Robert L. Tankel, P.A.

Mortgage Foreclosure Offense and Defense

Florida Condo and HOA Offense and Defense on Mortgage Foreclosures

The flood of mortgage foreclosures seems overwhelming at times. Condominium and Homeowner Associations are besieged by owners who are delinquent in payment of assessments and under first mortgage foreclosure.

Most attorneys representing associations throw "good money after bad" in the hope of obtaining a judgment against someone who probably will never have the means to pay the judgment or which can be discharged in bankruptcy court. Our Tampa Bay based, Florida firm does not.

At the law firm of Robert L. Tankel, P.A., I have found that most clients are engaged in an absolute waste of time and money when paying a lawyer to defend a foreclosure. The typical response of most lawyers is to prepare a cross-claim against the delinquent owner, require the Condominium or Homeowners Association to pay the filing fee, and spend several hundred dollars in legal fees trying to obtain a money judgment against the delinquent owner.

By the time this money judgment is prosecuted, the Condominium or Homeowner Association has spent more than $1,000 in legal fees and costs going after a judgment against a condominium unit or HOA owner who probably has no assets and will have no assets for the next five or 10 years. I call that throwing good money after bad, and I take a different approach.

During the orgy of financing, refinancing, and flipping condominium units and HOA homes that took place from 2000 to 2006, numerous loans were made by non-traditional entities. In the "old days," a person would go to a bank or savings and loan association and borrow money for a residence. The loan would then be held by that organization as part of its portfolio loans.

Around the year 2000, loans began to be aggregated into securities that were rated by agencies and sold off to investors as far away as Finland. These were called Collateralized Debt Obligations (CDO) or mortgage-backed securities (MBS). These CDO and MBS investments were sliced and sliced and sold and sold until nobody really knew who had the legal right to collect on them.

While an entity may have thought it had the right to service the loan, which was just one part of the outsourcing of the lending process that took place during the refinancing and mortgage boom, and condominium unit and HOA owners thought they were making payments to an entity that had the right to collect, it turns out that seven out of 10 lawsuits filed do not attach any documentation whatsoever showing that the plaintiff has the legal right to sue on the alleged unpaid note and mortgage, which also sues the Condominium or Homeowner Association.

So, what happens when a lawsuit is brought by a party who has no assignment of the right to collect on the note or mortgage? Section 57.105 Florida Statutes requires that all lawsuits be filed based on existing law or an argument for an extension of existing law, made in good faith. Mortgage foreclosures are essentially contract actions, and no law exists where a third party has a right to sue somebody for mortgage foreclosure if that third party has not received an assignment of the note or mortgage to "stand in the shoes" of the original lender.

When a Condominium Association or Homeowner Association is sued, the plaintiff in the foreclosure does not seek any money. Instead, it names the Condominium or Homeowner Association in order to establish that the mortgage being foreclosed is superior than the lien rights of the Association, so that when litigation is over, the condominium unit or the HOA home is sold and the new buyer takes free and clear of any obligations to pay past-due Condominium or Homeowner Association assessments. There is a "Safe Harbor" provision in the Condominium Act and Homeowner Association Act which provides that foreclosing mortgage holders are only obligated to pay a limited amount of past-due assessments.

When I are given authority to challenge a foreclosure where the plaintiff has not received an assignment of the note or mortgage, I answer the complaint on behalf of the Condominium Association or Homeowner Association, and allege that the plaintiff has no right to sue. I also send a demand to the lawyer bringing the suit that the lawyer has 21 days under Chapter 57.105 Florida Statutes to either file the assignment of the note or mortgage or dismiss the suit. If they fail to do so, and I prevail on our argument that they have no right to bring the action, both the lawyer and the plaintiff are subject to prevailing party attorney fees!

