Borrowers can avoid this exit with a short sale!

The short sale has and will always be, a much better alternative for the banks. In many cases, when modification isn’t an option, a short sale is better for the existing homeowners  as well.

It’s good for the banks because it’s the fastest way to bring down their massive backlog of foreclosures.

Now that more and more foreclosures are lingering in the courts, banks now realize its the simplest way to get these homes back on the market, sometimes in just a few months.

They may not get back the full value of the home but their losses are about 15 percent less than if the home was foreclosed on, according to Bloomberg News.

It’s good for the borrower because they can walk away, legally, with little or no debt at all. Some banks are even offering cash incentives, as much as $35,000 in some cases, to entice homeowners to sell back their homes.

It’s win-win! In fact, it’s better than that. It’s win-win-win! The stress, the headaches, the months and years of inaction, can be put to bed with a short sale.

A short sale, in short, is quite simple. A distressed homeowner can sell the bank their home for less than what they originally owe. Banks will often agree to not go after a deficiency judgement if borrowers agree to a short sale.

JP Morgan, who approves about 5,000 short sales a month,  is giving the largest incentives, but more and more lenders are now agreeing to them.

There’s a ripple effect here that’s good for everyone. The seller gets to leave foreclosure hell once and for all, and can get money to help them transition into a rental and start fresh.

A new family gets to buy the home at a nice discount, and the neighbors don’t have to live next to an abandoned home or deal with having a non-caring faceless entity, namely the banks as their neighbor.

The lawn guy, the bug guy get back to work, and the new owners buy new furniture, new drapes, and suddenly the economy is bouncing back!

Banks might have thought foreclosing was the right idea. It wasn’t then, it isn’t now, and it will never be.

Courtesy: New York Giants

The clock may have run out on this year’s Super Bowl (Way to go Giants!!) but there’s still a few minutes left in this year’s REAL grudge match, the Banks vs. the Attorney Generals.

It’s 4th and Inches, the score is tied, and it would be nice to avoid overtime.

Today we could learn whether the much-discussed robo-signing settlement with Wells Fargo, Bank of America, JP Morgan Chase, Ally Financial and CitiGroup will come to pass, and in what form.

With California AG Kamala Harris returning to the negotiating table, the deal looks closer than ever to being sealed. Harris, who represents the state with the largest amount of foreclosed homes, has rightfully been hesitant to sign off because her state has the most to gain, or lose, from this deal.

We were initially very hesitant to see this deal go through ourselves, but the time has come for it to put to bed.

Why?

Because we feel the deal in its current form does a lot. Does it help every single homeowner who’s underwater? Of course not. There is no deal that will.

But here is who it does help. The homeowners who have fought to keep their homes from day one, who were at the forefront of these legal challenges against the banks. Much of what we have learned about robo-signing and the lack of standing banks had to bring foreclosure, would not have come to light without these crusaders, and its time they got a reprieve.

In theory it also helps the responsible homeowners, the ones who paid their mortgages on-time and whose homes went underwater through no fault of their own. They too need to be rewarded.

The reported 25 billion dollars (perhaps more if all 50 states sign on) that the banks are putting up will finally offer these homeowners some principal reduction, and the chance to refinance, two things we have long sought to see.

For those who just walked away, who left their homes to fall into disrepair, it’s our opinion that they should not be a priority.

The longer this deal lingers without any hope of conclusion, the longer we face the chance of a social contagion where everyone decides to stop paying their mortgage.  That will not help the market, and more importantly it won’t help the homeowners who’ve truly been wronged by the banks.

There are some bloggers and commentators who are still urging the AGs to not sign this deal. Is is a slap on the wrist? Yes, but that’s all it can be. We must not forget that rob-signing is the tip of the iceberg.

Whatever state claims that might be washed away by this agreement will seem like small potatoes once Schneiderman and his team wrap their investigation.

In fact they’ll seem more like little potato crumbs. Trust us what lies ahead is far worse.

If this settlement is the homeowner’s Super Bowl, then what lies on the horizon is the Supercalifragilisticexpialidocious Bowl.

There is nothing more important to us than making sure the banks face punishment for their dirty dealings.  It is very important that people continue to challenge the banks by trying to flesh out whether they  truly have standing to bring foreclosure. There’s no reason why this should end with this settlement. When it’s said and done, we believe the banks will be punished.

So far Schneiderman has not not wavered in his efforts to go after the banks. His efforts in the last few weeks have them running scared for the first time. We’re confidant he’ll do whatever it takes to get the banks. He has been one of the holdouts against this deal, but he is starting to turn around on it.

If he can be comfortable with it, then so can we.

With details of the proposed $25 billion settlement with the nation’s largest banks over the robo-signing fiasco now out in the public eye thanks to the Associated Press, we feel a large sense of disappointment.

There’s no question that this deal will change the mortgage industry for the better. Some homeowners will even have a much better chance of being able to restructure their loans when facing foreclosure under this deal.

No One’s Getting Their Keys Back

Yet, there are many out there who are going to feel little comfort with this agreement. Here’s what the deal is NOT going to do. It’s not going to put people who’ve lost their homes (again because of deceptive foreclosure practices) back in those houses, or give them any real financial security.

According to the deal, about 750,000 Americans, which by the way is about ½ of the people who are eligible for help under this settlement, may get a check for about $1,800. That’s the equivalent of one of those parting gifts they’d give contestants when they lose on Wheel of Fortune. In other words, it does them very little good.

Now it’s true that about a million current homeowners will supposedly get their loan balances reduced by an average of 20 thousand dollars. That’s great, and something we here at the South Florida Law Blog have been begging for. But when you consider their are about 11 million out there with underwater mortgages, A LOT of people will be no better off.

Banks Still On Easy Street

And here’s the other thing this deal doesn’t do. It doesn’t hold the banks accountable. Why after the mountains and mountains of evidence of wrong-doing, is the government still playing nice-nice with the nation’s lenders?

The funny thing about this settlement, despite the fact that it’s long overdue, it feels rushed.  There hasn’t been a full investigation into the banks’ conduct, no discovery, yet here this deal is, as if they are trying to push it through before anyone notices. It’s feels as if they are trying to avoid the investigation in the first place!

Red Flags Already Raised

Several politicians, including Ohio Senator Sherrod Brown, are already raising concerns over a lack of a proper investigation.  We should also point out that the attorneys general in New York and California, a state with one of the highest foreclosure rates, have split from the federal government to pursue their own investigations.  The ink on this deal isn’t dry and yet it’s already raising red flags.

“Wall Street is again trying to pass the buck,” Brown told the Associated Press, “Instead of criminal prosecutions, we’re talking about something that’s not more than a slap on the wrist.”

The banks have dragged their feet, in order to escape any real punishment. The perception still remains that the banks are too big to be punished, there is nothing in this deal that invalidates that notion. While we agree this deal should be and is about fixing the system, there is a call for retribution from homeowners that this deal simply doesn’t address.

“This is not vengeance against the banks,” Brown told HousingWire about the deal.

But shouldn’t it be?

President Barack Obama delivers remarks on the economy at Shaker Heights High School,Shaker Heights, Ohio, Jan. 4, 2012. (Official White House Photo by Chuck Kennedy)

We really haven’t seen President Obama insert himself directly into the housing crisis, but there are rumblings that he may do just that during Tuesday’s State of The Union address.

The fact is that is what homeowners have been clamoring for. A new USA TODAY/Gallup Poll found 58% of Americans want the government to do more to help people keep homes.

According to HousingWire, Ohio senator Sherrod Brown told reporters today that there was evidence that Obama would address the robo-signing case which involves several major banks.  A North Carolina congressman even said there were rumours that Obama would announce a settlement, something HUD secretary Shaun Donovan suggested last week was ‘very close’, as we mentioned in our Week In Review on Friday.

For the record, Obama’s press secretary refused to confirm any details, saying only that the President was “focused on the issue of housing”.

Between Dononvan’s comments and the recent white paper sent out by the Federal Reserve, it seems that more and more top government officials are finally realizing how important the housing market is to our economic recovery, not to mention their own political survival.

This is not news to us here at the South Florida Law Blog.

We called it a band-aid, and at least for some South Florida homeowners, it’s proving to be just that.  The Palm Beach Post profiled several homeowners who were among the first to receive benefits from the program. Sheryl Stuart, a Jupiter homeowner whose business went under, applied for help through the mortgage relief program, and is about to see her payments end next month.  Hardest Hit only entitles qualified homeowners up to six months of mortgage assistance.

