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Foreclosure Defense Florida

Continued Collapse of The American Financial System?!?

This post was first published in January 2010…

The $786 Million Dollar Question No One Wants to Answer

According to one estimate, the total dollar value of foreclosure final judgments entered in Pinellas County in 2009 was $786,464,927.80.   The vast majority of those judgments were given to entities who were not the original lender or the lender who’s name appears on the loan documents.  As will be described below there are very real questions regarding whether the parties seeking to collect this pot of money are legally entitled to do so.   The named plaintiffs that were granted summary judgment and who seek to collect this money read like a who’s who of the dead lender carcasses that litter the annals of American business.   Aurora Loan Services, Argent Mortgage, Bear Stearns, Citigroup, Countrywide, JP Morgan all the failed players of American finance are included.   Many of these Plaintiffs never originated loans and even if they did (as in the case of Argent, Aurora or Countrywide), the loans they are foreclosing on in some of these cases do not bear their company name.

An Alphabet Soup of a Catastrophe

The most interesting issue surrounding the names of Plaintiffs that appear in foreclosures is the thousands of final judgments that courts have entered in Pinellas County and across the country to exotically-named entities like, ” Ace Secs Corp Trust 2007-Asap2″,” Ace Securities Trust 2005-He6″, ” Bear Stearns Alt-A Trust 2006″, ” Citigroup MTG Trust 2005-He2″.   These entities and the thousands of other similarly sounding ” Alphabet Soup Entities” have been issued title to properties after foreclosure sales in courts across the country.   The names indicate they are an investment vehicle known as a REMIC or Real Estate Mortgage Investment Conduit.   (See Wikipedia here for a full explanation.) After a borrower signs and a mortgage is closed in the name of an initial lender that mortgage was sold to an investment house like Bear Sterns, Citigroup where it is grouped together with thousands of other mortgages, after the group of mortgages are pooled together, they’re given a name say, the ” Citigroup Mortgage Trust, 2005-HE2″.

Breaking the Rules- All of the Rules

The REMIC investment vehicle was designed so that the money coming into the vehicle, (in this case, the monthly mortgage payments made by homeowners) is not taxed by the IRS.   The REMIC’s servicer collects each borrower’s monthly payment, takes their fee off the top then the institutional investor who bought into the REMIC is given the monthly payment they are entitled to under the Pooling and Servicing Agreement.   Both the pooling and servicing agreement and IRS regulations create very specific timelines and rules that must be followed in order for that REMIC to retain its tax free status.   One of the most important rules is that all mortgages that are part of a REMIC must be transferred or formally assigned into the REMIC within 90 days of the startup date or ” birth” of the REMIC.   If a mortgage is not formally transferred into the REMIC within this 90 days, it is not legally or effectively in that REMIC and the Alphabet Soup Entity that claims it owns it in foreclosure does not really own it. (For More info on REMICs, click here.)

Lies on Top of Lies With Still More Lies

In their rush to close and fund REMICs, the investment houses played fast and loose with this most important aspect of the vehicle.   Loans were closing here in Pinellas County, then pledged to the REMIC but no one ever got around to assigning it into the REMIC””and certainly not within the 90 day period required by REMIC rules. After the homeowner stops paying and a foreclosure is filed the Alphabet Soup Entity needs to doctor up an Assignment of Mortgage to give it some claim of ownership.   In the good old days before pesky foreclosure defense attorneys started questioning the integrity of documents provided by foreclosure firms, they could doctor up any old lie of an Assignment of Mortgage they wanted without risking any consequence.   Now as courts have begun examining these Assignments, the Plaintiffs have been busted concocting thousands (millions??) of fake assignments and other documents.   This issue is related to the ” Lost Note” issue because the note and mortgage are two documents that must stay tied together in order to retain their enforceability against the homeowner.   Through sloppiness, greed, lies and fraud, the lenders have separated the documents they need to prove ownership. If they cannot prove ownership, they cannot foreclose the mortgage, they cannot take the property back and the investment is lost until some entity with a legitimate claim of ownership to the mortgage shows up.

I Don’t Care- I’m Not in Foreclosure and I Just Want the Deadbeats Borrowers to Pay

Not so fast.   Everyone is affected by this colossal breakdown.   It has been estimated that such securitized trusts potentially jeopardize approximately 50% of all long term retirement securities.   As this system continues to break down, the value of these investments will plunge, real estate prices will continue to plunge and these decreases will continue to drag down the overall economy.   The sloppy and fraudulent assignment and ownership problems call into question the ownership and title to every property that is encumbered by any mortgage and especially any mortgage that has been claimed to be owned by a securitized trust.   These legitimate questions about ownership and clean title to properties risks bankruptcy and failure of the title insurance and much greater instability in the US and international financial market.   So until the $786 bajillon dollar question gets answered with any real certainty or until we all acknowledge that the question cannot be honestly answered under the existing legal rules, we all will continue to suffer under a massively unstable system.   If something is not done to address this problem and correct the fundamental problems that exist a much larger collapse could occur.

For more information or to find out how this affects you personally, whether you are behind on your mortgage, in foreclosure or are invested in the financial markets, contact Matt Weidner at


  • Mark L. says:

    This is pretty scary. Scarier yet is a number of reports from people there are a lot of outfits out there who represent they can help individuals in foreclosure but turn out to be charlatans. Can anyone speak to that, and how you ensure you’re getting the right help?

