Recently, There has been much talk about homeowners making the strategic decision to walk away from houses that are now way “underwater,” meaning that the home value is far lower than the principal balance owed.  This is especially relevant in the hardest hit foreclosure states – Florida, California, Arizona and Nevada.

I have consistently advised my clients that the best way to deal with their foreclosure is as a purely dispassionate business decision, realizing how difficult it is to look at a home with cold eyes and think of it only as an investment.  Many homes represent more than just a place to park the car – homes symbolize marriage, childbirth, coming of age, retirement and death.

I am still emotionally connected to the home where my mother died.  We moved there my senior year in high school with my father, and I spent much time in that home over the next 20 years.  It was the hub of the wheel for our large family, and on Christmas Eve, dozens of us would come from all parts of the country to celebrate the season.  We would joke that we never called each other – we just called Mom to find out how the clan was doing.  Heck, I guess Mom was my precursor to Facebook.

Everyone has a connection to a place just like my home, and for many, the thought of giving it up is too much to bear.  This is what mortgage companies bank on when they make their “take-it-or-leave-it” offer.  This is their unfair advantage because they know many homeowners will continue to pay more than they can afford to stay in a place not worth what is owed.

After my mom died, my dad could no longer live in our home, and I bought it from him to keep it in the family.  I found strange comfort sleeping in the exact spot my mother’s life ended.  However, my life circumstances changed, and I had to move on.

What I realized is that I don’t really miss that house.  I miss the memories made there, and staying there did nothing to preserve the great times of the past decades.  My point is that a home is only a shell for memories and merely a reminder of personal connections we cultivate.  Leaving a home does not destroy a family’s bond.

I am NOT saying you will likely lose your home in foreclosure, and I am NOT saying you should give up.  To the contrary, every day that I am in this fight for middle class home ownership, I realize that most homeowners have tremendous leverage against the mortgage companies.  The banks’ confidence only comes from the fact that most people do not fight.  Truthfully, the banks are losing ground in contested foreclosure cases.

So, I say FIGHT YOUR FORECLOSURE! However, keep in mind that, despite having hired a foreclosure defense attorney, you may ultimately be faced with the decision to walk away.

When it comes to the welfare of your family, tough decisions need to be made, and rationality must prevail over emotion.  The banks prey on your emotion, and you choose to give the banks that power.  The good news is that you can also choose to take that power away by detaching your emotional connection to your home.  As the old saying goes, Home is where your heart is – not where you park your car.

Related posts:

1. Divorce yourself from your home!
2. How Bankruptcy Can Help Save Your Home
3. Beware the HOA when walking away

Author’s note – Although not publicized, I am absolutely convinced there is a race in the State of Florida to prove which Floridian can do the dumbest thing.  Given recent actions by some bankers, lawyers and public servants, my guess is that the prize for first place must be pretty awesome.  This series will expose these recent acts of stupidity, and then I’ll open the floor for voting. If you feel that a particular Floridian deserves consideration, please send your suggestion to parker@jaxlawcenter.com.

Florida Bankers Association President Alex Sanchez is proposing legislation to Florida lawmakers that would make it much easier for banks to take homes away from Floridians by doing away with that pesky due process in foreclosure cases.  The association wants Florida’s legislators to make this state a non-judicial foreclosure state, which allows banks to take homes without filing a foreclosure complaint and without allowing the homeowner an opportunity to contest the banks’ right to foreclose.

In its effort to obfuscate the truth, the FBA has named the bill . . . and I am not making this up . . . The Florida Consumer Protection and Homeowner Credit Rehabilitation Act.

From the banks perspective, this bill makes perfectly good sense.  Mortgage servicers have virtually no way of proving they own 98% of the residential home mortgages being foreclosed upon in Florida and the rest of the country because these greedy bankers bundled their mortgage portfolios and sold them, often before the closing of the loan, into securitized trusts (REMICS) on Wall Street with no regard for the investor or borrower.

As a Florida foreclosure defense attorney with over 500 actively defended foreclosure cases, I believe the banks have “thrown in the towel” in the cases I’m defending.  I cannot recall the last time the plaintiff in a foreclosure case came to a court hearing with an intelligent argument that resulted in a ruling against the homeowner.

Since the plaintiffs rely on fraud in almost every foreclosure case, good defense lawyers are always frequency-tuned to find the lies, and now that Circuit Court judges have been exposed to the stench of foreclosure mill pleadings, more judges are looking at each foreclosure with more skepticism.

So, what is the only way the FBA can defeat contested foreclosures?  Legislatively delete the homeowner’s ability to fight for their home.  Make no mistake, a non-judicial foreclosure state is this close to a police state.  Just ask California, with its tent cities filled with displaced homeowners who were never given an opportunity to fight the banks.

