March 20, 2009
By Brian Bandel

Lawyers find ammunition against foreclosure suits

Rita Offenberg lived in her Weston home for 13 years and raised her two children there, but a foreclosure lawsuit threatened to take it away and saddle her with debt. Then, she fought back.

She hired Weston attorney Roy Oppenheim, who reviewed her mortgage documents and helped her qualify for a short sale agreement with the bank. With the help of a real estate broker, she closed the short sale in December. Even though the mortgage wasn’t fully repaid, Offenberg was not left with any debt.

“I feel like I was one of the lucky ones,” she said.

With one of every five Florida homes holding a mortgage that’s past due or in some form of foreclosure in the fourth quarter, according to the Mortgage Bankers Association, foreclosure defense is creating opportunities for attorneys.

 Oppenheim has helped clients resolve foreclosure lawsuits through short sales and loan modifications. He said he’s been so successful because the work of foreclosure plaintiff attorneys, who are burdened with thousands of cases, has often been sloppy.

 A handful of foreclosure plaintiff law firms that were contacted for this story refused comment or did not return calls.

 Oppenheim also found mistakes in transferring mortgage notes by mortgage-backed securities (MBS) investors. About 60 percent of outstanding mortgage debt is securitized – although borrowers often don’t know that their bank sold the note. Companies such as Mortgage Electronic Records System and Deutsche Bank service the loans for the trustee who represents MBS investors.

 Oppenheim said the trustees often have a difficult time finding the mortgage note – if they can locate it at all. Half the time, an assignment of mortgage was not filed in county court when a mortgage was sold, he said.

 Broward County court is swamped with foreclosures, said Howard Forman, the county’s clerk of the courts. He said one reason cases move slowly is that mortgage documents can take a while to produce.

 If the lender can’t produce the note after five years, the borrower owns the house free and clear because the statute of limitations has run out, Oppenheim said.

 If the five-year rule doesn’t apply, a borrower could use the “where’s the note” defense to delay a foreclosure and negotiate a short sale or loan modification, he said.

Loans that shouldn’t have been made

Another way to counter a foreclosure lawsuit is to revisit the mortgage origination and search for a violation of the federal Truth in Lending Act (TILA) or the Florida Unfair and Deceptive Practices Act. Stephen Dibert, president of Boynton Beach-based MFI-Miami, said his company specializes in helping lawyers do just that.

 Through forensic mortgage auditing and mortgage fraud investigations, MFI-Miami services for a list of possible violations.

 “Ninety percent of the mortgages that I audit should have never even been given to the client,” Dibert said. “They are predatory. The client was totally deceived when they sat down to do the closing.”

 Winning a case like this could result in the mortgage being rescinded, which isn’t always the best option. Still, making a TILA claim could give a borrower leverage to negotiate with the bank for a more favorable outcome, Dibert said.

 Oppenheim said pointing out that the lender may not have the note often works better than a TILA complaint because the legal remedies are more effective.

A more gentle approach

Some people think that being aggressive with lenders is the wrong way to go. Scott D. Coloney, founder of the Fort Lauderdale-based Foreclosure Response Team of Florida, said his group has negotiated loan modifications, short sales and deeds in lieu of foreclosure without taking legal action. His team includes more than 300 Realtors.

 

“If we have a good working relationship with the lender and they trust the info we are giving them, it will help our consumer base more than if we attack them and create a condition with the servicer where they don’t even want to talk to us,” Coloney said.

 He believes lenders and loan servicers are making bad decisions because they don’t have good market data. His team does a market analysis and tries to convince the lender to make a deal instead seeking a foreclosure judgment.

 “They would rather modify loan than see a default,” Coloney said.

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http://southflorida.bizjournals.com/southflorida/stories/2009/03/23/