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Archive for the ‘Foreclosure Defense’ Category

133 hits on my website in just the past few hours… Foreclosures in Texas are spiking in February 2011.

Defending a foreclosure in Texas is a complicated and time consuming matter, but having an attorney who is intimately familiar with the mortgage industry and who has protected foreclosure clients before can really ease the process. When it comes to having your attorney go to court, make sure they KNOW THE ORDER in which they need to see the clerk and how to get in front of the judge to issue the temporary restraining order, and how and when to serve the trustee or the opposing counsel.

There is a lot of background work that the attorney must do before this happens. The attorney must gather all facts, write up all the paperwork (this alone takes a number of hours), have the client sign and notarize an affidavit, if necessary, all of which will be brought to the judge and filed with the clerk in the order that is needed to stop the impending foreclosure sale.

Before even writing up the paperwork, the attorney needs time to review your loan documents, including any default letters or correspondences regarding transfers of your mortgage from one mortgage servicer to another. Knowing what to provide is simple — upon signing the Cashman Law Firm, PLLC‘s fee agreement, we will provide you a fairly standard and easy-to-read form which you will fill out. Reading your form will provide the information we will need to know which documents to ask you for.

All in all, if the attorney is not careful, this can end up costing you lots of money in legal fees. The process itself is not cheap because it is time consuming for the simple reason that the research must be done efficiently to identify which of the many federal or state statutes or procedures have been violated (very frequently there are multiple causes of action because the mortgage servicer or lender routinely violates a number of statutes), and there are multiple sets of pleadings that must be drafted by the attorney which are very specifically tailored to the facts of your case. In addition, once all the research is done, the attorney must then run to the court, see the clerk, fill out the forms to file the paperwork, wait to see the judge as fast as possible to argue the client’s case and convince him or her to sign a temporary restraining order (“TRO”) (because most cases have severe flaws, the judges typically do sign most of the temporary restraining order applications). Once the TRO is signed, the attorney must then run back to the clerk, file the order, wait for a citation to be drafted, and then must get a process server or some other party to serve the opposing counsel or trustee giving them notice that they are not to proceed with the foreclosure process.

In summary, this is a complicated process, and most attorneys who do foreclosures in Texas do them for the banks. Early on when I came to Texas and I inquired why more attorneys were not doing this, I was told, “Texas isn’t called the ‘lender’s bar’ for nothin’.” Foreclosure attorneys are prevalent and numerous in Florida and other states where the laws are very friendly to borrowers and it is quick and easy for any lawyer to practice this field of law. Here in Texas, as I have written in previous postings, the law not friendly to homeowners, and it provides a “one-two punch” depriving the property owners of their homes.

Everything I have written, however, should not scare you. The Cashman Law Firm‘s goal is 1) to review your paperwork as quickly as possible to identify issues and flaws with regard to your loan, regardless of whether it is a mortgages, a home equity loan, a refinance loan, or a home improvement loan (the rules are different for each, but the issues are generally the same), 2) draft the paperwork and have the client sign and notarize their affidavit, 3) run to the court, initiate a lawsuit, and get the judge to sign a temporary restraining order, and 4) serve the other party the judge’s order which likely will tell them to cease and desist moving forward on the foreclosure until the underlying issues are resolved by the court.

Please let me know if you have any questions about the foreclosure process in Texas.

For Clients Outside Houston: While I will travel to areas outside Houston (e.g., Galvaston, Austin, Dallas, etc.), very often I will prefer to hire local counsel to take care of matters which are too far away. For these cases, I would tell the client during our initial consultation that I would do all the work and I would write up the paperwork, but to minimize the costs to the client, I’d have a local attorney drive over to the court to make the filings on their behalf.

For Clients in New York: Even though I am licensed in New York and Texas, my office is in Houston, Texas. As such, as I stated above, I would do all the work, but when it came to filing the documents in court, I would hire local counsel to make the filings for me.

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PLEASE NOTE: OUR FIRM IS *NO LONGER* ACCEPTING NEW CLIENTS FOR THIS AREA OF LAW.  PLEASE CONTACT THE TEXAS BAR FOR AN ATTORNEY REFERRAL.  IF YOU ARE AN ATTORNEY LOOKING TO TAKE ON FORECLOSURE CLIENTS, PLEASE CONTACT US.

I’ve been reading about certain “contingency fee” mortgages that some attorneys are having their clients sign.  Specifically referring to a New York Times article written by David Streitfeld on November 6th, 2010 entitled, “Taking On a Second Mortgage to Pay the Lawyer,” Florida foreclosure attorneys have devised a new and creepy way to have clients pay inflated attorney fees.

In short, the scheme is that the attorney charges a contingency fee of 40% for whatever the attorney saves the client in terms of a mortgage loan modification and/or principal reduction.  However, instead of having the client pay the fee out of their pocket (which is impossible because all that is gained is equity and a lower monthly mortgage payment), the client agrees to take out a second mortgage in the law firm’s name to pay the contingency fee.

