Ginn Investor News And Litigation

Ginn Wins Ownership Battle Critical To Billion-Dollar Project

2009-12-24T17:14:00.000-05:00

Sunday, 20 December 2009
Ginn has won a "very critical" legal battle over a challenge to its ownership of 179 acres vital to its $4.9 billion Bahamian resort project, the Court of Appeal finding that a rival claim to the property was "without merit".

Wilbert Bootle and his family had challenged the Certificate of Title granted to Ginn for the site in Grand Bahama's West End. The land in question is located at the heart of the company's mixed-use Ginn sur mer project, and Mr Bootle alleged he and his family had a better ownership claim to the 179 acres via adverse possession.    However, the Court of Appeal found Mr Bootle's appeal against the original Supreme Court decision to be "clearly without merit", dismissing his action and removing any doubt as to the validity of Ginn's ownership.

One source familiar with the land situation, speaking to Tribune Business on condition of anonymity, said the 179 acres in question was situated at the heart of the Ginn sur mer project. Had the Bootle challenge succeeded, and a Certificate of Title been issued instead to him, the impact on the proposed development could have been disastrous.

Besides sitting in the middle of the two major chunks of real estate - one a 600-acre parcel, the other 1,200-1,400 acres - that Ginn acquired from the old Sammons estate to facilitate its project, the 179 acres incorporates part of the development's airport runway and the entrance to its canal system.

"It's a very critical piece," the source said of the disputed 179 acres. "The runway is at the end of that, and it's where the entrance to the canal system is. Ginn couldn't ignore it."   And if Mr Bootle's claim had won, the source said: "It could have derailed the entire development, because the land was in the middle of the project. Ginn didn't take any chances."

Tribune Business was told that when Ginn was in the process of acquiring its West End real estate from the Sammons estate, which owned the former Grand Bahama Hotel Company, both parties - and their attorneys - were unable to establish possessory title to the 179 acres in question.

Sources said this was due to a technical problem, namely that the site's borders did not match the description contained in legal documents establishing the chain of title. To eliminate any uncertainty, the Grand Bahama Hotel Company and Ginn moved to 'quiet' the title to that land via a Quieting Titles Act petition.    Part of this process involves Ginn/Grand Bahama Hotel Company publishing notice of its Quieting Titles Act petition, so that any rival ownership claimants can stake their claim and have it heard by the court. This, Tribune Business was told, was what prompted the Bootle claim.

A Bootle is understood to have been the original Crown Land grantee in West End in the 18th century, but the land involved is understood to have gone through hundreds of conveyances since, while the Sammons estate enjoyed 40 years of uninterrupted possession.

In its judgment, the Court of Appeal recorded how Mr Bootle was appealing a May 18, 2006, order by retired Justice Jeanne Thompson, in which she ordered that Ginn-LA West End be issued with a Certificate of Title to the property. She also dismissed Mr Bootle's adverse possession claim.    In her ruling, Justice Thompson had found that Mr Bootle's evidence of adverse possession "falls woefully short of the necessary proof" to trump Ginn/Grand Bahama Hotel Company's documentary title.

The Grand Bahama Hotel Company had initiated the Quieting Titles petition and, via agreements on November 17, 2004, and on March 23, 2005, sold its interest in the 179 acres to Ginn-LA West End, Ginn's holding company for the Ginn sur mer project. Given that Grand Bahama Hotel Company had sold its interest, the Certificate of Title was issued in Ginn's name.

While Mr Bootle's initial appeal against the verdict was struck out for failing to 'settle the record' in the time set by the Court of Appeal, the latter recorded: "Some time after this (it is not certain when) the appellant learnt that the original petitioner in the quieting action, Grand Bahama Hotel Company, which was registered as a foreign company in the Bahamas in 1963, but at all material times was a company incorporated in Delaware in the United States, was voluntarily dissolved on April 28, 2006."

This meant that at the time Ginn was granted a Certificate of Title on May 18, 2006, the entity that had initiated the Quieting Titles Act petition was not in existence.   This, the Court of Appeal said, prompted Mr Bootle to seek to overturn the order striking out his original appeal, and to challenge the Certificate of Title issued to Ginn.

Apart from alleging that Grand Bahama Hotel Company could not apply to strike out his appeal because it was a non-existent entity, Mr Bootle alleged that Ginn was not a party to the action. He also alleged that Grand Bahama Hotel Company's attorneys did not disclose that the company no longer existed when Ginn was issued its Certificate of Title.

"The hub of the appellant's argument, therefore, is his contention that Grand Bahama Hotel Company could not have been a petitioner capable of maintaining an action in the Supreme Court at the time of the grant of the Certificate of Title, and nor could it have been a party to this appeal since it was a non-existent entity from the date it was dissolved and struck off the Delaware register, even though that fact was not notified to the Registrar General of the Bahamas," the Court of Appeal said.

"In this respect, [Mr Bootle] has made a serious allegation of fraud against counsel for Ginn, who were also counsel for the [Grand Bahama Hotel Company], alleging that they knew, or must have known, of the fact but did not disclose it to the court."   Yet the Court of Appeal's verdict was that Mr Bootle's appeal was "without merit" regardless of whether it was reinstated. The court found there was "nothing" that would prompt it to interfere with Justice Thompson's findings of fact.

In addition, the Court of Appeal said the sales agreement that enabled Ginn to acquire the property was a Vendor Purchaser summons. "That meant as a matter of law, that from the time the agreement was entered into Ginn acquired an equitable interest in the properties and became, in the eyes of equity, the beneficial owner of the property the subject of the Quieting, which interest predates the dissolution of the company," the court found.

As a result, even though the Grand Bahama Hotel Company had ceased to exist on the date Ginn obtained its Certificate of Title, the court still had to consider Ginn's ownership interest.    "Ginn's equitable interest was indefensible in the circumstances, as there was no one who could make a better claim to the property," the Court of Appeal found. It also ruled that Mr Bootle's complaint about Ginn not being substituted as the petitioner was "clearly without merit".

The Bottom Line On "Strategic Defaults"

2009-12-18T16:57:00.001-05:00

I'm getting tired of the moralistic nonsense being espoused from the media and the usual band of hypocrites about "moral obligations" to meet your payments on underwater property.

Exactly why is it that you have a moral or ethical obligation to banks to continue to pay - whether or not you can afford to do so - when the very same banks have no hesitation to walk away when it is in their interests to do so?

Dec. 17 (Bloomberg) -- Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.   “This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”

Exactly as you do when you strategically default on your mortgage, giving the property back to the bank to get out of your loan obligation.

Why is Morgan Stanley doing this?     The Morgan Stanley buildings may have lost as much as 50 percent since the purchase, he estimated.    As a consequence of being "upside down" they are walking away.     This isn't the first one Morgan Stanley has walked off on either:    Morgan Stanley last month agreed to hand over Crescent to Barclays, ending the firm’s obligation on a $2 billion loan after taking almost $1 billion in losses.    When Morgan Stanley acquired it, Crescent owned 54 office buildings in cities including Dallas, Houston, Denver, Miami and Las Vegas. It also owned the Canyon Ranch spa and resort, residential developments in Scottsdale, Arizona; Vail Valley, Colorado; and Lake Tahoe, California.

This is no different than a "strategic default" - walking away from mortgages not out of necessity but because the borrower believes it is in his best financial interests.   Morgan Stanley can pay, they are simply choosing not to, because the property has fallen in value. This is exactly identical to you choosing not to pay because your house or investment property has fallen in value.

George Brenkert, a professor of business ethics at Georgetown University, says borrowers who can pay -- and weren't deceived by the lender about the nature of the loan -- have a moral responsibility to keep paying. It would be disastrous for the economy if Americans concluded they were free to walk away from such commitments, he says.

