In our last blog we talked about the stories that resonated with Roy Oppenheim in 2011, but what stories mattered to you?

We reviewed the most popular stories on the South Florida Law Blog this year and came up with our list of the top 10 posts for 2011

# 10 — Florida Deficiency Judgments FAQs . . . By Popular Demand

Some of Oppenheim Law’s most popular videos and blog posts this year were on the topic of deficiency judgements. Understanding deficiencies and the Florida rules which pertain to them are key to avoid getting a deficiency judgment.

The unpaid mortgage debt associated with a residence is a deficiency.  A bank can foreclose and force a judicial sale of a home if the mortgage borrower fails to pay the associated mortgage debt.  The deficiency is the difference between the proceeds from the sale and the remaining mortgage loan balance. A deficiency can also result from a short sale, which is an alternative to foreclosure.

The rules pertaining to deficiencies differ from state to state. In Florida, if the bank is successful in obtaining a deficiency judgment, it will be recorded in the public records and collectable for up to twenty years. To avoid the possibility of getting a deficiency judgment, before deciding to walk away from your home, hiring a good foreclosure defense attorney is necessary.

#9 — #Fail – Government Plan to Help #Florida Homeowners

At first glance, it looked  like Florida foreclosure victims were finally getting the help they need from the feds. Reading the fine print it looks like if we had to describe this in one tweet word: #fail.

The two agencies that are in charge of overseeing the Independent Foreclosure Review went  have gone out of their way to keep the details of this program secret.  The most alarming issue is the possible conflict of interest between the consulting firms that were chosen by bank regulators to administer the foreclosure reviews. The fact is these consulting firms are actually getting paid by the banks.

The same banks that ultimately led the economy into the mortgage crisis were placed in control of deciding which homeowners are entitled to compensation for the banks own wrongdoings.  It is doubtful homeowners will receive any meaningful relief from this program.

#8 — Law Review Executive Summary: Black Magic of Securitized Trusts

Deconstructing the Black Magic of Securitized Trusts by Roy D. Oppenheim and Jacquelyn K. Trask-Rahn gives an in-depth analysis of the process of securitizing mortgages and how it has gone awry. The article begins with a focus on the rise of subprime lending, the impact that subprime loans, such as “interest-only” and “negative amortization,” had on the American Dream of home ownership, and how “securitizing” these loans led to a false sense of security for homeowners and investors during the housing bubble.

During the spike in foreclosure filings that followed the implosion of the market, in an effort to prove proper standing to bring the action, banks began producing tens of thousands of assignments predating the filing of the foreclosure action. This mass production of assignments proved that trustees had not properly transferred the mortgages from inception thus the banks laced standing to foreclose.

#7 — Banks Desperately Seeking Short Sales

Oppenheim Law has represented hundreds of homeowners’ short sales over the past few years and as a result has seen millions of dollars of homeowner deficiencies waived by the banks, who are becoming more eager to avoid foreclosure and complete short sales.

On New Year’s Eve we’ll post our top 5 stories for 2011 — Happy Holidays!

The lesson learned: by working with the banks, homeowners can craft their own real estate bailout and avoid a deficiency judgment.

“We are seeing banks focus on more efficiently clearing distressed inventory through more streamlined short sales,” said South Florida Law Blog’s Roy Oppenheim.

The increase we’ve seen in short sales is in line with numbers reported by RealtyTrac, reporting a 19 percent increase in short sales in 2011’s second quarter, while the number of bank-owned sales was stagnate.  12 percent of nationwide sales were short sales, according to the Q2 2011 U.S. Foreclosure Sales Report released by RealtyTrac.

“The short sale program is not a government bailout, it has evolved through American ingenuity,” reminds Oppenheim, “but is one of the only programs that is truly working.”

Florida banks see the short sale light

The banks would not be approving these shorts sales if it wasn’t an upside for them too, and it is.  Banks have finally realized a short sale will also help their bottom line.

The average price for a home sold in short sale  was $192,129 in the second quarter, 21 percent below the average price of a non-foreclosed home.

Yet a home that went through foreclosure sold for an average of $145,211, nearly 40 percent lower than a non-foreclosed home.

And more good news for the real estate market, even though there have been a large number of distressed home sales recently, fewer homes are coming on the market.

Is homeownership still part of today’s American Dream? A recent article in the Wall Street Journal shared some old school advice on buying a home in today’s economy, more along the lines of Depression Era thinkers versus Baby Boomer spenders.

1. Buy what you can afford without scrimping on other needs. If you need to save for retirement or college, save. Don’t think your Florida home is going to pay for them.

2. If you need to move in less that seven years, then rent, don’t buy. You will be hard pressed to break even on your Florida home unless you live in it for a long time.

3. Values could stay depressed for many years. The only way you can plan to build equity in your Florida home is to pay down the mortgage.

