September News Letter

Short Sales
Unless Congress grants an extension, a law created in 2007 to help troubled homeowners expires at the end of this year, homeowners will be unable to avoid paying taxes on forgiven debt for their primary residences. Some sellers will face daunting tax bills once the law expires. If, for example, a lender wipes away a $100,000 debt in a short sale, the typical South Florida borrower could owe more than $25,000 in taxes. The only way to avoid the hit would be to file for bankruptcy.

Because lenders often take several weeks or months to approve short sales, homeowners who don’t start the process soon are likely to miss the deadline. The Great Recession combined with under water home values have left millions of Americans in a financial crisis over the past six years. More than 412,000 South Florida homeowners are “underwater,” owing more than their properties are worth, according to real estate website Zillow.com. It could be a decade or more before values return to a level that allows these homeowners to break even in a sale.

In many cases, a short sale is the best option for escaping a burdensome mortgage. The seller avoids foreclosure and often can negotiate with the bank to reduce or eliminate the deficiency – the difference between what’s owed and what the house sells for. Since 2007, more than 53,000 homeowners in Palm Beach and Broward counties have completed short sales, according to the RealtyTrac listing firm. Over the same period, lenders have repossessed nearly 85,000 homes in the two counties, RealtyTrac said.

To apply for a short sale, a homeowner must have a financial hardship, such as a job loss or large medical expenses. New government guidelines that take effect in November allow for a short sale if the homeowner must relocate more than 50 miles away for a job transfer or new position. After finding a buyer, the seller submits to the lender the written contract, along with pay stubs, bank statements and tax returns. Then the waiting begins. Even though the short sale process has improved in the past year, with banks responding to offers more quickly, delays are still common.

Given the depth of the housing bust, the law should be extended for at least another year to give borrowers relief and to help clear the glut of distressed mortgages, said Guy Cecala, publisher of the Inside Mortgage Finance newsletter. While there appears to be bipartisan support for keeping the law, some analysts say an extension may not come until after the presidential election in November. Others say the law may well expire, but Congress could grant an extension early next year and apply it retroactively.

Because of the uncertainty, homeowners should assume no extension is coming, said Jim Heidisch, broker with Campbell and Rosemurgy in Pompano Beach. He said many of his clients are stunned to learn of the looming expiration. As the end of the year draws closer, short sale applications are likely to increase, and the backlog could result in frantic homeowners struggling to close.

sun-sentinel.com – September 2012

Bankruptcy Law
It used to be that a debtor could only strip a second mortgage lien in a Chapter 13 Bankruptcy. That all changed in May of 2012 when the appeals court in the 11^th Circuit Court for Florida, Georgia and Alabama, ruled that a debtor may strip off a wholly unsecured mortgage or secured lien.  Specifically, if the balance of the first mortgage on a debtor’s home is more than the value of the home, then the second mortgage may be stripped off.

The decision was rendered in a case titled: In re: McNeal. This is a departure from the case law that limits lien stripping to Chapter 13 proceedings.  McNeal is controversial and many firms are reluctant to use the case until the judges in our district issue opinions that further interpret the case. This can have serious implications for a homeowner because if a lien is stripped using McNeal, and the case is later overturned, or interpreted differently by our judges, it could turn out years later that the lien strip of a second mortgage was improper, and thus ineffective.

On the other hand, second mortgage lien strip off of wholly unsecured mortgages in chapter 13 is backed by solid case law and supported by all judges in the Southern District of Florida. Until such time as a body of case law develops to interpret McNeal, bankruptcy firms are advocating the filing of a chapter 13 that support the debtor’s right to strip off a wholly unsecured mortgage. The entire 11^th Circuit Court is reviewing the McNeal opinion.

September, 2012

Mortgage Modification

Although the whole of America has encountered mortgage difficulties due to the economic crisis, it seems that now – especially for those in the South Florida region – there could be room for optimism.  Figures are indicating that, in recent times, fewer homeowners are facing the dreaded prospect of foreclosure, thanks in large part to the recovering economy, but also due to government-backed and other programs offering assistance.

For example, the Bank of America has been extending its financial supportive hand, and the results have been very positive.  Indeed, the numbers speak for themselves: in June 2011 there were 30,000 of “seriously delinquent mortgages” in South Florida and now – in August 2012 – this figure has dropped to 12,000 – a staggering 60 percent decrease. BankUnited and Chase can also support the occurrence of a similar reduction in such numbers, most notably since 2009.

