HOAs CAN STOP FORECLOSURES

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The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available TO PROVIDE ACTIVE LITIGATION SUPPORT to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

EDITOR’S NOTE: One good thing about House Bill 87 recently passed in the Florida legislature is that homeowner associations, condominium associations, and cooperative associations can force a bank to proceed with foreclosure. The problem they have is that once a homeowner knows that foreclosure is “inevitable” they stopped paying the Association dues as well as not making any payments on mortgage debt.

But I think the lead story is that these associations could stop the foreclosures altogether. As I have previously stated on these pages arguments that are frequently rejected by both the trial and appellate courts when they are proposed by homeowners are accepted and even augmented when the same argument is made by an institutional opponent to the foreclosure.

The associations may be included in the institutional category. In my opinion they should take advantage of the new portion of House Bill 87 when appropriate, but their focus should be on filing foreclosures on the homeowners who have not paid their dues. In that same foreclosure it is my opinion that the alleged mortgage that was recorded should be attacked as to both validity and priority.

When I was practicing law in South Florida in the 1970’s and 1980’s I represented hundreds of associations as general counsel and of course as trial counsel for the foreclosure of liens. generally foreclosures were not as pandemic as they are now but there were still plenty of them. The procedure is the same as the mortgage foreclosure.

  1. You plead that the association has the right to a lien as per the the Declaration of Condominium or other enabling document for the association.
  2. You plead that you gave adequate notice in accordance with the statutes.
  3. You plead the amount of monthly dies and special assessments due from this homeowner and you plead that no payments were made (not merely that the homeowner failed to pay). You might want to phrase it as “neither the homeowner nor any other stakeholder has made any payment to the association or its agents on this debt.” (This is to require the Bank to plead the same words).
  4. You plead that you filed the lien to secure past dues and future dues until the foreclosure judgment is entered and the property is sold.
  5. You plead that the dues were so much for monthly maintenance, so much for special assessments, and that the expenses of filing the lien and enforcing it with an attorney should also be awarded.
  6. You plead that all other lienholders are junior to the lien of the association unless you know otherwise. You plead that the mortgage lien recorded at page XX Book XX in the Public Records of the County is junior to the lien of the association.
  7. When the trial or Motion for Summary Judgment comes along you have a witness that verifies that they are the records keeper for the condominium as set forth under the Condominium Statutes, they have personal knowledge regarding the receipts and disbursements with respect to the account of this homeowner, they verify or testify what was received from all sources on this account, and that the balance due to the association, as a receivable, is a specific total amount arrived at through simple addition and subtraction.

When the HOA files such an action it is setting the standard for a foreclosure proceeding and it has the full authority of Florida Statutes behind it. Since in most cases the alleged owner of the mortgage lien is no longer the party named on the instrument, the Association can plead truthfully that this party has no interest in the debt and therefore is not entitled to enforce it nor argue for its validity or priority relative to the Association’s lien and foreclosure.

Any OTHER party would be required to intervene and prove that they can make and prove the SAME ALLEGATIONS AS THE ASSOCIATION — something they clearly cannot do. And if they try, depositions of the leading witnesses for the new guest to the party would occur revealing that they have no money trail to show that they funded either the origination or acquisition of the loan and that if they have any claim, it is unsecured and subject to a separate right of action against the borrower. Instead they have a bunch of fabricated paper that refers to financial transactions that never occurred in reality.

The usual end result, if the HOA is successful, and my firm is prepared to demonstrate this to any association that wants to hire us (or who wants to instruct their association attorneys to do it) is that the Association wins, the homeowner redeems the Association lien because it is a small fraction of the presumed lien of the mortgage and everyone is happy except the bank that tried to foreclose who finds itself foreclosed out of the mortgage.

Or the Association becomes the owner of the property at a foreclosure sale or some other person outbids the association WITH CASH and the association lien is satisfied, along with a new owner who pays the monthly and special assessments.

