A Boca Raton homeowner whose waterfront mansion has been in foreclosure since 2008 had her case voluntarily dismissed by her lender Thursday in Palm Beach County court after a legal misstep during trial.
Homeowner Valerie Kaan bought the 13,000-square-foot home in 2003 for $8.4 million. Her loan was for $6.8 million from Washington Mutual Bank, which was later purchased by JP Morgan Chase. The outstanding balance as of Thursday was up to about $10 million with late fees, taxes and insurance, Oppenheim said.
“I always tell my clients that a good settlement is usually in everyone’s best interest but in this case, for some reason, the bank did not recognize their own foibles,” Oppenheim said. “Maybe this will send a message to banks that when people come to the table in good faith with a reasonable offer, they should more seriously consider it.”
Oppenheim said Kaan was in negotiations for a short sale and loan modification for two years before negotiations broke down.
Chase declined comment.
At Thursday’s foreclosure trial, Oppenheim said the bank tried to introduce the original “wet ink” note, which had allegedly been lost previous to the 2008 foreclosure filing.
But because the bank did not amend its pleadings to include the note or notify the borrower and the court that it existed, the move violated civil procedure, Oppenheim said.
The court docket reflects that a copy of the original note was filed in the case in 2009.
The voluntary dismissal was signed by Circuit Judge Roger Colton. He also gave Kaan attorneys’ fees and costs.
“Our firm _ three lawyers _ were saddled up ready to go to trial and they sprung on us at the last minute a new set of facts,” Oppenheim said. “It was trial by ambush and judges won’t put up with that.”
Real estate attorney and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida, and is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook.
Roy Oppenheim’s commentary was originally published on Yahoo! Homesand is being republished on South Florida Law Blog with their permission.
For the uninitiated, a deficiencyis when the proceeds from a foreclosure sale, or a short sale, don’t cover the balance of the mortgage loan. In a recourse state, such as Florida or 39 other states, it is legal for the lender to go after the homeowner for that deficiency when a deficiency judgement is awarded.
My experience has been that if a bank actually does bother to seek a deficiency judgement, there is a good chance it can either be severely reduced or negotiated, especially if you have an attorney.
But it looks like the pendulum is starting to swing in the other direction, if you have a loan backed by Fannie Mae or Freddie Mac.
A report just released by the inspector generalfor the Federal Housing Finance Agency (FHFA), which oversees both of the government-sponsored enterprises, suggests Fannie and Freddie should be much more aggressive in recovering deficiency judgments, in order to mitigate their losses.
The FHFA stresses their report is not an “encouragement to aggressively pursue borrowers who do not have the ability to pay their mortgages.” (Of course you can’t squeeze blood from a turnip.) Instead it centers on an old and familiar target: the strategic defaulter.
Now the inspector general’s office is just doing their job. They were asked to perform an audit, and they did. But there is a just a whiff of hypocrisy that is both arrogant and outrageous.
The easy answer, if there is one, is that no one has really tried to change the very culture of the banking industry. Corrections have been at the micro level, yes, but these granular solutions have merely chipped away at the problems with mortgage securitization.
No one until this point has been bold or audacious enough to stand up to the banks. Maybe it’s because of fear of blowback from the bankers and their powerful allies, maybe it’s that the regulators and legislators actually don’t know how take them on.
Wall Street has always managed to have a defense that it always seems to fall back on whenever its motives are questioned.
Banks have used it so often there is actually a name for it. It’s called the Wall Street Rule.
Two Brooklyn Law School professors recently, and succinctly, brought attention to the Wall Street Rule and how it applies to the mortgage securitization engine. Bradley Borden and David Reiss correctly argue mortgage backed securities were flawed from the start.
By convincing Congress to ease certain tax restrictions back in 1986, these securities called REMICS were created and became a loophole to allow the banks to avoid paying income tax on millions upon millions of mortgages, which I alluded to back in August.