But on the business side of things we allow companies to set up separate LLCs and then trade on the "parent" credit even though there is no recourse to the parent. This allows firms like Morgan (or developers we know that have several shell LLCs) to build and buy huge amounts of real estate - yet when something goes wrong they have tremendous leverage on a short sale, put-back or simple walk-off: if the lender doesn't like it they'll bankrupt the "container" LLC and the lender will get nothing.

Consumers, of course, do not have the same opportunity. Try to set up a LLC and then use it as a vehicle to buy a house without a personal guarantee associated with the loan. The rules should be consistent for everyone, and if big business can strategically default on their obligations for profit (rather than for hardship) then consumers should be able to do so as well.

Strategic Default, in today's economic, legal and ethical environment, is perfectly within the rights of consumers and they should exercise that right when it makes economic sense, after consultation with both legal and accounting professionals.

Government Policies of Fear and Shame Keep Homeowners Debt Slaves

2009-12-18T08:07:00.005-05:00

The following is an article I posted in my blog The Foreclosure Defense Blog, which may be read there in its entirety. It seems that this is more applicable to Ginn communities than just about anyplace else.

Government and Lender Policies of Fear and Shame Help Keep Homeowners Debt Slaves
Government, lenders, and various lender-sponsored “help” agencies have acted in unison, using fear mongering tactics and shame to manage the housing crisis for the sole benefit of lenders.

Brent T. White at the James E. Rogers College of Law has published a fascinating study called Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis. At the risk of appearing smug, this bears out everything I have been preaching for the past two years. While I don't pretend to be as smart as the professor, unfortunately I have been through this experience before. As the saying goes, history is the best teacher. The study is 54 pages long and worth reading in entirety but I have condensed the discussion:

Despite reports that homeowners are increasingly “walking away” from their mortgages, most homeowners continue to make their payments even when they are significantly underwater. This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences. Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations – and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision.

The Financial Logic of Walking Away
Before examining why more underwater homeowners are not strategically defaulting, it might be helpful to explore why they should. . . . .

Read the full story at The Foreclosure Defense Blog.

Beware of the Deficiency!

2009-10-25T21:00:00.001-04:00

I feel compelled to post this article in full. We have been trying to alert readers to this issue for at least a year now. The problem is this. These lawyers only got it half right. A short sale is usually just as bad as a foreclosure. That's right. Most short sales (in fact, it is Bank of America's stated policy) provide that the seller is still liable for a deficiency.

Foreclosed homeowners may still have debt to pay
Jeff Baum is at the forefront of a real estate industry trend that is sure to cause more pain for homeowners who thought they had left their troubles behind. Baum, a principal with Green Circle Capital Group in Boca Raton, brokers the sale of nonperforming residential debt between lenders and investors. Those investors buy the debt with the intention of collecting from the former homeowners.

“I’ve made quite a bit of my living over the last two, three years selling deficiency balance paper,” said Baum. A deficiency balance is the portion of the mortgage loan that wasn’t covered by the sale of the home. That debt becomes an unsecured note similar to other consumer debt such as credit cards. Hedge funds, servicing companies and collection agencies pay cents on the dollar for the unsecured debt. Their collection efforts mean more problems for former homeowners who failed to pay off their mortgages after a short sale or a foreclosure during the 2-year-long residential real estate crisis.

Investors will likely be more aggressive than lenders in going after the debt “to get a more advantageous rate of return than the larger institution would be willing to put the effort in,” said Baum, who formerly worked in SunTrust Bank’s residential mortgage-backed securities unit.

Mortgage holders or the debt buyers have up to five years from the time the loan goes into default to sue to collect the debt. The practice has its critics within the lending industry. Miami-based Republic Federal Bank doesn’t sell deficiency debt, said Jim Angleton, the bank’s senior vice president. But Angleton predicts other lenders will seize the opportunity.

“As the market declines, it is going to be more in vogue: institutions trying to sell the debt and debt collectors trying to create another niche for themselves,” he said. “Those [debt collectors] are not even bottom feeders, they are subterranean feeders. They are in the Dracula mode of blood sucking.”

Republic doesn’t go after borrowers for deficiencies unless they have other assets that can be tapped into, Angleton said. In about 25 percent of the cases, the bank goes to court to get deficiency judgments, he said.

COLLECTION CRISIS

Real estate attorney Daniel Kaskel said many people who lost their homes may face a collection crisis. Last month, one of his clients closed on a short sale that generated enough money to cover most of the first mortgage of about $245,000. But proceeds of the sale weren’t enough to pay off a second mortgage of about $174,000, said Kaskel, with Sachs Sax Caplan in Boca Raton.

Chase, which held the second mortgage, agreed to release its lien from the property for the sale to close, but it held the borrower responsible for the deficiency, according to Chase’s letter to Kaskel’s client. If Chase sells that deficiency debt to a debt collector, the former homeowner can expect to have to come up with the money plus interest.

“I make my clients aware of this [threat,]” Kaskel said. “In some situations, they would rather do the short sale, move on and worry about any deficiency when they get a phone call from a debt collector.” If his client hadn’t done the short sale, the house would have been lost to foreclosure and the client would have ended up owing the balance on the first and second mortgage, he said.

“In a short sale, at least the seller has some control over it,” said Kaskel, who negotiates with lenders on behalf of doctors, lawyers and other professionals that make more than $300,000 a year. His clients worry about being pursued by debt collectors because many have other assets that could be targeted to satisfy a deficiency, he said. “These are not [economic] hardship cases,” he said. “These are people who do not want to remain in a situation where it will take eight years of paying the mortgage for their homes to be worth what the mortgage is worth,” he said.

DEFICIENCY JUDGMENTS

After winning a foreclosure action, a lender has up to five years to ask a judge to declare a deficiency judgment. The judgment amount is the difference between the loan and the market value of the home on the day it sold at a foreclosure auction. Once they are awarded the judgment, lenders can sell it to debt collectors, said Miami attorney Lewis Cohen, a partner with Cohen & Bobota. Many of his clients are banks.

“A bank usually would walk away from the debt rather than throw more money to collect something that is uncollectable,” he said. “So, why not sell it for 25 cents on the dollar?” Judgments are good for 20 years, and while people may be broke now, their financial situations could improve in the next two decades, said Richard Zaretsky, a West Palm Beach foreclosure defense lawyer. The dormant debt may come back to haunt them, he said.

Judgment holders, like collection agencies, can force people into court yearly to disclose their finances, said Zaretsky. Attorney Thomas Willis, with Shuster & Saben in Miami, says the problem will increase over the years.

“Can you imagine, as people’s finances are beginning to improve — boom! — they get hit with a collection action for tens if not hundreds of thousands of dollars,” he said. “You are going see a lot of people having to declare bankruptcy.” Since the only way to deal with a deficiency judgment is to pay the debt holder or declare bankruptcy, that’s already happening, according to Miami bankruptcy attorney Joel Tabas, with Tabas Freedman Soloff Miller & Brown. “A lot of people are filing bankruptcy to get out of the deficiency obligation,” he said.

The best way distressed sellers can protect themselves is to negotiate a reduction in the deficiency balance or persuade lenders to waive their rights to collect deficiencies. Miami real estate broker Ross Milroy recently brokered a short sale in which Bank of America demanded the seller sign a note for $25,000 to cover a loan deficiency. The seller, who owned a condo in the Grandview Palace in North Bay Village, showed the lender that he was unemployed and disclosed his limited financial resources. “So they waived the $25,000 note, and we proceeded to close,” said Milroy, managing broker of Miami Angel Properties.

Willis, with Shuster & Saben, said sellers need to be aggressive with banks. “Your bargaining position is much better if you pro-actively try and resolve the situation now rather than waiting later down the road,” he said.

INFLEXIBLE LENDERS

Some lenders won’t bend, said Davie real estate broker Patty Da Silva. Recently, a client found a buyer for a home for about $181,000. The property had a mortgage for nearly $500,000. The lender approved the sale but held the seller liable for the outstanding balance, said Da Silva, owner of Green Realty Properties. Her client could be subject to a judgment, she said.

