Articles Posted in Foreclosure Defense

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consumer-protectionMost of our debt collection laws in Florida apply only for consumer debt, not business debt.  Sometimes the answer is not quite clear as to what type of debt is involved.  What if for instance you operate a business and took out a loan, but signed a personal guarantee.  Sometimes, that personal guarantee will have language referring to the debt being for personal, family or household use.  That would likely make the guarantee a consumer debt.

By the way, that terminology comes from the Florida Consumer Collection Practices Act (“FCCPA”), Fla. Stat. Section 559.55-559.77 which defines a consumer debt as a debt incurred for “personal, family or household use.”

What happens if you buy a house, live in it for years, but then ultimately end up moving and renting it out?  Or you rent out a room while you are living there?  Commericial or consumer debt?

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Both tenants and third party investors should be very happy that a new federal law goes into effect on June 23, 2018, that protects tenants in foreclosure.  Basically additional notice is required and the tenants even have the right to remain in the unit for the remainder of the lease.  A copy of the law (that had previously expired in 2014) is at the link below for the specifics:

While titled the “Economic Growth, Regulatory Relief, and Consumer Protection Act,” the Act is generally called “the Crapo bill” after its lead sponsor, Republican Senator Mike Crapo of Idaho. With a few exceptions discussed below, the changes either carve out exceptions from compliance with consumer statutes or codify consumer protections that at least certain industry players are already following on their own.

Tenant Protections After Foreclosure of Landlord’s Property

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Servicemembers’ Protection from Foreclosure

The Servicemembers Civil Relief Act, 50 U.S.C. § 3953(c), provides protections from foreclosure for covered personnel where their residential mortgage loans were extended prior to their active duty. Originally this protection extended for only 90 days after the person left military service, but this period was extended to nine months and later to one year, but with a sunset at the end of 2017. Section 313 of Public Law No. 115-174 restores the one-year period and eliminates the sunset, making the one-year period permanent.

  • This is good news for our armed forces who are facing foreclosure now or in the future.  The one year protection has been re-established after it expired last year and has been made permanent!
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bank-owned-foreclosureThere a lots of reasons a debtor needs to file a bankruptcy.  However, debtors should be warned that they are likely giving up valuable rights to fight a foreclosure of their home if they do so — unless they reaffirm the mortgage.  Over the last few years, many debtors elected not to voluntarily reaffirm an underwater home — this would allow them to be personally sued for any deficiency balance even after the bankruptcy was over.  Another problem is the decision to reaffirm sometimes comes up before a loan modification review is complete and debtors aren’t sure whether reaffirmation is in their best interest.

Bankruptcy case law has been building in various Florida jurisdictions over this conflict.  Many courts have seen this as an issue of debtors “having their cake and eating it too” when debtors are released of their liabilities under the mortgage, but yet they can continue to fight the foreclosure and live rent free.

In response to this dilemma, Governor Scott just signed a bill on March 26, 2018 that stops defendants from defending a foreclosure if they have previously agreed in bankruptcy to surrender the property to their lenders.

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auto-stayThe automatic stay that normally applies when a debtor files bankruptcy, does not work the same in a second or even third bankruptcy case.  This has caught many debtors unaware and may cause the loss of a home.

In a 2nd bankruptcy filing, the automatic stay expires after 30 days.  During that time you have to get it extended.  We recommend filing a motion to do so when the case is filed to have enough time to get an order entered before the stay expires.

Sometimes debtors find it necessary to file a 3rd bankruptcy.  Perhaps a job loss or insufficient paperwork caused the prior bankruptcies to be dismissed.  If so, it’s important to know that the automatic stay does not apply at all for a 3rd bankruptcy.  As soon as possible, the debtor would want to file a motion to impose the stay, even to the point of filing a request for an emergency hearing if a foreclosure sale is looming.  It’s also important to note that you cannot file bankruptcy on the eve of a foreclosure sale because there is no stay until you can get one in place.  Typically you would have to identify factors in the motion and at the hearing as to why this third case will be more successful than the prior ones that were dismissed, as well as show the feasibility of any plan to keep the home (which could include a loan modification at an estimated payment of 31% of your gross income).