Whether buying or selling a Florida short sale or foreclosure or renting; make smart decisions in light of today’s economy. Today’s housing market is still unraveling.

Second mortgages refer to any loan taken out on a property that is subordinate to the first mortgage, and include home-equity loans or lines of credit.

According to data from CoreLogic and The New York Times, homeowners with a second mortgage are two times more likely to be underwater on their property.  CoreLogic’s data also shows that homeowners with second mortgages are facing deeper levels of negative equity in their homes – $83,000 compared with $52,000 – than borrowers without second mortgages.

The bright side is that Oppenheim Law is seeing massive principal reduction on second mortgages through loan modifications, according to Oppenheim.  It’s becoming common for the Florida foreclosure defense law firm to negotiate up to 80% in principal reductions of second mortgages, a far greater percentage than first mortgages.

A vast majority of first mortgages were cut up, bundled and sold to investors as mortgage backed securities, the process that played such an enormous role in the Florida real estate crisis. On the other hand, nearly three-quarters of second mortgages are still held by the banks that made the original loans.

The good news for Florida homeowners is that these banks are beginning to treat second mortgages similarly to consumer credit card debt, accepting minimal “pay offs” to settle up with homeowners.

Homeowners who are willing to negotiate a “short payoff” can have tremendous success reducing their second mortgage principal by 50% to 80% and then paying off the remaining balance in cash.  Banks are even starting to solicit Florida homeowners with second mortgages to make initial offers for 40% to 50% reductions, which Oppenheim Law is then able to negotiate to as much as 80%.

Ironically, the first key to success in dealing with a Florida loan modification on a second mortgage is to stop making your monthly payments.

The bottom line is that while a second mortgage is a strong indicator of negative housing equity and can complicate the process of completing a Florida loan modification or short sale, Oppenheim Law is having continued success negotiating principal reduction of second mortgages for South Florida homeowners.

For more information on second mortgages and Florida loan modifications visit oppenheimlaw.com.

A new federally funded program is now accepting applications for mortgage assistance payments in Florida. The Florida Hardest-Hit program pays an applicant’s mortgage for up to six months to help them to focus on finding a job. There is a maximum, however, of $12,000. Also, the program will pay out up to $6,000 to bring loans current. If this seems meager, it is. Governor Scott gutted the program and stripped it of all effectiveness by changing the terms from 18 months of assistance to six. Ostensibly, this was done to open the program to more people. The problem with such a change is that the assistance provided will do little good to the people that need it most, those who bought houses during the height of the bubble and thus are extremely underwater. Additionally, loans that only need $6,000 to be current are hardly the loans that merit special federal assistance.

Oppenheim Law encourages homeowners to participate! The lack of effectiveness is not stopping homeowners from applying, nor should it. Any help is better than no help at all. Yesterday, the first day of the program, saw many more applications than were expected. However, an official tally for the state won’t be available until the end of the week.

Do such offers signify that banks have learned their lesson and are trying to get out of sub-prime loans, or are they looking to just prevent further losses? Perhaps the answer is that the banks are concerned about existing home prices. Bank of America’s chief economist, Mickey Levy, while speaking privately, spoke of the concern that the 1.8 million bad loans in the nation will drive down the market if they go into foreclosure. Such fears help explain why the banks are desperate to avoid foreclosing on homes. They don’t want the rest of their loans to become vulnerable: the more foreclosures, the more house prices fall, therefore, the value of the banks’ loans go down and more people want to walk away from their homes, causing the banks even more losses.

In the end, this situation is a win-win. Not only do banks protect home prices, but they stand to get back more money quicker from a short sale than a foreclosure and the good publicity would be a nice change of pace for their PR departments. Homeowners in trouble are also helped because they can get out of their houses with some cash in their pockets and get on with the rest of their lives.

While we have addressed the deficiency judgment issue for years now, the Sun-Sentinel has now also reported on the danger of what will soon happen. In two or three years, when big banks catch up with their foreclosures, we will see a flood of such deficiency judgments. The main targets of the big banks will be strategic defaulters. Strategic defaulters are the folks who could afford their mortgages but defaulted because they are so underwater that it didn’t make any sense to pay. Not every strategic defaulter has to worry though. A deficiency judgment can only be entered in foreclosure cases. Short sales cannot lead to a judgment being entered against you unless the bank decides to file an action and litigate in court. An action would require the bank to pay attorneys and other fees with no guarantee of success and scrutiny of their documents, which might lead to sanction if fraud is uncovered.

There is still some time left before we are inundated with deficiency judgments. Nevertheless, everyone going through the foreclosure or short sale processes needs to be on their guard. We here at Oppenheim Law have seen a recent up tick in banks pursuing deficiency judgments. Steps can be taken now that will help protect people against this worst-case scenario, as we have successfully been doing in the last few years.

While South Florida is #1 for mortgage fraud and foreclosure settlement talks between banks and the Obama administration appear futile at best, this week’s new was not all doom and gloom.