This is going to cause all the players in the false securitization scheme that masked a massive PONZI scheme a lot of trouble because the investors, insurers, government agencies, counterparties to credit default swaps and others who paid on this debt are going to find out through a Court Order that the whole thing was a sham and that the real lenders, the investors never had the bond secured nor was the mortgage debt ever subject to a valid claim through the bond, nor was it properly perfected and secured, so the mortgage filed in the county records was a sham.

HOAs have good reason to follow this strategy for themselves, their distressed homeowners who can be restored to ownership of the property without the illegal encumbrance filed by the the Wall Street players, and for the other homeowners whose property value decreases each time another foreclosure is filed.

John C. Goede: Can HOAs file for a court order requiring lenders to complete stalled foreclosures?
http://www.naplesnews.com/news/2013/jun/30/john-c-goede-can-hoas-file-for-a-court-order-to/

The Sneaky Game Banking Giants Are Playing to Suck More Money From the Foreclosure Crisis
http://www.alternet.org/economy/banks-and-foreclosure

WHY WOULD A BANK OF ALL THINGS PAY 6 TIMES WHAT THE PROPERTY IS WORTH UNLESS THEY WERE COVERING SOMETHING UP? Big banks sometimes pay 600% above value to retain Sarasota foreclosures
http://www.housingwire.com/fastnews/2013/07/08/big-banks-sometimes-pay-600-above-value-retain-sarasota-foreclosures

WHERE ARE THE CONVICTIONS OF THE BANK OFFICERS WHO TURNED THIEVERY INTO POLICY? More than 40 convictions in mortgage fraud scheme involving Florida properties, Ohio straw buyers
http://www.inman.com/wire/more-than-40-convictions-in-mortgage-fraud-scheme-involving-florida-properties-ohio-straw-buyers/

WHY DO BANKS WANT US HOMELESS? Our bank wants us homeless
http://www.salon.com/2013/07/08/our_bank_wants_us_homeless/

Does Your Mortgage Receive Your Full Attention?
http://realtytimes.com/rtpages/20130709_mortgageattention.htm

 

Peeling the Onion: Morgan Stanley Forced to Produce Documents Corroborating Illegal Acts

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What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Comment and Practice Tips: There are two things you should know going into foreclosure defense. One is that the best decisions on the trial and appellate level came from cases where both sides were institutional in nature. So if the adversaries were both banks, or one was a managed fund, or perhaps a Homeowners or Condominium Association, the Court was a lot more receptive to the same arguments they routinely rejected from Borrowers. That alone suggests some strategies both for investors and homeowners (particularly those hard hit by the mortgage meltdown). The second is that an increasing number of courts are, in the words of one judge who WAS ruling routinely against borrowers, “getting tired of the sloppiness” with which the loan deals were originated, allegedly transferred and claimed as owned by one of a number of parties. They are entering more orders requiring proof of loss, proof of payment and proof that any financial transaction took place in which the forecloser was either the recipient (payee) or the payor of actual money that exchanged hands.

We have seen how the same homeowner with the same property has been assaulted by two completely different “holders”, neither of whom were creditors, each claiming to be producing the original note — and there it was in all its glory, two “original” notes both of which had been printed the previous day on a very good printer. We have seen how the appraisals went further and further off the reservation under pressure from the banks and how the applications were changed under pressure from the banks to close the deal regardless of outcome or viability of the loan.

Strategically I have been encouraging practicing attorneys to pay close attention to the dozens of lawsuits filed against the banks by institutional plaintiffs — pension funds that bought bogus mortgage bonds, government agencies whose findings might be incorporated as fact in your case (especially if the case settled), HOA’s and banks fighting over priority of liens. The facts alleged are fairly uniform — all leading to the conclusion that the loans were neither underwritten in conformity with industry standards (leading to fraud or breach of contract actions) nor supported by documentation that is enforceable (i.e., the mortgage lien was never perfected and the note was incorrectly fabricated and executed without consideration from the named payees or nominees.

