 12 months. “How could the bank say we are $23,000 behind? That part doesn’t make sense to us,” she said. Gillette said most homeowners don’t understand that trial reduction does not reduce the loan’s interest rate.
“All the while, that loan balance is growing until (the homeowner) is so far in the hole there’s no way they can ever come out of it,” said Gillette, who has seen numerous homeowners devastated by trial modifications.
Some have left his clients in arrears by as much as $70,000, he said.
“The banks are setting these people up to fail,” said Gillette, a former mortgage professional who theorized that mortgage lenders would rather foreclose on the house and write off the bad debt. Banks, on the other hand, insist that their institutions want to help, rather than end up in the real estate business.
“A foreclosure is not good for the customer, not good for the community and not good for us. It’s always going to be the last option,” Unger said. That said, banks have lately run into problems for rushing the foreclosure cadence.
Rushing the cadence
Earlier this month, banks came under scrutiny in the wake of the disclosure that many had used “robo-signers,” or people who rushed to sign thousands of documents a day without reviewing the details.
“Some of these practices can deprive homeowners of their legal right to save their homes,” said Rob McKenna, Washington state attorney general.
As a result, the nation’s largest mortgage company, Bank of America, temporarily halted foreclosures. The attorneys general from all 50 states launched an investigation. Other large lenders, JPMorgan Chase, Ally Financial Inc. and PNC Services stopped foreclosing in up to 23 states.
However, the hoopla has largely died down, as Bank of America is pushing ahead with a new wave of foreclosures, according to The Associated Press.
Some say putting the blame entirely on banks and the government isn’t fair. After all, homeowners sign a contract, a note and deed of trust that shows an obligation to make the payment, said Mark Saftich, a senior mortgage director for Director’s Mortgage Inc. in Vancouver.
“That’s why there is so much paperwork at the closing table,” Saftich said. “It is signed by all parties stating they will pay the lender the amount over the life of the loan with a clause that says, if it’s not paid, notice will be given and the house will be foreclosed.”
Jacqueline Freeman said the notion of foreclosure never entered her mind when she and Joseph purchased their home and 10-acre farm in 2003.
Lessons learned
But the Freemans say they’ve learned some hard lessons about trusting mortgage providers and the government’s HAMP program. “The main thing is, it doesn’t stop the clock on the foreclosure, in spite of paying out all that money,” Jacqueline Freeman said, adding that she remains optimistic about saving the farm.
The Freemans put in a call to Sen. Patty Murray at the height of the senator’s election rebid. Murray’s office has pledged to help the Freemans, who say they will do whatever it takes to avoid foreclosure, Jacqueline said. “We are fine, upstanding, taxpaying citizens with a farm,” she said. “It’s not just a house. It’s our business and everything we do.”
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Posted on October 31st, 2010 by Mark Stopa
I’m glad to see an increasing number of reporters placing the blame for the foreclosure crisis where it belongs – in the laps of the big banks. Here’s an article from the New York Times that sums up public perception:
How the Banks Put the Economy Underwater
By YVES SMITH
Published: October 30, 2010
IN Congressional hearings last week, Obama administration officials acknowledged that uncertainty over foreclosures could delay the recovery of the housing market. The implications for the economy are serious. For instance, the International Monetary Fund found that the persistently high unemployment in the United States is largely the result of foreclosures and underwater mortgages, rather than widely cited causes like mismatches between job requirements and worker skills.
This chapter of the financial crisis is a self-inflicted wound. The major banks and their agents have for years taken shortcuts with their mortgage securitization documents — and not due to a momentary lack of attention, but as part of a systematic approach to save money and increase profits. The result can be seen in the stream of reports of colossal foreclosure mistakes: multiple banks foreclosing on the same borrower; banks trying to seize the homes of people who never had a mortgage or who had already entered into a refinancing program.
Banks are claiming that these are just accidents. But suppose that while absent-mindedly paying a bill, you wrote a check from a bank account that you had already closed. No one would have much sympathy with excuses that you were in a hurry and didn’t mean to do it, and it really was just a technicality.
The most visible symptoms of cutting corners have come up in the foreclosure process, but the roots lie much deeper. As has been widely documented in recent weeks, to speed up foreclosures, some banks hired low-level workers, including hair stylists and teenagers, to sign or simply stamp documents like affidavits — a job known as being a “robo-signer.”
Such documents were improper, since the person signing an affidavit is attesting that he has personal knowledge of the matters at issue, which was clearly impossible for people simply stamping hundreds of documents a day. As a result, several major financial firms froze foreclosures in many states, and attorneys general in all 50 states started an investigation.
