More on the Florida Foreclosure Nightmare

We just discussed the nightmare situation in Florida, which is likely to spin out nationally. Before I tell you more about what I think about the Florida situation, I’ll tell you I was raised by a family in law enforcement, and as such, I tend to think people who are arrested are usually guilty.   And I think that the people who are ending up inside the Florida bankruptcy courts are usually going to be people that shouldn’t be in their homes.

It’s because of the fact that I and others usually believe this to be true that I think due process and the trust in the process of our courts is so incredibly important. It’s necessary to force the parties at hand to marshall evidence that they swear is true, and to present it to an impartial judge to render judgment after full consideration. This is America, where everyone gets a chance before the court. If this breaks, the weak and the innocent are the ones who suffer.

So it’s because of this background that I feel sick to my stomach learning of a random sampling of foreclosure cases conducted by the Florida Bar News has just found “that 20 percent or more of the cases set for summary judgment had some procedural or paperwork problems.”

Think about that. 20%! It’s outrageous, and shouldn’t stand in a country that values the rule of law.

Why is this happening? Again, keeping with what I know about the law, the criminals courts would simply shut down if everyone had a jury trial. Hence the crucial role of plea-bargaining. (If you want to see the role plea-bargaining plays, you should read Courtroom 302, one of my favorite books, by Chicago Reader journalist Steve Bogira.) There’s a plea-bargaining mechanism to be had here in these foreclosure trials: remove the deficiency judgements. People want to be able to hand over their homes, but they don’t want to spend the next decade hounded by JP Morgan for every last dollar that can be grabbed out of their paycheck. From the Florida Bar (my bracketed numbering):

Another hitch in clearing cases, he said, is [1] sometimes banks put off getting the final judgment so they don’t have to immediately take possession of the property, which makes the banks liable for property taxes and homeowners’ association fees on homes that may take considerable time to resell…

“If we had everyone defending their foreclosure, we’d never get through this.”

She said an unappreciated problem is [2] that many foreclosed homeowners don’t realize they are still liable for deficiency judgments, which is the difference between what they owed on the mortgage and what the bank gets in a foreclosure auction or a short sale. Those who do understand may fight or try to delay foreclosures, which doesn’t help the courts with the backlog. But it also means that once the foreclosure crisis is over, courts could be hit with a wave of deficiency actions.

Zikakis said of many of her clients, “If they could be relieved of the deficiency, they would hand in the keys immediately.”

Two things. First, in number one, notice that a lot of the backlog is the result of banks not wanting to take over properties. Some estimates place an abandoned property at $20,000 a pop, so a bank leaving three properties abandoned in any given place reasonably costs the municipality a teacher’s salary.

The second is even more important: homeowners are still on the hook for the deficiency judgments. If banks said they wouldn’t chase homeowners to the ends of the earth, garnishing their wages and disrupting their earnings, many years after a bum investment decision went south – if they were able to take at least a share in the downside – there would be a much, much smaller crisis. But because banks are credibly signaling that they will move Heaven and Earth to get every last penny they can out of those who have already been kicked to the curb, those who are about to be kicked out want to have their say in court.

Having mortgage cramdown would have helped alleviate this, FYI. Sure, courts would have gotten more crowded short-term, but it also would have been clearer in the results. And remember, this isn’t about poor people wanting to steal a home from someone;  it’s about people wanting to make sure they can negotiate their way out of the housing crash that has left them deeply underwater.  The ramifications of the crisis have left people much worse off than their original bad investment would have.  People are willing to negotiate. Are the banks?

When you go back and read at Yves Smith’s site about a sample judge, it’s clear he’s moving people as fast as possible into a situation of not wanting to fight, either for their homes or for the negotiated values of them. Those who are falsely being evicted or those who have a credible case to fight are being lost in the shuffle. Meanwhile, banks realized that they could cash out big, especially in fees, by rushing as much as possible through foreclosure, but that doesn’t give homeowners a fair shake, or cause a reasonable negotiation to occur. And that is simply not just.

Start watching this (Naked Capitalism is the clearinghouse of info). The ratings agencies are being put in motion and they are always late to the news. JP Morgan has just fessed up to worries, arguably slowing the foreclosures in the country to a standstill. It’s going to get much worse before it gets better.

