Recently in Deficiency Waivers and Lawsuits Category

Dyck-O'Neal - Great case out of the 1st DCA - No SMJ in deficiency lawsuits

judgment.jpgIn the past year, Floridians have been hit with ten thousand or more deficiency lawsuits by Dyck-O'Neal, a collector hired by Fannie and Freddie to go after unfortunate homeowners. Many defaults have been obtained against homeowners which should not have occurred due to lack of personal and/or subject matter jurisdiction. Many folks did not even know these additional lawsuits have been filed against them. A recent New York Times article recently addressed this focusing on the ability of Dyck-O'Neal to go after deficiencies even in cases in which the underlying foreclosure action was suspect.

Some defenses raised by defense counsel in these cases are now hitting the appellate courts. In one such case decided May 1, 2015, Reid v. Compass Bank, 1D14-930 (Fla. 1st DCA May 1, 2015), the First DCA affirms the rule that a plaintiff in a foreclosure case cannot file a new lawsuit to seek a deficiency if the foreclosure court reserved jurisdiction for the purpose of entering future orders relating to the foreclosure.

"Notwithstanding the fact that First Federal Savings supports the argument that a party is not entitled to pursue an action at law on a promissory note where that party includes a prayer for a deficiency judgment in its foreclosure complaint and the trial court reserves jurisdiction to enter a deficiency judgment, we have determined that affirmance is warranted in this case based upon the circumstances presented."

In that case, Dyck-O'Neal took a backdoor approach by moving to consolidate the old and new cases for which no objection was raised. Had the consolidation not occurred, the new case would have lacked subject matter jurisdiction and would have been subject to dismissal.

Lack of personal jurisdiction is another basis for dismissal. If the former homeowner has moved from the county and/or state, these deficiency suits which are debt collection cases are being brought where they used to live. In addition to potential dismissal of these cases for lack of personal jurisdiction, most if not all of them would be grounds for an action by the homeowner for violations of the Fair Debt Collection Practices Act (FDCPA). Finally, upon dismissal of the Dyck-O'Neal case, the statute of limitations has likely run preventing it being re-filed.

Even if a default has occurred, it is not too late to raise these defenses. An inadequate search may have been undertaken to find the former homeowner before tacking on a 100k judgment. In Bartell v National Collegiate Student Loan Trust 2005-3, D. Ct. ND Cal (2015), the court ruled a sole attempt to provide Bartell with service of process took place at her former residence in Berkeley, where she last lived in 2009--not San Francisco--and involved no good-faith or systematic effort to find her current address.

Obviously these are highly technical objections and should be raised by an attorney experienced in these areas. There is plenty of stake, the average judgment that we've seen being sought by Dyck-O'Neal is in the six figures. And once a final judgment is entered, unless grounds like this exist to try and overturn it, the judgment itself entitles a debt collector to seize assets and begin wage or bank account garnishment for a period of no less than 20 years. For more information, please contact Christie D. Arkovich. P.A.

Have You Been Sued for a Deficiency Judgment in Florida?

July 13, 2014, by Christie D. Arkovich, P.A.

money palm tree.jpgMortgage companies in Florida must think money really does grow on trees as they are now suing for deficiency judgments on past foreclosures of homes. July 1, 2014 was the deadline in Florida for lenders to file deficiency lawsuits for foreclosure Judgments issued between July 1, 2009 and July 1, 2013. This is the result of the foreclosure bill last summer drastically dropping the number of years for a mortgage company to sue for a deficiency from five years to only one year.

So we've seen a flurry of filings from a couple groups: Dyck-O'Neal, Inc. and Collins Asset Group. The approaches have differed somewhat, Dyck-O'Neal files new actions for primarily FNMA while Collins substitutes plaintiffs and simply files a motion in an existing case that is likely re-opened to do so. Until recently, actions seeking a deficiency have been limited mostly to small local banks or credit unions. The Washington Post described Fannie and Freddie filing more deficiency actions through debt collection firms such as Dyck-O'Neil in order to stop strategic defaulters and try to collect debts on behalf of taxpayers. However, Dyck-O'Neal has been sanctioned in Georgia and Texas for improper actions.

