Not only is America’s foreclosure crisis still going strong, it now comes with even more fraud and deception.

With heightened media coverage surrounding the recent national mortgage settlement and refinements to government assistance programs, experts say selling “the schtick” has only become easier for criminals. But there are red flags consumers can watch out for when trying to determine whether or not an organization is legit.

First, homeowners should never have to pay anything up front for a loan modification or information on how to negotiate with their lender, says Roy Oppenheim, whose Florida-based law firm Oppenheim Law has handled more than 1,000 mortgage and foreclosure fraud cases over the past 5 years.

“If you’re paying upfront to a non-lawyer who’s claiming they can modify your loan, that’s a big scam,” Oppenheim says.

Read More from US News and World Report

Short Sales Soar as Home Foreclosures Fall

The foreclosure crisis isn’t over, but a new trend in real estate sales could be the light at the end of the tunnel for many borrowers and lenders. Short sales, which occur when homeowners sell their homes for less than what they still owe, outpaced foreclosures for the first time ever in January,according to a new report from Lender Processing Services, Inc.

The Federal Housing Finance Agency announced this month that mortgage servicers will be required to review and respond to short sale offers within 30 days and make final sale decisions within 60 days. The new requirements, which take effect in June, have kept lenders busy expanding and training the staff needed to catch up with growing short sale demand.

“When the robosigning crisis hit, there was effectively an 18-month moratorium on foreclosures,” said Roy Oppenheim, a foreclosure defense attorney with Oppenheim Law in South Florida. “The banks got caught with their hand in the cookie jar and the lid slammed closed on it. Fraud, robosigning — it all came to a stop. But through this $25 billion settlement, they’re using the crisis to their advantage. The settlement creates a major incentive for the banks to do short sales.”

Read More from Lawyers.com

Short sales pick up in housing market

Lenders are pricing short sales more aggressively, RealtyTrac adds. In January, the average short sale price was 10% lower than a year earlier, exceeding the drop in U.S.home prices.

Some mortgage servicers started pursuing short sales more aggressively months ago. Bank of America says it did 107,000 short sales last year, up from 92,000 in 2010 and double the 2009 volume. New measures are also likely to boost short sales.

Freddie Mac and Fannie Mae, which own or guarantee 60% of home loans, will soon require lenders to decide short sale offers within 60 days. Realtors have complained that short sale offers often linger. The recent $25 billion mortgage settlement also encourages short sales.

New rules have slowed foreclosures in many states, increasing short sales, says Florida foreclosure defense attorney Roy Oppenheim.

Read More from USA Today

Maybe you weren’t convinced the first time I told you the era of the short sale was finally upon us.

I can’t blame you for thinking that banks were acting irrationally when it comes to the foreclosure process.

But Lender Processing Services just offered up the most convincing numbers to date that short sales are no longer just some pie-in-the-sky dream for distressed underwater borrowers.

For the first time in the US, LPS says there were more short sales in a single month then there were foreclosures.

In January short sales made up 23.9 percent of home sales, while foreclosure sales made up 19.7 percent of all home purchases.

Of course that means that over half of all real estate closings are for distressed homes.

A year before, the percentages were skewered in the opposite direction. In January 2011, 16.3 percent of home purchases came through short sales, and 24.9 percent were foreclosures.

Why are the banks now convinced, as I was long ago, that going through the long and harrowing process of a foreclosure is not their best option?

The proof is once again in the numbers. On average, foreclosed homes sold for 29 percent less than non-distressed properties in January.

Homes sold via short sale? They went for 23 percent less. Here in Florida, LPS says short sales have outnumbered foreclosures since July.

That means short sales are a better deal for the banks, plain and simple.

The truth is banks don’t want to own these properties, they certainly can’t handle maintaining these homes, and they just end up laying waste to neighborhoods by hanging on to them.

It’s just better for banks to sell the home and get a new buyer inside, rather than engage in a legal battle with a homeowner over whether they even have the right to foreclose in the first place!

And it’s better for homeowners who want to walk away from their homes, because they can do so legally, and leave the threat of foreclosure behind for good. It’s simple logic, yet it took the banks eons to come to this conclusion.