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6 Responses to More on the Florida Foreclosure Nightmare

  1. QUESTIONABLE commercial and residential real estate foreclosures via deceptive and fraudulent proceedings enable lenders to repeatedly, illegally flip properties, and enables falsified IRS form 1099-A’s. Foreclosure fraud is the best means by which unscrupulous foreclosure mill lawyers deceptively auction and bid (or insiders bid) and acquire those properties; and some neighborhoods blighted.

    Foreclosure fraud deliberately utilizes defunct mortgage lenders companies or companies which no longer own promissory notes; huge ransom “fees” makes it even harder for property owners to regain properties. Two particular companies “which benefit from fraudulent foreclosures are Wells Fargo and Freddie Mac.

    Representations about Freddie Mac billion dollar losses should be weighed against the needless money that Freddie –as well as other lenders– PAY foreclosure mills and debt collectors who utilize courtrooms to outmaneuver and persecute property owners who oppose fraudulent foreclosures. Further, when justified lawsuits for fraud –as well as for OUTRAGEOUS “Unfair Debt Collection Practices,” become filed against lenders and mills, those same lawyers make additional $$$$ from litigating and concealing their own wrongdoing!

    Further, THE SHOCKING fabricated pleadings filed in Bankruptcy courts for FRAUDULENT REPOSSESSION of commercial and residential real estate res ipsa loquitur is demonstration of intentional foreclosure fraud. Foreclosure fraud has many far reaching effects for people; for example: UNJUSTIFIABLE HOMELESSNESS, UNFAIRLY answerable for IRS tax bills, and undue “deficiency judgments.” **http://open.salon.com/blog/wwwlawgraceorg/2010/08/18/case_in_point_foreclosure_mills_judicial_fraud_consumer

  2. Random Blowhard says:

    Rule of Law, Meh, an outdated concept who’s time has come. In the future only the demands of the worthy rich will be obeyed. The small people will be used and then discarded as is there lot in life.

  3. Craig says:

    A thoughtful and well-considered post. I think it’s absolutely critical to distinguish between the genuinely fraudulent and atrocious actions of certain companies–”foreclosing” on properties that aren’t mortgaged–and paperwork screwups in an otherwise righteous foreclosure.

    I see a disturbing tendancy to conflate these two kinds of stories in the press and on blogs; I don’t think that can end up advancing the cause of justice very far.

    Bottom line: anyone who hasn’t paid on their mortgage in twelve or eighteen months is entitled to a very, very tiny amount of righteous indignation. If the question of who owns such a house turns out to be a bit complicated, the one answer we are certain is wrong is the delinquent borrower.

  4. Pingback: Wonk Room » Where Are Congressional Republicans On The Calls For A Foreclosure Moratorium?

  5. I paid my NON-SUBPRIME mortgage for 7 years prior to abusive marriage. When a foreclosure mill lawyer fraudulently foreclosed via a defunct lender’s identity, the courts castigated me for opposing the foreclosure mill lawyer’s red flag use of the defunct lender’s identity, and Bankruptcy “lift stay” motions and “proof of claim” documents under Wells Fargo’s name.

    Years later, the foreclosure lawyer used the non-existent lender’s identity, to carry out a ‘simulated’ auction (in my absence), and a “straw” buyer purchase of my home took place. The foreclosure lawyer had the property deed recorded into the name of the non-existent lender, and 3 months later, the local newspaper showed Freddie Mac as paying the non-existent lender over $86,000. At the end of the year, I discovered that Wells Fargo had gotten in on the foreclosure sham by filing a false IRS form 1099-A for my property when I received an IRS tax bill.

    It’s not simply loss of my home that ‘eats my lunch’, it’s such things as horrible, horrible YEARS of judicial abuses, privacy invasions, danger for my safety, blackballed from LAW employment, and other reprisals to which I am yet subjected, due to APPALLING LAND GRAB racketeering (AKA) foreclosure. And, it is similar appalling injustices of which I know have happened to other people, merely because they also lawfully sought their rights to DUE PROCESS OF LAW. I will not cease speaking out / I’m not an Internet troll. I am doing every lawful thing I know, because I simply want MY LIFE BACK. *http://www.lawgrace.org/2010/09/30/important-facts-about-foreclosure-and-mortgage-fraud/

  6. Pingback: Cantor Opposes Foreclosure Moratorium: ‘People Have To Take Responsibility For Themselves’ | thehitjob.com

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