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

 

Wake Up Tennesee: You Only Think the Foreclosure Mess Won’t Hurt You

PRACTICE AND PROCEDURE IN TENNESSEE
If you are seeking legal representation or other services call our Florida customer service number at 954-495-9867 (East Coast — including Tennessee) and for the West coast the number remains 520-405-1688. Customer service for the livinglies store with workbooks, services and analysis remains the same at 520-405-1688. The people who answer the phone are NOT attorneys and NOT permitted to provide any legal advice, but they can guide you toward some of our products and services.
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 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 Alert To Tennessee Residents: LEGISLATURE CONSIDERING BILL TO PASS MAINTENANCE FEES AND ASSESSMENTS IN ARREARS ONTO HOMEOWNERS THAT WERE NOT FORECLOSED IN ASSOCIATION.

There are somethings you can do about this, one of which is obviously to ignore the issue and let the ill come to your door and find out you have to pay several thousand dollars to cover the lost association dues to the HOA. Right now the mood of Tennessee courts is to be very dismissive of the homeowner defenses and counterclaims. It is a bright red state. The judges are applying knowledge from years ago to a novel situation in which the parties are not who they appear to be and the money is not where it appears to be.

Because of that it would be wise for homeowners to unite and contact their legislators to NOT further burden them with already rising costs associated with foreclosures. But more than that, study, up, you end up with a first lien on the property and wipe out the mortgage that is being foreclosed, leaving with the homeowner with right of redemption that is far easier to satisfy than the one the bank is trying to impose based upon appraisal fraud at the commencement of the transaction.

I personally know several investors who are buying the liens from associations and foreclosing on the banks, getting considerable traction but not winning all the time.

So Tennessee wake up and smell the roses or the stuff that comes out of the back of a horse — it’s your choice.

TN bill would pass foreclosure fees to neighborhoods
http://www.wsmv.com/story/21634792/tn-bill-would-pass-foreclosure-fees-to-neighborhoods

MOVING INTO FIRST POSITION: PRIORITY OF LIENS

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IF YOU HAVE A SECOND MORTGAGE, HELOC OR OTHER JUNIOR LIEN ON YOUR PROPERTY (LIKE AN ASSOCIATION LIEN FOR NON-PAYMENT OF MAINTENANCE), THAT MIGHT JUST BE YOUR TICKET OUT OF THIS MESS.

I would add that if you are the holder or the attorney for the holder of junior liens, you should pay careful attention, because it is possible if not likely that you will have an opportunity to improve the value of that lien and at the same time clear the title with the homeowner such that the predatory loan defenses and title defenses disappear forever.

While the judiciary has been slow to apply the normal requirements of law, procedure and prioritization of real estate interests, that has only been apparent where the homeowner is contesting a foreclosure and the presumption in the Judge’s mind is that you’re a deadbeat who is trying to use technical gimmicks to delay or get out of a jam. In several cases we have reported here the rules were easily applied when the party seeking relief was an institution seeking to perfect its lien and establish its priority in the chain of title.

What I am suggesting here is that a deal between a junior lien holder with no equity covering their current position and the homeowner with an uphill fight on their hands could result in a favorable outcome for everyone except the first lien-holder. The following is a hypothetical scenario executing this strategy:

  • John Jones owns a house worth $75,000. The first mortgage is $200,000 and the second mortgage is $50,000. The original appraisal was $270,000. Jones also has a lien on his property for non payment of assessments to his condominium association. Each lien under law is subject to the procedure of foreclosure.
  • Scenario 1: The association sues to foreclose claiming the other lien holders have not perfected their liens and citing the deficiencies we all know from this blog. Homeowner settles or redeems property after Association has obtained a judgment placing it in first position. Homeowner is defendant is foreclosure of Association lien. If the Judgment states that the first lienholder failed to perfect their security interest, then the association has done your work for you.
  • Scenario 2: The holder of the second mortgage or HELOC which now views the loan as virtually worthless, or at least without any security covering the the loss, brings a quiet title action with you jointly establishing them is first position. In exchange for funding the litigation, the second place holder gets into first place, establishes that the first holder did not perfect their security interest and gets paid in full with or without a bonus.
  • Scenario 3: Homeowner is more creative and gets third party to purchase the holder of the junior lien and uses the same tactics as above. But without it appearing as bank vs. bank, the likelihood is that the court will see it as a homeowner maneuver and resort back to the wrongly conceived presumptions that makes all this necessary in the first place. A smart credit union or small community bank would do very well with this and could pilot it one house at a time.