Former Florida homeowners are just learning of this now when they are being served by process servers with a summons or a motion for deficiency judgment. Just when they thought their problems were behind them noted a recent Marketplace article.

It's important to hire an attorney to defend against these deficiency judgments. Many can be settled or reduced drastically in amount. The bank has to prove the fair value of the property at the time of the foreclosure despite a bid of perhaps only $100 to keep the doc stamps low at the foreclosure auction. The comps the bank uses for its one sided appraisal are often poor choices for the homeowner and can be disputed. Not all are like that, but we've definitely had reason to question the basis of many appraisals. Jurisdiction of the Court may be questioned if the homeowner has moved from the area, Florida Statutes Section 48.193 provides a list of circumstances for when someone can be sued in Florida. If the homeowner was previously served only by publication (in a newspaper that no one reads by the way), this may also be a defense. The homeowner may have previously obtained a deficiency waiver that is now being overlooked or ignored. If the foreclosure judgment was issued within the past year, there may still be challenges to it, such as the lender filing the original note five days after the hearing. Maybe only one spouse signed the promissory note and all their assets are now owned jointly as tenants by entireties. The potential Judgment amount may be miscalculated. Maybe there was a lack of diligence on the part of the bank such as pursuing a sinkhole insurance claim to offset its losses. Consumer laws may provide some protections if there was an unlawful attempt to collect the debt. There are many more potential defenses and plenty of room for negotiation.

Attorneys can offer advice regarding protection of assets and what you can and cannot do after being sued for a deficiency. Notwithstanding the Florida fraudulent transfer laws which have a look back of four years, there are safer places for monies other than a checking or savings account which can easily be garnished such as IRAs, 401ks, homestead, Florida Pre-Paid Tuition, annuities and life insurance. Bankruptcy may offer the best protection of all.

For short sales, the water is a bit more murky. There is doubt that the new one year limitation provided by the revisions to Florida Statute Section 95.11 even applies in a voluntary short sale. For clients who consulted with legal counsel and negotiated for a deficiency waiver, they are fine. For others who obtained a release of the mortgage lien, but not of the underlying promissory note, they may still be facing a full five year statute of limitations.

If you or someone you know is facing a deficiency motion or lawsuit, please contact Christie D. Arkovich,, P.A. for help.

How long does a judgment last in Florida?

September 17, 2012, by Christie D. Arkovich, P.A.

courthouse.jpgUnder Florida law, a creditor has up to twenty years to try and collect a judgment. That's an intimidating number, two whole decades. Something not to take lightly. To become a lien on real estate, a certified copy of a final judgment must be recorded in the public records in the county in which the real property is located.

Once recorded, Florida law provides that the judgment acts as a lien on non-homestead real property for an initial period of ten years. See Florida Statute Section 55.10. The judgment can be re-recorded and act as a lien for an additional ten years. Prior to 2004, a recorded judgment acted as a lien for only seven years, but could be re-recorded up to two additional times for a total of twenty years.

In comparison, a bankruptcy remains on someone's credit report for 10 years. However, the last 18 months is the most important time period in anyone's credit history and often the bankruptcy after it gets old enough is considered irrelevant.

We often see the problem lasting longer for someone who allows a default judgment to be entered against them. When someone avoids addressing the problem by aggressive action against an abusive debt collector, settlement or bankruptcy, they are limited in income or asset ownership for the entire 20 year period of the judgment.

We see lots of people who know they can't pay off the debt in full decide just to ignore the problem. Unfortunately, the problem gets bigger and is followed by seizure of assets such a vehicle used to get to work, garnishment of wages or bank accounts. A consumer usually has options, particularly nowadays when poor business records are maintained by the debt collectors and violations of law abound.

For advise on how to avoid a judgment, please contact Christie D. Arkovich, P.A.

I've just been served, what do I do?

