http://blogs.abiworld.org/ ABI Bankruptcy Blog Exchange » Miami Florida Bankruptcy Law Gregarius 0.5.4 en http://jbublick.blogspot.com/2009/11/florida-mortgage-foreclosure-and.html Sat, 14 Nov 2009 07:53:00 -0800 http://jbublick.blogspot.com/2009/11/florida-mortgage-foreclosure-and.html
In the origination of a typical residential mortgage transaction, there are two instruments - the promissory note and the mortgage. The promissory note documents the actual terms of borrowing and the mortgage provides for a lien on the real property to secure the debt of the promissory note.

In a typical residential mortgage foreclosure action in this part of Florida, the foreclosure case initially usually only seeks a judgment setting a foreclosure sale of the involved real estate. This judgment of foreclosure seeks the setting of a foreclosure auction sale by the Clerk of the Court. A typical judgment of foreclosure is not a "money" judgment upon which the mortgage company can seek "execution" or collection of the sum due other than via the proceeds of the foreclosure auction. It should be noted though, that some residential mortgage foreclosure cases contain an additional count for a judgment on the promissory note which would be a "money" judgment and allow the mortgage company to seek "execution" or collection from any non-exempt assets

After the foreclosure sale, the mortgage company may be able to seek a "deficiency" judgment or otherwise sue for the balance due on the promissory note that was not paid from proceeds of the foreclosure sale. In recent times in South Florida, most mortgage companies have not pursued deficiency judgments for a variety of reasons. This policy though could change.

In a situation of a first and second mortgage on a property in today's market, often the second mortgagee will not pursue a foreclosure but will sue on the promissory note to obtain a "money" judgment upon which it may seek collection.

Where a husband and a wife own a property, it needs to be clarified if both parties actually signed the promissory note. Often one of the spouses only signed the mortgage and not the promissory note and such spouse would not generally face liability for a deficiency or on the promissory note. The spouse would have signed the mortgage but not the promissory note if he or she was a title holder or even if not on title, due to the Florida homestead provisions.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/10/senator-reed-introduces-bill-to.html Fri, 02 Oct 2009 11:34:00 -0700 http://jbublick.blogspot.com/2009/10/senator-reed-introduces-bill-to.html press release that he introduced "Preserving Homes and Communities Act of 2009" (S. 1731) which is a bill to help "keep families in their homes and prevent communities from deteriorating as a result of skyrocketing mortgage defaults." The bill is cosponsored by Senators Dick Durbin (D-IL), Sheldon Whitehouse (D-RI) and Jeff Merkley (D-OR).

One aspect of the bill will require that "qualified homeowners are evaluated for and offered loan modifications." The bill will apparently prohibit foreclosure while the homeowner waits for loan modification analysis and provide legal relief where lenders fail to follow the mortgage modification program rules. The bill will apparently "force lenders to modify qualified mortgages."

On September 30, 2009, the bill was referred to Senate Committee on Banking, Housing, and Urban Affairs.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/09/update-on-proposed-bankruptcy-cramdown.html Fri, 11 Sep 2009 02:25:00 -0700 http://jbublick.blogspot.com/2009/09/update-on-proposed-bankruptcy-cramdown.html stated that if the mortgage servicers do not act to stem the foreclosure crisis by modifying more mortgages, there would be an increased chance that Congress will enact bankruptcy laws allowing certain mortgage modifications. Frank stated that “the best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified.”

Frank reportedly told the Wall Street Journal that he intends to eventually include a mortgage modification provision in legislation that will overhaul the financial system. He also stated that legislation should address the problem of mortgage service's claiming lack of authority due to securitization. Frank also argued that proposed bankruptcy mortgage modification will not affect the flow of credit as it will be limited to mortgages already in existence.

