Don’t be a Gingerbread Man (or Woman)

Many government-sponsored programs to help distressed homeowners, which are here now, have gone, or are on the way, get set up in conjunction with the lending institutions.  These programs are often stated to be designed for direct accessibility.  In other words – NO ATTORNEY NEEDED.  While it is very “noble” of the financial institutions to be offering this assistance, recall the fable of the Gingerbread Man.

I have an actual case in point.  My client was struggling to pay her mortgage.  Like many today she was squeezed, not because of any wrong decision she made, but because of an unexpected change in her life’s circumstances.  She did the right thing, picked up the phone, and called her mortgage lender to inquire as to whether there was an assistance program to help her.  So far — no harm, no foul.  She didn’t need an attorney to make that call for her.

My client learned that she might qualify for the Home Affordable Modification Program (HAMP) and a package was mailed to her.  A completed application was quickly returned following which my client received a congratulatory letter stating that she was accepted into the temporary program and could start making lower monthly payments.  Thereafter, month after month, for more than a year, she made the new lower monthly payments.  Imagine her shock when she received a pre-foreclosure letter.  She called and wrote the lender that there must be some mistake, but to no avail.  With little delay the bank then filed a foreclosure action even though she was up to date in her agreed payments.  Finally, she sought my assistance.

It became apparent to me that my client was supposed to return a second set of documents.  She understood the second set to be a different offer.  She considered the second offer less beneficial, especially because it required a “balloon payment” and that scared her.  A “balloon payment” is usually when the mortgage comes due for the full amount after just a few years.  In fact, the paperwork was to finalize the HAMP program.  The “balloon payment” term was misused by the lender.  The lender was trying  to explain that the difference in payments would be carried to the very end of the mortgage.  Monthly payments under the “final arrangement” would have been less than those of the “temporary agreement.”  Not one word in any of the paperwork suggests that the homeowner seek the advice of an attorney, despite the confusing language.   No one from the bank called to suggest she retain counsel.  No warning was given that the “temporary agreement” would end if she didn’t agree to the “permanent arrangement.”  It made no difference to the bank that for the last year she paid them more than she would have paid them had she signed the final HAMP papers.

So, I had to go to court and fight the lender that made the “noble” offer to assist.  Who needs that kind of assistance?  Had my client sought my advice in review of all correspondence received from the lender, she would have signed onto the lower monthly payment offered by the “permanent arrangement.”  Happily, following mediation, we obtained a successful resolution but at additional expense to the homeowner.

Do you ever scamper to avoid threats that pursue you?  If so, be careful not to jump on the back of a fox to cross any rivers.  You might get eaten!  Please, call me before that happens or at least before you are completely devoured.

Get Real!

    With so many real solutions available to distressed property owners, it’s sad that many fall victim to scams.  In one type of scam the “solution specialist” states that they have investment buyers for distressed property.  The investment buyers state that they will allow the distressed homeowner to continue living in the subject property and even repurchase it in the future.  The homeowner enters into a short sale of the property with the investment buyer, but with an agreement allowing the homeowner to rent with a right to repurchase.  That is a classic “short sale fraud” situation.   While there may not be a state or federal law disallowing the homeowner to rent or buy from the investment buyer, it would almost certainly be a violation of the short-sale agreement.  Nearly every lender agreeing to be cut by a short sale requires an affidavit known as an “Arm’s Length Affidavit” or “Good Faith Affidavit” in which both buyer and seller agree to such terms as: the sale was negotiated between a buyer and seller unrelated and previously unknown to each other, the sales price was the best price received for the property or that all offers received were disclosed to the distressed homeowner’s mortgage lender prior to the short sale, that after the sale the homeowner will have no legal or beneficial ownership in the subject property, that after the sale the homeowner will not be reacquiring any legal or beneficial ownership in the property for at least two years, as well as many other terms.

Another type of short sale fraud is the flop-flip.  Usually, the flop-flip involves an unscrupulous real estate agent who convinces the short sale seller that a low ball offer is the best or even the only offer received for the property.  The fraud may involve manufactured low ball comparables and an unscrupulous appraiser suggested by the agent.  Higher offers for the property are withheld from disclosure to the seller, and consequently from the seller’s mortgage lender whose repayment gets cut short at sale.  Thereafter the property is sold to the low ball buyer who is actually a straw buyer.  The sale is a “flop.”  Actually, seller’s real estate agent either has some ownership interest in the buying entity or receives an illegal commission from the scam buyer.  Soon after the property is purchased, or as soon as possible thereafter, the property is “flipped” for a much higher price, possibly to one of the same entities that had made a higher offer than the scam buyer’s offer.

