February 19, 2012

Foreclosure Filed: Should I Hire An Attorney?

I live, breathe, eat, drink and occasionally sleep in what is considered by experts to be the heart of our Nation’s foreclosure crisis.  I am a Florida licensed real estate agent whose practice consists solely of representing sellers in Florida on short sale transactions.  Frequently, I am asked the following question by Florida homeowners: “A foreclosure has been filed against me, should I hire an attorney?”  My answer is always: “You can, that’s up to you.”

I deal with Florida foreclosure defense lawyers every day.  They represent the Florida homeowner in defending the foreclosure action through the courts and then refer their clients to me to handle the short sale.  I deal with the bank on behalf of the homeowner, get the approval of the shorting lender typically as a full release of liability with $3,000 paid to the seller by the bank for relocation costs and we close the file.  As a result of the successful HAFA short sale of the property, the lis pendens is discharged, the foreclosure case is dismissed, and the seller/borrower is forever free of this monstrous mortgage debt.  The Florida attorney in that scenario filed a notice of appearance and an answer to the foreclosure complaint and that’s it – case closed – full settlement.

I received a call after 8 PM on Friday night from a Florida foreclosure defense lawyer working late.  I didn’t get the message until Saturday morning.  It looked like he was playing catch up on his files and was asking about a specific file that we were working on together – he was handling the foreclosure defense for a client in Clearwater, Florida and I was handling the short sale for the same clients.  He wanted to know the status of the short sale.  Below is the email that I sent to his paralegal in reply:

Hey *paralegal name and attorney name redacted*,

*attorney name redacted* left a message for me at 8:17 pm last night asking for the status of *seller name redacted*.  *seller name redcated* was a HAFA short sale that closed on 12-30-2011 in your office.  The HUD1 is attached and there was a $900 attorney fee included for *attorney name redacted* on line # 1304.

Thanks,
Paul

Bear in mind that he was asking about the status of this file on 2-17-2012 and he was unaware that the file closed on 12-30-2011.  Some law offices are able to handle real estate closings so I sent the title work back to the law office and also had the shorting lender pick up an extra $900 tab for attorney fees for him.  I had sent him the HAFA short sale approval earlier that month and we had the closing in his office so it was a surprise that he was unaware that the closing took place.

But I’m getting a little sidetracked away from my point.  My point is that there has to be an end game for Florida homeowners in all of this.  Florida homes mortgaged prior to 2009 are in large part underwater and many that I deal with are severely underwater by $50,000 to $100,000 or more.  What is the goal in all of this?  To lengthen the amount of time that the foreclosure will take to complete?  And then what?  Be left with a Florida deficiency judgment and/or continued collection on the mortgage deficiency for up to 20 more years?  Is the goal to modify the loan?  When lenders modify mortgage loans they typically make them temporary and do not modify the principal.  This means that the lender can recall the loan and send you a past due bill at any time whether months or years later.  I have repeatedly encountered Florida homeowners who have been told –by no fault of their own – that the lender decided that they did not qualify for the loan mod over a year after having being given the mod and now the lender demanded all of the past due amounts at once.

The fact is that we are in the throes of a housing crisis and it is going to be a slow crawl out of all of this mess.  The foreclosure programs such as HAFA (the Home Affordable Foreclosure Alternatives) which allow a home to be short sold and require the bank to provide a full release of liability and give $3,000 to the home seller at closing are set to expire at the end of this year.  Also, there are some dire tax consequences written in the IRS code for those who wait until after 2012 to complete a short sale.  This means the time to settle the debt and get out of it without having to repay the deficiency or taxes on the debt forgiveness to the IRS is now, this year.  Those who wait it out may find that these programs no longer exist come 2013.

This article is not to say that hiring an attorney won’t help the homeowner.  Other than the cost, it certainly won’t hurt.  And I don’t know your situation – maybe you have equity?  Maybe you made all of your payments on time and were never late?  Or maybe you came home one night and there was a creepy process server sitting in your driveway who handed you a Florida foreclosure complaint and the first thing that came to mind was: I should hire an attorney.  So, I get asked that question a lot – a foreclosure has been filed against you and you want to know if you should hire an attorney?  My answer: You can, that’s up to you.  I will help you with the short sale.

Do you like what you read, then contact me for help with your Florida Short Sale

February 18, 2012

Mortgage Deficiency Collections

The Collection Advisor February 2012 issue brings us some creepy news from debt collectors on Mortgage Deficiency Collections.

“It could be said that some consumers might be in a better position financially post-foreclosure, as they no longer need to worry about making large mortgage payments.  Any analysis regarding these deficiencies should begin with a discussion of whether the loan is recourse or non-recourse.  A recourse loan is, ‘a loan that allows the lender, if the borrower defaults, not only to attach the collateral but also to seek a judgment against the borrower’s (or guarantor’s) personal assets.’  Blacks Law Dictionary 955-956 (8th ed., West 2004).  The majority of states are so-called ‘recourse states’ and permit lenders to pursue a mortgagor personally for a deficiency after sale.”

“An interesting situation potentially arises where a creditor obtains a deficiency judgment against a consumer and places a judicial lien on another piece of real property at which the consumer resides.  If the consumer subsequently files for bankruptcy and asserts his or her homestead exemption as to the residence, there is some question as to whether the bankruptcy code allows the consumer to avoid the judicial lien resulting from the deficiency judgment.  One bankruptcy court has rules that the language of the bankruptcy code is ambiguous as to whether the judicial lien can be avoided in such a situation, and posited that a public policy concern called the ‘Flow of Capital Purpose’ should prevent avoidance of liens resulting from a deficiency judgment.  See In re Crisuolo, 386 B.R. 389 (Banr. D. Conn. 2008).”

The bottom line is that if you own property in a recourse state such as Florida which allows creditors to obtain and pursue deficiency judgments then don’t delay on obtaining a full release of liability through a short sale at this time.  Mortgage lenders will allow the debt to be settled with a zero balance now, but if you wait then all you have to look forward to are mortgage deficiency collections.

Do you own a Florida property and want to do a short sale?  I can help.

February 13, 2012

Motivation

Filed under: Miscellaneous

“Keep away from those who try to belittle your ambitions. Small people always do that, but the really great make you believe that you too can become great.”

Mark Twain

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