Credit Default Swaps: Effect on Foreclosure Litigation

The actual certificates of asset backed securities (ABS) and in particular mortgage backed securities (MBS) were sold to investors. And they weren’t just sold, they “sold forward.” This is a form of short selling wherein the investment bank sells the security first and THEN waits until it can get the underlying mortgage and note at the cheapest possible price to fulfill the description in the indenture of  the mortgage backed security (bond). It is exactly the reverse of what is portrayed by government and the press. They say it starts with the loan — not true. They say first the loan then the pooling, then the securitizing, then the sale to investors. It is exactly the reverse.

The Toxic assets everyone is talking about are NEITHER the MBS nor the mortgages and notes. The toxic assets are credit default swaps — which are a device by which anyone can receive a fee in exchange for their promise to pay if the underlying obligation goes into default. Under the current and old rules which Obama has now proposed changing, if you wanted to sell a credit default swaps you were not required to have any amount of capital or reserves. The pizza delivery kid could have sold these. AIG sold hundreds of billions of these without the capital to back it up. Bear Stearns and the rest of the investment banks were selling like crazy to each other in order to artificially raise reported earnings and thus raise the price of their stock.

So the TARP money (Troubled Asset Relief Program) probably never acquired a single toxic asset unless it did so under subrogation or equitable trust. The insurance products, including credit default swaps and cross collateralization agreements frequently had subrogation clauses. The significance of that is the transfer of interests in credit default swaps was in fact the transfer of an interest in real estate without recording it in accordance with state law. The interest in real estate was the interest in a security instrument wherein the property was real estate. Not even MERS kept track of the trading in CDS or for that matter the secondary trading of MBS.

So for your MERS related claim you have (a) notice (right in the Deed of Trust or Mortgage) to the world that there are going to be transfers off record in violation of state law and (b) withholding the information on the recipients of those interests. Hence at the moment of closing of the “loan” transaction (which I maintain is actually a thinly veiled securities transaction wherein the borrower is the unwitting issuer of a “negotiable” instrument where the instrument is actually (a) non-negotiable and (b) sold without the borrower’s knowledge (identity theft) as an unregulated security under false pretenses to “qualified” investors who be definition had access to the true information but never bothered to use it because of the AAA rating and the AIG insurance.

It is an inescapable conclusion that the mere closing of these “loans” in this manner creates an immediate cloud on title rendering the deed unmarketable. This raises the spectre of claims against the Title Insurance carrier who will no doubt claim that there is no coverage because of fraud. That will be difficult for them to maintain in view of the fact that MERS is right there in the deed, but even if they succeed, they are proving your case in chief.

21 Responses

  1. The behavior of these institutions is reminiscent of
    Keating ( Lincoln Savings) in the 80’s. Who would have thought such schemes could or would one day go global? It is in fact outrageous and nothing less.
    These people should be charged with the crimes they have committed, and continute to commit against the
    homeowner.

  2. JT, that’s a good question about pmi and default swaps. IF the default swap is a form of insurance and the lender actually realizes money from a claim, they are getting it twice, since any loan exceeding 80%LTV
    has m.i., whether it is charged to the borrower separately or included in the note rate, which is otherwise known as a ‘self-insured’ loan.

  3. It is not really patently against the law, at least in Nevada, not to record a transfer of an interest in real property. Don’t cry yet. The bad news for the bad guys is when such transfer is not recorded, it is only binding
    on the parties to that transfer, i.e., bad guy 1 and bad guy 2. If an interest is not recorded, you have and are bound by no notice. In Nevada, it’s NRS 111.315.

  4. Hedge Fund Insurance Premiums Soar
    May 22, 2009
    Given the events of the last year—hedge funds blowing up, getting beaten up and/or ensnared in a raft of Ponzi schemes—it’s no surprise that insurance costs for the industry are soaring.

    Insurance for negligence, errors and omissions and professional indemnity have all gone up, Bloomberg News reports. Negligence insurance costs about 20% more today than it did six months ago, according to Brian Horwell or Miller Insurance Services.

    Horwell said that a $200 million hedge fund with a “straightforward strategy” is paying $10,000 per year more for $5 million of coverage that it was at the end of last year.