However, the problems in the mortgage securitization market run much wider and deeper than robo-signing, and started much earlier than the foreclosure process.
When mortgage securitization took off in the 1980s, the contracts to govern these transactions were written carefully to satisfy not just well-settled, state-based real estate law, but other state and federal considerations. These included each state’s Uniform Commercial Code, which governed “secured” transactions that involve property with loans against them, and state trust law, since the packaged loans are put into a trust to protect investors. On the federal side, these deals needed to satisfy securities agencies and the Internal Revenue Service.
This process worked well enough until roughly 2004, when the volume of transactions exploded. Fee-hungry bankers broke the origination end of the machine. One problem is well known: many lenders ceased to be concerned about the quality of the loans they were creating, since if they turned bad, someone else (the investors in the securities) would suffer.
A second, potentially more significant, failure lay in how the rush to speed up the securitization process trampled traditional property rights protections for mortgages.
The procedures stipulated for these securitizations are labor-intensive. Each loan has to be signed over several times, first by the originator, then by typically at least two other parties, before it gets to the trust, “endorsed” the same way you might endorse a check to another party. In general, this process has to be completed within 90 days after a trust is closed.
Evidence is mounting that these requirements were widely ignored. Judges are noticing: more are finding that banks cannot prove that they have the standing to foreclose on the properties that were bundled into securities. If this were a mere procedural problem, the banks could foreclose once they marshaled their evidence. But banks who are challenged in many cases do not resume these foreclosures, indicating that their lapses go well beyond minor paperwork.
Increasingly, homeowners being foreclosed on are correctly demanding that servicers prove that the trust that is trying to foreclose actually has the right to do so. Problems with the mishandling of the loans have been compounded by the Mortgage Electronic Registration System, an electronic lien-registry service that was set up by the banks. While a standardized, centralized database was a good idea in theory, MERS has been widely accused of sloppy practices and is increasingly facing legal challenges.
As a result, investors are becoming concerned that the value of their securities will suffer if it becomes difficult and costly to foreclose; this uncertainty in turn puts a cloud over the value of mortgage-backed securities, which are the biggest asset class in the world.
Other serious abuses are coming to light. Consider a company called Lender Processing Services, which acts as a middleman for mortgage servicers and says it oversees more than half the foreclosures in the United States. To assist foreclosure law firms in its network, a subsidiary of the company offered a menu of services it provided for a fee.
The list showed prices for “creating” — that is, conjuring from thin air — various documents that the trust owning the loan should already have on hand. The firm even offered to create a “collateral file,” which contained all the documents needed to establish ownership of a particular real estate loan. Equipped with a collateral file, you could likely persuade a court that you were entitled to foreclose on a house even if you had never owned the loan.
That there was even a market for such fabricated documents among the law firms involved in foreclosures shows just how hard it is going to be to fix the problems caused by the lapses of the mortgage boom. No one would resort to such dubious behavior if there were an easier remedy.
The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable.
Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?
There are alternatives. One measure that both homeowners and investors in mortgage-backed securities would probably support is a process for major principal modifications for viable borrowers; that is, to forgive a portion of their debt and lower their monthly payments. This could come about through either coordinated state action or a state-federal effort.
The large banks, no doubt, would resist; they would be forced to write down the mortgage exposures they carry on their books, which some banking experts contend would force them back into the Troubled Asset Relief Program. However, allowing significant principal modifications would stem the flood of foreclosures and reduce uncertainty about the housing market and mortgage securities, giving the authorities time to devise approaches to the messy problems of clouded titles and faulty loan conveyance.
The people who so carefully designed the mortgage securitization process unwittingly devised a costly trap for people who ran roughshod over their handiwork. The trap has closed — and unless the mortgage finance industry agrees to a sensible way out of it, the entire economy will be the victim.
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Posted on October 30th, 2010 by Mark Stopa
Have you ever wondered why banks sue “unknown tenant 1, unknown tenant 2, unknown spouse of John Doe, and unknown spouse of Jane Doe,” in addition to the homeowners? Sometimes, these individuals are necessary in a foreclosure case. For instance, if the property in foreclosure is a rental property, then the tenants must be sued and served with process.
Often, though, as the Tampa Tribune explains, banks and their lawyers know there is no need to sue these parties, but they do so anyway – just to pad the bill. And who receives that bill? The homeowner, of course. Incurring expenses that don’t need to be incurred just to pass on an expense to homeowners – ya gotta love the foreclosure mills.
