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All About Foreclosure

In Florida, foreclosure is generally defined as the legal process through which a lender utilizes the courts to obtain forced sale of real property pledged as security for a debt or mortgage because the borrower defaulted by failing to meet the repayment terms contained in the loan agreement and promissory note.

Lenders typically file foreclosure actions after a borrower misses three to five payments in a row.  Lenders file foreclosure for two purposes:  (1) to force the homeowner to resume making payments on their mortgage (this would be the bank’s first choice) and (2) to obtain judicial sale or possession of the property so that the real estate can be sold and the proceeds used to reduce the loan balance.  Banks are generally not in the business of buying and selling residential real estate.  The bank does want your house.  The bank wants your money or somebody’s money to reduce the outstanding balance on their non-performing loan that is probably upside down.

One of the most important things for a homeowner to understand about a foreclosure action is that it is a civil lawsuit.  In civil court, the party that brings the lawsuit is the Plaintiff and the person being sued is the Defendant.  In a foreclosure case, the lender or bank is the Plaintiff and the homeowner is the primary Defendant.  As anyone who has ever served on a jury or even watched “The People’s Court” knows, the Plaintiff has the burden of proof.  This means that when a foreclosure case is defended, the lender must prove every element of its case by preponderance of the evidence.  To prove each element of its case, the bank will have to come forward with admissible evidence to prove that the homeowner executed the original mortgage and note and that each time ownership of the mortgage was transferred all legal formalities were complied with and the note was properly assigned and recorded.  The lender may also have to prove that proper disclosures were made to the homeowner/borrower prior to the real estate closing where the loan documents were signed.

Many homeowners mistakenly believe that they are powerless to take on a large bank.  We have learned from litigating with the banks that this is simply not the case.  Banks make mistakes all the time.  In the last few years, Americans have watched as banking giants Countrywide, Wachovia, Washington Mutual, Lehman Brothers, Fannie Mae, and Freddie Mac have gone bankrupt, were taken over by the government, or taken over by the FDIC and sold to other banks.  All of these companies were destroyed due to mistakes in residential real estate lending.  The Wall Street Journal, Sixty Minutes, and 20/20 have done stories about the mistakes banks made about whether or not to lend individuals money to buy homes.  By now, most Americans know that lenders made foolish loans to people they knew would not have sufficient income to repay the loans once the short term “teaser rate” was over or once the A.R.M. (adjustable rate mortgage) adjusted.  The banks simply thought that prices would keep going up forever so that if the homeowner could not pay the mortgage they could sell the property, make a profit, payoff the loan, and allow another bank to make a loan to the new buyer.  Often mortgage brokers and banks did not care that they were making very risky loans because they planned to earn their commission and then sell the loan as soon as the ink was dry.

What most Americans do not know about is the mistakes the banks made in the process of selling the loans from bank to bank.  In many cases the bank or mortgage broker was in such a hurry to sell the loan that proper formalities with respect to the sale and transfer of the loan were not complied with.  In other cases the mortgage was bought and sold multiple times and as it was transferred from bank to bank and ultimately to a collateralized mortgage trust, the original note was lost.  Now, because the lender has lost the note it lacks the critical evidence needed to prove its case.  To make matters worse for the lender, many of the banks and mortgage brokers who previously owned the note (and might have it in their files) have closed or merged with other banks.

Homeowners might think they face a huge financial institution with unlimited wealth, but the truth is that the bank is only as strong as the weakest link in its chain.  The banks have tens of thousands of foreclosure cases pending in Florida Courts.  In 2008, over 40,000 cases were filed in Miami-Dade alone.  In 2009, there will be over 100,000 foreclosure cases filed in the tri-county area of Dade, Broward and Palm Beach counties.  In Collier, Lee, and St. Lucie counties, the percent of homes in foreclosure and the ratio of foreclosure cases filed per local judge is even higher.  The law firms that represent the banks have been overwhelmed with cases and have had to hire dozens of attorneys, many of whom have little litigation experience.  The enormous case loads being handled by the bank’s attorneys means it is difficult for the attorney to devote a substantial amount of time to any one case.  As such, bank lawyers often focus their attention on their easy cases against unrepresented homeowners in an attempt to pick the “low hanging fruit.”

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Miami Office:
4770 Biscayne Boulevard Suite 1030 Miami, FL 33137
Phone: (305) 576-8688

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540 North Harbor City Blvd. Melbourne, FL 32935

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8551 West Sunrise Blvd. Suite 209 Plantation, FL 33322