Florida Foreclosure Lawyer

Jacksonville foreclosure court in national focus
Even Rolling Stone takes issue with city’s legal system.

Originally published in the Jacksonville Times.

By Roger Bull
The New York Times has come down for multiple visits and written multiple stories. The Wall Street Journal and NPR were here. CNN was filming Monday and Tuesday, and Rolling Stone’s lengthy article hits the newsstands today.

The subject: Florida’s foreclosure courts. Or more specifically, the foreclosure court in Jacksonville.

The foreclosure mess — from the originating loans to the bundling, selling and reselling of the loans to the questionable tactics used in the foreclosures themselves — has been major news across the country recently. But nowhere is the light of attention shining brighter than it seems to be in Northeast Florida.

“It’s really escalated the last three or four weeks,” said Mark Kessler, who is in the 4th Circuit foreclosure court almost daily representing lenders.

“I’m being interviewed constantly,” said James Kowalski, a Jacksonville lawyer who has been defending mortgage foreclosures for 10 years now.

According to a recent Wall Street Journal article, Kowalski started the type of defense that “has sown confusion and turmoil in the housing market.”

Kowalski laughed at that representation, but did concede it has been defense lawyers who have brought the spotlight here.

“It’s because of Jacksonville Area Legal Aid,” he said, “and no other reason.”

And that would be April Charney, a Legal Aid staff attorney who has become a national spokeswoman against what she considers abuses by the plaintiffs in foreclosure cases.

“The focus on Duval,” she said, “is because of the lawyers willing to step up. Me, Jim Kowalski, Chip Parker.”

Add to the list Senior Circuit Judge A.C. Soud, the retired judge in charge of the 4th Circuit’s foreclosure court. He is the central character in the Rolling Stone article. The headline — “Courts Helping Banks Screw Over Customers” — leaves no doubt about where it’s coming from.

Not about ‘saving the house’

Matt Taibbi, whose book on the financial crisis: “Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America” came out last week, paints Soud as clueless and Kessler as worse.

“There’s a definite point of view,” Kessler said. “I guess they decide ‘We’ll make so-and-so to be the bad guy and rake him over the coals.’ What doesn’t seem to get brought out is that most of these mortgages are two and three years in default.”

Kowalski did make national news after a case in Maine where a GMAC employee admitted preparing 10,000 foreclosure files a month that no one had reviewed, despite documents swearing that they had been. That led to GMAC and other lenders freezing foreclosures in some states to investigate what’s now commonly called “robo-signing.”

But the judge in the Maine case pointed out that GMAC had promised not to do that anymore after Kowalski found evidence of robo-signing in a deposition he had taken several years earlier.

It’s all part of securitization, Kowalski said of the bundling of mortgages into packages that can be bought and sold.

“Everything that’s going on here in Florida,” Kowalski said, “has been going on for the better part of the decade. It’s embedded in the concept of securitization. The robo-signers, the mill law firms, problems with process serving, faking court documents.”

The process, he said, was created to maximize profits and those who don’t get the foreclosures done quickly enough don’t get more business.

“It’s not about saving the house,” he said.

Another reason the national attention on foreclosure is picking up, he said, is that the bundling of mortgages and the sales of those bundles to trusts was not done correctly, leaving ownership of the mortgages in doubt. Not only are homeowners losing their homes, investors stand to lose billions, he said.

“They’re saying ‘Wait a minute, we just realized that you sold us air.’”

Closed off from court

So as the media try to sort out the whole thing, they often find themselves in Florida, where the state began special foreclosure courts this summer. Staffed by retired judges, the so-called “rocket docket” is charged with clearing a backlog of foreclosure cases.

Soud has set a goal of resolving 25 cases an hour. Almost all, he said, are uncontested, and that allows them to move so quickly.

But Soud said he wasn’t sure why so much attention has been focused here.

“I’m speculating that when one story is out and the out-of-state media sees it,” he said. “I’ve had reporters start off with ‘We saw your name.’”

That’s why Kessler figures a CNN producer gave him a call when the network came to town this week after seeing his name in either a Times-Union story or the Rolling Stone, which is available online.

Taibbi, the Rolling Stone writer, was accompanied to Soud’s courtroom on the fifth floor of the courthouse by Charney, and his visit produced its own drama. The media are allowed in the chambers, Soud said, but only with clearance. The judge’s access policy has drawn sharp criticism.

