HOAs CAN STOP FORECLOSURES

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The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available TO PROVIDE ACTIVE LITIGATION SUPPORT to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

EDITOR’S NOTE: One good thing about House Bill 87 recently passed in the Florida legislature is that homeowner associations, condominium associations, and cooperative associations can force a bank to proceed with foreclosure. The problem they have is that once a homeowner knows that foreclosure is “inevitable” they stopped paying the Association dues as well as not making any payments on mortgage debt.

But I think the lead story is that these associations could stop the foreclosures altogether. As I have previously stated on these pages arguments that are frequently rejected by both the trial and appellate courts when they are proposed by homeowners are accepted and even augmented when the same argument is made by an institutional opponent to the foreclosure.

The associations may be included in the institutional category. In my opinion they should take advantage of the new portion of House Bill 87 when appropriate, but their focus should be on filing foreclosures on the homeowners who have not paid their dues. In that same foreclosure it is my opinion that the alleged mortgage that was recorded should be attacked as to both validity and priority.

When I was practicing law in South Florida in the 1970’s and 1980’s I represented hundreds of associations as general counsel and of course as trial counsel for the foreclosure of liens. generally foreclosures were not as pandemic as they are now but there were still plenty of them. The procedure is the same as the mortgage foreclosure.

  1. You plead that the association has the right to a lien as per the the Declaration of Condominium or other enabling document for the association.
  2. You plead that you gave adequate notice in accordance with the statutes.
  3. You plead the amount of monthly dies and special assessments due from this homeowner and you plead that no payments were made (not merely that the homeowner failed to pay). You might want to phrase it as “neither the homeowner nor any other stakeholder has made any payment to the association or its agents on this debt.” (This is to require the Bank to plead the same words).
  4. You plead that you filed the lien to secure past dues and future dues until the foreclosure judgment is entered and the property is sold.
  5. You plead that the dues were so much for monthly maintenance, so much for special assessments, and that the expenses of filing the lien and enforcing it with an attorney should also be awarded.
  6. You plead that all other lienholders are junior to the lien of the association unless you know otherwise. You plead that the mortgage lien recorded at page XX Book XX in the Public Records of the County is junior to the lien of the association.
  7. When the trial or Motion for Summary Judgment comes along you have a witness that verifies that they are the records keeper for the condominium as set forth under the Condominium Statutes, they have personal knowledge regarding the receipts and disbursements with respect to the account of this homeowner, they verify or testify what was received from all sources on this account, and that the balance due to the association, as a receivable, is a specific total amount arrived at through simple addition and subtraction.

When the HOA files such an action it is setting the standard for a foreclosure proceeding and it has the full authority of Florida Statutes behind it. Since in most cases the alleged owner of the mortgage lien is no longer the party named on the instrument, the Association can plead truthfully that this party has no interest in the debt and therefore is not entitled to enforce it nor argue for its validity or priority relative to the Association’s lien and foreclosure.

Any OTHER party would be required to intervene and prove that they can make and prove the SAME ALLEGATIONS AS THE ASSOCIATION — something they clearly cannot do. And if they try, depositions of the leading witnesses for the new guest to the party would occur revealing that they have no money trail to show that they funded either the origination or acquisition of the loan and that if they have any claim, it is unsecured and subject to a separate right of action against the borrower. Instead they have a bunch of fabricated paper that refers to financial transactions that never occurred in reality.

The usual end result, if the HOA is successful, and my firm is prepared to demonstrate this to any association that wants to hire us (or who wants to instruct their association attorneys to do it) is that the Association wins, the homeowner redeems the Association lien because it is a small fraction of the presumed lien of the mortgage and everyone is happy except the bank that tried to foreclose who finds itself foreclosed out of the mortgage.

Or the Association becomes the owner of the property at a foreclosure sale or some other person outbids the association WITH CASH and the association lien is satisfied, along with a new owner who pays the monthly and special assessments.

This is going to cause all the players in the false securitization scheme that masked a massive PONZI scheme a lot of trouble because the investors, insurers, government agencies, counterparties to credit default swaps and others who paid on this debt are going to find out through a Court Order that the whole thing was a sham and that the real lenders, the investors never had the bond secured nor was the mortgage debt ever subject to a valid claim through the bond, nor was it properly perfected and secured, so the mortgage filed in the county records was a sham.