Baum said many people, including attorneys, are not aware of the sellers’ rights and obligations. A homeowner that walks away from a property is still responsible for the debt, he said. “A lot of times, I run into individuals who let their properties go into foreclosure or did a short sale and they think they are released from their obligations,” he said. “But they are not.”

Walking From Underwater Mortgages

2009-10-25T00:57:00.001-04:00

South Florida homeowners walking away from underwater mortgages
MiamiHerald

Prepared for the worst, Duque has been surprised by the seemingly minimal consequences so far. Andres Duque thought he got a real steal when he paid $125,000 for his Little Haiti condo. But four years later, similar units are selling for $35,000 and even less.

And so, faced with the prospect of being underwater on his mortgage -- owing more than the unit is worth -- for the next 20 years, Duque, 33, made what seemed to him like a rational choice: to cut and run. He stopped paying the mortgage, basically forcing the lender to take the condo off his hands through foreclosure.

``I was able to pay off all my credit cards,'' said Duque, who is biding his time in the condo, waiting until they come and evict him. ``In a way, it was the best thing that happened to me because all my income is not being consumed by this freaking monster of a debt.''

Duque's game plan is known as a strategic default -- when borrowers walk away from loans, even if they can afford the payments. Here is a look at the benefits, the risks and the ethics of such a move.

As property values have plummeted by an average of 50 percent, such strategic defaults now make up a sizable chunk of South Florida's foreclosures. In the fourth quarter of last year, they accounted for an estimated 28 percent of all defaults in Miami-Dade and Broward counties . . .

With the social stigma of foreclosure eroding, experts say it is becoming easier for discouraged borrowers to justify throwing in the towel. South Florida is already a veritable Atlantis of underwater borrowers. In September, homeowners here collectively owed $62.7 billion more than their homes were worth, according to an analysis by First American CoreLogic. The analysis found that about half of all outstanding mortgages in Miami-Dade and Broward are underwater.

Among those who bought in Broward in 2006, the median negative equity was $75,000 as of March. In Miami-Dade, the figure was $63,000, the Web-based real-estate service firm Zillow.com reports. Negative equity refers to the difference between a loan balance and the market value of a home.

``I wouldn't blame borrowers who knew they were facing significant losses even if they could afford to stay,'' said Andrea Heuson, a finance professor at the University of Miami. ``Every day you wake up, you are reminded how much you paid for something, and then you read every day in the newspaper how much prices have fallen.''

Walking away, however, is fraught with financial, legal and ethical dilemmas. Lenders, government and the credit industry are starting to pay more attention to how strategic defaulters think and behave -- in an effort to convince them to tough it out.

Tracking strategic defaults is an inexact science. Experian researchers identified possible strategic defaulters as homeowners who have gone straight from current on their payments to not paying at all, but remained in good standing on other credit obligations. Nationally, Experian estimated 588,000 borrowers defaulted on purpose in 2008.

Frustration with the tax-funded bailout of banks and Wall Street may have also emboldened depressed borrowers to default out of anger and a desire to stick it to the banks. Duque's resolve, for example, hardened after watching Michael Moore's movie Capitalism: A Love Story. In the movie, Moore makes a case that corporations preying on consumers led to the housing crisis and recession.

Most strategic defaulters find themselves weighing whether the hit to their credit scores is easier to bear than paying underwater mortgages for years to come. The most optimistic analysts say it could be three years before prices begin to appreciate. Others say prices have another 30 percent-plus to fall before flat-lining. Prepared for the worst, Duque has been surprised by the seemingly minimal consequences so far. His credit limits on two cards were slashed by a few thousand dollars, but they were not canceled.

Surprisingly, strategic defaulters with good credit scores who remain current on their other credit lines can quickly rehabilitate their credit scores after foreclosure -- faster than many realize, according to Sarah Davies, a senior vice president at VantageScore, a credit scoring and consumer analytics firm owned jointly by the nation's three major credit reporting agencies. ``You can pull yourself out of any major impact from foreclosure in 24 months,'' she said.

And five years down the road? ``A foreclosure is going to be very easy to explain, seeing there are thousands of others who have also defaulted. So, there is a safety-in-numbers issue there,'' Heuson said, referring to a possible borrower rationale.

Consumers are essentially putting a price on their credit score . . .
But there are other risks. Foreclosure defense attorneys warn of the growing threat that lenders will obtain deficiency judgments against borrowers. Such judgments allow them to collect the difference between the loan balance and the market value of the properties. They also allow lenders to garnish wages and seize assets.

Jim Angleton, senior vice president of Miami-based Republic Federal Bank, estimated lenders are going after borrowers 15 percent of the time. ``You know they are not being forthright with you about their assets when they are keeping their credit cards, their very fine cars and other assets current.''

The Strategic Default

2009-10-06T21:17:00.001-04:00

Leaving Affordable Mortgage May Become Winning Gambit

Oct. 1 (Bloomberg) -- Scott Conroy pays the mortgage every month on his one-bedroom condominium in San Diego, even though it’s worth 33 percent less than what he owes and it may take more than a decade to break even.

Homeowners like Conroy who can afford their monthly payments are weighing whether to sell and pay the difference, stick it out until housing prices recover, or walk away. In the U.S., 26 percent of borrowers owe more than their home is worth, said Karen Weaver, global head of securitization research for New York-based Deutsche Bank Securities. In parts of California, Florida and Nevada, it’s as high as 75 percent.

So-called strategic defaults, in which homeowners stop paying their mortgages while remaining current on other debts, rose 128 percent to 588,000 last year, according to Experian PLC, a Dublin-based credit-checking company, and Oliver Wyman, a New York-based consulting firm. Two-thirds of those who walked away defaulted on their primary residences.

“You’re looking at an extremely long horizon in order to see a return of home values to where they were at their peak,” said Stan Humphries, chief economist for Zillow.com, the Seattle-based real estate data service. “It could be 15 to 20 years in some markets.”

Strategic defaulters represent about 4 percent of all homeowners underwater. That trickle could become a flood as the likelihood recedes that home prices will soon return to their peak values, said Rick Sharga, senior vice president of Irvine, California-based RealtyTrac Inc., an online seller of real estate data.

In San Diego, where Conroy lives, home values are down about 40 percent since March 2006 when he bought his place, according to the S&P/Case-Shiller Index of 20 U.S. metropolitan areas. Prices have rebounded for three consecutive months, returning to the October 2002 level, before the start of the housing boom. Nationwide, home values are what they were in September 2003, according to the Case-Shiller index as of July.

“You have to ask yourself: Are you just renting the home from the bank?” said Michael Joe, a foreclosure expert at the Legal Aid Center of Southern Nevada. “Would it be cheaper to walk away and rent across the street?”

Conroy, 32, and his wife purchased their home for $385,000 in March 2006, a month before marrying. The property was reassessed this summer for $250,000. The couple is trying to save, he said, knowing they may have to move to a bigger place within 18 months to start a family. “We’ve given up on this dream of having equity in our home,” Conroy said. “We don’t expect to walk away with cash in hand, we expect to pay.”

More homeowners may opt to take a hit to their credit score rather than come up with cash to cover the loss, especially in California and the nine other U.S. states where the legal repercussions of foreclosures are less than other parts of the country, said Sharga.

Ten states are so-called non-recourse, prohibiting deficiency judgments after most home foreclosures: Alaska, Arizona, California, Hawaii, Minnesota, Montana, North Dakota, Oklahoma, Oregon and Washington, according to the National Consumer Law Center, based in Boston. The bank can repossess your home in those states, not other assets, to settle the debt.

In California, a second-mortgage holder may try to pursue a delinquent borrower to repay through litigation, said Rick Brooks, a financial adviser with the San Diego-based wealth advisory firm Blankinship & Foster. Banks generally prefer not to sue because it can easily cost $60,000 or more, said Debra Guzov, co-founder of the law firm Guzov Ofsink LLC, based in New York.