The latest rumble over the lack of prosecution on this mortgage mess has produced the resignation of the guy at DOJ who was supposed to be prosecuting these cases. Maybe the change will come. But by this time int he Savings and Loan scandal of the 1980″s there were more than 800 people sitting behind bars with others on probation. The PBS piece “Untouchables” has kicked up a fore storm over the issue of criminal prosecution. Those cases too should be watched carefully and your wording in your pleading ought to be as close to their wording in their lawsuits especially where they have already survived the usual motion to dismiss.

Robert Schiller the economist who created the black letter basis for measuring economic data relating to the housing industry says we are far from done with the damages and debris left by the mortgage meltdown. And out of 105 economists who participated in an independent survey very few had anything good to say about housing or the economy — with the two inextricably entwined. Fixing housing is not merely about stopping foreclosures or increasing modifications. At the heart of the mortgage meltdown was fraud.

And fraud comes in two flavors — civil and criminal. Both require receivers and restitution if prosecuted properly. Investors and homeowners alike are entitled to receive as much restitution as possible that can be clawed back by properly appointed court receivers. Both were decided by appraisal fraud, by deceptive disclosures in which the actual lender was intentionally concealed so that the investment bank could claim ownership and buy insurance payable to the bank instead of the investors, buy credit default swaps with the same result, and apply for Federal bailout with the same result.

Housing won’t be fixed until the corruption of title caused by a nominee on the mortgage and nominee on the note is fixed and settled. The economy won’t be fixed until investors get their share of the insurance and bailouts. The consumer sector won’t be fixed until all that is done, because it is only after the money is allocated to the investors that we can know the actual balance due, if any, on any of the loans.

One thing we know at this point is that most foreclosures (at least 65% according to the San Francisco study) are initiated by “strangers to the transaction” who were not creditors, holders or anything else that would entitle them to enforce the closing documents on a loan that came not from the named payee but from another source entirely. We know that the “credit bid” submitted at auction was pure fiction and fraud and should be corrected in the property records. And we know that the the proceeds of insurance, credit default swaps and federal bailout should be applied to the receivables owed to the investors. Lastly, we know that when those monies are allocated the balance due on those receivables will be far less than what has been or will be demanded from borrowers in past, present and future foreclosures.

 

NY Times: Morgan Stanley Forced to Reveal Truth

Zombie Title Exposes The Real Deal in Foreclosures

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What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for enforcement of association liens or wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Analysis: This is not a new problem. For along time in Florida, the banks would delay the foreclosure sale until they thought they could sell the property fairly quickly. When I was representing several hundred associations we had different tactics we used to get the monthly maintenance and special assessments from the bank but that was when the mortgages were real and the foreclosures were honest.

The homeowner associations were stuck between a rock and hard place. Now they are foreclosing anyway and including the pretender lender as at best a junior lien holder. Practically every development in which an HOA or condo association is involved has the problem if they were built anytime after 1996. Even the ones built before that are having the problem.

The bank chases the homeowner out with threats of foreclosure, perhaps even initiates the foreclosure and then dismisses it leaving the ownership and liabilities of the home in limbo,. Florida addressed the problem by giving time limits to the bank before they were liable for the assessments.

In the worst cases, so many people are chased out of their homes that the remaining homeowners, sometimes as few as 5%-10% of the total homes must shoulder the burden of maintaining the entire complex.

In current circumstances the homeowner who left is dogged by a house he thought was gone, with cities suing them for liens and eyesores on stripped homes that are literally falling apart. In many cities tens of thousands of homes were actually bull dozed by the city for the zombie title homes that were abandoned by the pretender lender who chased people out of homes they would have stayed in, paid the taxes, paid the insurance and maintained the property.  The more homes that are hit with this phenomenon the more likely it is that more families are going to walk away from their homes as the neighborhood turns into crack houses and squatters.