At Oppenheim Law we’ve saved homeowners over 22 million dollars in deficiencies. Homeowners are able to walk away from their obligations without any lingering repercussions of a deficiency judgement chasing them around for 20 years.

The bottom line it’s just sound business sense for banks, and its the best way to legally walk away from your underwater mortgage.

From The Trenches

Roy Oppenheim

Bill extends Mortgage Debt Relief Act of 2007

I warned you earlier this month that if you’re considering a short sale, the time to get the ball rolling is now.

That’s because the Mortgage Debt Relief Act, which was passed in 2007, is set to expire at the end of this year. If that happens you’ll have to pay taxes on any forgiven debt that comes out of a short sale.

I remain skeptical that Congress, in this election year, will come through and extend the MDRA, but at least some Congressmen haven’t forgotten how important this legislation is. Then again, in an election year anything is possible.

U.S. Reps. Jim McDermott, D-Wash., Shelley Berkley, D-Nev., and John Larson, D-Conn., have introduced the Homeowners Tax Fairness Act. It would extend the Mortgage Debt Relief Act for another three years.

Let’s hope Congress gets their act together and passes this bill.

NY Foreclosure Case Could Be A Game Changer

It remains to be seen if a foreclosure dismissal will have an impact here in Florida, but none the less it has the chance to be a real game changer.

The case is OneWest Bank, FSC vs Galli. OneWest had tried for a partial summary judgement against the Gallis, but the judge in the case denied it and instead ruled in favor of Mr. and Mrs. Galli.

As I’ve always said, you have to make the banks prove they own the note, but in reality it’s more than that. I could pick up a note off the street and say I owned it, but it wouldn’t necessarily be true.

But Judge John Maltese correctly pointed out that MERS (the illegal entity the big banks set up to subvert the recordation system of our country) had assigned this mortgage several times before OneWest even came into the picture, something the judge ruled MERS did not have the right to do.

By the judge’s own words, “How the plaintiff came into possession of the mortgages and notes in this case is suspect.”

We have rules in place for a reason, rules the banks constantly try to skirt, so thank you to Judge Maltese for not allowing it in this case.

How Quilting Can Explain The Foreclosure Crisis

I never thought I’d use the words quilting and foreclosure in the same sentence, but there’s a first time for everything right?

San Francisco artist Kathryn Clark once worked as an urban planner, and her response to seeing people losing their homes was to turn neighborhood maps into a quilt, with an empty spot representing a foreclosed home.

The result is simple, yet a haunting example of what foreclosure can do to a neighborhood.

Even if you’ve never had to face foreclosure up front, I doubt you can look at one of her quilts and not come away with an understanding of just how widespread the foreclosure crisis is.

Have a great weekend and we’ll see you soon in the trenches!

If you can’t stay in your home, this is frequently the best possible scenario.

You don’t have to pay taxes on that debt because of the Mortgage Forgiveness Debt Relief Act, which was enacted in 2007 as President George W. Bush was leaving office.

But like all good things, it may not last.

There is growing speculation that this tax break, which will expire at the end of 2012, will not be renewed.

Even though the bill passed with overwhelming bipartisan support and was enacted by a GOP President, tea partiers and Republican strategists alike seem fixated on the ‘moral contagion’ factor as well as the program’s $2.7 billion price tag.

Which means that if you agree to a short sale on your $200,000 home for only 150K, you could have to cough up taxes on the $50,000 of forgiven debt.

Currently the Debt Relief Act allows for up tax relief on up to $1 million of debt if you’re single, $2 million if you are married.

Once again there’s a lot of talk from some conservatives about the cost to the taxpayer. Never mind the fact that President Obama and the $25 billion settlement has made principal reductions and loan modifications the centerpieces for stabilizing the housing market.

So even the idea that this tax break might not see the light of day in 2013 is a slap in the face to everything the Attorneys General spent months haggling over.

The same government that is dangling the carrot of refinancing in front of you might very well bat it away with a massive tax bill.

Bottom line, if you’re thinking about a short sale, get started NOW. Short sales can sometimes take months to complete, and if you wait til one minute after the clock strikes midnight on December 31st, you run the risk of your beautiful stage coach turning back into a pumpkin.