Homeowners with equity facing foreclosure may be subjected to a different scam.  They are easily targeted because readily available public record information will disclose that they are in foreclosure proceedings, and that they have equity in their property.  The “solution specialist” in this situation might also state that they have investors available who will allow the homeowner to stay in the property after sale.  But, instead the fraudulent scheme does nothing more than result in the equity in the home being skimmed off.  Sometimes, the underlying mortgage is not even satisfied and the pending foreclosure action proceeds along.

Yet another type of fraud involves entering into a complex trust agreement.  The “solution specialist” in this type of scheme convinces the property owner to transfer title in the property to a trust carrying a very prestigious sounding name.  In return, the trust makes the property owner the beneficiary of the trust and simultaneously agrees to use its lawyers, accountants, appraisers, analysts and experts to fight with the mortgage lender to lower the principal balance and payment terms.  This is meant to attract property owners who see the trust transfer as a way of separating themselves from the resolution process thereby avoiding the frustration, time and effort that go with resolution. Often very boisterous claims are made that the trust is then able to void or cancel the outstanding mortgage.  These trust instruments are often missing some important terms, like who receives rents from the property, who decides whether to sell the property, when to sell, how much to sell the property for, what to charge for rent, who pays for insurance, who pays for taxes, what the tax consequence is to the transferor (the prior title owner), who the trustee is, and how the trustee is compensated.  As you might have guessed, the terms are missing because the trust then controls the property, receives the rents, and so forth.  When such terms are stated, it is no different.  Making it more outrageous is that many times the trust receives a payment in advance from the transferring property owner, and does nothing in return because the trust agreement never says that the trustee necessarily needs to do anything.

There are so many types of fraud committed against distressed property owners and so many variations of those types of fraud that an entire book could be written about the topic.  Crooks who commit fraud are also fond of using lofty names like “short sale specialist,” “distressed property specialist,” “underwater property expert,” and at least another twenty like names.  While even those with a law license, real estate license, or mortgage broker’s license sadly also involve themselves with such scams (rarely though), many times the “solution specialist” refers to no such license nor to any recognized certification.  That should be a big red flag warning.

My use of the term “solution specialist” is both facetious and general.  The wolf wears many styles of clothes, uses many different names, and is seen in the most unusual places.  Don’t be a sheep.  Ask lots of questions.  It is possible to be both polite and firm while being suspicious, especially when it seems too good to be true.  When it seems too good to be true, it’s almost certainly not real.  “Get real!”  If you or someone you know has the slightest doubt at any time before, during or even after a transaction, do not hesitate to call for a consultation.


Vidal -v- Liquidation Prop., No. 4D10-3358, slip op., (Fla. 4th DCA, October 31, 2012)

Following entry of summary judgment of foreclosure for the lender, the Vidals appealed arguing that affirmative defenses precluded such judgment.   Among the defenses were lack of standing, Truth In Lending Act (TILA) violations, and two types of fraud.  Having untangled the facts, the appellate court agreed with the Vidals that for the lender to have standing, the lender had to prove ownership and possession of the note on the date suit was filed.  An assignment of mortgage was produced, but it transferred only the mortgage not the note, and as all should know “the mortgage follows the note.”  An allonge to the note was produced but it was not dated.  An affidavit by the lender attesting that it received transfer of the note prior to filing would have evidenced standing.

The appellate court also combed through Vidals argument as to the TILA defense and agreed with them.  While the remedy of rescission has a three year statute of limitations, there is only a one year period for the remedy of recoupment unless brought by way of defense, as it was.

The defense of fraud allegedly arising from the lender’s knowledge that income was overstated was cut because one suffering from fraud cannot recover when they knew the statement to be false.

On the second fraud defense, wherein it was alleged that the lender had orally represented that the loan was a fixed rate when in fact it was adjustable, the appellate court found that such contention was expressly washed out by the written contract.


BONY Mellon -v- P2D2, No. 2D11-3661, slip op., (Fla. 2d DCA, October 31, 2012)

Lessee under a 100 year ground lease mortgaged the property.  In all respects the mortgage instrument gives the appearance of a garden variety mortgage given by a land owner to secure a loan.  Also signed on that date and handled by the same title agent was an assignment of the ground lease and the lessor’s consent thereto.  When the lessee failed to pay rent to P2D2 an action was filed seeking possession, judgment for rent due, and a declaration quieting title, which action named as defendants the lessee (i.e the mortgagor) and the bank.  P2D2 argued that the mortgage document was a nullity since, on its face, it purports to mortgage lands not owned by the lessee.  However, the appellate court found that when all the facts and circumstances were considered, the lessee had actually mortgaged its leasehold interest.  The appellate court held for the bank on its appeal seeking to reverse entry of summary judgment on the quiet title count, but sustained entry of default against the bank under the count for possession.  The Force was not with P2D2.