This puts pressure on home values not only in those neighborhoods but in surrounding communities. So Wall Street as the articles are now trumpeting, is in the process of buying up as much property as it can and can’t do it fast enough  because they are getting the property for pennies on the dollar.

The only good part about Wall Street’s involvement in the purchase of these properties is that the same set of companies and investment banks who foreclosed knowing they were not creditors and were at least partially acting for their own selfish benefit are the people who end up holding the properties. That should make it easier to get the properties back into homeowner hands, because there is no bona fide purchaser for value without notice of claims. They fail on both value and notice.

When the day of reckoning comes and the titles are found to be void or voidable, the REITs will discover the same thing that the REMICs did — they got a holographic image of an empty paper bag. In that sense, the investors in both the REMICs and the REITs will find themselves holding the bag, so to speak. as the unofficial seller of the properties to the REITs Wall Street will report record profits, just like when they said they “sold” mortgages to the REMICs, when in fact they had not.

If Wall Street follows the plan they used with the REMICs, they will issue undivided proportional interests in REITs and then later decide what properties to assign to the REIT. The ones likely to lose money they will bet against and receive the money on the interests they sold leaving the investors, once again, out in the cold.

This will undoubtedly take the fatal chunk out of our private pension systems and even several public pensions that end up investing in high rated “insured” REIT investments. If the rating agencies don’t look under the hood to see what is happening and they take the information supplied by Wall Street as true, the securities will be high rated. The already underfunded pension funds will lose still more money while Wall Street continues to record record profits.

If you step back from the situation to get a broader view. you will see the pattern and the reality. The pretender lenders forced most of the foreclosures away from settlement, modifications and short-sales because they would expose themselves to huge liabilities for repayment of insurance proceeds and credit default swaps on derivative instruments that were called out as devalued.

The foreclosure had nothing to do with the need to foreclose or the realities of the situation. It is simply a device for the banks to cover their tracks leaving the title to properties, already corrupted beyond recognition, in doubt as to just about every property and every loan transaction between 2001 and the present.

Ever alert to profit opportunities the banks knew that they controlled the market prices by forcing foreclosures down the throat of all stakeholders, including city and county and state coffers depending upon property and related taxes. This only opened up the market to underwrite more municipal bonds. Wall Street wins again while everyone else loses.

Now that they don’t seem to be able to drive prices down much further they are manipulating more and more regional markets bring prices up so they can sell the REIT the fake interest of the REMIC acquired in a fabricated foreclosure in which a deed was issued based upon a completely fabricated credit bid from a non-creditor. Wall Street wins again while everyone else loses.

There actually is a remedy to change Wall Street and reinstatement of the Glass-Steagal Act is only one of the things needed. The real problems started when (1) the accounting rules started to change into exotic formulas and allowances that made absolutely no sense and (2) when investment firms were allowed to shield themselves from liability by becoming corporations that offered their own stock to the public, Before that the partners were liable for every trade and everything else that went on in their firm.

If you think about it an “off-balance sheet” transaction is unicorn — a mythological construct. In the case of current accounting standards the damage is deadly and pervasive. It allows companies hide what they are really doing and exposes both customers and shareholders in the investment bank to risks they know nothing about. It allows the firm to pay outlandish bonuses for results that are mostly hidden and riddled with liabilities that should bring the firm crashing down.

And if you think about it, taking the risk of loss away from management people and shifting it to shareholders was the single most disastrous invitation to moral hazard. Partners were suddenly transformed into having nothing to lose and everything to gain. Since they decided the compensation, the “profits” were taken largely by management before any distribution to shareholders and the value of the stock was heavily dependent upon the so-called profits. Most of the profits are now coming from “proprietary trading” which is the vehicle through which the investment firms are repatriating money siphoned out of the economy in the last crash. In reality they are trading with themselves and declaring a profit. It would be a joke if it were not true.

People in the Obama administration have taken the party line that we unfortunately made these activities legal and in many cases that is true. But the civil theft aspect, the fraud aspect, the market manipulation aspect are not legal.