Soud was particularly unhappy that Taibbi followed a woman who was defending herself out of the courtroom and into the hall to interview her.

So in an e-mail to Charney, Soud threatened her with contempt.

“When you came this morning you did not have authority to take anyone back to chambers without proper screening. This policy is in effect for security reasons,” Soud wrote.

“Please do not repeat such conduct in the future. Your unprofessional conduct and apparent authorization that the reporter could pursue a property owner immediately out of Chambers into the hallway for an interview, may very well be sited (sic) for possible contempt in the future.”

David Goldman, an attorney who handles foreclosure defense, said that the foreclosure court is the only one where access is that limited.

“They even keep our employees out,” he said. “Yesterday, we had a paralegal who was kept out until the case was called and the lawyer went out to get her.

“They’re courts,” he said. “And they should be open. Anyone should be able to get in and observe.”

As for the Rolling Stone article, Soud said he’d never read the magazine and doesn’t intend to.

       As even a casual glance will show you, we get many questions posted here.  Not wishing our readers to think we are rude and ignoring them, let me explain why the stock answer to *any* legal question is, “Call an attorney.  Today.”

       The first good reason for our lack of response is simple.  We are full time, practicing attorneys.  Just last week, we finished a three-day attempted murder trial.  (Our client was acquitted of 2nd degree attempted murder but convicted of the lesser included offense of aggravated battery, for anyone who is keeping score.)  I also have literally dozens of foreclosure cases that demand my constant attention lest I blow it for my client, and I MUST give them priority.

        The second reason is the really important one.  If you rely on legal advice we give you based on incomplete or inaccurate information to your detriment, well, I’ll likely have to sell one of my organs to pay our future legal malpractice insurance rates.  And that’s frankly in nobody’s best interest.  Also, we don’t know where you are posting from.  I’m admitted to the bar of the State of Florida and the United States District Court for the Middle District of Florida.  I am wholly, completely, 100% absolutely prohibited from giving advice to someone in another state.  I would be guilty of practicing law in that state without a license.  I’ve dealt with speeding tickets in various and sundry states with no joy, I can’t imagine a charge like that would be any more fun.

       So, dear readers, please understand why we HAVE to fall back on the cliched, hackneyed, but ONLY response we can give.  Talk to an attorney.  In your jurisdiction.  Who has experience in the area of law you are seeking advice.  Don’t trust the yellow pages or the internet?  Every state’s bar association has lawyer referral lines.  They’ll be happy to find you one of their people that can help.

        In the meantime, please keep checking back here often.  Our goal is to give you the information *here* that will answer your questions and prepare you to join battle with the lenders.  You tell us how we’re doing.

Thank you, T.D. Golik

This was originally composed as an email to a friend in South Florida. It is submitted here for our readers to mull over.

     You asked me to briefly sketch for you the possibility of class-action remedies for homewoners in foreclosure cases. For that, I’m going to have to go into a history of what has happened so far.  Sorry if you already know most of this stuff, but I just can’t assume it. Let’s start by dealing with the most common scenario I face.

      Mortgages during the refi boom, bundled together and sold as mortgage-backed securities were red-hot on Wall Street. There was a rush to bundle mortgages into investment trusts (such as Argent Securities Series 2006-2, which I see alot) and sell them to investors. Here’s the problem.  SEC and IRS pass-through tax regulations, as well as the pooling and servicing agreements for these trusts that have to be filed with the SEC, all require that the trust corpus (the notes and mortgages) be transferred to the trust within limited periods of time, usually 90-120 days. This was far beyond the realm of possibility.  Some experts have theorized that as many as 50% of original notes and mortgages were actually destroyed in order to prevent proof that they were not properly transferred.

     Scenario one.  Now, we have banks such as Deutsche Bank, and US Bank NA, as trustees for the investment trusts, suing to foreclose on these mortgages. In virtually every case, there is no assignment of the mortgage in anybody’s favor, and frequently the notes filed in the case contain no endorsement. A year later, when they begin summary judgment, original notes comes forward, properly endorsed. Because the endorsements are not dated, the assignments are usually better evidence of fraud. They are always prepared by the foreclosure firms, and are almost always signed by employees of Nationwide Title Clearinghouse in St. Pete, as officers of the original mortgage company. Beyond that, the motions for summary judgment always contain an affidavit of some employee of the trustee who claims to have examined all the documents, verified the amounts due, etc. In my experience, all of these signatures are as phony as three-dollar bills. But as you well know, proving it is difficult, expensive, and most judges just don’t care, they won’t hold up a foreclosure just so you can conduct a deposition, frequently of someone out of town. So the trustees foreclose, and people lose their homes. Many of these, of course, are subsequently sold at foreclosure auctions by innocent purchasers for value.