Since banks in the region have been particularly helpful, this has made a huge difference. Indeed, just a few months back, the majority of states in the nation made a $25bn settlement between Ally Financial Inc., Bank of America, Citigroup Inc., JPMorgan and Wells Fargo & Co.

As part of this, Bank of America wrote letters to 200,000+ mortgage holders (primarily in California and Florida), offering assistance. Other programs include the Home Affordable Modification program (offered by the federal government) that could lead to a reduction in monthly payments for some mortgage holders, as well as 46,032 trail/permanent modifications in Florida counties from various lenders.  Lenders thus seem to be making major efforts to help tackle the area’s “housing debacle,” rather than continue with its prior attitude of jumping to foreclosures. There has been a clear increase in banking flexibility, with some evening forgiving principal.  In addition, according to RealtyTrac, in the Miami-Fort Lauderdale-Pompano Beach region, foreclosure filings dropped 15 percent in July 2012 from their substantially higher figure in July 2011.

floridahousingnews.com – August, 2012

Foreclosure Defense
The spike in foreclosure cases beginning in 2006 has tested the courts, prompting the creation of a task force and the allocation of extra funding to help cope with the unprecedented foreclosure load. 

As the administrative judge for the civil circuit division, Miami-Dade Circuit Judge Jennifer Bailey has a bird’s-eye perspective on the foreclosure crisis that has changed South Florida’s housing landscape. Bailey has lectured on the subject of foreclosures. She has testified before Florida legislative committees. And she wrote the Foreclosure Bench Book for attorneys and real estate professionals.

Miami should be proud of its judges, who shouldered the burden of an exploding foreclosure caseload. In the last typical year of 2006, there were 9,800 foreclosure cases filed. Since that time, 215,717 foreclosure cases have been filed through June 2012 — an average of nearly 40,000 per year. In just the past two and a half years, your judges have resolved over 92,000 cases.

The Eleventh Circuit’s existing manpower and resources continue to be challenged by the foreclosure load, which is currently about 60,000 cases, but the one-time state funding we received in 2010-11, and now again in 2012-13, will allow us to hire additional retired judges and case managers to assist our daily efforts to resolve these cases. However, this special state funding does not include funding for the Clerks of Court, who handle all the paperwork, case files, and docketing of case activity. The foreclosure crisis has imposed a huge burden on the Clerks while budget cuts have forced them to cut positions or leave vacancies unfilled, leading to challenges in the handling of the court records.

Judges’ individual caseloads tripled from an average of approximately 1,900 active cases per judge, to approximately 7,000 active cases per judge during the peak of the foreclosure crisis. After a great deal of hard work on moving these cases to resolution, that number has since dropped to approximately 5,000 active cases per judge — still an extremely difficult burden to carry. To assure access to justice, we set up a special calendar which only hears foreclosure summary judgments full-time. We have tried to keep judge’s calendars accessible for hearings in other types of cases by making sure we are still setting time for jury trials and by splitting calendars so that foreclosure cases are heard at separate times from other cases, so that the volume of foreclosure cases does not elbow out every other type of civil proceeding.

Currently we have both trial judges and senior judges trying foreclosure cases, and once the Foreclosure Project, which started July 1, gets fully running, we will be moving hundreds of foreclosure cases to trial each week.

– miamiherald.com – August 2012

Local and International News
State, West Palm Beach and Port St. Lucie officials are faced with embarrassment following today’s announcement that the movie effects company Digital Domain Media Group is seeking Chapter 11 bankruptcy protection, according to the Palm Beach Post. In an attempt to boast local employment, the city of Port St. Lucie loaned the private company $7.5 million to help it meet its goal of hiring some 300 workers at an average salary of $65,000. “It appears now we won’t be able to collect that,” Ed Cunningham, a city spokesperson, said.

Port St. Lucie’s other financial ties to the firm include a 130,000-square-foot headquarters and animation studio the city bankrolled, an additional $441,067 it gave the company to cover extra construction costs and a $40 million bond. The city of West Palm Beach gave $2 million to Digital Domain to found a school that is now on the verge of collapse. In total, Florida governments invested nearly $135 million in the company. Digital Domain was valued at $400 million May 1, but as of today it is valued at a mere $15 million. Florida Governor Rick Scott has since ordered a probe into the state’s decision to invest in the company.
therealdeal.com – September, 2012Short Sales
Unless Congress grants an extension, a law created in 2007 to help troubled homeowners expires at the end of this year, homeowners will be unable to avoid paying taxes on forgiven debt for their primary residences. Some sellers will face daunting tax bills once the law expires. If, for example, a lender wipes away a $100,000 debt in a short sale, the typical South Florida borrower could owe more than $25,000 in taxes. The only way to avoid the hit would be to file for bankruptcy.