The Best Short Sale Incentive Ever!

My friend David Worth with Keys Gate Realty asked me to share this very valuable information with you.  Dave is a distressed property expert located in the Homestead area.

Short Sales Incentives:  Why the Bank will Pay You Cash to Sell the Home You Can’t Afford

November 2nd, 2012 7:47 AM

Get cash to sell the home you can’t afford

Since the beginning of the housing crisis, millions of homeowners have found themselves pinned in by their financial circumstances and chained to a mortgage on which they owe more than their home is worth. In the past, homeowners enduring these challenges had very few options, and most would be forced to lose their home to foreclosure.

Today, however, there are more options. The government and the banks have created a multitude of programs and foreclosure alternatives that can help people in these circumstances find a dignified solution for their problems without crippling their financial future. These options include loan modifications, refinancing, or short sales.

The most amazing development in today’s market, however, is one simple fact: Banks are now willing to give cash to homeowners to sell the home they can’t afford.

For your free report on how you too may be able to get CASH back at closing to sell the home you can no longer afford, visit Dave’s website  and watch the video clip.


PALM BEACH MARKETPLACE -v- ALEYDA’S MEXICAN, No. 4D12-570, slip op. (Fla. 4th DCA, October 24, 2012)

Petition for Mandamus was filed to compel the trial court to enter a default judgment and writ of possession.  Tenant had failed to timely post rent into the court’s registry that came due and owing, as required by F.S. §83.232.  The statute provides that failure to post rent alleged as past due, or that subsequently comes due, in an action for possession is an absolute waiver of defenses entitling the landlord to immediate default for possession.  This is a ministerial duty of courts, meaning there is no discretion beyond that stated in the statute.  Although mandating entry of the writ of possession, the appellate court reminded the trial court that the statute only speaks to a default for possession and not to any entitlement to money damages or even to the funds previously deposited.


PLAKHOV -v- SEROVA, No. 4D11-3280, slip op. (Fla. 4th DCA, October 24, 2012)

During the residential tenancy agreement, the landlord Serova was faced with a foreclosure action and difficulty paying the monthly assessments on the condominium unit rented to Plakhov.  The tenant, having received notice of both the foreclosure action and nonpayment of the association dues, grew worried.  Unknown to the tenant, the landlord was in discussions with the mortgage lender to modify the mortgage, and subsequently made modification payments to the lender.  Also unknown to the tenant, the landlord had brought her condominium association payments current two months before the tenant decided it was in his best interest to move out.  It took several months for the landlord to find a new tenant.  Consequently, the landlord not only took the security deposit but also obtained a money judgment for $16,700 against Plakhov.  While affirming the judgment, the appellate court rejected the tenant’s defenses which included allegations of constructive eviction created by the landlord’s defaulted payments.


Blue Star -v- LED Trust, No. 3D12-1728, slip op. (Fla. 3d DCA, October 24, 2012)

LED Trust filed a lis pendens against property owned by the Blue Star group, an entity in which the LED Trust was investing.  LED’s action turned on counts including breach of contract, violations of corporate statutory duties, fraud, conspiracy to commit fraud, and for an accounting.  None of those counts could be plugged into the property owned by Blue Star.  Other counts in equity were brought for declaratory and injunctive relief, imposition of a constructive trust or equitable lien, and for specific performance.  But, the appellate court found LED’s equitable claims to be dim in that they were lacking a necessary connection to the subject property.  The appellate court illuminated that LED was really seeking damages arising from mere membership interests in an LLC.  In conclusion, the appellate court found that LED’s claims failed to establish a fair nexus between the equitable or legal ownership of the subject property and LED’s claim.  Accordingly, the lis pendens could no longer cast a shadow on the title.


Good -v- Deutsche Bank, No. 4D11-1167, slip op. (Fla. 4th DCA, October 17, 2012)

In response to a foreclosure action the homeowners responded with an affirmative defense alleging violations of the Federal Real Estate Settlement Procedures Act (“RESPA”) and seeking recoupment against the bank as successor in interest.  Following entry of a summary judgment of foreclosure, the homeowners appealed arguing that the trial court erred because the bank failed to negate the affirmative defense.  The appellate court found that RESPA imposed no liability against the bank since liability was not imputable to it as successor.  Only the actual persons or entities who violated RESPA can be pursued under RESPA.  The court reasoned that if Congress wanted to create successor liability under RESPA it would have expressly done so as it did under the Truth in Lending Act (“TILA”), see 15 U.S.C. § 1641 (2011).