     To the best of my understanding, these are clear violationsof the Fair Debt Collections Practices Act, in that they have used legal process to enforce and collect a debt they had no right to collect. However, in scenario number one, we run into an enormous series of problems. First of all, the misdeeds need to be uncovered. Not too much trouble there, at least here in Florida the AG is investigating all of these companies and foreclosure chop-shops. It will all come out. So what? What next? Who do you hold liable? Who is ultimately responsible? Deutsche Bank, for one example, is acting in the capacity of trustee. The real liable parties of violating the FDCPA are technically the owners (or better, purported owners) of the debts. Of course, companies like Deutshce Bank would be liable for any intentional wrongdoing on their own part that exceeded their authority as trustees. But they, of course, are going to point the finger at the attorneys. Bottom line, a blinding melee of lawsuits (which will include homeowners, innocent purchasers for value, and of course the men, women, and retirement funds that own these trusts!) which in all probability while paralyze our federal court system and likely denude the entire pacific northwest of trees to print all the paper, with no clear liability or ability to collect in the end. This will make the Agent Orange and tobacco lawsuits look like small claims actions, and likely will not be resolved prior to 2105.

      Scenario number two. A bank, 95% of the time Wells Fargo in my experience, bought the mortgages from Fly-By-Night Lenders, Inc., and are now seeking to foreclose. Wells Fargo very rarely has the assignments, and the companies that sold them the mortgage no longer legally exist. Wells Fargo has no doubt obtained summary judgment on thousands of homes without ever having or showing a valid assignment of the mortgage. But you can bet that all the documents they filed with the court claimed at the very least, “they now had the right to enforce and collect this debt” which is essentially the same thing. This scenario is the same as before. Affidavits are filed attesting to the vailidty of the debt and Wells Fargo’s right to collect, signed by people that sit at a desk and sign hundreds of these papers a day because they are valid employees of Wells Fargo, and those affidavits are the ONLY mortgage documents they have ever seen, or for that matter, cared about. It is this factory signature practice that has led to the national moratorium on foreclosure by many banks, but we’ll get to this in scenario three. Here, we have a different ballgame. No shadowy, unseen investors and complicated securities issues. A bank that bought loans, foreclosed on properties, and sold them to people who had no idea Wells Fargo had no right to foreclose in the first place. Here liability is clear (so long as the federal judge hearing the case agrees that making fraudulent representations to a state court is a FDCPA violation!), damages are astronomical, and aggrieved parties abound. 90% of Florida homeowners never asnwered the complaint, and just walked away, *assuming* the bank that sued them had the right to. Now, here, the good attorney in you should say, well, they slept on their rights, they lose. While true on a state level where the time limit for filing a motion for relief from judgment based on fraud has long come and gone, the statute of limitations to file for a FDCPA violation has not. The import of all this should be sinking in clearly by now.

     Lastly, scenario three. The original lender, or its legitimate successors and assigns, sues to foreclose. Same as before, some trained chimp sits sitting affidavits all day long without reviewinga damned thing. Bottom line, fraud on the court. Remember, in Florida you cannot foreclose just with a mortgage and note. You have to prove “all conditions precedent” i.e., default, acceleration, etc. This done by affidavit. That are turning up more and more to be sworn statements containing very false allegations. (Not just failure to review pleadings and files, but even complience with notification conditions of mortgages.) The upshot of this is exactly the same as scenario two. Thousands of improperly lost homes, purchasers for value, the whole enchilada. These banks are furiously at work right now trying to figure out just how hard the hit is going to be. Obviously we’re talking billions. Whether ther US banking and financial institutions can stand this battering is anyone’s guess. It’s a bigger mess with far greater ramifications than the simple margin buying that torpedoed the stock market on Black Thursday. But one thing is for certain. If these banks survive they are going to be selling their rubber bands to pay out on all these claims.