Banks may be more willing to accept foreclosure alternatives, such as a short sale or deed-in-lieu of foreclosure, in states where a lender can’t sue for personal assets, said Brad Geisen, chief executive officer of Foreclosure.com, based in Boca Raton, Florida.

In a short sale, the borrower finds a buyer for the home at an acceptable price and the bank agrees to forgive the difference, said Greg McBride, senior financial analyst with North Palm Beach, Florida-based Bankrate.com. In a deed-in-lieu of foreclosure, the bank sells the home after a similar debt negotiation.

Short sales or deeds-in-lieu of foreclosures are considered the same as a foreclosure on your credit score, said Craig Watts, spokesman for Minneapolis-based FICO Corp., owner of the credit-scoring formula most widely used by U.S. lenders. A foreclosure remains on a credit report for seven years. Credit scores can begin to rebound in as little as 2 years if bills are paid on time, according to FICO.

Morality and social stigmas play an important role in whether someone who can afford the payments will walk away, said Paola Sapienza, professor of finance at Northwestern University’s business school, in a July study on strategic defaults. Eighty-one percent of 1,646 homeowners interviewed think it is morally wrong, the study found.

“If you know someone who’s done it you’re way more likely to do it,” Sapienza said. “That’s the scariest part, is that there might be some contagion part of this.” Albaugh and Conroy, the San Diego homeowner, said they’re frustrated by the lack of help for homeowners like them who keep paying. “It seems like the banks are more willing to work with people who aren’t making their payments rather than people who are,” Conroy said.

How The Lender Seeks A Post-Foreclosure Deficiency Judgnent

2009-09-25T00:07:00.002-04:00

In The State Of Florida Is There Judgment Of Deficiency After A Foreclosure?
In Florida, a mortgage foreclosure does not automatically result in a deficiency judgment. Just because you lose a property at foreclosure does not mean you will remain personally liable for money owed to the lender . To obtain a deficiency judgment against the borrower the foreclosure sale the mortgage lender has to file a motion for a deficiency after the foreclosure sale, and the court must hold a separate evidentiary hearing on the lender’s request for deficiency liability. At the evidentiary hearing the mortgage lender has to show the court evidence that the property’s value on the sale date was less than the note balance. The borrower can get his own appraisal or can use the government’s tax assessed value as evidence of value. If the property was worth more than note balance on sale date the court will not give the mortgage lender a deficiency judgment against the borrower. The borrower may present evidence of value in the form of a formal appraisal or other less formal opinions of value such as the local government’s tax assessed value.

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Do Not Just Walk Away!!

2009-09-12T12:26:00.000-04:00

While it’s now well accepted that well over 90% of Florida homeowners in foreclosure are just walking away, it is now becoming apparent that the "other shoe is yet to drop." As I have said over and over on this blog, if you have no assets and have nothing to protect, that's probably OK. BUT, if you do have assets, this will prove to be a big mistake.

Until now, there has been some uncertainty whether the banks were going to pursue deficiency judgments from Florida homeowners. Well the evidence is becoming clear that many banks will pursue and ARE NOW pursuing these Florida judgments post-foreclosure. (I know this for a fact. I have a friend who buys them in bulk from banks for pennies on the dollar.)

For the uninitiated, in Florida and other “recourse” states, a Bank would be entitled to obtain a judgment against you for the difference between the mortgage amount and the value of the property. In other words, if your Florida real estate property is worth less than the mortgage the Bank can come after you for the difference. In non-recourse states, like California, the Banks can not do that. Florida is a recourse state and the Banks may have up to five years to bring the action. Moreover, the bank has up to 20 years to enforce this judgment. Do you really want a bank pursuing you and trying to hunt you and your assets down for 20 years?

There are many law firms out there who claim to be "aggressively" defending Florida foreclosures. But what does this mean exactly? Almost all of them are doing nothing more than delaying the foreclosure. Then what? Well, if your goal is just to stay in the house for a while without paying your mortgage, then that works for you.

BUT, if you are an investor - or you have assets to protect - or you are simply at that stage in life that requires, shall we say, a more responsible approach, my advice is (1) do not simply "walk away" and ignore the foreclosure, and (2) avoid those bottom-feeder law firms that are ultimately just playing the delay game.

Is Ginn Sur Mer the Next to Fall?

2009-09-05T16:48:00.002-04:00

THE BAHAMA JOURNAL
September 4th, 2009
Old Bahama Bay Temporarily Closing

While the Isle of Capri was making waves with the announcement that Treasure Bay will be its new owners, Old Bahama Bay in West End was –at the same time - reportedly closing on Tuesday for one month.

According to a statement released by Old Bahama Bay on Thursday, the resort will use this time period to conduct scheduled maintenance work in keeping with a commitment to maintaining quality standards and service.

Vice President of Communications for Ginn Sur Mer Ryan Julison told our news team employees who haven’t taken vacation yet will be paid for the month off and those who have already taken vacation will not be paid.

Rumours have been swirling for months about the permanent closure of the resort, to which management has repeatedly denied.

In July, it was reported that low occupancy resulted in the layoff of 85 employees.

Half of All Mortgages Are "Underwater"

2009-08-13T09:54:00.002-04:00

"Underwater" Mortgages to Hit 48% says Deutsche Bank

Aug. 5 (Bloomberg) -- Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.

The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today. As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.

“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote. Seven markets in states with the fastest appreciation during the five-year housing boom -- including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas -- may find 90 percent of borrowers underwater, according to the report. The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Weaver and Shen. Home prices will decline another 14 percent on average, the analysts wrote.

"Underwater" Mortgages to Hit 48% says Deutsche Bank

2009-08-06T08:07:00.001-04:00

Aug. 5 (Bloomberg) -- Almost half of U.S. homeowners with a mortgage are likely to owe more than their properties are worth before the housing recession ends, Deutsche Bank AG said.
The percentage of “underwater” loans may rise to 48 percent, or 25 million homes, as prices drop through the first quarter of 2011, Karen Weaver and Ying Shen, analysts in New York at Deutsche Bank, wrote in a report today.
As of March 31, the share of homes mortgaged for more than their value was 26 percent, or about 14 million properties, according to Deutsche Bank. Further deterioration will depress consumer spending and boost defaults by borrowers who face unemployment, divorce, disability or other financial challenges, the securitization analysts said.
“Borrowers may also ‘ruthlessly’ or strategically default even without such life events,” they wrote.
Seven markets in states with the fastest appreciation during the five-year housing boom -- including Fort Lauderdale and Miami, Florida; Merced and Modesto, California; and Las Vegas -- may find 90 percent of borrowers underwater, according to the report.
The share of borrowers owing more than 125 percent of their property’s value will increase to 28 percent from 13 percent, according to Weaver and Shen.
Home prices will decline another 14 percent on average, the analysts wrote.

Thoughts on Golf Channel Ginn Segment

2009-08-04T23:43:00.005-04:00

Tonight's segment on Golf Channel didn't tell us anything we don't already know - and it may have disappointed owners in resorts other than Bella Collina. But it certainly is bringing the Ginn fiasco to light. It also serves to debunk the myth still being held onto by some Ginn groupies that this was all just a product of the poor Florida real estate market . . . or the nonsense that investors got what they deserved.

I like this promo I came across:
Rise and Fall of Real Estate Mogul Bobby Ginn on Golf in America
Bobby Ginn: Real Estate Bust -
Bobby Ginn was a real estate mogul who developed numerous resorts and communities during the real estate boom in the 1990's. His Ginn communities were marketed as the ultimate in upscale golf luxury, and Ginn parlayed his sponsorship of professional golf tournaments - including the Ginn Championship at Hammock Beach, the Ginn Open at Reunion and the Ginn sur Mer Classic at the Conservatory - to lure investors. Now, with unfinished clubhouses and neighborhoods in foreclosure, he is thought to be hiding out in the Bahamas. A whistle blower will sit down with GOLF CHANNEL’s Rich Lerner to discuss the real estate bust and what it means to the world of golf. (my emphasis)

It looks like Bobby is finally being viewed as the scoundrel he really is, rather than the visionary BS we've been fed. The kool-aide is finally wearing off.