There are many issues here, and pardon me for sounding the “foreclosure scam” alarm with regard to what on paper appears to be an inventive way for the attorney to guarantee being paid.  In short, the client is essentially signing over to the attorney a security interest in their home in return for providing a service which is supposed to have the end goal of lowering the homeowner’s mortgage payments to a fair and affordable amount.  However, charging an unreasonable contingency fee which attaches to, encumbers, and uses the home itself as security for payment of that contingency fee inevitably defeats the purpose of the loan modification because it will unnecessarily increase the monthly cost of the mortgage payment.

Then, as soon as the homeowner falls short of paying the second mortgage to the attorneys, regardless of what they claim they will or will not do, the law firm immediately has the right to declare a default on the second mortgage, accelerate the entire debt as being immediately due, and can foreclose on the home judicially or non-judicially, depending on the state in which the property is in.

In other words, the homeowner who contacts the law firm for help to protect them from losing their home to the bank signs over a security interest in the home which in the end will cause them to lose that very home the lawyer was sought out and paid to protect… to that lawyer.

While this is not a classic foreclosure scam, it still smells like one.  The lawyer is taking advantage of the fact that the homeowner does not have any other choice than to pay their inflated contingency fees.  However, the contingency fee should be commensurate with A REASONABLE FEE, not how much the attorney can save the client.  This model of charging a percentage of what is saved works well when it is a few thousand dollars, as is often done with tax assessors.  However, with a home which is easily worth hundreds of thousands of dollars, taking a 40% cut of whatever is saved (which can often be hundreds of thousands of dollars) would constitute an excessive fee.

On top of that, there are a number of ethical and legal issues with making such a transaction which would place the financial interests of the attorney and the client to be adverse to one another.  This raises ethical issues which will not be covered in this issue.

In summary, before agreeing to such a “contingency fee” security interest deal, ask yourself whether the amount of money you will save (and that the attorney will consequently earn) would constitute a REASONABLE FEE for the services rendered.

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According to a Reuters article printed today entitled, “New York Courts Impose New Foreclosure Rule“, courts are now requiring attorneys representing banks and lenders to sign an affidavit stating that they took reasonable steps to verify the contents of foreclosure documents they sign.  This is their attempt to stop the too-common practice of “robosigning,” or signing and submitting documents to the courts without reading them or verifying their truthfulness.

It is a surprise attorneys do not do this in the first place.  I would say it is malpractice (and certainly an ethical violation) to submit paperwork that can deprive homeowners of their homes without first making sure that the contents of the documents are accurate.  This is what I call “lazy lawyering,” and it has caused so much of the mess many of our firm‘s potential clients and homeowners facing foreclosure have to deal with every day.

This problem (in my humble opinion) is the tip of the iceberg.  The issue is not that attorneys are blindly submitting often false and inaccurate information.  The problem is that there is an air of irresponsibility and a lack of ethics among the banks, the lenders, and the loan servicers where it is “chic” to break rules and to forge documents just to keep their “foreclosure machine” running smoothly without kinks.

What upsets me is that it is the homeowner that is hurt because the average joe and jane homeowner likely do not know how to tell the difference between falsified signatures and real ones, and even if they did, the documents that flow their way are so complicated that they really need an attorney just to understand what is going on.

Things should not be so complicated.

Also, if the New York courts think that forcing attorneys to sign a document saying that they looked at the documents they submitted will not stop them from robosigning those documents as well.  What is really required is some TEETH, as in SANCTIONS for both the attorneys AND the underlying banks, lenders, and loan servicers.  These sanctions need to be so steep that it will give these parties pause before submitting one more junk, forged, or inaccurate and unverified foreclosure document.

Additionally, instead of news articles and governments getting involved with new “rules” [which ARE already on the books, just not enforced], here the New York Office of Attorney Ethics (and each state’s attorney discipline board) should be involved in stopping attorneys each time it comes to their attention that a particular attorney or firm is involved in submitting documents without verifying their truthfulness.

An attorney should not be the puppet hand of a bank.  Just as we have ethics that we are bound to follow, they too have ethics that they need to follow.  The solution is not more paperwork, but simple ENFORCEMENT of the rules already in place.

 

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Texas has three methods for lenders to foreclose on homes — non-judicial foreclosures, judicial foreclosures, and quasi-judicial foreclosures.  Since most of the foreclosures these days are non-judicial, that will be the subject of this article.

Generally, Texas has a “one, two, punch!” approach to foreclosing on real estate properties in default.  Lenders first give the homeowner a “Notice of Default” in which they inform you that you have defaulted on your mortgage.  They also at this point give you notice that unless you take action to bring the loan out of default, they will also accelerate the debt (meaning that if you do not bring your account current [or work out a compromise with the bank], it will no longer ask you for monthly payments, and instead it will demand that you to pay the entire amount of the mortgage balance owed).