      One last thing. Second mortgage holders. The conventional wisdom was that all the second mortgage holders (typically smaller banks like Region) in this mess were just SOL. The houses had depreciated so badly that there wasn’t anywhere near enough to satisfy the first mortgages, let alone the seconds. But, if the first mortgages get tossed as invalid, now the second mortgage holders jump line to primary lien holders! “Curiouser and curiouser, said Alice…”

     In summation, this should give you a very good idea of the enormity of the situation and show you where the successful class actions should (and will!) be filed by the saavy attorneys and firms that don’t want to get left behind in the potential killing of the century.

TDG

If you have been reading this blog regularly, or if you have just skimmed the articles, you probably have heard that the Florida Supreme Court (FSC) has a task force that was working hard last year at trying to come up with ideas to break the log jam of foreclosure cases strangling Florida’s courts. Along with recommending mediation in all new foreclosure filings (a recommendation adopted by the FSC in December of 2009) one of the proposals was for a change to the Florida Rules of Civil Procedure and the FSC approved forms published for use in accordance with the rules. These proposed amendments were fast-trascked by the Supremes in order to have them implemented as soon as possible.

On February 11, 2010, the Florida Supreme Court issued its written opinion adopting the proposed rule changes in their final forms. The most significant change was an addition to Florida Rule of Civil Procedure 1.110(b), which added language that all new foreclosure complaints filed in the state had to be verified, which means that they must be attested to by the Plaintiff, asserting that all the information in it is true and correct, under penalty of perjury. In its opinion, the Justices explained that this was being done to encourage the banks to ensure that they had all the proper documentation proving their claims to be able to foreclose on the subject property BEFORE commencing a suit. The Justices also noted that foreclosure complaints frequently contain contradictory statements where in one count, the bank claims to own the note and mortgage, and in the next count, they are asking the court to reconstruct a lost note and/or mortgage!

The significance of this requirement should not be understated. The FSC is threatening banks with perjury charges if they continue to bring their frequently incorrect and fraudulent cases before Florida courts, and at the same time, sending those courts a signal through this rule change to deal harshly with Plaintiffs that are clearly abusing the judicial system. This should start getting interesting soon…

Other changes were less dramatic, but potentially just as important for homeowners. One change homeowners in foreclosure definitely need to be aware of, is the change to form 1.996(b), Motion to Cancel Foreclosure Sale. The previously approved forms did not require very much in the way of grounds for requesting the cancellation, which the Justices felt may allow for cancellation of sales without valid grounds. The new forms will require more information.

Lastly, a modification of the form filed by process servers when they are unable to personally serve an individual were modified to require more information from the process server. Since many foreclosure actions are done through a process called “service by publication” the FSC felt homeowners and their attorneys should have more information available to them to determine whether the attempts at service were sufficient.

The full text of the opinion (Docket number SC09-1460) with the actual changes adopted, can be viewed at:

http://www.floridasupremecourt.org/decisions/opinions.shtml

It’s no secret that the number of foreclosure cases has climbed dramatically in the last twelve to eighteen months as the recession has driven an increasing number of homeowners into default on their mortgages.  What is not so well known is how this spike in filings has strained an already overloaded court system almost to the breaking point.
According to a recent article in the Florida Bar News, as of September 30, 2009, there were 291,309 foreclosure cases pending in Florida’s court system.  And in 95 percent of those cases, the homeowners have no legal representation.

The Florida Supreme Court recently heard oral arguments on a proposal by the Task Force on Residential Foreclosure Cases. The task force chair is Judge Jennifer Bailey of the 11th Circuit in Miami-Dade County.  The task force proposed a program that would require mediation for cases where the borrowers actually live in the home.  Costs of the mediation would be born by the lender.  Comments on the proposal stressed the need to resolve cases before they consume scarce court resources.

It should be stressed that the proposal is just that.  A proposal.  Whether the program will ever be implemented, and the exact terms of it, remain to be seen.  Mediation is seen as an attractive alternative to court proceedings, any one of which has the potential for demanding too much of a judge’s time, resulting in ever-increasing delays in the court’s civil docket. 

Mediation is a process where both parties negotiate through a neutral, court-appointed mediator to arrive at an agreement resolving issues in the case prior to court proceedings.  One of the distinct advantages is that even if the case proceeds to trial or a hearing, as many issues as possible are resolved without wasting the court’s time.  Several members of the task force expressed opinions that mediation would greatly benefit the majority of homeowners who are unrepresented by giving them a forum where lack of legal training might not be the hindrance it would be in a court setting.