It is also reported this week that Michigan Congressman John Conyers told a House panel that it is time to reconsider the proposed bankruptcy mortgage modification bill - the Helping Families Save Their Homes in Bankruptcy Act.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/09/hamp-hearing-by-house-subcomittee.html Thu, 10 Sep 2009 10:05:00 -0700 http://jbublick.blogspot.com/2009/09/hamp-hearing-by-house-subcomittee.html
Assistant Treasury Secretary Michael Barr's written testimony outlined the steps being taken by the Administration to strengthen the housing sector and help homeowners. He referenced the new home buyers tax credit and the Making Home Affordable Program, including the Home Affordable Modification Plan ("HAMP") which is a "$75 billion program to lower mortgage payments for at risk borrowers" for up to 3 to 4 million borrowers. He stated that forty-five servicers have sign up for HAMP, that offers have been extended on over 570,000 trial modifications, and that over 360,000 trial modifications are already underway. But the Wall Street Journal reports that these figures amount to only 12% of eligible borrowers having started trial loan modifications under HAMP according to a Treasury report and that there are increasing concerns about the number of borrowers who will actually receive a permanent modification after receiving three month trial period modification.

Assistant Secretary Barr stated that HAMP's guidelines require servicers "to service all loan in their portfolio according to HAMP guidelines, unless explicitly prohibited by pooling and servicing agreements, and further must make reasonable efforts to obtain waivers of any limits on participation."

He also that that the parties are working on "establishing denial codes that will require servicers to report the reason for modification denials, both to Treasury and to borrowers." He expects the denial codes to become operational on October 1.

Alys Cohen of the National Consumer Law Center also offered written testimony. She testified that the HAMP program is not providing a sufficient number of loan modifications and that the offered modifications often do not meet the HAMP guidelines. She also stated that the implementation of HAMP has been slow and sporadic. She advocates that Congres should mandate a stronger approach to loan modification, including allowing bankruptcy judges to modify appropriate mortgage loans. She suggested the following improvements: 1. the Net Present Value model for qualifying homeowners should be made public, 2. the HAMP guidelines and directives should be consolidated and clarified, 3. institution of an independent review process upon denial, and 4. access to an ombudsman for complaints.

Congressman Barney Frank argued that proposed bankruptcy mortgage modification will not affect the flow of credit as it will be limited to mortgages already in existence. He stated that if the mortgage servicers do not act to stem the foreclosure crisis by modifying more mortgages, there would be an increased chance that Congress will enact bankruptcy laws allowing certain mortgage modifications. Frank stated that “the best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified.” Frank reportedly told the Wall Street Journal that he intends to eventually include a mortgage modification provision in legislation that will overhaul the financial system. He also stated that legislation should address the problem of mortgage service's claiming lack of authority due to securitization.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/08/divorce-attorneys-fees-and-bankruptcy.html Sun, 16 Aug 2009 13:10:00 -0700 http://jbublick.blogspot.com/2009/08/divorce-attorneys-fees-and-bankruptcy.html decision in the case of In re Maria D. Lopez, Case No. 08-18101-BKC-LMI (Bankr. S.D.Fla. April 17, 2009)(Isicoff, J.), the Bankruptcy Court held that the involved attorney fees were not entitled to priority status as a "domestic support obligation".

The debtor's ex-husband was awarded his attorney fees in their dissolution of marriage proceeding and sought priority status for the claim in the debtor's chapter 13 case. Priority status would require full payment and the lack thereof would subject to claim to status as a general unsecured creditor and typically only a small dividend.

The Court explained that the Bankruptcy Code provides that a domestic support obligation ("DSO") owed to a former spouse is entitled to priority status and that while an award of attorney fees in some instances may be considered a DSO, not every award of attorney fees in a dissolution of marriage case are entitled to DSO status.

The Court states that for a claim to be considered as a DSO, it must meet all the requirements of section 101(14A) of the Bankruptcy Code. Generally, the claim must be

1. owed to a spouse, former spouse, or child of the debtor, or such child's parent or guardian
2. be in the nature of alimony, maintenance or support
3. established or subject to establishment by reason of a separation agreement, divorce decree, or property settlement agreement or by court order
4. not assigned to a nongovernmental entity unless voluntarily assigned for purposes of collection

At issue in this case was whether the attorney fees are "in the nature of alimony, maintenance, or support." The Court noted that the 2005 BAPCPA amendments to the Bankruptcy Code amended certain provisions relating to claims arising from "alimony, maintenance, or support" and renamed these obligations "domestic support obligations," but that the pre-BAPCPA case law does to a certain extent continue to have applicability post-BAPCPA.