Ginn on Golf Channel Tonight

2009-08-04T10:43:00.002-04:00

I wanted to make sure everyone is aware that the golf channel is running a segment on Ginn August 4 at 10 pm EST on its Golf in America show. If you want more info, go to www.golfchannel.com, look under tv shows.

It was promoted heavily during the Buick Open last weekend.

I love the byline:

The Ginn bust: A promise unfulfilled or possible fraud: What it means to the world of golf.

Dumb Mistakes Intelligent People Make

2009-07-05T19:44:00.000-04:00

As I work with clients, I realize that there are some dumb mistakes being made that simply must be pointed out:

1. Don't leave money in a bank account that holds the mortgage. Although the lender must get a judgment before it can attach your assets, standard bank agreements provide a right of set-off so that it can simply help itself to a bank account if held in the same name as the note. This seems to be common sense but most attorneys just don't think of mentioning it to their clients.

2. Many, if not most, short sales provide that the lender may still pursue a deficiency, if there is one. At the risk of making enemies with more realtors than I already have, you cannot simply rely on your realtor for legal advice. Can you imagine going through the hassle of doing a short sale only to find out that you still have personal liability for the deficiency?? Taking legal advice from your realtor is almost as dumb as relying on the bank for your advice!

3. What's your exit strategy? Just as bankruptcy lawyers seem to conclude that everyone that walks through their door needs to file bankruptcy, it seems that there are plenty of "one-size-fits-all" practitioners in the foreclosure defense field. Are you looking to stay in your home? Are you a candidate for a loan modification? Are you an investor that just wants to get out? It's not so much a matter of defending the foreclosure as it is deciding what you want to accomplish.

As soon as I come up with a few more "dumb mistakes" (which shouldn't take very long) and I get a few moments, I'll do another post.

Are Increasing Numbers Not Paying the Mortgage?

2009-06-11T00:16:00.000-04:00

Are Increasing Numbers of Homeowners Withholding Their Mortgage Payments?

RISMEDIA, June 9, 2009-One of the reasons that it is hard to get a handle on the depths of the foreclosure crisis is that much of the information is hidden beneath the surface, like an iceberg. We are seeing only a small part of what may turn out to be a much bigger disaster than ever imagined because so much is hidden from view. And so, we are left to wonder-is the worst yet to come?

There is, for example, wide speculation that banks have been holding back significant numbers of REO properties in order not to flood the market.

A cursory review of local tax records suggests that there are far more properties in default than there are in either the auction or bank owned phase. Are these temporary defaults that will ultimately be cured, or are these the first waves of what alarmists like to call the Tsunami? Are the majority of these early stage defaults inevitably going to make their way to auction?

If homeowner equity was rising, the majority of defaults would likely be cured before auction. Now, the only options are to sell or forfeit the home. But, a hard target search of specific defaulted property sold between 2005 and 2007 revealed that most are not listed through the local MLS which suggests that they are not really trying to sell and most appear to be well maintained.

And, if lenders fearful of flooding the market are delaying auctions, why not further limit the damage by not recording the notice of default? That way there is no public record for people like me to uncover and question.

The uncertainty about the future of the economy is threatening even those jobs once thought to be recession proof and has caused many people to adopt an almost survivalist approach to short term life planning. If your job goes away, what would you wish you had more of, cash, or the good will of the mortgage company?

People who can pay their mortgages have stopped, and their number is growing.

Among probable reasons are the following:
- The decreasing stigma of such an action compared to the widespread fraud underlying our economic collapse. When GM is synonymous with bankruptcy, it’s clear that the game has changed.- The uncertainty of the revival of the economy and the corresponding fear of loss of income if the recession deepens or lengthens has many people waiting for a signal regarding the economy in general or the security of their job in particular.- Belief that, if they are current, they will not qualify for a mortgage modification.- Chaos theory is yet another reason that some aren’t paying their mortgages. There has been a persistent rumor that behind the bank bailouts and the bankruptcies, the Federal Government is working on a plan B for dealing with a complete economic collapse and the ensuing anarchy.

People who believe this argue that there wouldn’t be anyone coming to see about the mortgage. And, if everyone who had a mortgage began to withhold their payments, that could happen. Those working short sales and REOs have discovered that the banks and servicing companies are already overwhelmed.

And, because the revenue stream of mortgage servicers is entirely dependent on collecting mortgage payments, when those stop coming, they won’t be able to make payroll or keep the lights on. And, it will be lights out for the banks next. Unlike GM, they don’t have many assets and make nothing.

The government can only bailout so many things with our money before we hit a tipping point. California is facing an unprecedented financial crisis, and other states are facing similar revenue shortfalls. If the choice comes down to saving the banks or saving our neighborhoods, the politicians need voters more than they need banks. Or, so say the chaos theorists.

There are many different reasons why certain homeowners might be withholding their mortgage payments to preserve their cash. Fear of job loss or economic collapse, loathing for the high-flying financiers who are getting bailout funds, the lessoning stigma associated with bankruptcy and default, or to qualify for a mortgage modification.

Some are fully intending to make up the payments and pay the late fees if the economy shows signs of improving soon. Others think that banks might make concessions so why not wait and see what happens? But, as the number of non-payers grows, whether by choice or necessity, they further imperil the survival of many financial institutions.

New York Times Article On Ginn

2009-05-23T15:43:00.005-04:00

May 24, 2009

It’s Tee Time. Where Is Everybody?
By GERALDINE FABRIKANT
Montverde, Fla.
OFF the turnpike here in central Florida, hidden behind stucco walls, sits a sprawling Tuscan-style clubhouse on a hill overlooking a string of lakes, a golf course and green fields.

This 1,900-acre property, called Bella Collina, was designed to hold 800 homes. Today, only 48 houses dot the landscape, and just three are occupied. The clubhouse, though open, is eerily quiet, and a promised swimming pool and equestrian center have yet to be built.

Bella Collina, the brainchild of Robert Edward Ginn III, looks like a ghost town. So does Tesoro, another resort opened by Mr. Ginn near Port St. Lucie, where just 150 houses sit on 900 lots. And the Conservatory in Palm Coast, also from Mr. Ginn, is even more barren: 335 out of 340 lots are empty.

As the real estate boom expanded in recent years, developers and home buyers believed that residential golf resorts were a sure-fire bet. Many buyers looked to buy properties that they could flip for a quick profit. Others were lured by stunning views, club services and security. While there is no reliable data on the growth in residential golf resorts, analysts say the market is well past its peak — particularly in the Sun Belt — and there is now an overabundance of developments.

“The aggressive building of new resort courses continued from the mid-1990s into the 2000s, contributing to an increasing glut of inventory that finally found no market,” said Joe Beditz, chief executive of the National Golf Foundation, a trade group that tracks data on the golf industry.

Mr. Ginn, 60, was able to cash in on the boom despite a spotty record that included some well-publicized failures on Hilton Head Island, S.C., in the 1980s. But when the real estate market began to tank in 2007, his empire came undone. “As property values plummeted, many investors had property worth less than their loans, and they were unprepared to pay their club and association fees,” says Toby Tobin, a Florida real estate agent.

Other golf resorts are also struggling. WCI Communities, which built resorts in Florida, Virginia and the Northeast, filed for bankruptcy in August. So did the Yellowstone Club in Big Sky, Mont., and three other resorts that, like some of Mr. Ginn’s, had loans arranged by Credit Suisse. Even the venerable Greenbrier Resort in West Virginia has sought bankruptcy protection.