    The increase in errors and omissions premiums is more difficult to track, as it tends to be quoted on a fund-by-fund basis, according to Bloomberg. But those hedge funds with a lot of debt or more complex investments are likely to be the hardest hit by the rising costs of protection.

    Meanwhile, professional indemnity insurance, which offers protection against loss or damage by a client or third party stemming from mistakes or negligence, costs about 10% more than six months ago, according to Fitch Ratings.

  5. Has anyone seen this yet?

    http://www.whitehouse.gov/blog/Protecting-Homeowners-Protecting-the-Economy/

    Wednesday, May 20th, 2009 at 6:49 pm
    Protecting Homeowners, Protecting the Economy
    The President has just signed the Helping Families Save Their Homes Act and the Fraud Enforcement and Recovery Act into law, landmark pieces of legislation addressing the problems that helped set off the economic crisis we are fighting through now.
    The Fraud Enforcement and Recovery Act gives the federal government more tools to crack down on the kind of fraud that put thousands of hardworking families at risk of losing their homes despite doing everything right to live within their means. It expands the Department of Justice’s ability to prosecute at virtually every step of the process from predatory lending on Main Street to the manipulation on Wall Street. It also creates a bipartisan Financial Crisis Inquiry Commission to investigate the financial practices that brought us to this point, so that we make sure it never happens again.
    Before signing it, the President said:
    Last year, the Treasury Department received 62,000 reports of mortgage fraud — more than 5,000 each month. The number of criminal mortgage fraud investigations opened by the FBI has more than doubled over the past three years. And yet, the federal government’s ability to investigate and prosecute these frauds is severely hindered by outdated laws and a lack of resources.
    And that’s why this bill nearly doubles the FBI’s mortgage and financial fraud program, allowing it to better target fraud in hard-hit areas. That’s why it provides the resources necessary for other law enforcement and federal agencies, from the Department of Justice to the SEC to the Secret Service, to pursue these criminals, bring them to justice, and protect hardworking Americans affected most by these crimes. It’s also why it expands DOJ’s authority to prosecute fraud that takes place in many of the private institutions not covered under current federal bank fraud criminal statutes — institutions where more than half of all subprime mortgages came from as recently as four years ago.
    The Helping Families Save Their Homes Act expands on the success of the Making Home Affordable Program first announced in February. By reducing foreclosures around the country, the average homeowner could see their house price bolstered by as much as $6,000 as a result of this plan, and as many as 9 million homeowners could get help making their mortgages affordable and avoid preventable foreclosures. This bill makes this help easier to access and take advantage of, helps get credit flowing again, establishes protections for renters living in foreclosed homes, and establishes the right of a homeowner to know who owns their mortgage. It also provides $2.2 billion to address homelessness, helping families be part of the recovery one by one.
    Before signing it, the President said:
    Let me talk a little bit about the housing bill. The Helping Families Save Their Homes Act advances the goals of our existing housing plan by providing assistance to responsible homeowners and preventing avoidable foreclosures. Last summer, Congress passed the HOPE for Homeowners Act to help families who found themselves “underwater” as a result of declining home values — families who owed more on their mortgages than their homes are worth. But too many administrative and technical hurdles made it very difficult to navigate, and most borrowers didn’t even bother to try.
    This bill removes those hurdles, getting folks into sustainable and affordable mortgages, and more importantly, keeping them in their homes. And it expands the reach of our existing housing plan for homeowners with FHA or USDA rural housing loans, providing them with new opportunities to modify or refinance their mortgages to more affordable levels.
    Any plan is only as effective as the number of people who take advantage of it. This bill recognized that, but if you think you might benefit from refinancing as millions of other Americans could, go to MakingHomeAffordable.gov to find out if you or your family is eligible. Learn more about these bills through the White House fact sheet out today.

  6. From the BlogofSandiego.com

    Condo developer Jeff Greene buys his own “credit default swaps”

    Nobody knew better than Los Angeles apartment mogul Jeff Greene when the real estate bubble would burst. He was one of the main architects of the fraudulent loans that inflated real estate prices. Then he bet that the whole edifice would come tumbling down and made a billion dollars on that bet. He had discovered “credit default swaps” (CDS). Watch him explain to a CNBC reporter how his only regret is not doing “twice as much”:

    http://media.cnbc.com/i/CNBC/components/Syndicated%20Video%20Player/videomodule.swf?id=867451979&pcode=cnbcplayershare&play=&base=http://plus.cnbc.com/stickers/partners/cnbcplayershare

    The star-struck reporter obviously did not know about Greene’s scam of creating bad loans and then buying the financial instrument (CDS) that bet on them not defaulting. Every CDS traded was grossly underpriced because the market did not know how bad the underlying loans really were. But Greene knew. He was therefore able to buy low (before the markets realized the risk) and sell high (after the markets realized the risk) the oldest trick in the book.