The entire mortgage meltdown was a PONZI scheme that fell apart like all PONZI schemes, when investors stopped buying the bogus mortgage bonds issued by unfunded entities that violated the REMIC statute. These are crimes against humanity as we have seen events unfold around the world and they should be punished. But more than that the mega banks need to be broken up into entities that are not too big to regulate, with some of them failing altogether because of the money they owe the investors which would reduce the balance due from “borrowers.”

We are lucky enough to have 7,000 depository institutions, most of which are healthy who can pick up the pieces without loss of any service now provided by the large banks. The electronic funds transfer backbone and the Check 21 rule changes allow the smallest bank to provide the same services as the large bank including inexpensive ATM transactions at the site of the smallest of merchants. Convenience and service would go up while bank fees would go down.

People say I’m a dreamer …. but I’m not the only one (John Lennon).

Zombie foreclosures terrorize ex-homeowners
http://www.csmonitor.com/Business/Latest-News-Wires/2013/0110/Zombie-foreclosures-terrorize-ex-homeowners

Another Nightmare, “Zombie Title” Shows How Servicer Refusal to Foreclose Hurts Stressed Homeowners and Communities
http://www.nakedcapitalism.com/2013/01/another-nightmare-zombie-title-shows-how-servicer-refusal-to-foreclose-hurts-stressed-homeowners-and-communities.html

BLOOMBERG: HOA V BOA: Homeowner Associations Step Up the Pressure on Banks

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Homeowner Associations Wake Up to Collections and Profit!!

FORECLOSING ON THE BANK!!

EDITOR’S COMMENT: Becker and Poliakoff in South Florida is probably the largest law firm representing homeowner associations in the U.S. Once upon a time I was a competitor in Florida when I represented several hundred associations. It was Becker, Poliakoff and Streitfeld until Jeffrey Streitfeld went on the Bench to become a Circuit Judge — and I might add, one of the best.

Some time ago I predicted that homeowner associations would wake up to the realities:

  1. The banks have a strategy where they don’t officially take responsibility for the property until they are forced to do so. They do this because they don’t want to pay HOA dues, maintenance and special assessments. They also avoid taxes sometimes, but that is a different  ball of wax. 
  2. Associations are realizing that they have rights to collect on homes where the homeowners dues, maintenance payments and special assessments have not been paid while the bank is the de facto owner of the property. 
  3. In many cases, when confronted with an aggressive and knowledgeable law firm, long steeped in HOA matters, the bank simply folds, pays up and everyone goes on their way. But in other cases, the bank still drags their feet leading to both a solution and an opportunity for the association: FORECLOSURE ON THE BANK. And Becker and Poliakoff and other attorneys representing associations have caught onto the fact that there is money in those mountains of paper. 
  4. As shown below, foreclosing on the banks not only recovers money where the bank finally pays up, but actually results in the sheriffs sale of the property at a legitimate auction in which the association need only bid the amount of its lien. Some people don’t realize that the lien of the association for unpaid dues, maintenance or special assessments is a perfected lien, if filed properly, and subject tot he exact same foreclosure process as any mortgage.
  5. When the bank pays, they pay interest, costs of filing, and attorney fees, which is a big ouch.
  6. When they don’t pay, the association gets a declaration from the Judge that the property is owned de facto by the bank, and then enters a final judgment of foreclosure, which results in the sale.
  7. If the Association is the winning bidder, they get the house. So if the unpaid dues are $10,000, the association gets it. And if the house even in a down market is worth $80,000, the Association turns around, sells the property at an attractive distressed price, nets $70,000 which can do a lot to correct their budget and to wash out the unpaid assessments on that particular condo, town-home, coop or HOA dwelling unit. There are some wrinkles here, but I don’t want to give the banks any help.
  8. This is why I have suggested that distressed homeowners actually partner with the associations in the foreclosure of their own home. Under the right configuration of facts and documents and pleadings and judgment, the homeowner can strip the mortgages (which are probably invalid anyway) as an encumbrance on their residential dwelling unit. The homeowner can exercise a right of redemption after the foreclosure sale eliminated the non-creditor pretender lenders from the title chain, pay off the HOA balance, and start paying dues, maintenance and special assessments. I suspect that Becker and Poliakoff is headed exactly in that direction and I applaud them for it.