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loan modWe received a nice loan mod today with a P&I payment of only $746.  For our bartender client that is great news and very affordable!  She had even had a loan mod previously but had lost her job and was unable to pay so Wells Fargo filed another foreclosure action after the last one was dismissed.  We then delayed the foreclosure and kept re-applying after a denial for a loan mod as her income and expenses fluctuated.  We never gave up.

This client had an FHA loan and there are a number of hoops an FHA loan mod has to undergo.    The first question our client was what her payment would likely be to determine whether it would be affordable or whether she should simply look elsewhere to live and let this house go.  A target payment is determined by three values for an FHA loan:

  1. 31% of gross income;
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bankruptcy keyboard.jpgSometimes our Florida foreclosure defense clients wait too long to challenge a foreclosure. This is the primary reason why we attorneys always post advice and blog incessantly about not letting a mortgage company get a default judgment or challenging a default if one occurs.

However, a client can also wait too long on the back end to challenge a final judgment. In Branch Bank & Trust Co. v. Michael’s Enterprises of Virginia, Inc., 519 B.F. 916 (Bankr. E.D. Va. 2014), a homeowner waited until a week after the sale and sought a temporary injunction which was denied. The sale proceeded and several months later the debtor refused to vacate the property and filed bankruptcy.

In the bankruptcy, the debtor attempted to collaterally attack the judgment already entered. Claims cannot be re-litigated, they can only be appealed. The Court awarded sanctions against the debtor, its shareholder and its legal counsel for $10,000. The debtor in this case attempted to argue that the foreclosure sale was a fraudulent transfer because it was for less than 70% of the market value. This argument failed to impress the U.S. Supreme Court in BFP v. Resolution Trust Corp., 511 U.S. 531 (1994) which was followed by the bankruptcy court.

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Green Tree to Pay $48 Million in Borrower Restitution and $15 Million Fine for Servicing Failures. See this announcement from the CFPB and the Federal Trade Commission.

Locally in Tampa Bay, Florida this is resulting in Greentree seeking continuances for all trials – including one this morning on behalf of one of our clients – to make sure that they are in compliance with this order. Perfect timing, because our client just submitted her loan modification paperwork in an effort to keep her home after her divorce.

I thought it would be useful to post what exactly are some of the mortgage servicing requirements by the new RESPA rules:

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cell phone stop.jpgMany of our Tampa Bay, Florida clients facing foreclosure want to speak with their mortgage company and reach some kind of agreement for a loan mod, deed in lieu, cash for keys or short sale. Many do not. They’ve been there and done that and no longer want to receive in some cases hundreds of calls from a mortgage company.

So what do we recommend clients do in these situations? Well first of all, any company which calls your cell phone after you verbally tell them not to is acting in violations of the Telephone Consumer Protection Act (“TCPA”). If you have filed a bankruptcy, all calls regarding a debt are generally prohibited. All calls after you send a cease and desist letter are generally prohibited.

The reason I say generally prohibited is because there are some areas that may be allowed. For instance, a notice required by Florida Statute to send you information about cancelled homeowners insurance or escrow notices may be fine. But these are generally letters, not phone calls. However, even these notices are potentially improper if they address a debt being owed or otherwise appear to be an effort to collect a debt. We presently are involved in a class action in the Middle District of Florida, Tampa Division, of the U.S. Bankruptcy Court, on behalf of a client who continued to receive notices about insurance and escrow that appeared to state repeatedly that he would be charged for this debt — and he had filed bankruptcy and had obtained a discharge of all debt associated with the mortgage!

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Our firm doesn’t practice much in South Florida because it’s a little too far from our base in Tampa. But word has gotten around hundreds of miles away that the incumbent Judge Lewis leaves a lot to be desired in a Judge and it is negatively impacting homeowners facing foreclosure.

In case anyone reading this has friends or relatives in Palm Beach county, please pass along this blog and its links as we would like to help promote the candidacy of Jessica Ticktin as someone we feel would be an experienced, understanding and impartial judge.

Some words from Ms. Ticktin: https://www.youtube.com/watch?v=UW6HeTRPgEs

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