  7. From Pat Flannery at the BlogofSanDiego.com

    Condo developer Jeff Greene buys his own “credit default swaps”.

    Nobody knew better than Los Angeles apartment mogul Jeff Greene when the real estate bubble would burst. He was one of the main architects of the fraudulent loans that inflated real estate prices. Then he bet that the whole edifice would come tumbling down and made a billion dollars on that bet. He had discovered “credit default swaps” (CDS). Watch him explain to a CNBC reporter how his only regret is not doing “twice as much”:

    http://plus.cnbc.com/rssvideosearch/action/player/id/867451979/code/cnbcplayershare

    The star-struck reporter obviously did not know about Greene’s scam of creating bad loans and then buying the financial instrument (CDS) that bet on them not defaulting. Every CDS traded was grossly underpriced because the market did not know how bad the underlying loans really were. But Greene knew. He was therefore able to buy low (before the markets realized the risk) and sell high (after the markets realized the risk) the oldest trick in the book.

  8. Hey wait a second if all of our loans were pooled together, securitized, & sold as trusts…. then again why did we all get new loan numbers when the servicing rights were transferred? but the MIN stays the same? I think I may be getting pretty close to solving this arubics cube

  9. Judge’s ruling deals blow to national mortgage servicer
    BY TIM O’REILEY

    A Las Vegas bankruptcy judge has dealt a blow to an obscure but critical piece of the mortgage enforcement machinery that could slow foreclosures.

    After a rare hearing in front of three judges last year that initially encompassed 27 cases, U.S. Bankruptcy Court Judge Linda Riegle has ruled that the Mortgage Electronic Registration System (MERS) could not represent lenders seeking to foreclose on delinquent homeowners already in bankruptcy unless it could produce the actual loan note. This goes to the heart of how home lending has evolved over the past two decades, with a loan rarely staying on the books of the originator but often being sold several times to other institutions or investment groups. As a result, producing a loan document is far more complex than opening a drawer in a filing cabinet.

    MERS, a joint venture of numerous lenders launched in 1993, is a database tracking an estimated 60 million mortgages and promising to take responsibility for functions such as foreclosure as long as a mortgage stays with a MERS member. To reach this point, en route to its self-professed goal of “register(ing) every mortgage loan in the United States,” it has fought off court challenges to its status across the country and challenged the argument that it must possess a loan document to have legal standing. MERS has represented hundreds of different lenders in Las Vegas in recent years.

    For that reason, MERS quickly appealed Riegle’s decision in April. Although not commenting directly on the case, a MERS spokeswoman points to other states such as Florida, where MERS lost at the trial-court level but ultimately won on appeal.

    The case has attracted industrywide attention. Writing last October in the American Bankruptcy Institute newsletter, Johnathan Bolton, a bankruptcy attorney with the Houston firm of Fulbright & Jaworski, noted that the local case “could have a great impact on the ability to enforce mortgages in the United States.”

    “Since Nevada is a nonjudicial foreclosure state, this issue is only now coming to a head,” said Bill Uffelman, president of the Nevada Bankers Association. “If in fact you can’t produce the note, it puts the whole thing (a foreclosure) into abeyance.”

    But for people with homes worth far less than the loan balance or without the income to cover monthly payments, the ruling may buy only a few months of breathing room.

    “Whether this changes the outcomes of foreclosures remains to be seen,” said Henderson attorney Robert Massi, who represents debtors. “But it does buy time and gains some negotiating leverage” even before a bankruptcy.

    Lenard Schwartzer, a private attorney and a bankruptcy trustee who won the case, has come to doubt its practical significance.

    “In most cases, it buys an additional three to six months,” he said. “But not many people seem to care.”

