Changing Horses in Mid-Foreclosure

Once upon a time a Lender and a Loan Servicer were in a very busy horse race to get to the end of the home foreclosure crisis.  The Lender was very busy indeed, and the Loan Servicer said, “Give me these files and I will foreclose them before you can get to them.”  The Lender was far too busy to even assign the mortgages to the Loan Servicer before the Loan Servicer started filing foreclosures. You cannot really do that.  The plaintiff has to have subject matter jurisdiction in order to bring the complaint before the court.  If the Lender starts the case and then transfers the loan to the Loan Servicer, that is fine.  But if the Loan Servicer files the foreclosure case AND THEN the Lender assigns the loan to that Servicer—that is a problem. The plaintiff was not the right plaintiff.  All those foreclosure cases had to be dismissed and re-filed by the right party, which slowed the race to finish the foreclosure crisis. Do not file foreclosure before you have subject matter jurisdiction, and do not change plaintiffs in mid-foreclosure.   Read More

Reverse Mortgage, A Non-Negotiable Instrument

Take a dollar bill in your wallet; it says, “This note is legal tender for all debts, public and private.”  Whoever holds that note has the right to enforce it, that is a note.  Most Mortgage Notes are unconditional to pay sum certain with interest, so most Mortgage Notes are negotiable instruments.  In Florida, whoever has the right to enforce the Note has the right to enforce the Mortgage.  In a Reverse Mortgage, is the promise to pay unconditional? A Reverse Mortgage puts a lien on your house and you have an equity line.  The lender is either going to give you a line of credit up front, or along the way, and when you die, the mortgage is due. A Reverse Mortgage is NOT unconditional; you do not have to pay it.  The Note itself says that the lender’s only way to collect is to sell the property.  It is not negotiable because it IS conditional.  Thus, a Reverse Mortgage is non-negotiable; you cannot transfer it by just signing the back of it.  There is a simple fix—Assignment of Mortgage—but most lenders do not do that. With a regular Mortgage Note, if you endorse it in blank you can […] Read More

Foreclosure on a Reverse Mortgage

Once upon a time there was a little old woman and a little old man who lived in a little old house they could ill-afford to pay for, and so they took out a reverse mortgage.  Then the little old man and the little old woman expected to live happily ever after, receiving a monthly income from the equity in their home instead of having to make mortgage payments.  However, they forgot to pay their property taxes, and so the bank foreclosed. A Reverse Mortgage (Home Equity Conversion Mortgage or HECM) is for homeowners 62 or older and allows them to withdraw funds from the equity in their primary residence in a fixed monthly amount or a line of credit or a combination of both.  But the homeowner is still responsible to pay for taxes and insurance on the property. To foreclose on a regular mortgage, you just have to be the holder of the note, which has to be a negotiable instrument (similar to a check, which can be cashed even if someone steals it because a check is a negotiable instrument).  The problem with foreclosure on a reverse mortgage is that the reverse mortgage note is not a […] Read More

Sour Grapes of Voluntary Dismissal in Foreclosure

Once upon a time there was a very hungry banker fox.  The economy was down, rates were low, and he had not been making very many loans.  So when he came across an entire neighborhood on the brink of distress, his mouth began to water.  It was not so much that he was hungry for the houses, but he needed something to make up for his void.  There was one house in particular, tucked within a vineyard, where a juicy group of late payments had ripened into default.  The banker fox began to lay out foreclosure papers in preparation for a feast!  In his haste, however, he failed to include an Assignment of Mortgage. The homeowner, Mr. Pino Nuance, realized the flaw in the banker fox’s case.  It was sloppy, the banker fox admitted, and he subsequently filed the Assignment.  However, with widespread fraud and improper procedures associated with foreclosure filings, Mr. Nuance wanted to depose those who had prepared the Assignment.  Yet, the day before the depositions, the banker fox voluntarily dismissed his suit, citing that the grapes were probably sour anyway. But it was not happily-ever-after time for Mr. Pino Nuance. The banker fox slunk away with his […] Read More