Homeowner Associations in Need of Cash Sue to Force Foreclosures

By John Gittelsohn – Aug 23, 2011 9:01 PM MT

Ben Solomon, an attorney with Association Law Group, left, and Jane Losson, a board member of the Vintage East Condominium Association, stand for a photograph in Miami Beach, Florida. Photographer: Mark Elias/Bloomberg

Ben Solomon, an attorney with Association Law Group stands for a photograph while Jane Losson, a board member of the Vintage East Condominium Association, talks on the phone in the kitchen of repossessed unit in Miami Beach, Florida. Photographer: Mark Elias/Bloomberg

Members of the Vintage East Condominium Association in Miami Beach got tired of waiting for JPMorgan Chase & Co. (JPM) to foreclose on unit 9, so they sued the bank in February to take control of the property.

In June, more than four years after the owner stopped making payments, a judge ruled that JPMorgan lost its claim to the $144,000 mortgage. The apartment is now on the market for $87,500, and the association may stave off insolvency with proceeds from the sale and a new owner who pays monthly dues, said Jane Losson, a board member at the complex. Four of the 11 other owners at the property are also behind on dues.

“I find it an outrage that the bank had decided to do nothing and the other owners got stuck,” Losson, who’s had her Vintage East condo since 2004, said in a telephone interview. “If we get this unit sold, we’ll have a little money.”

Financially troubled condo associations are taking banks to court as foreclosure delays enable delinquent homeowners to stay in their buildings for years, often without paying dues that keep boards running. The groups start by pressuring lenders to speed up home seizures and take over payment of the monthly fees. In extreme situations, like the Vintage East case, associations may force banks to give up rights to the property.

“The lenders are stalling foreclosures,” Ben Solomon, the Miami Beach attorney for the Vintage East association, said in a telephone interview. “Our complaints say the banks abandoned their interest and either need to accept responsibility for the title or walk away.”

‘Mortgage Terminator’

Solomon, whose Association Law Group represented homeowner boards in 16 Florida counties with 15,000 delinquent owners, also won what he calls “mortgage terminator” lawsuits in claims against Bank of America Corp. (BAC), Citigroup Inc. (C), Deutsche Bank AG (DB) and Wells Fargo & Co. (WFC), according to court records.

About 60 million people, or one in five Americans, live in residences with condo or homeowner associations, according to the Community Associations Institute, a trade group in Falls Church, Virginia. States with some of the highest foreclosure rates — Florida, Nevada, California and Arizona — are also among those with the biggest share of populations in homeowner associations, said Frank Rathbun, spokesman for the 30,000- member trade group. The associations maintain residents’ common interests such as parking lots, roofs, landscaping and trash removal.

“About 50 percent of our members said the housing crisis and economic downturn have had a severe or serious impact on their association,” Rathbun said in a telephone interview.

Pushing Banks

About one in three Californians live in that state’s 45,000 condo and homeowner associations, said Kelly Richardson, an attorney who specializes in homeowner association law.

“Banks have been slow catching up to reality,” Richardson, with the firm of Richardson Harman Ober PC in Pasadena, said in a telephone interview. “When pushed, they’ll step up to the plate, but you have to push them.”

In Nevada — the state with the highest rate of foreclosure filings, according to RealtyTrac Inc. — delinquent homeowners owe associations about $150 million in back dues, said Steven Parker, president of Red Rock Financial Services, which collects debts for associations in Nevada and five other states.