    Because people tire of living under the threat of a forced move-out, especially when a house has negative equity, he now describes his work on the case as “50 to 100 hours of wasted legal time.”

    The ruling comes amid swelling complaints that mortgage servicers have exacerbated the deluge of foreclosures in the past couple of years. Assembly Speaker Barbara Buckley has introduced a bill in the current legislative session to allow financially besieged homeowners to request arbitration of a default, partly to bypass servicers and force lenders to the table.

    MERS claims credit for an integral role in the widespread expansion of mortgage lending options for consumers by providing the mechanism not only to follow loans from owner to owner but avoid tens of millions of dollars of recording fees every year and the piles of paperwork that come with it. MERS highlights one section of a Florida court decision that called it “an innovative instrument of commerce.”

    Nevertheless, Riegle’s ruling not only parsed federal and state law but at least implicitly rapped MERS on the knuckles for its practices. For example, she noted that MERS acted as the attorney on several loans in Las Vegas even after they were transferred to non-MERS members.

    She also rejected the argument that lenders who belong to MERS and designated it to be their legal representative should be good enough for the court. Without the loan papers, she concluded, MERS’ terms and conditions for its members do not give it any rights to foreclose under Nevada law.

    “To reverse an old adage,” she wrote, “if it doesn’t walk like a duck, talk like a duck and quack like a duck, then it’s not a duck.”

    Contact reporter Tim O’Reiley at toreiley@lvbusinesspress.com or 702-387-5290.

    Search Classifieds:

    contributed by

    Jose L Semidey
    Mortgage Analysis and Consulting, LLC
    703-946-5851
    http://www.toxicmortgageloan.com
    http://www.hipotecatoxica.com

  10. Michael Greenberger, University of Maryland Law School, Professor (May 15, 2009)

    Michael Greenberger talks about the Administration’s plan to change rules regarding “derivatives” (financial contracts that are based on the value of a commodity). The Administration believes the lack of oversight of these markets led to the current day trouble in the financial markets.

    Washington, DC : 50 min.

  11. Did anyone noice AIG has stopped paying CDS claims for Countywide a month or two ago. Countrywide sued in state court to get paid. AIG followed up in Federal Court on 3/19/09 alledging fraud on Countrywide’s part as to the quality of the loans they “insured.” (Case #2:09-cv+01888-MRP-JWJ). Couple this with Greenwich Financial’s suite on behalf of investors against Countrywide and the truth may set us all free :))

    John

  12. Does anyone have any idea how much the Credit Default Swaps pay out? I am of the assumption that lenders (etc) came up with this to replace private mortgage insuarance from years back at a rate of 20-30% or the original loan. This info seems to be “nowhere to be found.”

    Thanks!

  13. From the Home Equity Theft Reporter posted today:

    Lenders’ Failure To Comply With Bailout Bill Has Florida Attorney Seeking To Delay, Dismiss Foreclosure Actions
    In Fort Lauderdale, Florida, the Daily Business Review reports:

    * Lenders receiving U.S. government stimulus money are required to offer distressed homeowners reasonable loan workouts to prevent more foreclosures. But critics say that’s often not happening. Claiming lenders aren’t working with borrowers, Weston attorney Jonathan Kline is in state court trying to block the first of dozens of foreclosure cases.

    * Kline has asked judges to dismiss or delay about 10 cases. He argued the lenders […] are not complying with the Emergency Economic Stabilization Act of 2008, the bailout bill that originally authorized the Treasury Secretary to spend $700 billion to purchase distressed assets of the largest U.S. banks.

    ***

    * The bailout bill requires lenders receiving federal money — including those servicing Fannie Mae and Freddie Mac loans — to offer “reasonable loan modification based on three areas, including reducing the interest rate, reducing the principal amount of what is due and elongating the term of the loan,” Kline said. Kline said he is planning to file similar motions in all of the approximately 200 foreclosure cases he has working.

    * Last week, Kline presented the argument for the first time before Broward Circuit Judge Jack Tuter in a foreclosure case against U.S. Bank, the trustee for Homebank Mortgage Trust, which originated Fannie Mae and Freddie Mac loans. Tuter rejected Kline’s request for dismissal of the foreclosure. “He said it would have been better to present it in an evidentiary hearing, but he liked the argument,” Kline said. Kline said he may request a second hearing and will use that argument on other cases.

