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 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.

The times they are a-changin’.  And it’s about time.

Florida District Courts of Appeal are ruling in favor of homeowners when procedural due process has been violated as well as in cases where the trial court improperly granted summary judgment in favor of a bank based on lawyers’ assertions that have no evidentiary support on the record.

Recent decisions from the 1st, 3rd, 4th and 5th District Courts of Appeal can provide hope to homeowners and South Florida foreclosure defense attorneys that banks will be forced to start playing by the rules, or risk having their judgments reversed on appeal.

For example, the 5th DCA reversed a summary judgment decision in favor of a bank last month for a lack of evidence on the foreclosing bank’s standing to sue.  The Court of Appeal found that documents submitted at trial contradicted the bank’s mere allegations that it was the holder of the note, and therefore allowed to foreclose.

“Taken together, these decisions are powerful evidence that Florida’s appellate courts are increasingly receptive to foreclosure defendants’ complaints that some trial courts are not holding foreclosure plaintiffs to the requirements of Florida Civil Procedure – and perhaps that they are also paying attention to the widely reported improprieties in the mortgage lending industry,” said Dan Bushell, a South Florida appellate attorney, on his blog, Florida Appellate Review.

We have seen the pace of foreclosure proceedings drastically slow in the past months due to the court’s heightened documentation standards.  These recent decisions by the District Courts should pump the breaks even more on the banks’ steamroll approach to foreclosing South Florida homeowners.  Banks better take note.

From the trenches,
Roy Oppenheim, P.A.

Reports are in that Miami and Orlando are dragging Florida out of recession, but for now only Orlando is performing above its economic weight class.

The Miami Herald reported this week that while Orlando represents just 14 percent of Florida’s 7.2 million-person workforce, it accounts for 46 percent of the Sunshine State’s 44,000 new jobs last month, eighty percent of which came from the tourism industry.

Given the city’s abundance of theme parks, brand new “Medical City” popping up with the opening of the University of Central Florida’s new medical school and strong video game industry, it’s no surprise Orlando outperformed its economic class.

Wells Fargo economist Mark Vitner told reporters Thursday during his annual review of Florida’s economic outlook that Orlando is “certainly coming out ahead of the other large metropolitan areas in this recession.’’

Here in South Florida, Miami is doing its part to reverse the economic slide the state has weathered over the last three years as well. In the last 12 months, South Florida added 1,100 jobs in the finance sector alone. “Companies are hiring,’’ said Jaap Donath, vice president of research for the Beacon Council, Miami-Dade’s economic development agency. “They’re hiring across the board.’’

While Orlando has certainly grown by leaps and bounds, it’s important to keep the numbers in perspective. The South Florida metro area’s $253 billion economy is more than twice the size of Orlando’s, according to the federal Bureau of Economic Analysis. The smaller the economy and workforce, the easier it is to show big gains. Additionally, Miami has been sheltered from the brunt of the economic freeze due to its frequent interactions with booming South American consumers.

Tourism will continue to fuel both economies, but more expensive real estate factors will hinder South Florida’s recovery compared with Central Florida. At the end of 2010, the median price for a Miami-Dade home ($191,000) was 45 percent higher than the median Orlando price ($131,000.) However, as we’ve previously reported, the sun is indeed beginning to break on the South Florida housing market. Whether you’re smooth sailing or frantically treading water, Oppenheim Law and Weston Title have the Florida homeowner’s needs covered.

From the trenches,
Roy Oppenheim

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

Weston is Number One! Zip codes with good schools, high paying jobs are topping list

Some areas of South Florida are finally seeing the first steps of a tentative recovery. As reported by the Sun-Sentinel, ten zip codes in Broward and six in Palm Beach County are seeing higher home prices.

33327, in Weston, saw the largest price increase from February 2010 with a 9.3% increase. The areas that have had a price recovery have generally been close to good schools or high paying jobs. While only a few zip codes are showing signs of recovery, the news is nevertheless good for all of South Florida. As an area that was one of the worst hit by the real estate crisis, we are now seeing a recovery before the rest of the country. Prices are still low in other areas because foreclosures and short sales make up the majority of sales.
Every recovery has to start somewhere and it seems to be starting in our own back yard here in Weston.