“It’s probably at least $1 billion for the whole country,” Parker, whose company is a unit of FirstService Corp. (FSV), said in a telephone interview from Las Vegas. “Prior to foreclosure, we get almost nothing from banks. After the foreclosure, probably 30 percent of what we’re collecting is from banks.”

Drop in Foreclosures

U.S. foreclosure filings — notices of default, auction or seizure — fell to their lowest level in almost four years in July, as lenders and government agencies increased efforts to keep delinquent borrowers in their homes and paperwork delays slowed repossessions, RealtyTrac reported Aug. 11.

Filings have plunged for 10 straight months after state attorneys general began probing a practice known as “robo- signing,” in which lenders and servicers pushed through default documents without verifying their accuracy. The decline has been steepest in Florida and other so-called judicial states that require courts to approve foreclosures.

The bank delays have left homes in the delinquency process longer. U.S. homeowners facing foreclosure averaged 587 days without making a mortgage payment in June, up from 251 days in January 2008, according to Lender Processing Services Inc. (LPS), a real estate information company in Jacksonville, Florida.

Florida Delinquencies

In Florida, where 14 percent of homes with a mortgage have a foreclosure notice, the average delinquent borrower hadn’t made a payment for 719 days, or almost two years, LPS data show.

As of June 30, 18.68 percent of home loans in Florida were more than three months delinquent or in foreclosure, the most of any state and more than double the U.S. average of 7.85 percent, the Mortgage Bankers Association reported this week.

“Florida’s numbers continue to drive national numbers,” Jay Brinkmann, chief economist of the Washington-based trade group, said at an Aug. 22 news conference.

Banks often hold off on a foreclosure as long as they can to avoid paying dues, property taxes and occupancy costs, said John Rickel, chief executive officer of Association Dues Assurance Corp., a St. Clair Shores, Michigan, company that collects fees for community associations in 20 states.

“We probably have 100 to 300 banks that we’re trying to collect from right at the moment,” Rickel said in a telephone interview. “We’re always 100 percent successful in collecting against banks because they do have the funds available.”

Limiting Collections

Associations’ rights vary based on state law. In Nevada, the groups have “super priority,” which means they can collect up to nine months of back dues plus costs when a residence sells, even after a foreclosure. In other states, such as Arizona, homeowner associations can sue to garnish wages of delinquent residents, even if they have lost the property.

Florida law limits homeowner associations from collecting more than 12 months of back dues or 1 percent of the outstanding mortgage, whichever is less, after a foreclosure. That cap often doesn’t apply to banks, said Frank Silcox, president of LM Funding LLC, a Tampa, Florida-based company that advances cash to condo associations in exchange for the lien rights on past- due accounts.

“Our attorneys look for a reason the foreclosing bank isn’t entitled to the minimum,” Silcox said in a telephone interview. “Nine out of 10 times, we get the bank to pay.”

In one Miami Beach condo case, LM Funding collected $52,000 — counting late fees, 18 percent interest and collection costs — instead of about $3,000 the bank would have paid under the state limit, he said.

$148,000 in Dues

About 40 percent of LM Funding’s collections come from banks, with the balance from individual homeowners and through short sales, when the lender agrees to sell a property for less than the mortgage balance, Silcox said.

Bonnie Jordan, manager of the Bermuda Dunes Condo Residence Association in Orlando, said LM Funding advanced her $150,000 and recovered an additional $148,000 in back dues, helping the 336-unit development pay its bills after owners of 115 units went into foreclosure.

“We had $375,000 in bad debt,” said Jordan, whose complex charges monthly fees of $250 to $357. “LM Funding is recouping every dime for us.”

While banks present a potentially lucrative source of delinquent dues, they’re also a challenging target because they use legal tactics to prolong the foreclosure process, said Ellen Hirsch de Haan, an attorney with Becker & Poliakoff PA in Clearwater, Florida, who represents homeowner associations.