    Here’s a link to the story:

    http://www.dailybusinessreview.com/Web_Blog_Stories/2009/May/Workouts.html#

    Here’s a link to the motion:
    http://www.dailybusinessreview.com/images/news_photos/54997/Motion%20to%20Abate.pdf

  14. Let us add one further important point to your conclusion for Florida, or rather a question: Why is it that Mers is recording an assignment of mortgage and mortgage indebtedness to the foreclosing lender who in turn fails to reference or attach a copy of it to the complaint (but does include the note and mortgage)? And why isn’t the separation of the note payee (the lender at closing who’s name is in on the note) from the named Mortgagee on the mortgage (Mers) exploited as a title defect from the get go? Look closely my friends at that mortgage: it is signed only by the maker of the note who has no power to bind the note payee. And there is no power of attorney from the maker recorded or other authorizing reference in the note that allows or even mentions that Mers. Record title wise it is a complete stranger to the transaction. I see a vesting problem. It’s like a transfer of mortgage without the necessary assigment of the note. At best it creates an inchoate right cured only by the afteraquired title when the note is finally assigned but places everyone on inquiry notice of a gap in title. This situation should make bonafide 2d mortgage holders a bit curious to find out if their mortgage now has priority.

  15. Further to my last post: This common law argument on discharge can be used as a near perfect fit analogy, as long as it can be proved that the securitization process has indeed created a title cloud on the home owner’s property. The same analysis, but perhaps stronger, can be applied in the lost note cases.

  16. The second point of your argument is key to defeating the lien of the mortgage in equity, by way of quite title. Under Florida law a modification of a loan without consent of the original maker operates as a discharge of the maker.

  17. Right on MERS, if you multiply 60,000,000 mortgeges for all the fees they should have been paid for the transfers at your friendly local office of land records in your courthouse, the figure would be very large indeed.

    Our cojones-less legislators are going to increase your taxes to pay off some one else’s tax evasions scheme. Call your State treasurer, I am 100% sure they have no idea these fees are going uncollected. If you live in a state with non-judicial, I mean, fraud laden foreclosure state, like in Virginia. You will get very receptive ears now that most states are struggling for money just like all of us.

    I thought Ponzi Schemes were illegal, and all these mortgages were and are part of a very large ponzi scheme.
    Where this MERS enterprise was a part of it, check out their shareholders, most sub-prime risk loving and now foreclosing entities are the major shareholders.

  18. California State Treasury is asking for TARP money to be extended to local and state government. I think they should take it from MERS!

  19. Florida Supreme Court
    Task force hopes to standardize management of excessive foreclosures

    May 13, 2009 By: Jordana Mishory

    Barbara Pariente

    Florida Supreme Court task force on home foreclosures plans to propose uniform case management and design a model mediation program to deal with the glut of foreclosure cases tying up the state’s legal system.

    In an interim report released this week, the task force said uniform statewide solutions are needed “to avoid a patchwork of independent and confusing requirements.” But the task force is short on details, making it difficult for those working on foreclosure cases to comment on the proposals.

    “At this point, it’s a little uncertain how things are going to proceed other than we expect some time in August to have a final recommendation from this task force,” said Fort Lauderdale attorney Eric Schwartz, who represents licensed mortgage lenders.

    The 14-page report plus attachments notes the obvious: mortgage foreclosure filings have exploded. In three years, state courts have seen filings increase by 400 percent, and Florida has the fourth highest foreclosure rate nationally.

    But instead of receiving increased infrastructure or funding, the court system has suffered cutbacks as the economy plummeted, and judges are juggling a backlog.

    Supreme Court Justice Barbara Pariente said the court must try to balance the interests of lenders and borrowers when drafting a plan, and she emphasized the need for statewide standards.

    Pariente, who had not seen the report when she was interviewed, said she does not know what the answer is but knows it’s important that the process be efficient and guarantee each borrower who wants a day in court can have one.

    She also knows task force recommendations won’t make everyone happy.

    “We’re studying it. We hope to be proactive to create a statewide order,” Pariente said.

    The 15-member task force chaired by Miami-Dade Civil Administrative Judge Jennifer Bailey voted to design an alternative dispute resolution program for foreclosures that would be considered by the state’s high court. The program would be limited to cases filed in court because judges lack jurisdiction over other disputes.