For Mr. Ginn, a man who could sell 400 lots in a single day during the height of the real estate boom, it has been a huge comedown. While other developers may have built more golf resorts, few did so as grandly or as extravagantly. The tab for the 116,000- square-foot clubhouse at Tesoro reached $48 million.

“Most developers used consultants,” recalled Dean Adler, co-founder of Lubert-Adler Partners, a private equity firm in Philadelphia that invested in Mr. Ginn’s projects. “Bobby had a feel. He could be handed a topography map at a site and sketch out the entire resort.”

An amiable Southerner with a casual personal style, Mr. Ginn was a virtuoso at selling investors his vision of the luxe lifestyle.

“Bobby is very smooth and very likable,” said Hilton Wiener, a lawyer who bought an investment property at Tesoro. “He is a down-home guy who is not a pushy kind of salesperson.”

But when a new resort was in the works, Mr. Ginn knew how to generate a buying frenzy by holding lavish parties where potential buyers greatly outnumbered available lots, say agents and investors who attended the events.

“You would come to one of Ginn’s sales weekends and you would be drinking and thinking, ‘I hope I get chosen as one of the select few who gets to buy a lot,’ ” Mr. Wiener recalled. “The setting is very lush: hand-rolled cigars, fancy parties, vans with the Ginn name plastered on them.”

The high times ended when the market turned two years ago. Sales stalled, and Mr. Ginn had trouble paying off loans. Two of his properties, Tesoro and Quail West in Naples, Fla., filed for bankruptcy in December 2008 and were later sold for a fraction of what he had put into them. He sold Laurelmor, a resort in North Carolina, to another developer for $32 million. Mr. Ginn’s network of companies still owns the facilities at Bella Collina and the Conservatory.

Not all of Mr. Ginn’s 13 golf resorts are in such dire straits. But even at some of the most successful, like Reunion near Orlando, the Ginn Companies is considering programs to attract more buyers by offering fractional ownership at lower prices.

Mr. Ginn says his remaining properties will eventually pay off. “My belief is that when the depression ends, there will be a pent-up demand for happiness,” he said in an interview at his offices at the Hammock Beach Resort near Daytona Beach. “Sometime between 2035 or 2040, Florida will double in size.”

In the meantime, he faces dozens of lawsuits from angry investors alleging that his companies used deceptive and misleading trade practices in representing the demand for and value of his properties. “We will vigorously defend against these false allegations,” Mr. Ginn said.

BOBBY GINN grew up in Hampton, S.C., where his father was a small homebuilder. “I dropped out of school when I was 19 to go into the business because I always had a passion for building,” he said.

When Mr. Ginn was in his 30s, he worked with the Butcher brothers, Jake and C. H. Jr., Tennessee bankers who went to prison for bank fraud. In 1986, the Federal Deposit Insurance Corporation sued Mr. Ginn, contending that he had participated in a scheme with the brothers to defraud banks under the pretense of developing a property in that state. Mr. Ginn said he settled with the F.D.I.C. in the early 1990s and paid $500,000, without admitting wrongdoing. An F.D.I.C spokesman said the agency did not have documents from that period detailed enough to confirm Mr. Ginn’s account.

In 1985, he bought several resort and residential developments on Hilton Head Island, including such landmarks as the golf course where the Heritage Classic was played. “I liked the resort business more than building condos and shopping centers,” Mr. Ginn said. “Selling fun is more enjoyable.”

But his Hilton Head project did not prove to be a good investment. Some critics argue that he took on too much debt. As his cash-flow problems grew, a local radio station carried bulletins announcing when Ginn employees could safely cash paychecks and bumper stickers began appearing that said: “Honk if Bobby Owes You.”

Mr. Ginn sold his Hilton Head assets in 1986 to pay off debts, and declared personal bankruptcy two years later.

He resuscitated his career by working for Rochester Community Savings Bank in New York as a consultant on its investment in Wild Dunes, a North Carolina resort.
He got a big break in 1997, when Lubert-Adler started investing in his projects. Over the next decade, the firm, whose investors include the endowments for Harvard and Princeton, pumped about $800 million into his properties. Their partnership was structured such that the private equity firm put up all the money and took 80 percent of the profits.

The timing of the relationship couldn’t have been better. “Their business really took off after Sept. 11, when people turned from financial investments to hard assets,” said Robert Gidel, a former president of the Ginn Companies.

Mr. Ginn’s development style was unusual: he didn’t build clubhouses or other services until a large number of lots were sold. “Typically, developers start with a hotel or amenities because skeptical buyers want to see things,” Mr. Gidel said. “But here the market was so strong, and people wanted to believe.”

Dan Gerner, who owned a home in Quail West, one of the few developed properties that Mr. Ginn bought, said Mr. Ginn’s lavish spending ornamented his operation with all the trappings of success. At Quail West, Mr. Gerner said, Mr. Ginn “spent $12 million remodeling the clubhouse, and when the members didn’t like it, he spent $4 million more changing it.”

Many buyers bought several properties and hoped to flip them for a profit.
Even Mr. Adler, the Lubert-Adler chief, was personally involved in at least one deal at Tesoro. According to property records, he bought a parcel in 2004 and quickly sold it for a $205,000 profit.

A partnership formed by Mr. Adler and Mr. Ginn, A & G, also bought and sold five properties at Bella Collina for a $2.5 million profit over a period of weeks.

Those transactions raised possible conflict-of-interest questions, experts in private equity say, because the partnership bought property in developments that were also assets held by private equity funds that Mr. Adler was helping to oversee. Steven N. Kaplan, a professor of finance at the University of Chicago, said that transactions such as this can be problematic because investors in a fund are deprived of profits that potentially accrue to insiders who buy assets for themselves.

Mr. Adler says that although he bought the single property at Tesoro in his own name, he had actually “made a loan to two individuals to purchase that property.” He said that they — not he — kept the profits from the transaction and that they repaid him with interest.

As for the five properties purchased by A & G, Mr. Adler said the situation was “rectified.”
“I transferred my investment back to Mr. Ginn and never participated or received a penny of profit,” he said. Mr. Ginn confirmed Mr. Adler’s account.

The A & G deals are cited in a class-action suit filed last week in federal district court in Florida, alleging a scheme to sell properties based on fraudulent appraisals. Although Mr. Adler and Mr. Ginn are cited in the case, their firms, and not they as individuals, are named as defendants. Mr. Adler said he was no longer a partner in A & G when the transactions took place and denied any wrongdoing. Mr. Ginn said he had not seen the suit but also denied allegations of wrongdoing.

In 2006, Mr. Ginn’s partnership with Lubert-Adler borrowed $675 million from Credit Suisse, out of which it took a distribution of $332 million. (Mr. Adler said that his firm put back roughly that amount after sales slowed.) The partnership used the balance of the Credit Suisse loan to finance four resorts.

But the next year, the real estate market began to enter a free fall, and by 2008 the partnership couldn’t make payments on the Credit Suisse loan. Tesoro and Quail West filed for bankruptcy, and Laurelmor was sold. “There were no buyers and no market,” Mr. Tobin said.
Mr. Ginn says he now faces about 30 lawsuits.

According to one filed in a Florida circuit court, buyers were required to turn over their power of attorney to Richard T. Davis, a partner in a law firm that represented several Ginn companies, in order to buy land in Tesoro. The suit alleges that Mr. Davis signed documents that never provided detailed disclosures about costs, as the government requires. Since Mr. Davis was the companies’ closing agent, the suit contends, he knew that the disclosures were incomplete.
“I assure you that we tried to disclose everything that was out there,” Mr. Ginn said. Mr. Davis’s lawyer said the allegations were without merit.