September 1, 2012, by Christie D. Arkovich, P.A.

lawsuit.jpgIn Florida, typically someone who is sued is served with the lawsuit and given 20 or sometimes 30 days to file a response. If the lawsuit was filed in small claims court, you are given a date to appear at a pretrial conference instead of filing a written response.

The most important thing is: Don't ignore the deadline. It doesn't matter that you think you might be able to work it out or that you called the attorney's office who filed the lawsuit. If you don't file a timely written response with the court, or attend the pretrial conference, a default will be entered against you. A default judgment can last up to 20 years in Florida and is very hard to challenge.

Before the deadline expires, please see an attorney. Many attorneys, including our office offer a free consultation for foreclosure defense or debt collection matters.

At the consultation, you can expect to discuss the following:

1) Whether to present an aggressive defense to the lawsuit in an attempt to win the case;

2) Identify weaknesses in the other side's case;

3) Whether to attempt to negotiate a settlement which may reduce the principal owed, interest rate or fees and costs;

4) The expected length of the case so you can make plans;

5) Whether you should consider filing bankruptcy which may eliminate this and other debts and stop the lawsuit; and

6) What happens if a judgment is entered against you.

Christie D. Arkovich, P.A.

Principal Reductions are Happening: Don't Give Up if You Want to Keep Your House

June 14, 2012, by Christie D. Arkovich, P.A.

house money.jpgHere's an example in Tampa, Florida this month for one of our foreclosure clients who wanted to keep her house and avoid the possibility of a deficiency judgment:

New monthly payment: $933.45 with escrow
Old monthly payment: $1,491.35

New interest rate: 4% fixed
Old interest rate: 7.75 % fixed

Term: Unchanged at 24 years.
No balloon or equity sharing down the road.

Principal reduction $99,966.30 to the present fair market value of $151,000.

A total of 32 payments were outstanding since October 2009 when we went to mediation.

Don't give up. When this client first hired us, we likely said that principal reduction was very unlikely - we tell all our clients this. But she didn't give up and neither did we.

Will a homeowner see a principal reduction from a credit union, probably not. More likely that homeowner will be sued for the unpaid balance as Suncoast Schools Federal Credit Union is one of the largest filers for deficiency lawsuits in the Tampa Bay area. Ocwen remains the best servicer in our experience for principal reductions and a streamlined process for modifications. Everyone else is somewhere in the middle.

Bank's Ante is Increased to $35,000 for Short Sales

February 7, 2012, by Christie D. Arkovich, P.A.

short-sale seesaw.jpgBloomberg today reports that banks are offering as much as $35,000 to delinquent homeowners to sell their home in a short sale. In doing so, the banks avoid the costly foreclosure process especially when their loan documents are questionable and perhaps fraudulently prepared. I imagine we will be seeing a few of these in Florida, a judicial foreclosure state with particularly well trained and knowledgeable foreclosure defense attorneys.

JP Morgan Chase reportedly is sending out letters to borrowers offering up to $35,000. They are also offering deficiency waivers for the balance.

So open the mail - and ask your lender what move out incentives they are offering for a short sale. Perhaps you have more negotiation strength than you think. But don't let the mortgage company get a default against you - it will both weaken your position and will allow the foreclosure to proceed against you at a faster pace eliminating your short sale opportunities.

Suggested Short sale Contract Language to Help Avoid Deficiency Judgments

July 11, 2011, by Christie D. Arkovich, P.A.

short sale.jpgWhen listing and selling a home in a short sale, homeowners should consider including language to limit recovery of any unpaid amounts by the mortgage company (known as the deficiency balance). In Florida, we recommend this limitation be placed in the Purchase and Sale Contract. This way when the lender/bank agrees to the short sale, they are in essence agreeing to the terms of the contract between the buyer and seller. It is no different than if you wrote in "as-is" to limit your liability as to the condition of the property. I'd recommend something like the following be inserted into the contract:

The sale of this property is contingent upon the lender's acceptance of all sale/purchase contract terms including a complete discharge/forgiveness of debt of any remaining deficiency amounts on the loan. Accordingly, the bank's acceptance of this short sale agreement will constitute payment in full of both the first and second mortgage notes on this property and represent a waiver of any future lender right to pursue an action and/or judgment against the owners/borrowers to recover any deficiency amounts arising from this short sale transaction.