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Posted on October 30th, 2010 by Mark Stopa
With so many judges pushing foreclosure cases towards judgment at alarming rates, it’s refreshing to see judges in Manatee and Sarasota clearing their dockets in a way that the law allows, via dismissals for lack of prosecution. According to the Bradenton Herald, Judge Paul E. Logan dismissed 357 cases that remained idle for more than a year, as permitted by Rule 1.420(e). Granted, dismissing 357 cases is like scooping a bucket of water out of the ocean, but it’s a start.
Judges, the next time you want to clear your dockets, I respectfully suggest that you dismiss cases for lack of prosecution. And if you feel like the rule is too rigid, i.e. a lot of cases aren’t being prosecuted but can’t be dismissed under the language of the rule, get on the phone with the Florida Supreme Court and suggest a rule amendment. Rule 1.420(e) has been changed a handful of times over the years, and another amendment seems appropriate.
Yesterday I suggested an amendment to Fla.R.Civ.P. 1.420(e), making it easier to dismiss foreclosure cases for lack of prosecution.
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Posted on October 29th, 2010 by Mark Stopa
After numerous reports in recent weeks that they were going to hold banks’ feet to the fire about blighted titles resulting from faulty foreclosures, and shift the risk of loss onto the banks, title insurance companies have relented. Apparently, amidst threats from the banking industry, title insurance companies are going to keep writing title insurance policies, as if the foreclosure fraud fiasco never happened.
This is another sickening illustration how banks run the country, but let’s ignore that for a moment. From a business perspective, this is pure insanity. How can title insurance companies continue to issue title policies knowing about all the foreclosure fraud? It’s like swimming in a fresh-water lake in Florida – sure you may come out of it okay a few times, but is it really worth the risk of getting attacked by an alligator?
Next week, I’m going to post two motions I’m filing (in two separate cases) to vacate Final Judgments of Foreclosure. In one, BOA sold the house to a third party purchaser, who obtained title insurance and has been living in the house for a year but is facing an unexpected eviction/loss of ownership. Once those types of claims get filed on a regular basis (which is inevitable at this point), the title insurance industry will either: (1) collapse; or (2) be forced to change their business model (so as to shift the risk of loss from blighted titles via faulty foreclosures onto banks).
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Posted on October 28th, 2010 by Mark Stopa
Several days ago, I blogged about the flawed procedures being utilized in foreclosure cases in Brevard County, precipitating this Motion to Disqualify Judge. Since filing that motion, I’ve continued to reflect on the issues addressed therein, and I remain comfortable with my position. In my eyes, the issue boils down to one inescapable conclusion:
Judges cannot prosecute foreclosure cases!
Today, the Brevard judge agreed with my argument and issued this Order Granting Motion to Disqualify. The Order is quite vanilla, but it contains a phrase that I find telling. The judge notes that “from Defendant’s perspective,” the Motion to Disqualify is legally sufficient and requires disqualification. The key phrase, of course, is ”the Defendant’s perspective.”
From the Defendant’s perspective, when a judge takes it upon him or herself to set a hearing in a case that the Plaintiff has chosen, for whatever reason, to let stagnate, the judge is siding with the Plaintiff. A judge may argue (and may truly believe), that all he/she is doing is advancing the case forward, without bias towards one party or the other with regard to the hearing being scheduled. Particularly in foreclosure cases, though, it’s the mere advancement of the case, at the judge’s initiative, that reflects the bias. After all, the Plaintiff is seeking relief in the case; the Defendant is not. Hence, when the judge is advancing the case, sua sponte, the judge is necessarily helping one party to the detriment of the other.
Let’s put it this way … If a case is languishing, whose job is it to advance the case forward, towards judgment? The Plaintiff. Undoubtedly, the Defendant has no obligation in this regard. I’m not saying the Defendant can stall; I’m saying the Defendant has no obligation to accelerate the case if the Plaintiff lets it stagnate.
Some people reading this may argue I’m a slimy foreclosure defense attorney who’s just trying to delay foreclosure lawsuits. Not so. My concern is ensuring the system is fair for my clients. Lest you doubt that a judge setting a hearing on his/her own initiative is unfair, consider this:
I’ve represented Plaintiffs and Defendants in hundreds if not thousands of lawsuits throughout my career – all types of lawsuits, not just foreclosure cases. Other than recently (in the context of foreclosure cases), I can’t ever recall a judge setting a hearing on his/her own. It’s just not done. For example, I’ve filed dozens of lawsuits for Plaintiffs against insurance companies, seeking monetary relief. I think most of my litigation clients would tell you that I litigate those cases aggressively, but, on occasion, for one reason or another, some of those lawsuits have languished a bit. When that happens, do you think there’s ever been a time when a judge took it upon him or herself to set a hearing? Of course not. Do you think the judge ever tells the insurance company or its lawyer that they need to accelerate the case? Yeah, right. Never happens. As the Plaintiff’s lawyer, if I don’t set a hearing, the hearing never gets set, and the case stagnates. That’s just how it works. The insurance company has no obligation to advance the case forward (and risk entry of an adverse judgment sooner), nor would I expect them to. My client wants affirmative relief through the court system; it’s my duty to move the case forward to obtain that relief.
My point, essentially, is this – when this is how it works in litigation files, why should foreclosure cases be any different? Because the homeowner (allegedly) has not paid? Because the judge perceives the Plaintiff will win? Because the Judge has a lot of cases on his/her docket and wants to remove the backlog? Respectfully, that’s the rub. If a judge is setting a hearing on his/her own initiative, for any of those reasons, it reflects a bias that should not be present among the judiciary. Judges should treat my clients just like they treat insurance companies when I represent Plaintiffs – without any preconceived notions of who is going to win the case and without any agenda as to how quickly the case moves forward.
I can totally understand the judges’ desire to eliminate the high volume of cases with which they are dealing. The answer, though, isn’t for judges to exceed their role as neutral arbiter and act as prosecutor. The solution is to change to the rule on lack of prosecution.
Fla.R.Civ.P. 1.420(e) is currently set up in such a way that it’s virtually impossible, as a practical matter, for a case to be dismissed for lack of prosecution. For such a dismissal to be entered, (1) there can be no activity in the court file at all for 10 consecutive months; (2) the Plaintiff must be notified of the lack of record activity; (3) there must be no record activity in the ensuing 60 days; (4) an interested party must seek dismissal; and (5) there can be no “good cause” to prevent dismissal. Under this standard, cases can languish forever. I can file a Notice that I’m going on vacation for Christmas, and the 10-month clock starts all over again. Respectfully,that’s crazy, particularly vis a vis foreclosure cases.
If the judiciary wants cases to move quicker, it’s time for the Florida Supreme Court to implement an amendment to this rule. How about something like … if six months have passed with no record activity in a foreclosure case, then, boom – automatic dismissal. If that sounds too harsh, then give the Plaintiff a chance to prove good cause after six months. The point isn’t how the rule is amended; the point is that some amendment is necessary to ensure that foreclosure cases progress at the pace the judiciary desires. In other words, what I’m suggesting is this:
Judges, don’t prosecute foreclosure cases just because the bank has let those cases languish. Instead, convince the Florida Supreme Court to amend Rule 1.420 so it’s not so impossible to dismiss a foreclosure lawsuit for lack of prosecution.
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Posted on October 27th, 2010 by Mark Stopa
As if we needed more proof that the banks’ foreclosure procedures are fundamentally flawed, Wells Fargo just announced it is re-doing affidavits in 55,000 foreclosure cases, as the original affidavits, executed by robo-signers, were flawed. Lest you think 55,000 improper foreclosure filings is not a big deal, bear in mind – that’s just what Wells Fargo is admitting, based on its own, internal investigation. If Wells Fargo is admitting to 55,000, you can bet the problem is far more widespread.
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Posted on October 27th, 2010 by Mark Stopa
One of my goals, both as a foreclosure defense attorney and the author of this blog, is to make everyone – the public, homeowners, and judges – aware of the many pitfalls with the way foreclosure cases are handled by our courts. I realize not everyone agrees with my positions on all of these issues, and that’s okay. I also realize I’m not well-liked in some circles for being so vocal in my views, and that’s okay, too. My job isn’t to be well-liked – it’s to represent homeowners as well as I possibly can (consistent with the law and my ethical obligations). Besides, meaningful change in how foreclosure lawsuits are handled is nothing but a pipe dream unless someone such as myself is willing to stand up and say “this is wrong.” Not everyone will agree 100% of the time, but I stand no chance if I don’t try.
For example, a few weeks ago, I started receiving Orders from Honorable Douglas Baird in Clearwater which systematically denied my clients’ Motions to Dismiss, without a hearing. I found this troubling, particularly since Judge Baird had not even placed me on notice that he might be ruling on such motions without a hearing. Given my overwhelming belief that this disregarded the most basic notions of due process, I felt compelled to file a Motion to Disqualify the judge.
As I’ve said before in this blog, I don’t want this to appear as if I disrespect Judge Baird. I respect him plenty. The issue is that I strongly disagree with him on these issues and, candidly, felt compelled to tell him so. As I see it, if I can’t express respectful disagreement (especially on issues for which there is no clear “right” answer), what’s the point of being a lawyer?