Canceling Hearings

“The banks are setting and then canceling hearings before the final judgment is eventually entered,” she said in an e- mail, “then setting and canceling the sale date, then failing to record the certificate of title, thereby postponing the actual transfer of title to the bank for months, or even years.”

Bank of America, with 1.1 million mortgages at least 90 days delinquent, addresses non-performing loans as fast as possible while complying with the law, Jumana Bauwens, a spokeswoman for the Charlotte, North Carolina-based bank, wrote in an e-mail. Bank of America loans in which borrowers were at least three months late were valued at $32.5 billion as of March 31, up from $26.97 billion a year earlier, according to Federal Deposit Insurance Corp. data compiled by Bloomberg.

“After exhausting all home-retention efforts, it is in the best interest of servicers and investors to move the foreclosure process along while abiding by Florida laws,” Bauwens said in the e-mail. “On average, homeowners are delinquent 18 months prior to a foreclosure sale. In judicial states like Florida, the process is longer.”

Bank Trustees

To compel banks to act, Solomon’s lawsuits start by suing the homeowner for unpaid dues as a way of seeking title to the property. Then he files a claim against the bank, contending the non-performing loan restricts the association’s right to sell the property because the mortgage is worth more than the home.

The bank defendant is usually a trustee for the loan that was sold into a mortgage-backed security, a legal structure that can leave the party responsible for a mortgage unclear.

Citigroup and Deutsche Bank declined to challenge lawsuits brought by Solomon because both banks were trustees, not the servicers of the delinquent loans, bank representatives said.

In March 2010, Citigroup lost a lawsuit over a Miami Beach condo with a $136,000 mortgage, according to court filings. Danielle Romero-Apsilos, a spokeswoman for the New York-based bank, declined to comment, saying Citigroup wasn’t the servicer.

Deutsche Bank

Deutsche Bank in September forfeited its right to a unit with a $149,300 mortgage to the Palm Aire Gardens Condominium Association Inc. in Pompano Beach, Florida.

“Litton Loan Servicing, the loan servicer for the loan, and not Deutsche Bank as trustee, was responsible for all foreclosure activity relating to the loan,” John Gallagher, a Deutsche Bank spokesman in New York, said in an e-mail.

Donna Marie Jendritza, a spokeswoman for Litton in Houston, declined to comment on the lawsuit, citing privacy restrictions. Litton, which Goldman Sachs Group Inc. is selling to Ocwen Financial Corp., wasn’t named in the complaint or other court documents.

“We sue whoever holds the mortgage,” Solomon said. “The bottom line is the bank had a loan and the mortgage got terminated.”

No Defense

Palm Aire Gardens also won title to a unit with a $184,410 mortgage after Wells Fargo failed to mount a defense because it no longer owned the loan, a transfer that wasn’t reflected in property records, said Tom Goyda, a spokesman. The bank would have defended the mortgage if it hadn’t sold the loan, he said.

The San Francisco-based bank had $9.6 billion in mortgages more than 90 days delinquent and $11.4 billion in non-performing mortgages on one- to four-family homes as of June 30, Goyda said.

JPMorgan, the lender in the Vintage East case, had $2.5 billion in second-quarter costs tied to faulty mortgages and foreclosures, it reported July 14.

“There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Chief Executive Officer Jamie Dimon said in a conference call that day. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.”

Vintage East

Thomas Kelly, a spokesman for JPMorgan in Chicago, declined to comment on the Vintage East lawsuit or other cases in which the bank lost properties to homeowner associations.

The bank’s mortgage at Vintage East was on a studio apartment with $24,000 in unpaid back dues, said Losson, the board member. Other residents of the Art Deco complex, built in 1937 two blocks from the beach, loaned the association money to pay for roof and building repairs and wrote personal checks to cover insurance payments, she said.

“We’re still in precarious condition, but we can see our way out now,” said Losson, who estimated the condo association was owed $60,000 in delinquent dues. “We went up against JPMorgan Chase and we won. It’s a good story. There’s a way out of the morass.”

To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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