    The task force plans to offer recommendations that would be cost-effective and affordable while staying consistent with existing laws and policies. A pending issue is the “clarification of legal and ethical obligations of circuit judges in hearing uncontested securitized mortgage foreclosure cases.”

    Homeowner defense attorney Roy Oppenheim of Oppenheim Pilelsky in Weston seized on that point, claiming the constitutional rights of distressed homeowners may be sacrificed at the hands of overworked judges.

    “Why do we need clarifications if judges are really, really doing their jobs?” he asked. “It’s saying in a nice way that judges are not fulfilling constitutional obligations to protect those people not represented by counsel.”

    On Sunday, the Sarasota Herald-Tribune reported foreclosure lawyers for lenders are giving false statements in court and the lies and errors are slipping past overworked judges.

    The task force created nearly two months ago by Chief Justice Peggy Quince to assess whether the court system could find more efficient ways to handle foreclosures plans to deliver a final report Aug. 15.

    Bailey said the goals of case management and alternative dispute resolution are to ensure cases that can settle do so early to avoid clogging courthouses.

    Bailey compared the court system to a highway running at maximum capacity.

    “With foreclosure cases, it’s like that highway during a hurricane evacuation in a rainstorm with two lanes closed for construction because of the budget cuts that have affected the court system,” she said. “Our job is to create off-ramps for those cases … and try to keep the traffic moving because it’s not just affecting foreclosure cases. It’s affecting every case filed.”

    Whether mediation would be mandatory or case specific is still being debated. Miami-Dade County opted for mandatory mediation last month after a circuit court in the Florida Panhandle did the same.

    Bailey said the task force is developing criteria for what would be subject to alternative dispute resolution.

    The task force also is trying to determine where the court process breaks down and how to better move cases. It could propose administrative orders and forms to use statewide.

    The biggest complaint is a lack of communication between the two sides, Bailey said. The task force intends to provide the circuits with a uniform set of forms that also would give circuits flexibility.

    “Coming up with one static plan that doesn’t allow for any ingenuity would be unintelligent,” Bailey said. “The idea is to come up with a basic plan that we would build on that’s relatively uniform throughout the state.”

    The task force is soliciting public input but won’t hold any public hearings because of time and budget constraints.

    Oppenheim called the lack of public hearings “garbage.”

    “It’s the biggest problem to hit Florida in 50 years, and they’re not going to have public meetings,” he said incredulously.

    If mandatory mediation is recommended, Oppenheim said he would want lenders to pay for it to ensure everyone has their day in court.

    “I really get a sense that our judicial system has become a gigantic collection agency for the banks,” he said. “There definitely needs to be some creativity and some oversight here.”

    Schwartz of Weitz & Schwartz in Fort Lauderdale would be happy to see uniformity among circuit courts, saying the hodgepodge of administrative orders around the state makes it difficult for practitioners who work in a variety of jurisdictions.

    But he wants mediation to be addressed on a case-by-case basis.

    “It takes two to tango, and oftentimes we have files where the defendants are totally unresponsive and are not living at the property any longer,” Schwartz said. “To have [mediation] applied in those types of circumstances would be a waste of everyone’s time and money.”

    He advocates having procedures in place allowing parties to request mediation. He opposes Miami-Dade Circuit Court’s policy requiring lenders who file homestead residential foreclosure actions to pay $750 to the Tallahassee-based Collins Center for Public Policy for mediation in addition to foreclosure filing fees.

    In a speech last Friday in Fort Lauderdale, Pariente worried the public would stop “seeing courts as protectors but facilitators for the powerful.”

    Bailey said the task force is trying to put together the best system for what is “fundamentally a problem that extends so far beyond what the court system is designed to respond to. There are community stabilization issues, huge economic issues, homelessness issues, job issues, mortgage fraud issues, bank regulatory issues, most of which is outside our control. We’re just where the buck stops,” Bailey said.

    “The really hard work is now ahead,” Schwartz acknowledged.

  20. WHAT A SHAME CONTRIBUTOR”S NOTE

    Two minutes, and home goes away

    By Todd Ruger

    Published: Thursday, May 14, 2009 at 1:00 a.m.
    Last Modified: Wednesday, May 13, 2009 at 9:50 p.m.