Related posts:

1. What is a judge’s role in a foreclosure case?
2. Banks Want Your House But Not Your Problems
3. Retroactive Mortgage Assignments Not Effective In Massachusetts

California has had it rough.  It has skyrocketing unemployment and is the home of the Option ARM foreclosure wave.  In this climate, it is no wonder that California boasts the largest number of lawyers committing fraud on the Middle Class through the operation of illegitimate mortgage modification scams.

In a recent article by Fresno Bee reporter Barbara Anderson, The California Bar Association is fielding an alarmingly high number of complaints from clients who say their lawyers illegally withheld settlement money or charged them for work they didn’t do — especially those who promised help modifying mortgages.

According to the report, “The Bar is investigating more than 300 California lawyers involved in loan-modification rip-offs. Typically, homeowners facing foreclosure complain that they paid attorneys who then did nothing to help them keep their homes.”

This is not to say that lawyers from Florida and other states aren’t also ripping of panicked homelosers.  I see lawyers right here in Florida doing the same thing.

The bottom line is this:  DO NOT HIRE A LAWYER TO MODIFY YOUR MORTGAGE UNLESS THE LAWYER PLANS TO ACTUALLY DEFEND THE FORECLOSURE IN STATE COURT.

Mortgage modifications rarely work because the terms never go far enough to solve the long-term problem – massive negative equity.  The only way a homeowner can eliminate negative equity is by convincing the “lender” that doing so is in the “lender’s” best interest.  This ONLY happens by fighting the foreclosure in the state court case.  A good litigator can shift leverage away from the lender and toward the homeowner, forcing the lender to offer more meaningful solutions.

Lawyers who only do mortgage mod workouts with the loan servicer – dubbed by real lawyers as “HAMPsters” – do a disservice to their clients.  The client will rarely if ever achieve a long-term solution that will ensure the foreclosure won’t come back anytime soon.

Related posts:

1. Beware Of Mortgage Modification Scams
2. Foreclosure Rescue Scams Deluge Homeowners
3. California Foreclosures: Lenders Must Accept Loan Modifications

Well, when it comes to the purchase of real estate, there are only three documents that you need to understand:  The deed, the note and the mortgage (a.k.a. “Deed of Trust”).

The deed is the document evidencing ownership of the real property, and the grantor or seller of the property signs it.  Anyone named on the deed as the grantee has an actual ownership interest in the property described therein.

The note is the actual debt obligation.  It is signed only by the borrower and is physically delivered to the lender or “originator.”  The note is a naked obligation to owe money, and is not much different than any general debt.

The mortgage is a pledge of collateral (ie. the real property described in the deed) to secure the debt obligation evidenced by the note.  It is a blanket that wraps around the note and gives it security.  In essence, the mortgage says, “If I default under the terms of the note, you will not have to chase me down and find my assets.  Instead, I pledge to you this piece of property you can take and sell for enough cash to satisfy the terms of the note.”

Often, only one spouse will sign the note, but both will sign the mortgage.  This means that only the spouse signing the note will be held liable for the debt, and in the event of non-payment, only that spouse will have a foreclosure show up on his or her credit.  The spouse who only signed the mortgage is essentially saying, “I pledge whatever interest I own in the home to secure the promissory note signed by my spouse.”

Because a foreclosure is used to gain clear title to real property, every person or entity with an interest in the property must be named in the suit – even tenants and judgment creditors.  So, just because a spouse is “being sued,” it does not necessarily mean that the spouse is liable for anything.  If the spouse signed the mortgage only, his or her inclusion is just for the purpose of the lender taking the interest in the home.

A spouse who did not sign the note has every right to fight the foreclosure or even file bankruptcy to stop the foreclosure, regardless of whether the obligated spouse chooses to fight or file.  This is especially important to keep in mind where the spouses are now divorced or if the obligated spouse has died.

Related posts:

1. Transferring Rights to a Note
2. Missouri Court Weighs In on ‘Show Me the Note’
3. Mortgages and Divorce–A Match *Not* Made In Heaven

Generally speaking there are 4 owners of mortgage notes: the originator (the rarest of cases), a securitized trust (known as a REMIC), Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Corporation).

If your foreclosure complaint is filed by an entity other than the exact originator named in the mortgage note (the note should be attached to the complaint), you need to determine whether the plaintiff is the servicer or the alleged purchaser of your home loan.

If the plaintiff is the entity who normally accepts your payment, such as Wells Fargo, Bank of America, Citi, Chase, etcetera, you can bet it is not the owner.  The plaintiff may admit as much in the pleading, with a statement like, “Plaintiff, as the servicer for the owner, has the right to foreclose on behalf of the owner and holder of the note and mortgage.”