Strategic Defaults - When it's Time to Walk Away From Your Home

June 13, 2011, by Christie D. Arkovich, P.A.

underwater mortgage.jpgHave you been considering walking away from your house payments and mortgage? According to a recent CNN article, many homeowners are getting ruthless and voluntarily choosing to walk away. We are seeing this more and more among our foreclosure defense and short sale clients. Sometimes it is better to take the credit hit and save money on huge mortgage payments on an underwater asset. Home values have continued to slide another 11% in Florida in February when compared to the same month in 2010. CBS MoneyWatch reports that 47% of Florida homeowners are underwater.

Fannie Mae reports in a recent survey that the number of homeowners who would even consider walking away has increased from 15% to 27% this year. This is despite Fannie Mae's threat to withhold Fannie Mae backed financing for strategic defaulters that it made over a year ago.

So what should you consider before you make such a decision? Well, first of all, if you have a good job, assets and a strong credit report, you can be a target for a deficiency lawsuit later down the road as Florida is a "recourse" state. Banks and other owners of mortgage debt have up to five years to pursue you to collect the unpaid balance. The question is will they? If you look good to them on paper, it is more likely you will be sued for a deficiency. If this is the case, or you think your finances will pick up over the next few years, you may want to consider a short sale to at least try to open negotiations for a full or partial deficiency waiver. Alternatively, many clients elect to file bankruptcy now while they qualify to order to obtain closure and gain the certain knowledge that they cannot be sued later.

Continue reading "Strategic Defaults - When it's Time to Walk Away From Your Home" »

Chase offering $10,000 to $20,000 in short sales

April 30, 2011, by Christie D. Arkovich, P.A.

extracashpic.jpgIn a new incentive program beginning in late 2010, Chase is purportly offering $10,000 to $20,000 to homeowners who take the effort to short sale their property. The offer includes a waiver of any deficiency balance. But it only applies to loans actually owned by Chase, not just serviced by Chase. An article in the St. Pete Times today discusses the program in more depth. Chase is apparently providing approvals in approximately 35 to 40 days after an offer is made, while most short sales take at least six months to conclude.

This is opposite of a growing trend of banks and servicers refusing to grant deficiency waivers.

Many loans are actually owned by Freddie Mac or Fannie Mae now though. To check if your loan is owned by Fannie Mae or Freddie Mac, go to the Freddie look-up site and Fannie look-up site which provide an instant answer. No guarantees that the sites are accurate although in our experience they usually are accurate (even though the loan documentation may still be up for challenge do to failures and inconsistencies in the paperwork).

One other way to possibly see who purports to own and service your loan is the MERS look up site.

So if your servicer is Chase and you are unable to continue making your house payments and a modification seems out of reach or doesn't make sense, use the look up sites above to try and identify if Chase is only the servicer, or if they are also the owner of your loan. You can also call Chase directly and ask if Chase owns your loan or if they are merely servicing it for an investor. Ask who the investor is if possible. The more knowledgeable you are, the more you will know what options are available to you.

There are other more exact methods of determing the owner of your loan as well.

Continue reading "Chase offering $10,000 to $20,000 in short sales" »

Deficiency Judgment Landmines

April 30, 2011, by Christie D. Arkovich, P.A.

We have noticed here in the Tampa Bay, Florida legal community that written deficiency waivers of the unpaid loan balances for first mortgages are getting harder to come by. A recent St. Petersburg, Florida Times article focuses in on the potential landmine: "People have no idea of all the trouble that is coming" says Margery Golant, a lawyer in Broward County who sees deficiency defense cases on the rise. Florida is known as a recourse state and the lenders have a right to obtain a personal judgment for the remaining unpaid balance. They then can seek to collect that debt by garnishing wages or bank accounts or placing a lien on other property that the debtor owns.