The Court rejected the claimant's argument that the attorney fees met the requirement of being "in the nature of alimony, maintenance or support" as they related to custody, parentage, or visitation. The Court noted that the determination of what constitutes "support" is a matter of federal law. The Court further noted that in determining whether an award of state court attorneys' fees constitutes "support", the Bankruptcy Court may "only undertake a simple inquiry as to whether the debt can be characterized as 'support'" and that it may look to state law for guidance on whether the obligation should be considered in the nature of "support". The Court noted that the state court judgment awarded claimant attorney fees based on the debtor's litigation misconduct and not based on their respective wages or ability to pay.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/08/dragnet-clauses.html Tue, 11 Aug 2009 08:14:00 -0700 http://jbublick.blogspot.com/2009/08/dragnet-clauses.html
Some courts in Florida have held that "dragnet clauses" are generally enforceable so long as the language of the clause is clear and unambiguous as to the parties intent to secure pre-existing and after acquired debt. Robert C. Roy Agency, Inc. v. Sun First National Bank of Palm Beach, 468 So.2d 399 (Fla. 4th DCA 1985). But the 4th District Court of Appeals has held that the dragnet clause would not be enforced against someone other than the borrower unless it specifically includes within its terms or unless it can be shown that the third party otherwise had notice that the specific pre-existing debt was to be included within the grasp of the dragnet clause. Starlines International Corp. v. Union Planters Bank, N.A., 976 So. 2d 1172 (2008).

Other Florida courts though hold that dragnet clauses are unenforceable to secure pre-existing debt unless the pre-existing debt is specifically identified in the dragnet clause of the mortgage and possibly also in the note. United National Bank v. Tellam, 644 So. 2d 97 (Fla. 3d DCA 1994).Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/08/senator-durbin-gives-banks-cramdow.html Tue, 04 Aug 2009 02:58:00 -0700 http://jbublick.blogspot.com/2009/08/senator-durbin-gives-banks-cramdow.html
The media reports that Senator Durbin has "put the banks and mortgage servicers on notice" that Congress will renew efforts in three months for bankruptcy reform to allow residential mortgage cramdown unless the banks become aggressive in modifying mortgages to prevent foreclosure. It is reported that Senator Durbin want to see 500,000 mortgage modifications by November. Recently House Financial Services Committee Chairman Barney Frank made a similar threat.

This is amid recent revelations that the Administration's foreclosure mitigation efforts, of which the $75 billion Home Affordable Mortgage Program ("HAMP") is the centerpiece, have failed to slow the foreclosure crisis and stabilize the nation's housing market. The Administration initially estimated that HAMP would prevent 3 to 4 million foreclosures, but yet only about 200,000 modifications have been accepted and most of these are merely three month trial period agreements. This amounts to only 9% of delinquent borrowers.

The Treasury Department reports that approximately 85% of mortgages are covered by HAMP participating servicers, that 38 servicers have signed servicer participation agreement to modify loans under HAMP and that approximately 2,300 others automatically participate in HAMP as they service loans owned or guaranteed by Fannie Mae or Freddie Mac.

The banking industry reportedly spent $42 million on lobbyists to defeat bankruptcy reform efforts earlier this year when it failed to pass the Senate by 15 votes.

It is reported that mortgage companies are reluctant to modify mortgages as they collective lucrative fees on mortgages in default.


Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/08/hearing-set-for-hamp-preliminary.html Sun, 02 Aug 2009 04:38:00 -0700 http://jbublick.blogspot.com/2009/08/hearing-set-for-hamp-preliminary.html
A hearing on the motion for a preliminary injunction in the case of Nichole Williams et al. vs. Timothy F. Geithner, et al., case 09-CV 1959 (DC Minn.) has been set for September 28, 2009 in the Federal District Court of Minnesota. The Plaintiffs seek the injunction of all foreclosures by the involved defendants in the State of Minnesota until the HAMP program is procedurally sound. The lawsuit alleges the the homeowners' Constitutional right to procedural due process was violated, including by way of lack of notice of the basis of the decision and lack of an opportunity to appeal. The HAMP application of one of the plaintiffs was denied and he was not give any reason or an opportunity to appeal. The HAMP application of another plaintiff was ignored.

The memorandum of law in support of the motion for a preliminary injunction detailed the background of HAMP. The Emergency Economic Stabilization Act of 2008 (the "Act") was signed on October 3, 2008. 12 U.S.C. Section 5201. The Act allocated $700 billion to the Treasury Department and granted the Treasury Secretary the authority to establish the Troubled Asset Relief Program or "TARP." 12 U.S.C. Sections 5211, 5225. Section 109 of the Act provides for the Treasury Secretary to implement a plan to "maximize assistance for homeowners." 12 U.S.C. Section 5219(a). The Act also requires the Treasury Secretary to consent to any loan modification offer. Section 110 requires the Federal Housing Finance Agency, as conservator of Fannie Mae and Freddie Mae, to create and implement a plan to prevent foreclosures.

Pursuant to this authority, the Department of Treasury, the Federal Housing Finance Agency, Fannie Mae and Freddie Mac created and announced the Making Home Affordable Program, which consists of two sub-programs, on February 18, 2009. The first provides for certain mortgage refinancing and was called Home Affordable Refinance Program or HARP. The second provides for the implementation of a uniform loan modification protocol and was call Home Affordable Modification Program or HAMP. Approximately 3 to 4 million homeowners are potentially eligible for HAMP and the Treasury Department allocated $75 billion of TARP and non-TARP funds to fund HARP and HAMP. Beginning with March 4, 2009, a series of directives as to HAMP were issued to mortgage servicers.

The memorandum argues that as HAMP is being presently implemented, there are no requirements that homeowners be told the specific reasons for the denial of a HAMP modification and there is no uniform procedure to provide for the ability to appeal. The Plaintiffs argue that approximately 40-60% of the foreclosures conducted in Minnesota are by mortgage servicers bound by HAMP requirements. It is also points out that the General Accountability Office (the "GAO") just last week confirmed that procedural safeguards were not yet in place to protect homeowners.

Plaintiffs seek a preliminary injunction to preserve the status quo. They note the similarity to cases related to the government's loss mitigation and foreclosure prevention programs during the farm foreclosure crisis in the early 1980's. In these cases, the courts issued preliminary injunction of foreclosure proceedings until the government promulgated proper procedures making its foreclosure prevention program constitutionally sound. In the case of Allison v. Block 723 F.2d 631 (8th Cir. 1983), the Court ruled that "[n]otice to the borrower is therefore indispensable...the Secretary is required to give notice to defaulting CFRDA borrowers and to create a procedure for asserting section 1981a claims." The Allison Court also held that [a]gainst this backdrop of statutory language and legislative history, we cannot accept the Secretary's assertion that Congress left the implementation of section 1981a a matter of unfettered administrative discretion." The Court enjoined the farm foreclosure until "the intent of Congress becomes the action of the Secretary."

The Plaintiff also cited the case of Johnson v. U.S. Dep't of Agric., 734 F.2d 774 (11th Cir. 1984) where the 11th Circuit Court of Appeals held that the District Court abused its discretion by denying a motion for preliminary injunction in view of the fact that there was a substantial likelihood that the mortgagors would prevail, at least in part, on due process and equal protection claims. The Court found that the farm loans involved a statutory entitlement and a property interest protected by the due process clause of the Fifth Amendment and that, at a minimum, due process assures notice and a meaningful opportunity to be heard before a right or interest is forfeited.

The memorandum argues that HAMP is a government program authorized by Congress and jointly created by the Department of Treasury, Fannie Mae, and Freddie Mac. 12 U.S.C. Section 5201. The memorandum further argues that there is government action by the Department of Treasury and the Federal Housing Finance Agency (as conservator for Fannie Mae and Freddie Mac), the program creates an entitlement, and that the administration of Sections 109 and 110 of the Act are at issue. In short, the plaintiffs argue that the case involves government actors implementing a federal law with federal funds, that is not an issue of private actors making private decisions and that it satisfies the "government action" requirement for bringing a constitutional claim.