There is a large backlog of these “distressed” loans and the only way property values are going to go up in the rest of South Florida is if they are cleared out. This is what is happening right now and is the first step on a long road to recovery.

This news comes on the heels of reports that traffic to real estate websites increased 27 percent during the month of February – the largest jump since the first half of 2009. This combined with news that single family home sales across South Florida also went up in February and an encouraging job market leads Oppenheim Law and Weston Title to believe that the economy here in South Florida is showing signs of life after all.

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With the major banks virtually halting all of their foreclosures due to the document mill scandals, the fees have dried up and now we can see the impact of the courts falling asleep at the switch. The tremendous irony in the matter is that the failure of the courts to properly scrutinize fraudulent foreclosures, leading to the halting of new foreclosures and the drying up of the courts’ fees, would have lead to new foreclosures. Only this time, court employees would have been processing their own foreclosures. According to the Sun-Sentinel, most of the hardship of the court furloughs would’ve been felt by low income employees who are already struggling to make ends meet.

Thankfully the state has stepped in to avoid this mess and hopefully the courts will learn not to be too reliant on foreclosure filing fees in the future. Maybe they will even make sure that foreclosures aren’t fraudulent before kicking people out of their homes and denying them their constitutional right to due process.

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.

For five years I’ve discussed the inevitability of Black Swan events that change everything overnight – game changers. Certainly, the earthquake in Japan and the subsequent rash of Tsunamis are reminders of that phenomenon as is the ongoing escalated strife and instability in the Middle East.

Not only have oil prices shot up, we now face a whole new set of issues and concerns from the devastation and dislocation in Japan caused by the sudden earthquake.  Further, we will have to remain on edge for the next several weeks as aftershocks are felt in the Pacific Rim and the specter of additional quakes loom throughout the world. The Haiti and Chilean quakes were about a month apart last year, and quakes in Australia and New Zealand preceded this massive quake in Japan.

So you may ask, why is this relevant to me, my home and real estate prices? The answer is simple. In Japan, for example, some areas will have so declined in value that the properties may be close to worthless for years, while other areas spared the devastation may over-night double in value.

In the U.S. where certain communities have an excess supply of homes, I have always considered that part of our nation’s resources: an ark so to speak. God forbid, if America was to suffer the kind of devastation we are seeing in Japan, we will have the ability to move thousands of people quickly into homes that are vacant or abandoned. In fact, the latest estimates suggest 11% of all homes in the U.S. are currently vacant.

As a result, we have the ability to relocate displaced families from all over the world and serve as an international ark whereby we not only save displaced families’ lives but also help preserve entire neighborhoods from devastation, not of earthquakes, but of neglect and blight. We must as a nation think outside the box and dig deep into our own history and culture as we try to determine our Nation’s role in an ever changing world — a world that we will clearly have less control over than in prior decades.

From the Trenches

Roy Oppenheim

Picture this. In Florida: Retired judges being pulled out of retirement and paid to sit on foreclosure courts. Purpose: To decrease the amount of Florida’s foreclosure backlog.

Reality? The outcome of many cases is questionable, at best. Seems many of these judges, who may be well intentioned, are actually ruling in favor of the banks despite legitimate issues, such as the financial institution’s ownership of the note and mortgage.

Conflict of Interest? Retired judges are actually being compensated in order to decrease the foreclosure docket. Some argue that since these select judges have a financial interest in decreasing these cases, a homeowner’s constitutional rights may in fact be at jeopardy.

In fact, this past weekend, the New York Times reported injustices done to homeowners facing foreclosure through Florida’s recently created “foreclosure courts.” Simply put, questions are being raised as to whether the retired judges are ignoring problematic or contradictory evidence, especially since some banks have not yet even proven that they own the properties in question.

What next? The Attorney General’s office is investigating foreclosure firms that have submitted questionable ownership documents.

The true question is how did we get to this point? How could foreclosure decisions be rendered by courts where the ownership of the very documents upon which the suits are fashioned are suspect? Where is the consideration of the homeowner’s rights?

Perhaps an appeal of those cases incorrectly decided should be under way. More importantly, perhaps justice should actually be served.