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?

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!

That’s what the team at Oppenheim Law realized after watching 60 Minutes’ latest piece on the foreclosure crisis. This time Scott Pelley focused on a neighborhood in Cleveland where               officials  has resorted to tearing down what were once perfectly good homes.

Why? Because the banks that control the homes have been acting as terrible irresponsible neighbors.  The end result is too many neighborhoods are littered with abandoned      properties,   many of which have been stripped to the bone by thieves. As many as 25 percent of these homes are now empty, according to Pelley. These neighborhoods, of which there are far too many,   have fallen into a state of disrepair, where a total tear-down is the only option.

You don’t have to be underwater to get splashed

Probably the most disturbing revelation to come out of the 60 Minutes story was the foreclosure crisis has impacted all homeowners, regardless of whether they are in danger of losing their homes or not. In fact their homes didn’t even need to be underwater to feel the pinch of the housing mess.

With countless homes now empty and transformed into eyesores, those who remain are seeing their property values sink faster than the Titanic.  People are left with homes that are virtually worthless and unsellable, so even if they wanted to buy a home somewhere else, it’s unlikely they could.

Once such woman featured in the story, Roberta Bryant, when asked what her home was now worth, replied “30 dollars.”  She might have been laughing when she said it, but she wasn’t joking.

Banks leave communities behind, while homeowners rally behind them

While there has been plenty of debate whether people should walk away from a house that is underwater, 60 Minutes revealed a dirty little secret, banks have been doing just that.

When you look at the condition of some of the abandoned homes seen in the story, one needs look squarely at the banks for blame.  They should be maintaining these homes after they foreclose on them, but instead in many cases they do nothing, allowing these homes to become blights on the neighborhood and a haven for squatters or criminal activity.

The fact is, banks are cheap too. For all the the talk about financial responsibility, Jim Rokakis, a former county treasurer who spoke to Pelley said banks sometimes won’t go through with a foreclosure to avoid spending the $8-$10,000 to tear the house down. A cost the government is often left to pay.

Which is why we’re proud of homeowners like Linda Bizzelle. She was one of many homeowners interviewed, who despite having a home that’s now worth half of what she paid for it, refuses to walk away. People like her are the reason this epidemic hasn’t spread.

Monica Hubbard, another such homeowner, was asked why she continued to pay her mortgage.

“Because I signed on the line. I made a promise”, she replied. When asked if her signature still meant something, she answered “It does.”

Now when was the last time you heard a bank say that?

The ‘Principal’ Solution

Rokasis didn’t flinch when asked what it would take to keep more homes from meeting a wrecking ball. To the surprise of no one — he puts the responsibility, as he should, on the banks.

“You’re gonna have to write down principle balances,” Rokasis told 60 Minutes, “Because if you don’t write down the principle to something that’s more realistic, it just guarantees that more people will walk away and more people will default.”

We couldn’t agree more. The banks have often taken an all-or-nothing approach to foreclosure, which is akin to putting a square peg in a round hole.  It just won’t fit anymore. If the banks won’t accept responsibility for mess they created, than they at least should lessen the burden on today’s homeowner. It makes no sense why they wouldn’t want to keep people in their homes, even if they take a loss.

Isn’t getting 75,000 dollars back on a 150,000 loan better than having a homeowner walk away and getting nothing in return?

Foreclosure is a troublesome virus that is on the verge of becoming a pandemic, banks have the cure — now if they would only use it.

Roy Oppenheim
From the Trenches

The Oppenheim Law editorial team found this ironic:  A drug dealer has more constitutional rights to protection from the government in his home than your average homeowner in foreclosure.

In a case being appealed to the United States Supreme Court, the Florida Supreme Court recently held that because the “home” has a long standing history of receiving additional constitutional protect

Interestingly enough, the U.S. government, through Freddie Mac and Fannie Mae, is the single largest investor of residential mortgages. So what this really means is that the government can steal your house through bad loan paperwork and fraudulent foreclosure practices, but the local drug dealer is safe from a sniff by Franky the Drug Sniffing Dog.ions, using a drug sniffing dog outside the front door of a drug dealer’s house constituted an illegal search and seizure under the Fourth Amendment. Yet this same court has allowed banks and investors to use the lower courts in Florida as their own private collection agency.

This is yet one more example of the absurd turn that this country has taken during the real estate crash and subsequent foreclosure crisis, putting the government into the position of protecting the sanctity of a home owned by a drug dealer violating criminal laws, while stripping the same protections from one who is just down on his financial luck, in part due to the banks themselves.

The English belief that “every man’s house is his castle” formed the basis of the Fourth Amendment, and yet now has been convoluted to only protect criminals from prosecution, while leaving homeowners in foreclosure high and dry against a system that steamrolls their constitutional rights in the interest of protecting big banks, Wall Street, and now Uncle Sam.

The Florida Supreme Court stated in its holding that a “dog sniff” was “a substantial government intrusion into the sanctity of the home and constitutes a ‘search’ within the meaning of the Fourth Amendment.”