In fact, the Florida Supreme Court has held that a lawyer who receives such a demand is obligated to write a letter to the client explaining that the lawyer and the client have a potential conflict, and that the client has the right to seek outside counsel to defend it. Failure to do so is arguably a violation of the Rules Regulating members of The Florida Bar, although I generally do not get into those types of issues as what her lawyer tells his or her client is attorney client privileged.

I also send out discovery which asks the plaintiff to admit that it did not have an assignment of the note or mortgage on the condominium unit or HOA home at the time of the lawsuit and to admit other essential parts of the case which proves that it's action against the Condominium or Homeowner Association (as well as the owner of the home and person who signed the original note and mortgage) is in violation of Chapter 57.105 Florida Statutes.

I also ask the lawyers to explain what steps they took to verify that the lost note, (it almost universally alleged in foreclosures) were actually taken, and that the establishment of the lost note is not just a perfunctory part of the pleadings. If the plaintiff admits that it was assigned the rights under the contract (note and mortgage) I ask for a copy of the assignment, how much was paid and other relevant information.

The best part about this type of action is that I do it at no charge to the Condominium or Homeowner Association. The Association has no exposure to the plaintiff's attorney fees if I are not successful, and if I are successful, the court is supposed to award attorney fees to us. While some judges are reluctant to both dismiss a lawsuit that was improperly brought and award attorney fees against those lawyers, it is what the law provides for, and if necessary, I will take the case on appeal.

The sad fact is that there was such a rush to package up these condominium unit and HOA home loans, form a vehicle for investors to purchase, slice them up into varying degrees of "risk" and then repackage and resell ice them until the bottom fell out of the market that very few entities paid attention to the strict requirements of law. Unfortunately, it's those entities who have received hundreds of millions or billions of dollars in TARP money, and I know of no Condominium or Homeowner Association who has received a nickel from the government. If these entities and their lawyers cannot find a legal basis on which to foreclose (and timely finish the foreclosure) the suit should not be brought.

If you're wondering what the benefit of this is to your Condominium or Homeowner Association, once the mortgage foreclosure is dismissed, the Association has the opportunity to enforce its ability to collect the unpaid assessments plus legal fees and the condominium unit and HOA home owners are faced with a pretty straightforward choice:

• pay a few thousand dollars owed to the Condominium or Homeowners Association; or
• risk losing their home through a sale on the courthouse steps

Once they understand that, by paying off the Association, they can probably live in the condominium unit or HOA home for a year or more without paying the mortgage, generally they pay. If not, I recommend that the Condominium Homeowner Association authorize us to go all the way, sell the property and if necessary have the people removed from the home so that the Association can either rent it pending the foreclosure or sell it to someone who will make the Association whole, pay the legal fees and pay ongoing assessments, maintain the property and attempt to purchase the indebtedness.

I don't gladly foreclose on people or put them in the street. However, condominium unit owners and HOA home owners are generally unaware that they can have their homes taken away by foreclosure of the relatively small amounts due to their Condominium or Homeowner Association.

Unless a creditor has an interest in a home that is superior to Homestead, if Visa, American Express or any other credit card sues and gets a money judgment, Homestead property cannot be sold to satisfy that judgment. Unpaid Condominium and Homeowner Association assessments can result in the foreclosure of the lien and sale of the Homestead. It's a pretty stark choice and pretty easy if people understand it.

Finally, the credibility of the Board of Directors of the Condominium and Homeowner's Association is at stake. The Board is obligated to collect assessments. People who pay look to the Board to enforce the obligation to pay in a timely, uniform and fair manner. If people who pay realize that the Board is not doing anything to collect assessments, they will soon stop paying their Condominium and Homeowner Association assessments. People need to know that there are severe consequences for not paying assessments. This is called the "Moral Hazard" aspect of collecting. Delinquent owners need to know that there is a Moral Hazard if they do not pay their Condominium or Homeowner Association assessments; they will lose their home.

To learn more about mortgage foreclosure offense or defense services I provide, contact our firm for a consultation.

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