If you suspect, or know, that the plaintiff is merely the servicer of your loan, you need to determine whether Fannie, Freddie or a REMIC is the owner.  To determine whether Fannie or Freddie own your loan, just go to the Fannie Mae lookup tool and the Freddie Mac lookup tool.  If neither Fannie nor Freddie claim ownership, it is nearly certain that a REMIC is the purported owner of the note and mortgage.

Why do you want to know who allegedly owns your note and mortgage?  Well, for one, Fannie and Freddie are essentially quasi-government entities now, and servicers are required to comply with the default servicing provisions established by these entities.  Secondly, if the purported owner is a REMIC, there is a deadline by which your loan should have been completely transferred from the originator to the REMIC, and chances are that didn’t happen.

If you wish to fight your foreclosure, you should make an appointment with a skilled foreclosure defense attorney, and if the plaintiff seems to be a servicer, you should come to the consultation armed with the results of your preliminary research using the Fannie and Freddie tools.

Related posts:

1. Fannie Mae And Freddie Mac Suspend Foreclosures
2. Fannie Mae and Freddie Mac Jumbo Mortgage Loan Limits are Dropping January 1st
3. Fannie and Freddie Can’t Afford To Bail Out Subprime

Don’t get me wrong.  I know the answer, but over the years leading up to the foreclosure crisis, many judges sort of forgot why they were there. The role of a judge in the judicial process is to impartially enforce the rule of law, which is sometimes easier said than done.  Judges don’t want their dockets overloaded with contested foreclosure cases, and at the current rate of 11,000 foreclosures per month in the State of Florida, the bogging down of the judicial system is a real concern.

Prior to 2007, foreclosure mills and state court judges have allowed the rule of law to fall by the wayside.  However, though efforts by foreclosure defense attorneys like April Charney, judges have been force-fed reminders that fundamental principles of law matter more than crowded dockets. I can honestly say I have seen most of them rethink the way they handle foreclosure cases over the last three years.

Last week, New York Times journalist Amir Efrati wrote about judges delaying and dismissing foreclosures because of the plaintiff’s failure to provide proof of ownership of the right to foreclose.  The bottom line is that the mortgage servicers are bringing these foreclosure cases and clogging the courts, not the homeowners.  It is the CHOICE of the servicer to initiate legal proceedings, and quite frankly, if the servicer has done everything correctly leading up to the foreclosure, getting a judgment is a relatively simple process.

So, state court judges should demand that the servicer follow the law.  The laws of negotiable instruments – the buying and selling of promissory notes – have been around long before the founding of our country.  A judge’s failure to enforce these fundamental laws creates uncertainty in the marketplace.

Judges should never “take sides” in any case but should enforce the rule of law.  Judges should never ask a homeowner, “Have you made all your mortgage payments?” until he or she is certain that the plaintiff has proven it has the “standing” to foreclose.  Only AFTER the plaintiff has proven “standing,” the homeowner’s default under the terms of the promissory note become relevant.

Finally, if the plaintiff has proven its case, a final judgment should be entered against the homeowner and a sale date should be set about 30 days later.  A judge should never “feel sorry” for a homeowner and should never delay a sale date without the plaintiff’s consent.

Justice is a two-way street, and neither homeowners nor servicers should expect a judge to manipulate the Scales of Justice.

Related posts:

1. Sarasota Florida Judge Berlin Slams The Foreclosure Door On Wamu!
2. The real fight is in state court
3. Louisiana Bankruptcy Judge Sets Parameters for Calculation of Escrow Amounts Due When Bankrupcy Case is Filed

My firm never engages in the pointless process of loan modification because we would like to keep our sanity, thank you very much!

There is only one way to obtain a meaningful modification of your mortgage – make the lender understand that modification is it’s best option.  This phenomenon only occurs when leverage is shifted from lenders to homeowners who fight the foreclosure in state court.

The servicers don’t want to modify these loans, and as proof positive, just look at this real, recent job posting for Bank of America for a modification specialist in their “Home Retention Division.” {Editor’s note – link is now dead, surely because BofA didn’t like this article} The job is in Mumbai, India, and there’s no experience necessary!  That’s who you’ll be talking to when you call Bank of America.

Why is the job in Mumbai?  That’s where the cheap labor is located.  What kind of background, education and experience must the Mumbai workforce have in dealing with loan modifications?

More likely, this loan mod specialist is being paid a couple hundred dollars a month to transfer Bank of America customers to other loan mod specialists who will, in turn, do the same until the caller hangs up in frustration.

Thanks, but you couldn’t give me all the tea in India to get trapped in that nightmare.