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PRIORITY OF LIENS: TWISTED TAIL OF TITLE FRAUD

THE BOTTOM LINE IS THAT CASE LAW IN VARIOUS CASES REPORTED IN THIS BLOG SHOWS THAT WHEN ONE INSTITUTION CONFRONTS ANOTHER, THE APPARENTLY INFERIOR LIEN BECOMES EITHER SUPERIOR, OR THE ONLY LIEN. CONDOMINIUM ASSOCIATIONS, HOMEOWNER ASSOCIATIONS TAKE NOTE: YOUR LIEN MIGHT BE WORTH THE ENTIRE HOUSE IF YOU FILE FOR A DECLARATORY ACTION RAISING THE PRIORITY OF YOUR LIEN. HELOC AND SECOND MORTGAGE HOLDERS TAKE NOTE AS WELL. AND OF COURSE HOMEOWNERS OR THOSE WHO THINK THEY ARE EX-HOMEOWNERS TAKE NOTE: YOU MIGHT STILL HAVE THE RIGHT TO BRING A QUIET TITLE ACTION AND RECLAIM YOUR PROPERTY — ALLOWING ANY ACTUAL “LOSER” IN THE DEAL TO MAKE THEIR CLAIM BUT BARRING NOMINAL PARTIES FROM WINDFALL PROFITS IN THE ABSENCE OF ANY RISK OR INVESTMENT.

There is practically nobody left who doesn’t see that the “ownership” of the loan is a big red question mark. The question that is unresolved is whether that is relevant to questions of title and foreclosure sales. Here is the issue: In most cases the title record (the official title records books located in the property clerk’s office) show only one “party” to the note (a company identified as a lender) and one “party” to the security instrument — the mortgage or Deed of Trust — (a company identified as the mortgagee or beneficiary most frequently MERS or some other straw man or nominee).

So the first problem is that from the start, the ownership of the note and the ownership of the mortgage are split intentionally by the parties who engineered the “loan” closing. With the exception of a few states where the big banks lobbied for corrective legislation that probably is unenforceable or unconstitutional, it is not possible to enforce a mortgage that is not incident to a note. Each state has adopted the Uniform Commercial Code and its own property laws that make it impossible for one person to get the house and another to get a monetary judgment for the note —- both based upon the same obligation.

  • They must be the same person or there is no enforcement of the security instrument (i.e., no foreclosure). And in those states, the mortgage or deed of trust is not incident to the note unless they have a common “owner.” So even before we get to the issue of securitization of the receivable, we have a problem. There is basically no law that would allow foreclosure of a so-called mortgage or deed of trust in which the holder of the mortgage or deed of trust is different than the holder of the note.

Before we get to the securitization issue, there is one more factor that is covered by Reg Z and the Truth in Lending Act. It is whether the “loan” was table funded. A table funded loan is one in which the party identified as a lender was not the source of the money in the transaction. The prohibition and restriction against these transactions is meant to keep the consumer informed about the identity of the party with whom he/she is doing business and therefore able to decide whether in fact they want to do business with the party who is really funding the loan.

  • The title problem with a table-funded loan is obvious: the note is supposedly a description of the obligation that arises when the borrower accepts the benefits of the monetary advance from the source of funds. In a table funded loan, the note does NOT describe the real parties and therefore is not proper evidence of the obligation and thus cannot be used as a substitute for proof of the obligation.
  • Federal law and rules state that anyone who as a matter of practice is doing table-funded loans, is defined as a predatory lender.
  • This means that if someone wants to enforce the obligation, they must have more than the note to prove their case. This is precisely where the pretender lenders are finessing the courts — because before the antics of the last decade, there was no difference between the obligation and the note and everyone on both sides of even an adversary proceeding usually agreed that the original note was proper evidence of the obligation.
  • This also means that if someone wants to foreclose, they need something more than the note, because the note, as we have seen, is NOT the complete evidence of the obligation — there is another party involved who was undisclosed and who was the source of the funds. So the obligation was between the borrower and the source of the funds. But the borrower was not told or informed that the money being advanced was from another entity.
  • Ordinarily this would not present a major problem, but it still would require corrective action in order to clear title for  purposes of a satisfaction or release of the mortgage or deed of trust, refinance, sale, second mortgage, condominium association lien, homeowner association lien, HELOC, non-judicial sale or judicial sale. Without this corrective action ON RECORD at the county recorder’s office, the documents releasing or transferring title to the property would be fatally defective in that the real party who advanced the funds did not execute a release or satisfaction, leaving the borrower or the borrower’s successor with the exposure of yet another foreclosure or another claim on the original obligation. This defect is either suspect or apparent on its face when you see MERS involved or an “originating Lender” that is not a bank (and usually out of business now).