HOAs have good reason to follow this strategy for themselves, their distressed homeowners who can be restored to ownership of the property without the illegal encumbrance filed by the the Wall Street players, and for the other homeowners whose property value decreases each time another foreclosure is filed.

John C. Goede: Can HOAs file for a court order requiring lenders to complete stalled foreclosures?
http://www.naplesnews.com/news/2013/jun/30/john-c-goede-can-hoas-file-for-a-court-order-to/

The Sneaky Game Banking Giants Are Playing to Suck More Money From the Foreclosure Crisis
http://www.alternet.org/economy/banks-and-foreclosure

WHY WOULD A BANK OF ALL THINGS PAY 6 TIMES WHAT THE PROPERTY IS WORTH UNLESS THEY WERE COVERING SOMETHING UP? Big banks sometimes pay 600% above value to retain Sarasota foreclosures
http://www.housingwire.com/fastnews/2013/07/08/big-banks-sometimes-pay-600-above-value-retain-sarasota-foreclosures

WHERE ARE THE CONVICTIONS OF THE BANK OFFICERS WHO TURNED THIEVERY INTO POLICY? More than 40 convictions in mortgage fraud scheme involving Florida properties, Ohio straw buyers
http://www.inman.com/wire/more-than-40-convictions-in-mortgage-fraud-scheme-involving-florida-properties-ohio-straw-buyers/

WHY DO BANKS WANT US HOMELESS? Our bank wants us homeless
http://www.salon.com/2013/07/08/our_bank_wants_us_homeless/

Does Your Mortgage Receive Your Full Attention?
http://realtytimes.com/rtpages/20130709_mortgageattention.htm

 

ASSOCIATIONS PUSH FOR FORECLOSURE INSTEAD OF PRIORITY OF THEIR LIEN

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EDITOR’S NOTE: I wonder why the homeowner associations have not aspired to have their lien declared as having priority over the defective mortgages — a move that would guarantee collect-ability and which would save the homeowner from foreclosure.

Of course that would mean fewer foreclosure sales, fewer short-sales, and fewer re-sales. Realtors probably would not like that.

homeowners-associations-increase-lawsuits-to-force-foreclosures

With homeowners’ associations in a financial pinch, the amount of lawsuits filed to force foreclosures is on the rise, according to an article on Bloomberg’s website.

Homeowners’ associations have begun taking banks to court after finding that foreclosure delays have enabled homeowners to stay in their residences for months, even years, without paying association fees. The lack of incoming fees cause associations to lose tens of thousands of dollars in revenue, according to Bloomberg.

“About 50 percent of our members said the housing crisis and economic downturn have had a severe or serious impact on their association,” said Frank Rathbun, spokesman for the Community Associations Institute, a trade group with about 30,000 members.

The fees associations charge go toward community upkeep in places such as parking lots, roofs, landscaping and trash removal.

About one in five Americans live in a house with homeowner or condo fees, Rathbun told Bloomberg. Many people residing in buildings with homeowner or condo associations also live in states with high foreclosure rates, such as Florida, Nevada, California and Arizona.

According to Steven Parker, president of Red Rock Financial Services, delinquent homeowners in Nevada, which has the highest foreclosure ratings of any state, owe associations about $150 million in back fees.

John Rickel, chief executive officer of Association Dues Assurance Corp., told Bloomberg that banks often attempt to delay foreclosures because of the associated dues, property taxes and occupancy costs.

In Florida, for example, 14 percent of homes have a foreclosure notice, and the average delinquent homeowner has not made a payment in 719 days.

Homeowners’ associations desperate for cash will often have to push banks to foreclose on delinquent homeowners.

“Banks have been slow catching up to reality,” said Kelly Richardson, an attorney who specializes in homeowner association law, in the Bloomberg article. “When pushed, they’ll step up to the plate, but you have to push them.”

 

HOW TO USE A SECURITIZATION SEARCH

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WHAT IS A SECURITIZATION SEARCH?

Hopefully any securitization search will include all public records information that either name or describe your loan, and any information public or private that contains clues to what was done with your loan, who funded, it, and whether the receivables from your loan were mixed with receivables from other parties.