Stuart told the Palm Beach Post that even though she’s found a new job, her salary won’t be able to cover her mortgage payment once she stops receiving aid from Hardest Hit. She’s frustrated that she’s about to be right back where she started when she applied for aid in the first place.

“In this economy, to think you can turn your life around in six months is totally ludicrous,” Stuart said in the article,  ”The working class is quickly slipping into a black hole.”

The truth is this program, however well-intentioned it might have been, is just not enough. What Hardest Hit is essentially doing is giving homeowners a nice seafood dinner, when they really need to learn how to fish.

It scratches the surface but for people like Stuart it might just delay the inevitable. Unless you’re giving homeowners a solid two years of payment relief, you’re not giving these people time to go back to school, improve their financial standing, and really turn their lives around.

Hardest Hit is throwing good money after bad, and really, what’s the point of spending all this money if it won’t provide permanent relief?

Not to mention that many homeowners have been rejected by the program, nearly 10,000 according to the Post, for reasons including being over 180 days past due on their mortgage.  So if many aren’t getting the help they need, and those who are getting the relief aren’t feeling a lasting impact, what’s the point?

Spokeswoman Cecka Green told the Post the state is going through uncharted waters with Hardest Hit, and it looks to us like the state wasn’t truly prepared to handle the demand.

“We never really anticipated where we would be at this point since we had not ever before administered a program like this,” Green said.

Helping people make their payments isn’t the answer. We were elated when the Federal Reserve started talking about principal reduction, that’s a much better solution that ultimately has a chance of keeping people in their homes.

If we allowed homeowners facing foreclosure to lease back their properties, that too would have a higher success rate, in our opinion. If we’ve learned nothing else, it’s that banks make the worst neighbors.

Florida’s Hardest Hit was doomed from the get-go, so it’s time to focus on systematic long-term solutions.

Federal Reserve Wake-Up Call!

This week we blogged about the Federal Reserve finally coming around and looking out for the homeowners, instead of the banks. A 26-page white paper released by The Fed offered up their suggestions on how to fix the broken housing market. They also finally came to the conclusion that government MUST come down harder on lenders. Some of the ideas offered up by The Fed may be tough for Congress to swallow, but we believe they have a good chance of keeping more people in their homes.

We particularly liked the idea of turning more foreclosed and vacant properties into rental homes (so much better for the neighborhoods) and the need to offer principal reduction to more homeowners. Roy Oppenheim expands on this issue in his latest “From The Trenches” video.

Broward Foreclosures Down 67%

Foreclosures were in steep decline across the country in 2011, including a 67 percent drop here in Broward County, according to RealtyTrac. Thanks to the ‘robo-signer’ scandal, lenders were suddenly much more careful about bringing foreclosure cases to the courts.  While that is likely to continue in 2012, Roy Oppenheim told the Sun-Sentinel that things could start to pick up.

“It’s going to pick up, but it’s not going to be insane like it was,” he explained.

Palm Beach County also saw a significant drop last year, 58 percent, while Florida was down 63 percent, RealtyTrac reported.

Fannie Mae CEO Williams resigns

Fannie Mae and Freddie Mac are always at the center of the housing crisis, so we are very curious to see the fallout from Micheal Williams resignation, which came down Tuesday. He’s been with Fannie Mae since 1991 and been head of the company since 2009.

Who replaces him could have a huge impact on the direction of Fannie Mae, David Stevens, the president of the Mortgage Bankers Association told HousingWire.

“Depending on whom you’re hiring sends a strong message about where this institution is headed,” Sanders said.

This means both GSE’s will leadership changes this year, with Freddie Mac CEO Charles Haldeman set to leave his post sometime this year. Housing Wire reports both each made roughly $2.3 million in bonuses,

Big Banks Face Inquiry Over Home Insurance

The banks have been ripping off the homeowner six ways to Sunday, and here’s another disturbing example, courtesy of the New York Times.

The New York Department of Financial Services is investigating multiple banks, including many of the usual suspects like JP Morgan Chase and Bank of America, this time over their use of what’s known as force placed insurance, the Times Louis Story reports.  When a homeowner allows their existing homeowners insurance to lapse, something that is all too common these days, the banks step in, often with little notice, and take out new policies.