Because lenders often take several weeks or months to approve short sales, homeowners who don’t start the process soon are likely to miss the deadline. The Great Recession combined with under water home values have left millions of Americans in a financial crisis over the past six years. More than 412,000 South Florida homeowners are “underwater,” owing more than their properties are worth, according to real estate website Zillow.com. It could be a decade or more before values return to a level that allows these homeowners to break even in a sale.

In many cases, a short sale is the best option for escaping a burdensome mortgage. The seller avoids foreclosure and often can negotiate with the bank to reduce or eliminate the deficiency – the difference between what’s owed and what the house sells for. Since 2007, more than 53,000 homeowners in Palm Beach and Broward counties have completed short sales, according to the RealtyTrac listing firm. Over the same period, lenders have repossessed nearly 85,000 homes in the two counties, RealtyTrac said.

To apply for a short sale, a homeowner must have a financial hardship, such as a job loss or large medical expenses. New government guidelines that take effect in November allow for a short sale if the homeowner must relocate more than 50 miles away for a job transfer or new position. After finding a buyer, the seller submits to the lender the written contract, along with pay stubs, bank statements and tax returns. Then the waiting begins. Even though the short sale process has improved in the past year, with banks responding to offers more quickly, delays are still common.

Given the depth of the housing bust, the law should be extended for at least another year to give borrowers relief and to help clear the glut of distressed mortgages, said Guy Cecala, publisher of the Inside Mortgage Finance newsletter. While there appears to be bipartisan support for keeping the law, some analysts say an extension may not come until after the presidential election in November. Others say the law may well expire, but Congress could grant an extension early next year and apply it retroactively.

Because of the uncertainty, homeowners should assume no extension is coming, said Jim Heidisch, broker with Campbell and Rosemurgy in Pompano Beach. He said many of his clients are stunned to learn of the looming expiration. As the end of the year draws closer, short sale applications are likely to increase, and the backlog could result in frantic homeowners struggling to close.

sun-sentinel.com – September 2012

Bankruptcy Law
It used to be that a debtor could only strip a second mortgage lien in a Chapter 13 Bankruptcy. That all changed in May of 2012 when the appeals court in the 11^th Circuit Court for Florida, Georgia and Alabama, ruled that a debtor may strip off a wholly unsecured mortgage or secured lien.  Specifically, if the balance of the first mortgage on a debtor’s home is more than the value of the home, then the second mortgage may be stripped off.

The decision was rendered in a case titled: In re: McNeal. This is a departure from the case law that limits lien stripping to Chapter 13 proceedings.  McNeal is controversial and many firms are reluctant to use the case until the judges in our district issue opinions that further interpret the case. This can have serious implications for a homeowner because if a lien is stripped using McNeal, and the case is later overturned, or interpreted differently by our judges, it could turn out years later that the lien strip of a second mortgage was improper, and thus ineffective.

On the other hand, second mortgage lien strip off of wholly unsecured mortgages in chapter 13 is backed by solid case law and supported by all judges in the Southern District of Florida. Until such time as a body of case law develops to interpret McNeal, bankruptcy firms are advocating the filing of a chapter 13 that support the debtor’s right to strip off a wholly unsecured mortgage. The entire 11^th Circuit Court is reviewing the McNeal opinion.

September, 2012

Mortgage Modification

Although the whole of America has encountered mortgage difficulties due to the economic crisis, it seems that now – especially for those in the South Florida region – there could be room for optimism.  Figures are indicating that, in recent times, fewer homeowners are facing the dreaded prospect of foreclosure, thanks in large part to the recovering economy, but also due to government-backed and other programs offering assistance.

For example, the Bank of America has been extending its financial supportive hand, and the results have been very positive.  Indeed, the numbers speak for themselves: in June 2011 there were 30,000 of “seriously delinquent mortgages” in South Florida and now – in August 2012 – this figure has dropped to 12,000 – a staggering 60 percent decrease. BankUnited and Chase can also support the occurrence of a similar reduction in such numbers, most notably since 2009.