Remember: The fact that a document names or describes your loan does Not mean that the loan is in the pool or trust that is described. To the contrary, it appears as though no loans were actually transferred to a pool or trust unless and until one or more of the following had occurred:

  1. The loan account has been declared in default(remember that a declaration doesn’t make it so. Most borrowers accept the declaration as true because they know they have not made some payments. Those Borrowers don’t know or are ignoring the fact that many parties were promising to pay the obligation, and many of those promises preceded the application for loan, much less the loan closing).A securitization search will reveal the facts necessary to know or provide a reasonable basis for the belief that the loan payments continued to be made after the declaration of default (usually by the servicer) or that the trust or pool was dissolved and reconstituted under a different name and different documents.
  2. Foreclosure proceedings have begun either privately (non-judicial) or in the public records (judicial).
  3. The pretender lender has been ordered to either show the documentation or drop their foreclosure, and the Order was from a Judge of competent jurisdiction.

NOT ALL SECURITIZATION SEARCHES WILL PRECISELY NAME THE TRUST OR POOL: If the loan has traveled through Fannie, Freddie or Ginnae for a guarantee, it has been securitized but those entities, which are now essentially government agencies nationalized because of the mortgage crisis do not provide access to the secondary market information and even if you pay them, you will get very shallow data. Thus the analyst can see that the loan was definitely securitized or claimed as securitized, but he/she cannot report on the exact name of the pool or trust. The purpose of those entities is stated in their charter to be the facilitation of securitization of loans in the secondary market. The same is true for private deals which are not really private since they mostly involve public companies, but they are equally difficult to get a precise reading on the identity of a trust that or multiple trusts that could be claiming an ownership of the loan. It is behind this curtain that it was easiest fro the banks to change a few data points about the loans and sell them multiple times into multiple pools.

If the search does not produce the name of the pool trust, doesn’t that mean the search was useless and I lose (the bank wins)?

NO. The actual name of the trust or pool is irrelevant. What is important is that the loan is shown to be more likely than not claimed to be securitized. If the loan was claimed as securitized THAT MEANS you can shift the burden onto the pretender lender to prove its status and offer up real non-fabricated, unforged documents.It means that the receivable from your loan (your payments) was mixed with receivables and guarantees from other parties (other borrowers, insurers, counterparties etc.). It means that the promise to pay was changed from just your promise to a combination of promises from multiple people and entities, some of which were created solely for the purpose of serving as vehicles for the scheme of securitization. AND THAT MEANS the pretender creditor must sort it out— not you.

But that doesn’t mean you don’t have a problem. Because on private deals, the pretender will come in as though there was no securitization when you know there was. So you need as much evidence as possible to show that the loan was probably securitized — so a Judge will believe that there is fire behind the smoke and not that you are just trying to use civil procedure and discovery to delay the proceedings.

Is it better to have the name of the trust or pool than not to have it?

Opinion is split on this. For obvious reasons it is better to have the goods when you are asserting something as a fact to the Judge. But most Judges now know there is an issue with securitization. I believe that even if you have the name of the trust, you should not use it until you are forced to do so. The reason is that as a practical and tactical matter the more evidence you present the more you own it.

By presenting evidence of the securitization of the loan, you are playing into the hands of the pretender. You are accepting the burden of pleading and proving a case that is in reality a simple denial of a case that has either never been filed (non-judicial) or which has been filed with unsupportable allegations. Under the theory that if you use it you own it, your strenuous efforts to show that the loan WAS securitized will bite you in the behind when you defend the case on the basis that the transfer was never made.

My opinion is that it is better to say that the evidence will show that the receivable was not treated in away that is consistent with the pretender’s allegation that they are the creditor, and that the lien was defective or was rendered ineffective by the conduct of the parties.

Then what is the value of the securitization search?

If you don’t use the securitization search in tandem with a loan specific title search and get a thorough analysis of the highlights in the broken chain of title and how those defects appeared, then you are not using the securitization properly. The point is not to show that the loan was securitized and that securitization is evil. The point is to show that the lien in the public records of the county in which the property was located is invalid, unenforceable or void. The title search will show the current status of title tot he property as it appears in the public records. The analysis of that title will show the weak points in the title, whether there are clouds on title, title defects, breaks in chain of title etc. The securitization analysis also takes the facts as we find them, and then explains how the tittle defects came into being.

The securitization report and analysis makes sense out of a situation that is totally  counter-intuitive. Why would a bank intentionally lose money on a loan? That is the question in the mind of the Judge. It makes no sense. And in fact, no bank would intentionally lose money on a loan. So what is happening here? The answer lies in securitization or the intent to create the appearance of securitization, to be more precise. Through securitization neither the loan originator nor any of the securitizing parties had any money in the deal, nor did they have any risk of loss.They had no risk of loss because they were not using their own money or credit. Each party in the securitizing scheme was a paid service provider; each was paid for the same service: to create the illusion of a normal mortgage loan transaction.