The Florida suit also alleges that Mr. Ginn worked to artificially inflate the prices of parcels in his development. In one case, according to the lawsuit, a buyer bought two properties for a total of $1.007 million, and Mr. Ginn’s title company recorded the respective sale prices as $1.007 million and $1. The company then used the larger price as a “comparable” figure in an appraisal for Roy Bridges, a British financial adviser who bought a property for $1.195 million, according to appraisal records. Mr. Bridges’s property is now in foreclosure.

Mr. Ginn contends that “the county recorded it incorrectly.”
According to a transcript of a video obtained by a law firm representing property owners in the suit, a Ginn salesman told a group of potential buyers at Bella Collina that “Lot 5 sold for $2.1 million this morning.” But property records showed that the parcel sold for just $416,900, according to the lawsuit.

Mr. Ginn said he was “shocked because the salesman deviated from company practices.”
MR. GINN’S partnership with Lubert-Adler still has three properties left to develop and owns some land at existing resorts. “At this point, we have invested more than we have distributed back to investors,” Mr. Adler said. “We got hit by the economic tsunami, and we did not anticipate how tough it would be.”

Mr. Ginn says he is “ready to sell properties in trophy locations” when the market turns around.
“If you can’t sell,” he said, “you die.”

Watch Out For The Deficiency

2009-05-05T22:35:00.000-04:00

Will You Still Owe After A Short Sale or Foreclosure?

Many borrowers are under the assumption that their responsibility for a mortgage ends with a short sale or foreclosure. This is not always the case.

In a short sale the mortgage holders are increasingly requiring borrowers to sign a promissory note, a written promise to pay back all or a portion of the debt, as a condition of the short sale approval. Increasingly mortgage holders are asking sellers to sign a promissory note or retaining their right to pursue a deficiency.

In many states lenders have the right to come after borrowers for unpaid mortgage debt from a foreclosure or short sale, seeking a deficiency judgment. Many times it is the second mortgage holder who will pursue the deficiency as the first may have been satisfied through the short sale.
Whether or not a mortgage holder will pursue the borrower can depend on (1) their agreement with the investor or servicer, (2) what is allowed by State law, or (3) if the return outweighs the potential return. In addition, if there isn’t a true financial hardship that is when the mortgage holder might be more inclined to try to collect the unpaid balance.

I cannot stress enough that it is outside of the area of a real estate salesperson's expertise to advise a client regarding a promissory note or whether or not they could get hit with a deficiency judgment in the future. I strongly advise anyone who is faced with a short sale or foreclosure to consult an attorney before making any decisions.

Don't Just Give Up: Defend Against Foreclosure

2009-05-05T19:28:00.002-04:00

We are live in troubled times. Our economy is in chaos, unemployment is at an all-time high and we are experiencing the highest foreclosure rates since the Great Depression.
Many people are of the understanding that there is little you can do to defend against foreclosure. This is not true. I would first like to warn any person who is faced with a mortgage foreclosure to seek the advice of an attorney who is well versed in these issues.

When you are served, you will be served by a process server who is an employee or is contracted by the lender to serve you. He will tell you that all you need to do is write a letter in response to the summons/complaint within 20 days. This is a trap engineered by the attorney group that is representing the lender. Once you submit a letter, you waive all legal defenses and a summary judgment can immediately be brought against you and you will be removed from your home in the fastest possible time allowed under the law.

Also, do not vacate your home. In many cases people are being contacted shortly after a suit is filed and are told that the home will be sold on a certain date. This is not true. Only a court can set a date of sale. Remain in your home.

In order to protect yourself, a legal defense must be filed that raises all legal defenses within 20 days of the service of the complaint against you. Approximately 90 percent of all mortgages being foreclosed will be in a format such as follows:
"National Bank as Trustee for Home Loan Trust, 2005-FW2."

This will not be the lending institution that initially loaned you money and in all likelihood you will never have heard of this trust. In many instances, foreclosures are filed prior to an assignment of the mortgage to the plaintiff. As such, the plaintiff does not have legal standing to file the complaint and the complaint should be dismissed and filed again.

Remember this — time is your friend. The benefits of a vigorous defense are numerous. By delaying the foreclosure, you will be able to set aside the money which can be used when seeking a reinstatement or, at worst, will be available to you for the purpose of acquiring another home.
Also, the persons who put up a vigorous defense have increased leverage and are more likely to have success at reinstatement in the future. Additionally, in most foreclosures, the plaintiff is seeking a money judgment that can be avoided as well.

Return the Deed

2009-04-25T19:05:00.000-04:00

Return the deed to the bank with no personal liability: The best alternative for the "upside down" real estate investor

Investors: Are You Upside Down?

2009-04-25T08:57:00.000-04:00

Real estate investors are upside-down in their mortgage, can no longer handle the payments, and just want out. Realtors are advising they do a short sale, but there are no offers. The bank won't accept the deed. Even foreclosure defense lawyers are just offering to buy you more time. That might be OK for the homeowner who wants to stay in his home a little longer. But the investor just wants to get out and "stop the bleeding."

West Palm Beach, FL (PRWEB) October 18, 2008 -- Investors seem to be asking the same question: "What are the alternatives when you realize you are seriously "upside-down" and can no longer afford to pay the mortgage? Is there an exit strategy other than walking away and allowing the bank to foreclose? What about my credit? As an investor, I'm not interested in buying more time in the property. I would let them foreclose, but I don't want the bank going after my other assets."

"The threshhold decision is one of common-sense business, not legal." says investor / landlord Hilton Wiener, who also happens to be a realtor, CPA and a New York lawyer, now living in Florida.
"If you are "losing your shirt" and the kids are near starving, you have to make a decision- keep paying or not? What is your 800 credit score really worth? I will never suggest that you do not pay your bills but, let's face it, does it really make sense to go bankrupt "supporting" an investment - whether it be a house or a lot of dirt? It is hard to believe that people will blindly use up their retirement money or the kid's college tuition fund to further compound an already bad decision. It's much more than advising one to not "throw good money after bad," It's as if these investors are in a "drug addicted" state. They must wake up and start taking control of their lives. You've already lost the investment money. The parcel of land/ house/ condo already has zero value. I find it painful to sit by and watch people literally destroy their lives on top of it."

"We find that many owners are prepared to take the credit hit, if necessary, but they just don't want any other personal exposure. They just want to return the deed to the lender but do not want the lender chasing them with a deficiency judgment for which the borrower may be personally liable for up to 20 years." There are two alternatives that are always discussed: a short sale and a deed in lieu of foreclosure.

Short sales are the new rage among realtors. "Investor friends of mine looking for bargains have been on the buying end of short sales for years," says Wiener. But what are you, the seller, getting out of it? Other than the problems of getting a viable offer and then selling the bank on accepting the offer, and making sure they still don't demand the deficiency, and all this before the buyer backs out of the deal ... it's easy. And if you ask the bank to just accept a deed in lieu, they can't say "NO" loud enough. Realtors will tell you that the bank doesn't want the property back (which is the reason the short sale makes sense, say its advocates (other than their commission, of course)), but the lender inexplicably seems to make the short sale way too difficult.

This dilemma is easily explained once you realize that all this advice (indeed 99% of all the articles on loss mitigation from the so-called experts) is coming from two sources: a clerk working in the loss mitigation department of the bank for a couple of weeks, and Realtors. And the Realtors are usually just receiving their information in turn from the bank. Is there any surprise that this is all just one-sided information, spread as the gospel, from the very party you owe the money to, no less?
The real alternative?: have an attorney fight the foreclosure and give the property back in exchange for no personal liability. This means using a litigation attorney that specializes in mortgage law and foreclosure defense. Tip: If your attorney asks the bank what they will accept, it's the wrong guy.