Check out Oppenheim Law’s and Weston Title’s picks in the week’s winners and losers for Florida foreclosure, real estate and the economy.

Winners

Pending home sales up 18% in Miami-Dade
Pending home sales rose 18 percent in Miami-Dade County over the course of the past month, according to new data released today by the Miami Association of Realtors.

Pending home sales, which include single-family home and condominium unit sales, were also up 3.24 percent month-over-month in March, the figures show.

“Increased pending sales reflect the existence of pent-up demand and should result in strengthening home values as distressed housing inventory continues to be absorbed,” said Jack Levine, chairman of the board of Miami Realtors.

Hiring Shows Growing Strength
The American job market is starting to show some muscle, according to The Wall Street Journal.

The jobless rate, our most politically salient measure of economic health, edged down to 8.8% in the fourth consecutive monthly decline despite the fact that more Americans entered the job market.
“It’s a very solid report that shows the labor market gaining momentum,” said David Greenlaw, an economist with Morgan Stanley in New York.

The public sector remained a weak point, as local governments shed 15,000 jobs last month in an effort to close budget gaps, but many other sectors showed strong growth, according to The Wall Street Journal.

Professional and business services gained 78,000 jobs. Factories added 17,000 jobs, while health care added 37,000. Over the past 12 months, health care has added an average of 24,000 jobs a month.

Losers

South Florida is #1 for Foreclosure Fraud
South Florida is first in the country for the number of mortgage fraud suspicious activity reports per capita, according to a new report from the Financial Crimes Enforcement Network and The South Florida Business Journal.

The region, which recorded 11,833 such reports last year, also leads the nation in Medicare fraud and auto insurance fraud.

Overall, mortgage fraud reports rose significantly in 2010, with 70,472 reports filed last year, up from 57,507 in 2009.

In Foreclosure Settlement Talks With Banks, Predictions of a Long Process
Little was settled in the first round of foreclosure settlement talks, according to The New York Times.

As negotiations begin over new rules for homeowners who are in default, experts all agree that progress is going to take time.

But lengthy negotiations work to the banks’ advantage, according to The Times.

“The banks’ strategy is to run the clock,” a Georgetown University law professor, Adam Levitin, said. “The chances of a settlement that meaningfully reforms mortgage servicing and makes the banks pay an appropriate price for illegal conduct are rapidly slipping away.”

Draw

Subprime Bonds Are Back

As the economy recovers, long-term investors are willing to take on more risks and subprime and other residential mortgage bonds that helped trigger the financial crisis are back in vogue, according to The Wall Street Journal.

The stock market ended its best first quarter since 1999 last week, with the Dow Jones Industrial Average closing up 6.41% on the quarter.

The willingness to take on risk is helping ordinary borrowers, too, by leading banks to make more nontraditional loans, such as jumbo mortgages, and to charge lower interest rates for them.

While it is encouraging that the markets are continuing on an upward swing, cautious optimism is needed any time subprime bonds are involved.

So, while it looks like housing values keep dropping around the country and new construction is also off, South Florida real estate may have hit rock bottom or close to it.

It seems that South Florida’s position as an international location is encouraging foreigners to swoop in and purchase homes and condos that based on an international standard are outright cheap.  Of course; a strong stock market, a dollar that is fairly weak and the prospect of huge government defecits that forshadows inflation, only helps.

In Sun-Sentinel reporter Paul Owers’ blog House Keys, Owers discusses the ramifications of Broward County now requiring 10 days’ notice to cancel residential foreclosure auctions according to an administrative order signed by Broward Chief Judge Victor Tobin.

Prior to the Administrative Order, Broward foreclosure auctions could be cancelled only hours before the sale. Now, homeowners looking to cancel a home foreclosure in Broward County are forced to file a motion and be scheduled for a hearing at least 10 business days before the foreclosure sale date.

Oppenheim Law Real Estate Attorney and Legal Bogger Roy Oppenheim was quoted in the article saying, “This will have unintended consequences. Clearly, the homeowner gets the short end of the stick here.”

Effectively, this order limits the time homeowners have to negotiate a short sale or loan modification before their home is put up for auction.  Before the order, these deals could be completed up to the last minute.

This order appears to be an attempt to eliminate the backlog of foreclosure cases by limiting the number of homeowners who cancel their foreclosure auctions.

“Roy Oppenheim gets it, and I agree with him,” said Ronald Scott Kaniuk in a comment to the blog.  “Courts throughout the state are trying to expedite foreclosures in the mistaken belief that completing foreclosures – even if the process is flawed, improper or ill-advised – is better than having cases continue to proceed on a normal track like any other litigation.”

“The fact is that these rules are ad hoc and apply only to foreclosure cases, relegating a whole class of defendants to different treatment,” Kaniuk continued.  “This process doesn’t help anyone except the banks, who don’t need any more help, or bailouts for that matter.”