These end up costing the customer often double, triple, sometimes six times what they paid before. The article cites one unlucky State Farm customer whose policy skyrocketed from $2,000 to $6,000 dollars a year! Benjamin Lansky, the superintendent of the NYDFS, issued 31 subpoenas related to the case, according to Story, who said Lansky is looking to reports of kickbacks to the banks from the insurance providers. With more and more homeowners falling behind on their mortgages, this is another way the banks are engaging in price gouging.

We hope you’ve had a good start to your new year and hope you’ll keep up us here at the South Florida Law Blog so you can stay informed on the foreclosure issues you need to know about.

Have a good weekend!

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!

Just as Oppenheim anticipated, this year we’ve seen how big this foreclosure mess really is. There were numerous investigations, and a self-imposed moratorium on foreclosures during parts of 2011, resulting in a massive backlog of cases.

It was ludicrous, as Bank of America officials first said, that they would only need 60 days to review their inventory of files.

“It took them virtually a year to figure out that they were doing were just not kosher and had to stop,” Oppenheim explained.

There were several huge financial settlements offered to the banks over their illegitimate foreclosure practices, but the majority just did not stick.  Judges told them the settlements were unacceptable and did not go far enough. With various attorneys general and the IRS among the agencies getting involved, these cases are nowhere close to settled.

“The banks literally got their hand not just caught in the cookie jar, but the lid was slammed on it, and everyone got to see the hand just hanging there,” said Oppenheim.

2011 is leaving us with a still unstable market, so people are looking for tangible investments, Oppenheim continued, and with the dollar still weak, Florida real estate is not a bad deal. When you add the fact that there is an excess of distressed properties, prices are not expected to rise anytime soon. he said.

Now every year there is an X-Factor, and this year it was Occupy Wall Street. It was a movement no one really saw coming, and despite some right-wingers attempts to limit Occupy as a fringe movement, Oppenheim said, there is no question the message of Occupy has resonated with middle America.

Why?

It brought to the forefront two huge truths. One being that there is a huge economic inequality between the so called ‘1%’ and the rest of us.

The 2nd is that the veil has been lifted on how intertwined the government, the big banks and the Federal Reserve have become.

“The banks have grown so big and so large that the government itself is afraid to really, truly regulate it, because you really can’t tell where the government starts, where the federal reserve ends, its a really ugly sight.”

Anyone looking for an example need look no further that the 7.7 trillion dollars the Fed loaned to the largest banks — at essentially 0 percent! And what did the banks do with those assets?

Well its not only what they did, Oppenheim said, but what they DIDN’T do.

“They didn’t lend it to mainstream America, which would have seemed like they were going to do to help reverse this deflationary cycle.”

Instead it only led to more profits,which “came off the backs of you and me” to pay themselves bonuses and to help elect officials that were sympathetic to the banks, and not the average Joe.

Some politicians have floated the notion that corporations are people, but then, Oppenheim asks, how do you arrest a corporation and hold them accountable?

He concedes that it’s possible that individuals within these companies may not have committed a crime, but it’s clear that some companies as a whole did.

“I don’t buy into the notion that a crime wasn’t committed,” Oppenheim said, “We have not advanced our legal system sufficiently to deal with these very complex financial crimes.”

While foreclosures may have slowed down in 2011 he expects them to pick up in the new year.

“There’s this new wave, It’s not going to be as large, but it’s going to be a continuous stream coming through.”

Then there is what he calls zombie foreclosures,  which had been dismissed, but not permanently. Oppenheim would not be surprised to see them spring up in 2012.

“So far we haven’t seen them come back, but the banks have the right to bring them again,” he said.

If that happens, he fears the system would once again become bogged down with an overload of foreclosure paperwork, that will go through at a much slower pace.

The truth is, if banks brought all foreclosures to market right now it would crash the market, Oppenheim said, and the banks would become insolvent.

So what does Oppenheim predict for the real estate market in 2012? While he knows he can’t predict the future, Oppenheim says to expect the unexpected.

“I see that they’ll be something that we completely don’t anticipate,” Oppenheim said, “I’m not sure what it’s going to be.”

Coming up in our next blog, we’’ll review our top 10 stories for 2011.  Happy Holidays!