It is of course an election year, so this lame brain duck Congress cannot be counted on to come through for homeowners. I thoroughly expect them to let the Debt Relief Act lapse, and once again you’ll be on the hook for taxes on ‘loan forgiveness income’.

Loan forgiveness income. If that’s not an oxymoron, then I don’t know what is!

So if you like to gamble, wait until 2013. I however, would not.

If there was anything positive that came out of the prolonged discussions between the states and the banks on the mortgage servicing settlement, it was that banks were reluctant to go full steam ahead in the foreclosure process while talks were ongoing.

But even before the settlement was announced, we saw signs that pointed to more foreclosures in 2012.

According to RealtyTrac, there were 24,783 foreclosure filings in the state of Florida in January, a 14% percent rise from January 2011, the first year-over-year increase in over a year.

Now that the settlement has been agreed to, the training wheels are off.

It’s petal to the metal folks. One thing that the settlement does for the banks is provide them a blueprint for how to proceed in the foreclosure process without getting their fingers stuck in the cookie jar.

Which means borrowers will once again have to defend themselves just as rigorously as they did pre-robosigning.

I’ve been asked if the settlement changes my advice to homeowners, to which I reply, ABSOLUTELY NOT!

You must continue to stand your ground. If you are in foreclosure or about to enter foreclosure, I will say what I have always said, you must fight the banks and force them to kick you out of your home.

The settlement may have changed the rules for the banks, but it shouldn’t change the rules for you, the homeowner. The banks will not transform into wonderful and charitable companies just because the settlement might penalize them.

Make no mistake about it, they will continue to come at you and come at your hard.

So allow me to reiterate my advice to you, the borrower.

Get legal representation if you need it and force the banks to kick you out. Settlement or no settlement, you still have the choice to modify or do a short sale or stay and fight.

Just because the settlement exposed much of the banks misconduct does not mean you will automatically be off the hook.

Unless there is a sheriff’s deputy at your door, do not give in.

If there is proof your mortgage was caught up in a fraudulent securitzied trust, you have a much better chance now of halting the foreclosure process outright. Courts have finally caught on to the banks illegal behavior and they can’t hide behind the bench as they have done before.

Of course you won’t have your case dismissed if you don’t, say it with me now, STAND YOUR GROUND.

If a dismissal seems unlikely, then you should look at a short sale. They are on the rise and many banks will offer you substantial cash, as much as $35,000, if you agree to sell your house back to the bank.

Lenders are willing to let you walk away from your underwater mortgage if you do so legally.

That way you can get a fresh start in a more affordable home or in a rental property. But don’t expect them to make such an offer if you move out the minute you are unable to afford your mortgage. State your case, and STAND YOUR GROUND.

Your third option is to seek a loan modification or mortgage relief from the government. There are more government programs than ever, in part because of the mortgage settlement.

While many of them have not been successful in the past, the settlement has pumped more money into these programs and you have a much better chance of qualifying and ultimately staying in your home.

But remember you can’t qualify for these programs if you move out.

Stand your ground, and fight the banks.

In The Trenches

Roy Oppenheim

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 their home for less than what they originally owe. Banks will often agree to not go after a deficiency judgment 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.

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!

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.

The Wall Street Journal is reporting a sluggish start to selling season, typically kicked off by Super Bowl Sunday. Given the volatile international headlines this week, this news hardly comes as a surprise. From revolutionary tremors spreading throughout the Middle East to the actual tremors of Christchurch, New Zealand’s 6.3-magnitude earthquake, the global outlook seems bleak at best.

Here on the home front, rising gas prices fuel unemployment as every 2.5 cent increase in gas prices translate into 25,000 more Americans out of work. To make matters worse, the housing crash may have been even worse than initial estimates have shown.

Economists are discounting the possibility that recent buying momentum will propel GDP growth to the necessary 5-plus percent necessary to sustain job growth. Latest figures are predicting unemployment to stubbornly remain above 9% nationwide until well into 2012 as well as a continued surplus in housing inventory.

Are we seeing the beginning of a double dip recession? Join Oppenheim Law and Weston Title on March 9 to discuss the latest headlines and economic predictions as we navigate month three of the year of the short sale.