All of this mind-numbing analysis morphs from nitpicking to highly relevant when securitization enters the picture. Securitization as it was used in actual practice, i.e., real world reality, was simply a process by which the payments were split from the obligation, not the note and reframed as the basis for a third party obligation under the terms of a mortgage bond sold to third party investors. So the source of funding never receives the note or any of the borrower’s closing documents. He receives a mortgage bond in which there are multiple payors, obligors, and contingent liabilities only one of which is the borrower’s obligation to repay the obligation.

There are two primary defects in this process that are of high significance:

  1. In practice, the intermediaries used the documentation for securitization to multiply rather than split the obligation to pay amongst the various payors and co-obligors.
  • This means that for every dollar that was advanced for the benefit of the borrower, an obligation was ADDED to the receivable stream for each payor or co-obligor that was ADDED to the obligation to make payments under the mortgage bond. This is where the intermediaries began to make multiples of the money being funded rather than small basis points as was customary in the industry.
  • Through the use of highly sophisticated cloaked transactions, each dollar funded was multiplied as a nominal receivable which in turn was sold multiple times and insured multiple times in multiple ways.
  • Hence the the total evidence of the borrower’s obligation consists of the closing borrower documents PLUS the closing investor documents. The total accounting consists of the the servicing record of the borrower’s payments PLUS the distribution and tape record of reports and payments to the bond holders.
  • This totality of the evidence reveals that the borrower’s obligation resulted in multiple payments by multiple payors and co-obligors, some of whom made money participating in the sham scheme, and some of whom lost money in the scheme.
  • In most cases, one of the groups that lost money were the original investors who advanced money for their share of the flow of receivables described in the mortgage bond, which included, at all times, the receivables due from third party payors and co-obligors. Other losers were traders and institutions that were creating the appearance of an unregulated but phantom securities market in which profits and losses were apparently made on a daily basis, but which in fact were all accounting entries much like the Madoff scheme.
  • The current foreclosure scheme ignores these factors enabling intermediaries dubbed “pretender lenders” to profit from the confusion by pretending to be lenders when in fact they were never lenders of record and never lenders in the sense that they ever advanced any money. The intermediaries are filing false, fabricated and even forged or back-dated affidavits in the name of “Trustees” for trusts that do not exist or which have been dissolved or paid in whole or in part. The lender having been paid or settled as to the obligation under the mortgage bond thus releases any further claim. The intermediaries profit by pocketing the multiples of payments received, and the borrower suffers from the loss of a home or enforcement of a note that was never the evidence of the obligation.
  1. In practice, the actual source of funding — the party who advanced funds and who received a mortgage bond instead of the evidence of the borrower’s obligation —- NEVER held the note and was never intended to hold the note — and NEVER was the mortgagee or beneficiary and never was intended to be the mortgagee or beneficiary. Thus a declaratory action against the mortgagee or beneficiary of record should succeed in raising the priority of the interest of the plaintiff above that of the record holder of the security instrument, since the record holder has no obligation owed to it, and never was intended to be the recipient of funds nor to have the right or capacity to foreclose on the loan.

THE BOTTOM LINE IS THAT CASE LAW IN VARIOUS CASES REPORTED IN THIS BLOG SHOWS THAT WHEN ONE INSTITUTION CONFRONTS ANOTHER, THE APPARENTLY INFERIOR LIEN BECOMES EITHER SUPERIOR, OR THE ONLY LIEN. CONDOMINIUM ASSOCIATIONS, HOMEOWNER ASSOCIATIONS TAKE NOTE: YOUR LIEN MIGHT BE WORTH THE ENTIRE HOUSE IF YOU FILE FOR A DECLARATORY ACTION RAISING THE PRIORITY OF YOUR LIEN. HELOC AND SECOND MORTGAGE HOLDERS TAKE NOTE AS WELL. AND OF COURSE HOMEOWNERS OR THOSE WHO THINK THEY ARE EX-HOMEOWNERS TAKE NOTE: YOU MIGHT STILL HAVE THE RIGHT TO BRING A QUIET TITLE ACTION AND RECLAIM YOUR PROPERTY — ALLOWING ANY ACTUAL “LOSER” IN THE DEAL TO MAKE THEIR CLAIM BUT BARRING NOMINAL PARTIES FROM WINDFALL PROFITS IN THE ABSENCE OF ANY RISK OR INVESTMENT.

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