    • admin says:

      Good question dear friend and easy to answer. Due to changes in Florida Law that took effect January 1, only attorneys licensed to practice law in Florida and licensed mortgage brokers can negotiate with mortgage companies on behalf of borrowers. Only a properly licensed attorney can represent a homeowner in a foreclosure case. So your best bet is to hire a properly licensed Florida attorney to assist with your mortgage modification or foreclosure. Check that attorney’s qualifications carefully. For instance, look up my ranking on, the objective and independent lawyer evaluation service which is endorsed by the Florida Bar. You will note that I have achieved a “Very Good” ranking, based on reviews from clients and endorsements from fellow lawyers in my community. The endorsements from my colleagues are particularly important because my good colleagues (especially those that have known me for years) are in the best position to evaluate my skills as a lawyer and should give a client great confidence in my ability to serve.

  • David Acosta says:

    Matt, good article.

    To your point about how this affects everyone, here are some thoughts. It has been quite apparent that the mortgage meltdown and crisis has revealed the gap – scratch that, CANYON, between the overwhelming need by distressed homeowners and the availability of consumer advocacy. Not enough attorneys, and not enough attorneys who are fluent in this new paradigm. The financial industry recognized this consumer weakness early in the game and factored it into their risk equation to move at lightning speed to obtain judgments and gain control of the real estate assets. What has that led to?

    Well, beyond the human impact on displaced former property owners, it has resulted in what I believe is a record number of fraudulently obtained and void judgments. These void judgments then lead to defective titles. An investor buying a property sold under the illusion of proper authority is at risk of challenge to the title by displaced homeowners – once they obtain counsel and an audit of that case reveals the fraud. As you know a void judgment has no power – ever – and cannot be revived by smart lawyering. That is the law in Florida. Like musical chairs the investor may be left standing when the music stops. So there is a cost to be borne by the investors and related parties.

    I submit that the litigation flowing from this mess will pit title companies against all kinds of parties on this issue. The resulting risk and cost of this kind of title instability will cost everyone big, in terms of higher title insurance closing fees. Buyers of any real property that has been subject to foreclosure litigation will have to pay for expanded examinations into the legal impediments that may preclude effective conveyance of title from the seller. Therefore, the cost of buying and closing on real property in Florida will rise.

    Additionally, judges who are overlooking this problem are really contributing significantly to aftermath litigation attacking judgments as being void. Think: Rocket Docket. It should be no surprise to anyone when competent attorneys come into court with a detailed foreclosure audit report, and corresponding documents, showing that there was absolutely no controversy before the court between the foreclosing plaintiff and the homeowner defendants – leading to the entry of a judgment that was always void. Without an actual controversy the court never acquires or perfects its subject matter jurisdiction. This is beyond just contractual privity. Legally speaking, I always say, it is like the neighbor up the street suing for foreclosure – they never had a right of action. These void judgment actions will result in severe shocks to the real estate market, the parties to any of the transactions and ultimately to entire communities. What price tag do we put on this? I firmly believe that few people, short of economists who are devoted to studying the real and long-term effects of this problem, understand the impact.

    One judge, who spoke at a foreclosure defense conference where I was a presenter, appeared convinced that the faster these foreclosures go through the courts the faster our economy will recover. He also seemed inclined to sell this idea to the group. There has to be a way to better bring more attention to the realities of this bigger problem and dispel the kinds of myths that now occupy the minds of decision-makers connected to Florida foreclosures – including judges.

    • admin says:

      Wow….your comment is huge. I shared it with the JEDTI group of litigators that I’m part of. I am compelled by the much bigger issues behind all this rush to foreclosure judgments that we’re all aware of. The Florida Supreme Court Task Force Reports and Final Order are so compelling to me. The findings explicitly acknowledge that widespread fraud is being perpetrated upon the courts of this state and consumers and clearly identifies the law firms that are responsible for the large portion of that fraud. I find it very interesting that the new mediation rules require Plaintiffs to derraign title as a condition of mediation. So why are we just ignoring the title chain in all the other cases? I agree wholeheartedly with your angle. What I’m working toward is how to make that big payoff. Your “void judgment” theory is a great one….strip the mortgage or encumberance off the property and deliver it to the homeowner, taking back a mortgage from them for the fees. I am also convinced that when this all plays out major title insurors will be bankrupt.
      Really like your website and look forward to sitting in on your next webinar.

  • Greg says:

    Matt & David,

    All Beware of the Bad Santa.

    Your article posting and comment are both very well put. Our major task ahead is educating both the Judiciary and the public – and keeping it simple enough so that they realize the risks. The title industry, having invested in the MERS scheme and being otherwise conflicted will likely continue to hold out hope that this trainwreck of a failed business and legal model will somehow be cured without consequence to them. I for one have ceased, after nearly 30 years of writing title insurance, to issue any more upon real estate infected with either a MERS mortgage or a Securitized MBS Trust in its history, whether or not the property is in default/foreclsoure.

    And to all those righteous souls who are not in default and still paying their mortgages they should know that they are exposed to multiple liability on the promissory note they think is owned and held by the company to whom they send payments. To these diligent, and hopefully solvent folks I suggest they read what happen to poor Mr. and Mrs. Conrad Scott who thought they had paid off their mortrgage only to be sued afterwards by the true owner of their note.

    Yes, Virginia, there really is a Bad Santa – the Scotts had to pay their mortgage off twice.


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