Anyway, Judge Baird granted the Motions to Disqualify, and in so doing, wrote me a letter. The letter said, in essence, ”I figured foreclosure defense attorneys such as yourself realized that it was my procedure to deny motions to dismiss without a hearing, but since you didn’t realize that, I’m granting the Motions to Disqualify.”
Judge Baird and I are never going to agree on some of these issues. What I respect, though, is that even though he disagrees with me, Judge Baird realized how his procedure could be construed to others as unfair, particularly when I didn’t know about it beforehand. In fact, since that happened, I have yet to receive an Order denying a Motion to Dismiss without a hearing from Judge Baird. Is that a coincidence? Maybe. That said, I just received an Order (in a different case) from Judge Baird directing me to file a written memorandum to the bank’s response to my Motion to Dismiss within five days, after which he may rule on the Motion to Dismiss without a hearing.
Respectfully, I still find this new procedure patently unfair, and I said as much in another Motion to Disqualify. As I see it, the judge should not be taking it upon himself to prosecute a lawsuit that the Plaintiff has chosen, for whatever reason, to let stagnate. In other words, it’s not a judge’s role to say “I see the Plaintiff has stopped prosecuting this case. It’s time for me to help advance the case towards judgment.” My concern about this conduct is heightened by the fact that the Plaintiff is seeking relief in the case and the Defendant is not. Where only one party is seeking relief, the judge’s attempts to advance a dormant case towards judgment, sua sponte, reveal bias.
Also, I find it unfair to be given five days “from the date of the Order to file a written response.” By the time I received the Order, that gave me three business days to respond. Respectfully, that’s unreasonable. There is no emergency here; this case has been languishing for months. For the judge to suddenly, out of the blue, require me to file a written response within three business days, failing which my client’s argument may be denied without a hearing … I find that inappropriate. What if I were on vacation? What if I were in trial? What if I were busy with other files? I have handled all types of lawsuits, from inception through trial and appeal, and I can’t ever recall being given such a short deadline. Respectfully, why should I have to drop everything to file a written memo (in three days)? Simply because the judge decided, on his own, to start prosecuting this case towards judgment?
All of that said, I can’t help but feel a bit encouraged. After all, even though I suspect he still disagrees with me, it appears that Judge Baird has changed his procedure, if only a little. Instead of denying a Motion to Dismiss outright, without a hearing (and without any warning that a ruling may be coming), he’s at least giving me a chance to file a written memorandum before he rules. I still think this is insufficient, but at least it shows that the judges are receptive to opposing viewpoints. It’s a baby step, yes, but Rome wasn’t built in a day.
Candidly, I’m don’t know how Judge Baird is going to react to this most recent Motion to Disqualify. I’m sure no judge likes receiving such a motion, and I suspect he still disagrees with my belief that his procedures are flawed. That said, I remain hopeful that he will continue to re-evaluate his stance on these issues. After all, I’ll argue all day long, as I have several times now, that it’s not a judge’s role to set a foreclosure case for hearing when the plaintiff has decided, for whatever reason, not to push the case towards judgment.
Part of my willingness to express these views in an open forum, other than my stern conviction that I’m right, is that judges are all over the map on issues such as these. To illustrate, consider the procedures of Judge Anthony Rondolino. Like Judge Baird, Judge Rondolino is a Pinellas County judge. The rules are the same for both judges, the law is the same, and the cases are generally the same. Nonetheless, Judge Rondolino often grants Motions to Dismiss, most recently via this seven-page Order (entered after a 45-minute hearing), yet Judge Baird routinely denies Motions to Dismiss, often without a hearing. When one Pinellas County judge is regularly granting well-taken Motions to Dismiss, after duly-noticed hearings, and another is regularly denying them without a hearing, there is clearly room for reasonable people – even reasonable judges – to disagree. As such, it’s up to us, as foreclosure defense attorneys, to assert our views as respectfully but persuasively as possible. Be respectful, but don’t back down, and don’t give up. Judges are paying attention, and your efforts may make a difference.
As for homeowners out there, I strongly encourage you to evaluate which foreclosure defense lawyers are willing to fight, respectfully but forcefully, and which are just “going through the motions” of a foreclosure case.
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Posted on October 27th, 2010 by Mark Stopa
In this article, a reporter estimates the cost of a loan modification under HAMP to be $54,757. If you follow his math, which seems well-reasoned enough to me, that’s actually a conservative number. Anyway, think about that for a minute:
Our government is paying $55,000 for every loan modification under HAMP.
There must be a better way.
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