Thus the securitization report and analysis is essential element in the foundation of any case for damages or injunctive relief. It explains why a lender would go out of its way to inflate the appraisal on the property being used as collateral for the loan. Thus it lies at factual foundation of a claim for appraisal fraud. It explains why a lender would avoid the task of using underwriting standards developed over centuries to determine creditworthiness and viability of a loan. The originating lender was not in fact making a loan. In fact, in most instances it never handled the money for the funding of the loan even as a conduit. Thus the securitization report and analysis forms the factual foundation for the holy grail of mortgage litigation: Quiet Title.

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Homeowner Association Liens Might be More Valuable Than Anyone Realizes

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Funny how things come full circle. Back in the 1970’s, 80’s and early 90’s I was heavily involved in representing hundreds of associations for homeowners — condominium, cooperative, and homeowner associations. I litigated everything from recreation leases, construction defects, to liens for unpaid assessments or maintenance expenses. I published several articles and conducted a number of seminars on the subjects affecting these associations. Back then the liens were simple and there were issues between associations and lenders, but they were usually easily resolved.

So I get a call from someone in Florida whose parent owned a condominium apartment in a condo I represented back when I did that sort of thing. It turns out he owns the property that his parents once occupied and he has been following my blog with great interest for a while now. And his main question was “If we can agree that the lien of the association is a valid enforceable lien, then is it possible that the defects in what appear to be liens and encumbrances with higher priority could put the Association in first position?”

BAM! I was an expert witness on condominium and homeowner association law, an experienced litigator of all sorts of issues for these associations, and even had a “foreclosure mill” of my own, that enforced the liens and collected the money due, since it was rarely the case than anyone would let the property go just for unpaid assessments. But it had never occurred to me that in many if not most cases, the current round of fake securitized mortgages was sitting behind a valid lien from the association.

To make a long story short,”Yes,” I replied, “if the initial mortgage is defective or defects were introduced into the chain after the closing with the homeowner, then a properly filed and duly executed lien by the association would be sitting in either first position, or a position in which they could claim first position. This would greatly increase the likelihood of earlier and full payment of all outstanding liens, together with costs, and attorney fees and interest.”

The ramifications of this epiphany are enormous. Most of the new construction in recent years has been subject to governance by enabling documents creating an association that has the powers of assessment, rule enforcement, hiring contractors for common areas, hiring lawyers etc. Most of these associations are looking at much higher percentages of people who are not paying the assessments and not paying off the lien because they are already underwater. Or more correctly, perhaps we should say that they THINK they are underwater because they THINK that the mortgage is a valid recorded instrument that is enforceable. Most likely they are wrong and that is the message of this blog — to get people to stop and think before they abandon the most valuable asset in their lives — and now to stop associations from ignoring the value of their liens.

Most associations are looking at these liens as less than worthless. Some of them are not even bothering to file the liens. But if they foreclose on their lien, they could name the mortgage holder of record as a junior or non-existent lienholder because the lender of record is no longer due any money or never was dude any money depending upon whether they originated the loan with their own money or credit, or if they were simply the typical straw-man sitting in as a fee paid performer to look like a lender but act like one.

As we have seen in more and more cases, when institutional plaintiffs (associations included) make the same allegations as borrowers are making in the courts they are taken far more seriously by the Judges. Proactive associations  could therefore go after these liens aggressively and do a favor for everyone — except the banks who have no money in the deal anyway.

By knocking out the pretender lenders as an institutional plaintiff representing dozens, hundreds of even thousands of homeowners whose assessments will be effected by the non-payment by other homeowners, the Association clears an easy path for collection in full, and for the homeowner to retain the property and live in it, thus avoiding the future problem of a ghost town or half empty association where there is not enough money or resources to get the job done of running and maintaining the condominium, coop, or homeowner association. What these associations need is for their lawyers to get up to speed on securitized loans, get securitization searches like the one we offer (see link next to my picture) and file against the banks, who, in my opinion, will fall like dominoes, settling the claims of the association with payment in full.

Whether you go all the way through foreclosure or you settle with the pretender lender, the property owner (homeowner) will have the path cleared for him to make the same allegations, but this time with greater weight than is currently received in courts around the country.

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