    SARASOTA COUNTY – Starting Friday, hundreds of people could lose their property each month in foreclosure hearings scheduled to take less than two minutes.

    Often called a “rocket docket,” the streamlined foreclosure court can schedule up to 250 cases per day, sending properties to auction in cases where the owners never showed up to defend themselves.

    Speeding those cases through the court system will help unclog a glut of foreclosure cases, allowing civil judges to focus on cases where homeowners are fighting to save their property, as well as the other lawsuits they normally oversee.

    And the faster foreclosed properties can be resold to new owners, the faster housing values can recover in the local market, economists say.

    “I don’t want to have these undefended cases stacking up,” 12th Circuit Chief Judge Lee Haworth said. “It just seemed to be the right thing to do.”

    Courts across Florida have adopted similar dockets to handle the flood of foreclosures filed after the housing market downturn in 2006. The Sarasota-Bradenton-Venice market had 4,991 filings in the first three months of this year, far outpacing final judgments in cases.

    And a surge of foreclosures in April could signal an even faster rate of foreclosure filings this summer.

    The rocket dockets have been criticized, most notably in Lee County, for leaving homeowners who come to the hearing only seconds to be heard and giving little time to the judge to ensure paperwork is correct.

    For the housing market, though, moving properties fast is a good and necessary thing, said Jack McCabe, a Deerfield Beach-based real estate consultant who was one of the first to predict the housing bust.

    The vast majority of foreclosed homes, until they are resold, sit in a state of neglect and depress prices for all nearby properties, McCabe said.

    A large number of foreclosed properties in one area can attach a stigma to those areas. And in many cases, banks have not been paying for maintenance to keep the electricity and water on.

    “The downward pricing pressures, caused by the amount of neglected properties, pushes prices down even further on units that may be well maintained,” McCabe said.

    Sarasota County’s rocket docket will be run by retired Circuit Judge Harry Rapkin, who left the bench in 2004 after spending time in the spotlight for a decision not to jail Joseph Smith on a parole violation for a cocaine offense. Smith went on to abduct, rape and murder 13-year-old Carlie Brucia in 2004.

    Foreclosure defense attorneys, who have seen case after case where lawyers representing banks are giving false statements in court, worry that some homeowners will slip through the cracks and lose property they should not.

    “Given the high level of mistakes we’re seeing in the cases we’re dealing with, I don’t see how 250 cases a day would be mistake-free,” said Elizabeth Boyle, managing attorney at Gulfcoast Legal Services Inc., which represents poor homeowners.

    Many times the homeowners do not have an attorney, do not know about the free legal services available or do not realize they have to file something in court until it is too late, Boyle said.

    Haworth said the local version of the rocket docket gives more protection to property owners. First of all, the only cases going to the accelerated track are those where the defendant never showed up.

    Also, court rules in Sarasota and Manatee counties require that lenders’ attorneys ensure all paperwork is in order, filling out a checklist.

    Lenders are required to meet with owners of homesteaded property before asking the court for a summary judgment.

    And a homeowner can show up with a defense and the case will be returned to the regular foreclosure track.

    Still, Sarasota County judges have found obvious errors in paperwork when checking records they might not usually check. One judge told a group of attorneys that she just happened to check one foreclosure order that dealt with property in Miami.

    In other cases, banks have given false statements in court about who owns mortgages, whether the homeowner is willing to negotiate or whether they have completed all the legal steps to put a foreclosed house back on the market.

    A retired attorney living in Sarasota, whose study of 180 Sarasota County cases found only one in four had complete paperwork, said the fast docket leaves less time to catch those kinds of mistakes.

    “There is no check, no screen, to make sure the most obvious, egregious errors are corrected,” Richard Kessler said. “It’s not a hearing, it’s a hanging.”

    Haworth said the system puts the burden on the person being foreclosed on to point out any flaws there may be in the case against them.

    “If they decide for whatever reason they choose not to defend it, then they are defaulted,” he said.

    This story appeared in print on page A1

    All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

    CAN SOMEONE FILE SOMETHING AGAIST THESE PEOPLE???

    I F I DID THIS I WOULD BE IN JAIL!

Leave a Reply

%d bloggers like this: