The author of this post is not giving legal advice, just reporting what’s out there. You should consult a competent foreclosure defense attorney regarding such matters, as the contents in this post appear to reflect the court’s intolerance for homeowners who file bankruptcy to stop a foreclosure.
Folks who are in trouble with their mortgages in Florida really need to strategize before taking the plunge into the abyss known as the Florida legal system, where state judges clearly have “agendas”, the Florida Legislature has “agendas” and the federal courts have “agendas” … all aimed at taking of property when you can’t make the payments on it. It’s not often that the author of this post steers away from chain of title issues, but there appears to be widespread ignorance (or in the alternative, intolerance) on the part of the Sunshine State’s legal system, which makes things “not so shiny” anymore, given the recent spate of legislation and court actions.
All one needs to do is examine court dockets to see how fast, over time, that Florida circuit judges have blindly assumed that the financial institutions coming before them actually own the promissory note they’re trying to enforce. It would seem that judges simply rely on the blatant attack on the property owner as just because otherwise, why would this particular bank show up in court? Because they can! And they do! And judges give them so much leeway that Florida homeowners are stymied for options. This is why the State of Florida has so many zombie homes (despite what the politicians, economists and the media would have you believe) and shadow inventory that sits empty because of title issues. In very few cases I’ve examined have I seen evidence within a transcript that allowed for a forensic examination of the note, to make sure it’s “original”, like the bank’s attorney says it is. To show you that the inequity between state court systems is similar in nature, I’m consulting a case in New Jersey where the bank’s law firm sent a “cover lawyer” into court with what appeared to be a “faxed copy” of the note, claiming it to be the “original”. I think most judges, even in light of the foreclosure defense attorney’s objections, could tell the difference, but nope … this judge said that the word of the law firm and the faxed copy of what it self-authenticated is good enough! Can you believe that shit?
Another part of the equation is the existence of foreclosure defense lawyers who have seen fit to turn the foreclosure debacle into a cash cow by using delay tactics to keep property owners in their homes, despite the probable outcome that only about 1 in 25 cases brought into court makes it past the 810-day mark in a Florida foreclosure cycle. Knowing that the odds are never “in their favor” (attributing the quotation to The Hunger Games), frustrated mortgagors then contemplate using bankruptcy court to dodge the “sale bullet”. However, things in Florida are about to change.
THE FLORIDA LEGISLATURE
Effective July 1, 2017, Florida homeowners who run to the bankruptcy court and get their promissory note discharged are going to find themselves without other options to fight the foreclosure. See House Bill 471 here if you don’t believe me: fl-hb-471 It’s only two pages long and I’m sure you can read (if you’re reading this)!
Simply put, any documentation that is filed in Bankruptcy Court which would indicate surrender of the property (commonly seen in Chapter 7 cases) makes it legally okay for the bank’s attorney to submit that document that was filed in the Bankruptcy Court under penalty of perjury to a Florida circuit judge to get a Final Judgment of Foreclosure. I see this as a definite negative if you’re trying to fight a foreclosure. But then again, most homeowners are like electricity. They want to take the path of least resistance; and declaring bankruptcy is certainly a hell of a lot cheaper than fighting a foreclosure through Florida’s appellate system.
It appears that folks don’t understand the difference between an in rem and an in personam action. Enforcement of a security instrument, which in Florida’s case is a mortgage, can only happen when the party claiming to have an interest in the property can prove ownership. An attack on the property through the recorded security instrument is an in rem action (like quiet title actions). This is why I wrote the book The Quiet Title War Manual (with the professional help of California attorney Al West). The book explains the difference between the note and the mortgage. Folks who don’t get it should get this book and read it, because when Al West and I taught quiet title workshops, we hammered these basic principles into the heads of the attendees. In personam actions are actions involving debt, which in this case is the promissory note, NOT the mortgage! How convenient it is that the Florida legislature has come up with this House Bill in the wake of the recent court conflicts within the federal system!
THE FLORIDA FEDERAL COURTS
Let’s look at the case of In re Hooker: in-re-hooker Once you get past the first three paragraphs, you’ll understand why the Florida legislature did what it did to help the banks fight continuous counterattacks in state court. Again, how convenient, to avoid further confusion in the courts. Let’s just legislate this away, shall we?
Now we come to the slam dunk that affects the way the 11th Circuit Court of Appeals (which covers Florida), has ruled that Chapter 7 debtors who file a bankruptcy action and put forth a statement of intention to surrender the real property cannot later contest a foreclosure in the state court. in-re-failla If you read the first paragraph of this PUBLISHED OPINION, and then read the background on the case, it appears that the homeowners wanted to “have their cake and eat it too”. The Failla case simply states: “Debtors who surrender property must get out of the creditor’s way.” The Florida Legislature (I believe) made sure that a bill was passed that shut off the trough at the source of the feed (so to speak).
No more hogs at the trough. There have been so many different points of view, it’s understandable that the Florida legislature would pass a bill that state courts could point a finger at and say, “SEE?” So for those of you thinking that running into bankruptcy court (in any state for that matter) and declaring your intent to surrender the property (God forbid, why would you do that?) under penalty of perjury is so confusing to some when their state court cases get shut down.
It has also become relatively apparent that any homeowner that has placed themselves in the foregoing position and continue to litigate their foreclosure in the state courts of Florida are likely to get sanctioned! Vexatious litigants are likely to wind up in jail on contempt charges! I say this because of what happened to foreclosure defense attorney Stuart Golant, 70, in the Palm Beach County courtroom of Senior Judge Howard Harrison for simply making a motion!
Florida homeowners have had the deck stacked against them by the courts and the legislature in favor of the banks when it comes to promissory note enforcement. Once a mortgage has been recorded in the land records where the subject property is situated, all it takes is a missed payment and the door to “foreclosure hell” opens to swallow the homeowners whole. I can’t help but wonder what kind of counseling homeowners have received, given the phone calls and emails I get regarding strategizing an in personam case against them.
ONE MORE TIME …
In a judicial foreclosure state like Florida, a lender comes to court and waves the promissory note around and claims it has the right to enforce the terms of the note! It should be required to prove that the note is genuine, forensically. Have the actual paper tested. Have the ink tested. Check for pixelation by blowing the note up on a computer screen to examine evidence the note was photoshopped. Object to the note being entered as the original. I believe a majority of securitized notes are copies of what was downloaded into the MERS® System and later shredded, as I’ve covered in previous posts.
Once the lender gets the note in front of the court and gets it admitted into evidence and gets the court to agree that U.C.C. Article 3 (Negotiable Instruments) exists and that the alleged lender has the right to enforce the note, THEN the Lender gets to enforce the Security Instrument, the in rem part of the equation. The security instrument (Mortgage) is then “ripe for the picking”. Believe it or not, most homeowners think that the lender is foreclosing on the mortgage. That couldn’t be further from the truth! The Lender is foreclosing on the Note. Proving it has the right to enforce the Note means the Lender gets the right to enforce the Security Instrument, not until!
Bankruptcy Courts are designed to handle in personam scenarios. In personam relates to debt. Promissory notes are evidence of debt! Recorded mortgages are evidence of security interests, not debt! If you’re going to use the bankruptcy court to alleviate your personal obligation to the note, and liquidate it in a Chapter 7 bankruptcy proceeding, be prepared to move out of your home!
Thinking twice about running into Chapter 7 bankruptcy court to stop the sale? The “system” is ready for you! (Hint: This is why we have Chapters 11 and 13!) No matter, if you live in any state where you think the “deck is stacked” against you, plan your “end game” BEFORE you go into default, not after!
And this is why I don’t talk about in personam issues much. Homeowners really should get a financial education before they sit down at the closing table.
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