Related posts:

1. Loan Modification: Who Ya Gonna Call? Part I
2. Who Are The 100,000 Homeowners Who Got A Loan Modification Through BOA?

The mortgage industry looks at the American homeowner like cattle, and there is no concern whatsoever about the social implications of mass foreclosures. For Wall Street, it’$ all about the Benjamin$.

The mortgage servicers actually have the audacity to guilt homeowners into “doing the right thing” while callously decimating homeownership for the middle class.  I ask, “What would Donald (Trump) do?”  The Donald, self-proclaimed master-deal maker, would callously look at any real estate investment, even his own home, as a business deal, and THAT’s what you should do as well.

I completely agree with Brent White, a University of Arizona Law professor, who recently made national news for writing an “incendiary” legal article recommending that American’s with negative equity in their home should just walk away.  However, I take it one step further.  I believe Americans with negative equity should stop paying their mortgage and fight their foreclosure.

The reality is that seasoned foreclosure defense attorneys can frustrate and out-maneuver the typical foreclosure mill.  The “run-of-the-mill” mill lawyer is inexperienced, over-worked and underpaid.

Foreclosure mills try to oversimplify the very complex process of foreclosure.  My question is, if it’s so simple, why do I have hundreds of clients who have been fighting their foreclosures for years without making a single mortgage payment during the process?

So, take Professor White’s advice and just say No to negative equity.  But don’t just walk away!  Fight your foreclosure to gain leverage and possibly force a meaningful modification of your mortgage.

The first step is to treat your house like an investment and be prepared to walk if it is the best business decision.

Related posts:

1. Walk Away From Your Home, Advises Report
2. Chip Parker discusses walking away from your home on First Coast Connect
3. Should you “walk” away from mortgaged home

One of the central platforms of the Obama campaign was support for a modification to the bankruptcy code that would allow for the restructure of residential home mortgages by bankruptcy judges.  I have written ad nauseum about how bankruptcy reform is the only way to solve the single greatest domestic catastrophe since the Great Depression.  In the end, President Obama did precious little to convince middle-of-the-road “Blue Dog” Democrats that bankruptcy reform is THE real solution to prevent the tidal wave of foreclosures.  Instead, we get impotent programs with catchy names like TARP and HAMP that promise far more than they deliver.

Why can’t our elected leaders get it right?  The mortgage industry, comprised of a sea of securitized trusts, has no incentive to reduce mortgage balances.  Servicers make more money servicing non-performing loans, and in many cases, there is default insurance in place to compensate the trust in the event of a deficiency balance.

Not to worry.  Obama’s got a plan.  Shame is the latest weapon used by the administration to force lenders to engage in meaningful modification of mortgages.  No, I’m not kidding.  The New York Times reports that the administration will “try to use shame as a corrective, publicly naming those institutions that move too slowly to permanently lower mortgage payments.”

“The banks are not doing a good enough job,” Michael S. Barr, Treasury’s assistant secretary for financial institutions, said in an interview Friday. “Some of the firms ought to be embarrassed, and they will be.”

Um, has Mr. Barr actually met any of these financial institutions?  I’m pretty sure nothing embarrasses them.  As a matter of fact, I would bet that they wear their steadfast myopia as a badge of honor.  They run this show, and they do not care what happens in the end.

My office is overflowing with clients who want to modify their mortgages and are actively seeking assistance from the servicer.  The problem is that the servicer wants only to use the Treasury program as a tool to get a few extra buck out of the homeowner prior to dropping the foreclosure hammer.

Servicers lose paperwork or claim to have never received it.  They claim that trial payments were late or not in the correct amount.  They create a smog of confusion to frustrate and demoralize honest Americans languishing in homeowner purgatory.

Our politicians have proven they are inept and unwilling to make tough decisions that will stabilize the economy and return our country to prosperity.  They seek cover behind the Wall Street executives who opine that a wholesale adjustment to mortgages will destroy financing in this country.  Well currently, we’ve done nothing to correct the market, and last week, the FDIC reported lending by U.S. banks plunged by 2.8 percent in the third quarter, the largest drop since at least 1984 and the fifth consecutive quarter in which banks have reduced lending.

What’s my point?  The middle class can count on no one and must take control of this crisis.  The leverage held by the mortgage industry isn’t real, and the average homeowner is capable of beating back the banks.  As the middle class learns how to shift leverage through litigation, these securitized trusts and financial institutions will be forced to negotiate an equitable resolution on an even surface.

Shame?  You can have it.  I’ll take the big stick instead.

Related posts:

1. Will Obama reform bankruptcy laws to stop foreclosures?
2. Obama Housing Plan
3. Obama needs April Charney to lead the fight against foreclosures

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