Why would the bank just settle for the deed? Simple. When the lender forecloses, all it is doing is seeking to get title to your property. We are offering it to them up front -- without a fight -- which nowadays costs the lender over $50,000 on average per foreclosure and could take well over a year. In exchange, the bank is giving up the potential of getting a deficiency judgment (which they are not getting so quickly anyway). Given the time and expense, if the bank had actually loaned its OWN money, it would just take back the property and get it over with, in a heartbeat! But the bank has typically packaged and sold the loans to investors. "Let's put it this way," says Wiener, "I have a friend who is a very large hard money lender. When his borrower stops paying, he either modifies the loan to payments that are affordable, or he immediately accepts the deed in lieu of foreclosure. He is actually willing to pay the borrower ten grand for the deed just so he doesn't have to foreclose. (This is where we can have the discussion about the reasons for the mortgage meltdown.)"

Stop asking the clerk at the bank what they will accept. Fight the mortgage company, not with the goal of delay, but getting out and "stopping the bleeding." Once the bank no longer has its "stick" of threatening to hurt your credit, you will put yourself in the driver's seat.

Investors: Stop The Bleeding

2009-04-25T08:50:00.001-04:00

Stop the Bleeding and Get Out Now: Fight the Foreclosure

In this difficult real estate market, many investors are advised to just turn in the keys and walk away from a property they can’t afford. The lender will record a notice of default and if the borrower doesn’t cure the arrearage, a notice of trustee’s sale will be calendared and the property will be sold at a foreclosure sale.

In many states the lenders (or, in future years, those bottom feeders who buy such judgments for ten cents on the dollar) will pursue the borrower for a deficiency judgment. Meaning if you owed $400,000 on the loan and at the foreclosure sale the lender only received $100,000 back, you still owe $300,000. Years later you will still have someone chasing you for the money and your problems will continue long past turning in the keys on a failed investment.

It is now becoming clear that your best strategy is to fight a foreclosure. Hire an attorney to enjoin the foreclosure sale or, even better, to negotiate with the bank before foreclosure becomes imminent. There are many defenses to be asserted, including a developing theory of “predatory” or “unfair” lending practices. As well, courts have recently held that the current holder of the mortgage, if it has been assigned to a securitized trust, may not be the proper legal owner and thus unable to proceed with a foreclosure action. When lenders run up against an aggressive defense, they are much more open to yielding to the demand of a loan modification workout or negotiating a settlement. This is made none to clear by the recent monumental settlement between state attorneys general and Bank of America, whom acquired Countrywide Financial Corp. Countrywide is notorious for having engaged in unfair and deceptive practices and Bank of America has, as a consequence, agreed to modify the terms of subprime loans taken out by hundreds of thousands of borrowers. While you won’t benefit directly from that settlement it, and similar cases, provide substantial leverage for a proficient foreclosure defense attorney to force concessions on loan terms or prevail upon the lender to take the deed and forego any personal judgment against the borrower.

Lenders don’t want to spend a great deal of time or money on one case that has become a “problem” for them. And as we know, they have a lot of cases to work on these days. Lenders are becoming frustrated with defendant challenges to their foreclosure actions. Frequently, deals are struck whereby, in exchange for the borrower allowing the foreclosure sale to proceed, the lender agrees not to pursue a deficiency judgment and further agrees that the property value equals the loan amount, thus avoiding the tax on forgiven debt.

Borrowers are thus able to truly walk away from a property without the nagging concern of someone later pursuing a deficiency judgment or Uncle Sam later wanting money for debt forgiveness taxation. The attorney’s fees are a small price to pay for getting clear of tens to hundreds of thousands of dollars in continuing obligations. The time has come to stand up and fight foreclosures. Gain the leverage you need to release yourself for years of liability.

Deadline for Filing Proof of Claim is April 30, 2009

2009-04-24T08:25:00.001-04:00

Tesoro Bought Out Of Bankruptcy

2009-04-12T21:49:00.002-04:00

Port St. Lucie's swanky Tesoro bought out of bankruptcy
By Eve Samples, Palm Beach Post
Tuesday, April 7, 2009

PORT ST. LUCIE — Tesoro, Port St. Lucie’s swankiest subdivision, has been bought out of bankruptcy.

The apparent white knight: Glenn Straub, the owner of Palm Beach Polo Golf & Country Club in Wellington.
One of Straub’s companies, West Coast Investors LLC, closed on the deal last week, paying $10.99 million for the development off Becker Road.

What he’s getting for the money: 353 lots, a golf course, 11 acres of commercial property, a racquet club and Tesoro’s crown jewel, a 115,000-square-foot clubhouse. A second golf course lease also is included in the deal.

On the surface, the price seems like a song — especially since quarter-acre lots in Tesoro once started at $250,000. But the sale comes with baggage. A biggie is the clubhouse, a $45 million facility that will cost big bucks to run.

“The issues that the club has are fairly profound,” said Don “Toby” Tobin, a Palm Coast-based real estate agent who has followed the ups and downs of Tesoro’s developer, Celebration-based Ginn Co. “They don’t have enough members, and they’ve got members who are not paying their dues.”

The Ginn affiliates behind Tesoro and another community in Naples, Quail West, defaulted last summer on $675 million in loans facilitated by Credit Suisse. In December, they filed a Chapter 7 bankruptcy petition in West Palm Beach.

Straub, one of Wellington’s largest landowners, closed on the Tesoro sale Tuesday. The golf club temporarily shut down as the new owners took over. Members were directed to play at nearby Martin Downs Country Club — where Straub bought the village center and two golf courses in early 2008.

Loan Modification: The Latest Scam

2009-04-12T13:53:00.005-04:00

Florida’s Attorney General sues illegal mortgage modification company

Attorney General Bill McCollum filed a lawsuit against National Foreclosure Counseling Services, Corp. for charging up-front fees to customers seeking help modifying their mortgage. Florida legislators enacted the Foreclosure Rescue Fraud Prevention Act last October, forbidding any company from charging such a fee in Florida prior to services being rendered, other than by an attorney.

In response to the lawsuit, a judge has entered an order prohibiting NFCS, also known as American Foreclosure Counseling Center, from collecting any additional up-front money from clients.

Across the country, former mortgage brokers are now preying upon the same people they ripped off just a few years back. Back then, brokers were completing fraudulent loan applications and taking kickbacks (in the form of a yield spread premium) from lenders for charging home buyers higher interest rates than the rate for which they actually qualified.

Today, out-of-work brokers are now going back to these same people, promising they can renegotiate with the new owner of the home loan. Often, home owners pay an up-front fee of hundreds or even thousands of dollars, but in return, they often get nothing.

Keep in mind that, if you have been served with a foreclosure, you must respond to the complaint, regardless of whether you are working with your lender or not. Your lender will often use the “mortgage modification process” as a distraction to keep you from actively defending your foreclosure.

Any homeowner served with foreclosure papers should immediately seek the advice of a lawyer who focuses in the area of foreclosure defense. If you have been charged an up-front fee by National Foreclosure Counselling Services or any non-attorney "foreclosure rescue" firm, contact Florida’s fraud hotline at 1-866-966-7226.

Debt collectors and the lies they tell

2009-04-06T21:01:00.002-04:00

By Cathy Moran on Apr 6, 2009 in Debt Collector Abuse, Family Debt Problems

Stories from clients lately are full of another round of inventive and utterly false statements about the law from the mouths of debt collectors. These lies are effective because the hearer doesn’t understand either the law or the economics of debt collecting.

Some of the most often repeated lies are:

This debt is not dischargeable in bankruptcy
I can continue to call you until you give me the bankruptcy number
We’ll foreclose our HELOC regardless of senior debt or property value
Debt collectors realize that most consumers don’t understand how little legal leverage a debt collector has until they get a judgment. The consumer’s ignorance allows the debt collector to speak authoritatively without fear of contradiction. And there seem to be little constraint on their willingness to say anything that works.

The tools of the debt collector are fear, harrassment, and shame. They seek to use one emotion or the other to get the debtor to write them a check for money that they can’t get quickly or cheaply any other way.

Understand the game. Don’t get your legal advice from the debt collector.