This is true of short sales regardless of lender. It is also true of deed in lieu or other voluntary return of the property through a consent judgment in rem (which means against the property only). Even Freddie Mac has aggressively pursued new reduced promissory notes in short sales.

What does this mean? We think it means someone will come knocking to collect that debt eventually. It might be five years down the road (prior to the expiration of the statute of limitations), but if the lender obtains a deficiency judgment, like any judgment it can be collected for 10 years and renewed for a second 10 year period. In the State of Florida, a judgment creditor has 20 years to try and collect an unpaid judgment.

Most people cannot afford to pay back mortgage deficiencies when the home sold for 50% of the loan balance. These folks pay rent now elsewhere and with the understated inflation of living expenses going on right now, there simply is not extra funds to pay back the remainder of a mortgage note on property lost in short sale or foreclosure.

In Tampa Bay while we seeing far fewer waivers of deficiencies, we are not seeing waves of deficiency lawsuits yet. At least not for first mortgages. We have many second mortgage lawsuits to collect the balance owed. Most of the first mortgage deficiency lawsuits have been brought by regional smaller banks, and credit unions. Suncoast Schools Federal Credit Union is responsible for one-third of the deficiency lawsuits on first mortgages filed in the Tampa, Florida area. It is reported that the Cape Coral and Fort Myers area have been hit much harder with deficiency lawsuits perhaps because of the perceived or real wealth in the area.

Even if the bank elects not to pursue the debt, the debt still has value. It can be sold to a debt buyer or collection agency. It can be securitized and packaged with tens of thousands of other loans and sold as an investment on Wall Street.

Filing bankruptcy will of course discharge the claims for deficiency whether done now or years from now. So consumers may have the last word after all.

Planning on Purchasing a Foreclosed Home In the Tampabay Florida Area? Watch out for Freddie Mac's Disclaimers!

January 16, 2011, by Christie D. Arkovich, P.A.

Our neighbors are considering buying a condominium in Tampa that was foreclosed by Wells Fargo (owned by Freddie Mac) and noticed two strange things in the paperwork this weekend. First, Freddie Mac is only offering insurable title not marketable title and they wanted to use their own title agent.

Fortunately, our neighbors were smart enough to notice the distinction. First, the possibility of fraud in the foreclosure or anything else wrong with the foreclosure appear to have been excluded from the insurance coverage. So if the prior homeowner comes forth and says I didn't have notice of the foreclosure because I wasn't properly served (this happens all the time) or a faulty affidavit or assignment was submitted in the foreclosure litigation to support the plaintiff's claim that it owned or held the note (also a common occurrence), the homeowner can have the foreclosure sale reversed. Where does this leave the new buyer? Well they would have a claim for the failure of Freddie to provide good and clear title -- or would they? With an insurance exclusion, depending upon how it is written, this could be a major dilemma.

Second, Freddie specifically noted that the purchaser was responsible for any unpaid homeowners association expenses. In Florida, there is Florida Statute Section 718.116 that provides that upon foreclosure, the plaintiff is required to pay the past one year of unpaid condominium association dues or 1% of the original principal balance whichever is less. (This is not necessarily true for all homeowners associations). If the plaintiff lienholder fails to do so, are all the delinquent assessments plus attorney's fees, costs and interest due and owing, perhaps going back years? I wonder, how often does the bank or mortgage servicer actually make this payment by the thirty day deadline? These are the same parties that cannot look at mortgage modification paperwork within the first 30-90 days of submission because they are so overwhelmed.

On a somewhat unrelated note, I can see additional defenses to deficiency balance lawsuits. If Freddie and other lenders are limiting protection to new buyers by only providing insurable title instead of marketable title, this will cause the purchase price to be lowered. It's not the former homeowners fault that the first lienholder wasn't able to provide proper and thorough documentation of ownership and amounts due in the foreclosure case. This should provide a partial defense against the deficiency.