After 20 days, the lender will send you a second notice — a “Notice of Sale,” telling you the time and place where they will sell your home at a foreclosure sale.  This usually takes place the first Tuesday of the following month.

Two considerations a homeowner should have at this point are 1) there may still be a way to save your home, and 2) if not, there is likely one last alternative to stop the foreclosure sale.

At any point before the foreclosure sale, a home owner can always negotiate what is typically called a “work out” or a “loan modification.”  We are not referring to the federal government’s program which has had questionable results; we are talking about an honest conversation with the bank about what you can pay, and coming up with a mutually acceptable plan which will keep you in the home and will keep them from selling your home at the foreclosure sale.  Regardless of whether you agree to a loan modification where certain terms are altered or extended, or whether you agree to a payment plan to bring your payments current, you always have the chance to save your home.  Remember that at every point, it is advisable to have an attorney at your side at the very least to look over the documents and to advise you because banks typically materially alter the terms of your loan to your detriment when writing up a loan modification agreement.  More on this another time.

The last alternative which often feels extreme and makes the homeowner feel as if they’ve been destroyed and that they are a failure is to file bankruptcy.  From a non-emotional point of view, there is nothing immoral about filing for bankruptcy if all else has failed.  Bankruptcy is a tool that has been used by many both rich and poor to restructure their debts and allow the home owner to have some breathing room to get their finances and their home in order.  As soon as bankruptcy is filed, the foreclosure STOPS, end of story.

However, bankruptcy is not an online form that can be filled out in under four minutes.  It requires a consultation with a bankruptcy attorney who, among other things,  can guide the homeowner through what is called a “means test” to determine how the homeowner will be best advised to proceed under the bankruptcy laws.

Also, a bankruptcy is only useful if the homeowner together with his attorney will be able to create a plan which the homeowner will be able to afford which will allow him to resume payments to the lender, and which will also allow the homeowner to bring the amount the homeowner is behind on his mortgage up to date over time (generally this must be done within a five year period).  The unemotional benefit of bankruptcy here is whatever plan the court approves, the lender is FORCED to accept.  So if the lender is being less-than-cooperative, sometimes going down this path is the responsible way for a homeowner to keep his home and bring his mortgage payments up to date without losing his home to a foreclosure sale.

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For those of you on active-duty in the military, there is a tool you may be able to utilize to protect your home against foreclosure while you are deployed.  The law is called the federal Servicemembers’ Civil Relief Act (SCRA) and it bars foreclosures on active-duty members without a court order.

This law becomes relevant to active-duty service members because the process of deployment is often stressful to a family, and prior to deployment, general everyday activities (such as checking the mail or responding to bills) sometimes get put off temporarily.

The problem is that in Texas, a holder of a mortgage in default is able to move forward with what is called a “non-judicial foreclosure.” This means that the lender or the servicer of the note (according to its terms) is able to foreclose on the mortgage without needing to resort to a court system to sue and obtain a court order.  Instead, the bank mails a notice of default, it waits 21 days, and then mails a notice that they will be selling the home at the next  foreclosure sale the first Tuesday of the coming month (assuming there is another 21 days between the day of the foreclosure sale notice and the foreclosure sale itself, otherwise it will be sold the following month).

This can be a problem for military officials and soldiers whose home lives might be in disarray days or weeks before deployment.  Not paying attention to the mail might cost them their home and might leave their families and children homeless.

This was the experience of an Army National Guard Capt. in Frisco, TX until they found a LA attorney familiar with the SCRA who was able to help them.  (See the “Consumer Watch: Front-line foreclosure” article in the Army Times written by Karen Jowers.)

It should be pointed out that the army family’s paid-in-full home was sold at the foreclosure sale for only $3,600, and it was subsequently flipped to a purchaser who paid $135,000 for the home.  This should serve as a warning and a pointer that even though the fair market value of the home likely exceeded $135K, it still sold for only $3,600.  *IF* the family owed $135K on the mortgage and this were the case, the bank would likely come after the homeowners for $131,400 plus attorneys fees and costs (the difference between $135K and $3,600).

How is this?  In Texas, should a home be sold at a foreclosure sale for less than what is owed on the mortgage, the lender may still sue the homeowner for the difference between what is owed and what the home sold for.  This is called a “deficiency judgment.”   Even if the lender does not sue immediately after the foreclosure, the homeowner may not rest easy because the bank has four years to pursue a deficiency judgment.

Thus, we should be thankful that the Federal Servicemembers’ Civil Relief Act is in existence.  Why?  Because the SCRA shields property both against debts accrued before being called to active duty and during the military service itself.

[This article is written by Robert Z. Cashman, Esq., owner of the Cashman Law Firm, PLLC.  Robert is a foreclosure defense attorney in Houston, TX and a patent attorney licensed by the USPTO.  Information in this article should not be construed as legal advice; it may be outdated and/or incomplete.  As such, it is strongly suggested that you contact a foreclosure attorney to answer your questions.]

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