In summary, the memorandum argues that the Plaintiffs are entitled to due process in the administration of HAMP - a $50 to $75 billion federal entitlement program. The Fifth Amendment of the Constitution requires "due process of Law" before any person can be "deprived of life, liberty, or property" and the concept of property includes statutory entitlements derived from an independent source as well as government-fostered expectations. "Once a property interest in a statutory entitlement is identified, a person is entitled to notice, an opportunity to be heard, and reasonably accurate process for determining eligibility." The Plaintiffs also argued that the lack of the right to appeal to a neutral party is also a violation of their procedural due process rights.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/07/hamp-class-action-lawsuit.html Tue, 28 Jul 2009 06:46:00 -0700 http://jbublick.blogspot.com/2009/07/hamp-class-action-lawsuit.html
The Housing Preservation Project, a public interest law firm in St. Paul Minnesota, filed a class action lawsuit in Minnesota federal district court today alleging that the federal government's loan modification program violates Constitutional procedural due process requirements. Pursuant to its press release, the " lawsuit alleges that the program fails to provide homeowners with proper notice and a right to appeal decisions by loan servicers administering the program." The lawsuit seeks to enjoin Minnesota mortgage foreclosures until the government promulgates the necessary procedures to ensure HAMP fair administration.

The lawsuit is reportedly "modeled after similar lawsuits filed in the early 1980s, which sought and successfully stopped all farm foreclosures until the government ensured that the farmers’ procedural due process rights were not violated when administering a similar foreclosure prevention program." Count one of the complaint alleges that the failure to promulgate rules requiring servicers to provide notice of denial under HAMP is a violation of the fifth amendment's protection of procedural due process and alleges that there has been a lack of promulgated regulations, guidelines, and rules for servicers. Count two alleges that the failure to promulgate rules requiring servicers to provide a right to appeal is a violation of procedural due process. A memorandum in support of the motion for a preliminary injunction was filed.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]> http://jbublick.blogspot.com/2009/07/hearings-on-foreclosures-before-joint.html Tue, 28 Jul 2009 05:50:00 -0700 http://jbublick.blogspot.com/2009/07/hearings-on-foreclosures-before-joint.html hearing today entitled "Current Trends in Foreclosures and What More Can be Done to Prevent Them" to investigate the ongoing foreclosure crisis in the residential housing market. It is reported that the Committee "will review past federal regulatory failures" and efforts by the current Administration and Congress to address the situation.

Congresswoman Carolyn Maloney remarked that the foreclosure crisis is not striking evenly across the U.S. and that there are heavy pockets of concentration in certain areas such as California, Florida, Illinois, Massachusetts, Nevada, and New Jersey.

Professor Joseph R. Mason explained that the following factors are among those why mortgage servicers are having difficulties dealing with distressed mortgages: 1. mortgage modification is expensive to service, 2. mortgage arrearages hurt servicer's profits as they have to advance the mortgage payments to the investors, 3. mortgage servicing fees cease upon default, 4. increased fees to do not cover typical increased costs, and 5. difficulties in retaining staff. He also noted that mortgage investors, such as Aaa-class investors and senior bondholders, are weary that the current policy may be gamed by the servicers to protect its interests, such as maintaining the value of the servicer's residual or interest-only strip or to allow the release of overcollateralization to the servicer.

Dr. Susan M. Wachter noted that foreclosure rates are presently four time the historical average and the highest since the Great Depression. She stated that the residential foreclosure crisis began with a wave of subprime mortgages and that the next wave will be payment option mortgages. She also explained that the crisis will abate when home prices stop falling as "level of prices determines whether it is possible to repay the mortgage upon sale." Dr. Wachter further stated that mortgage servicers may lack the incentive and capacity to provide mortgage modifications, that loan modifications with principal write-down are necessary, and that regulatory supervision is necessary to avoid a failure of regulatory and market structure such as the present which triggered a crisis and brought down the system.Jordan E. Bublick, Miami-Dade, Broward, and Palm Beach, Florida, Attorney at Law, Practice Limited to Bankruptcy Law, Member of the Florida Bar since 1983 ]]>