Since banks in the region have been particularly helpful, this has made a huge difference. Indeed, just a few months back, the majority of states in the nation made a $25bn settlement between Ally Financial Inc., Bank of America, Citigroup Inc., JPMorgan and Wells Fargo & Co.

As part of this, Bank of America wrote letters to 200,000+ mortgage holders (primarily in California and Florida), offering assistance. Other programs include the Home Affordable Modification program (offered by the federal government) that could lead to a reduction in monthly payments for some mortgage holders, as well as 46,032 trail/permanent modifications in Florida counties from various lenders.  Lenders thus seem to be making major efforts to help tackle the area’s “housing debacle,” rather than continue with its prior attitude of jumping to foreclosures. There has been a clear increase in banking flexibility, with some evening forgiving principal.  In addition, according to RealtyTrac, in the Miami-Fort Lauderdale-Pompano Beach region, foreclosure filings dropped 15 percent in July 2012 from their substantially higher figure in July 2011.

floridahousingnews.com – August, 2012

Foreclosure Defense
The spike in foreclosure cases beginning in 2006 has tested the courts, prompting the creation of a task force and the allocation of extra funding to help cope with the unprecedented foreclosure load. 

As the administrative judge for the civil circuit division, Miami-Dade Circuit Judge Jennifer Bailey has a bird’s-eye perspective on the foreclosure crisis that has changed South Florida’s housing landscape. Bailey has lectured on the subject of foreclosures. She has testified before Florida legislative committees. And she wrote the Foreclosure Bench Book for attorneys and real estate professionals.

Miami should be proud of its judges, who shouldered the burden of an exploding foreclosure caseload. In the last typical year of 2006, there were 9,800 foreclosure cases filed. Since that time, 215,717 foreclosure cases have been filed through June 2012 — an average of nearly 40,000 per year. In just the past two and a half years, your judges have resolved over 92,000 cases.

The Eleventh Circuit’s existing manpower and resources continue to be challenged by the foreclosure load, which is currently about 60,000 cases, but the one-time state funding we received in 2010-11, and now again in 2012-13, will allow us to hire additional retired judges and case managers to assist our daily efforts to resolve these cases. However, this special state funding does not include funding for the Clerks of Court, who handle all the paperwork, case files, and docketing of case activity. The foreclosure crisis has imposed a huge burden on the Clerks while budget cuts have forced them to cut positions or leave vacancies unfilled, leading to challenges in the handling of the court records.

Judges’ individual caseloads tripled from an average of approximately 1,900 active cases per judge, to approximately 7,000 active cases per judge during the peak of the foreclosure crisis. After a great deal of hard work on moving these cases to resolution, that number has since dropped to approximately 5,000 active cases per judge — still an extremely difficult burden to carry. To assure access to justice, we set up a special calendar which only hears foreclosure summary judgments full-time. We have tried to keep judge’s calendars accessible for hearings in other types of cases by making sure we are still setting time for jury trials and by splitting calendars so that foreclosure cases are heard at separate times from other cases, so that the volume of foreclosure cases does not elbow out every other type of civil proceeding.

Currently we have both trial judges and senior judges trying foreclosure cases, and once the Foreclosure Project, which started July 1, gets fully running, we will be moving hundreds of foreclosure cases to trial each week.

– miamiherald.com – August 2012

Local and International News
State, West Palm Beach and Port St. Lucie officials are faced with embarrassment following today’s announcement that the movie effects company Digital Domain Media Group is seeking Chapter 11 bankruptcy protection, according to the Palm Beach Post. In an attempt to boast local employment, the city of Port St. Lucie loaned the private company $7.5 million to help it meet its goal of hiring some 300 workers at an average salary of $65,000. “It appears now we won’t be able to collect that,” Ed Cunningham, a city spokesperson, said.

Port St. Lucie’s other financial ties to the firm include a 130,000-square-foot headquarters and animation studio the city bankrolled, an additional $441,067 it gave the company to cover extra construction costs and a $40 million bond. The city of West Palm Beach gave $2 million to Digital Domain to found a school that is now on the verge of collapse. In total, Florida governments invested nearly $135 million in the company. Digital Domain was valued at $400 million May 1, but as of today it is valued at a mere $15 million. Florida Governor Rick Scott has since ordered a probe into the state’s decision to invest in the company.
therealdeal.com – September, 2012