Notably, numerous bank executives have been quoted as saying egregiously negative things about homeowners who admittedly cannot afford their payments, but who have legitimate defenses against banks who have attempted to ignore constitutional and statutory rights as homeowners.

Essentially, these lenders and their leaders who are paid tens of millions of dollars a year have taken the position that “these homeowners haven’t paid, so who cares about their rights and any defenses they may have.” Yet, for a drug dealing homeowner whose house is full of drugs, the fact that his house may have been subject to unlawful search and seizure is not only highly relevant, but in fact could prevent any prosecution of him, even though he clearly is guilty.

The question raised by this case is: how can the Constitution protect drug dealers from “Franky the Drug Sniffing Dog,” while leaving thousands of homeowners homeless at the hands of illegals seizures by “Freddie and Fannie – the government investors?”

The Constitution was not intended to protect only part of the population. The Court should interpret the Constitution evenly, and should not work to protect criminals over the average American taxpayer suffering at the hands of a broken economy.

If you are in or near foreclosure and need help keeping your home, please contact the team at Oppenheim Law.

More than 11.5 million people will eventually default on their mortgages, predicts a leading mortgage analyst.

Did you read that right? Yes.

It’s no surprise that the weakening real-estate market has a strong correlation to the amount of severe negative-equity properties forecast to foreclose. Just like the old saying goes: the apple does not fall far from the tree.

Amherst Securities Group LP, one of the most respected companies in mortgage research, fears the current conditions are leading to an “impossible number” of defaults. This means more homeowners will lose their homes and more properties will be foreclosed.

So what does this mean for you?

More foreclosed homes mean an even greater supply of distressed homes. This excess inventory will lead to greater drops in the values of houses, not to mention the effects on communities as a whole.

As a result of more distressed houses, homeowners will also find it even more difficult to sell their houses. Such conditions lead to a feedback loop of underwater homes because of greater drops in home values and therefore a greater number of foreclosures.

To make matters worse, government intervention could alleviate the pain, however, the government seems unable or unwilling to do what needs to be done.

In order to stabilize home prices, government-owned Fannie Mae and Freddie Mac could remove excess inventory from the sale market and list them on the rental market. A smaller sales inventory will stabilize the market and help home prices to begin to recover. A greater amount of homes in the rental market will also cause rental prices to drop, helping struggling renters who are unable to buy.

If you are already trapped in the depths of default, you need to seek a professional to help you avoid a deficiency judgment. Oppenheim Law can offer you strategies for crafting your own bailout.

The results are in, and it appears the majority of those surveyed believe 2012 will be the magic year for the housing market. Trulia and RealtyTrac recently polled 2,034 U.S. adults aged 18 years and older to find out when most Americans think the housing market will recover. A mere 10 percent thought a recovery would happen this year, while nearly a quarter of those surveyed predicted a bumpy road until 2015 and beyond.

Despite recent reports that foreclosures have slowed and sales in Broward and Miami-Dade are trending up, Florida is not out of the woods yet. As special guest and Florida real estate developer, Pat Sessions, pointed out during our talk show From The Trenches, the market has yet to bottom out here in Florida.

As always, the South Florida Law Blog continues to share and comment on the latest in real estate news.

Financial Times Headline: Caution urged on US bank foreclosure fines

Who gets the golden ticket? We all remember the deserving Charlie Bucket inside the chocolate factory of the eccentric chocolatier, Willy Wonka. In the end, Charlie gets the Chocolate Factory and the golden ticket.

This week’s Financial Times writer Tom Braithwaite reported a story: Caution urged on US bank foreclosure fines.  The story focuses on how banks will be fined for failures that led to the foreclosure debacle. BUT…there is some sympathy and sugar coating happening. It seems regulators are pressing to avoid “dangerously large” penalties, according to one of the top officials participating in fractious settlement talks.

John Walsh, acting comptroller of the currency, told the Financial Times that he supported financial penalties for mortgage servicers, led by Bank of America and Wells Fargo, whose shoddy paperwork and improperly signed affidavits caused the repossession of delinquent borrowers’ homes to come to a grinding halt.

Here’s another BUT….

But the Office of the Comptroller of the Currency has differed with some state attorneys-general, the Federal Deposit Insurance Corporation and the new Consumer Financial Protection Bureau, which all want a more far-reaching settlement, with $20b in fines and at least some of the money used to reduce the debt owed by struggling homeowners.

The fact is this:  if the government goes too light on banks; it will be an invitation for banks to continue to skirt the law and continue to believe that they are not just too big to fail, but too big to be regulated or stopped.

In effect, it’s encouraging a kind of moral hazard that says to the banks:
“No problem, walk all over the tax payer, the home owner and the government and we will not do much to you other than slap your wrist.”

Such a signal will only ensure further misconduct in the future.

Ironically, it is the moral hazard argument that the Fed Reserve uses to discourage principal reduction for underwater homeowners. That argument goes that if we allow homeowners to get a principal reduction your neighbor will want one too.

How ironic that moral hazard is a concern for home owners behavior but not bank behavior?

But then again, who ever said there was not a double standard…Let’s never forget the golden rule… he who holds the gold rules!

From the trenches,

Roy Oppenheim