How to beat foreclosure
Today’s St. Petersburg Times features a front-page story with the bold-face heading “How to Beat Foreclosure” and tells the stories of people who have stayed in their homes for years by gaming the system.
Only one problem: filing bankruptcy time and time again is an abuse of the system, and can cause you a lot more trouble than it’s worth. And ultimately, it’s not necessary at all.
The article tells the story of a handful of families who have managed to stop foreclosure sales by filing bankruptcy once, twice, even as many as eleven times. Unfortunately, this tactics won’t work for long, as judges are starting to get wise. And they have options:
Under a “three-strikes and you’re out” rule, debtors on a third filing get no relief from foreclosure if they had two cases pending in the previous year. In addition, judges are giving banks and other creditors more opportunity to request a one- or two-year ban on filings by those who seem to be abusing the system. And judges can order serial filers to appear in person and show cause why their case should not be dismissed.
Foreclosure defense, not bankruptcy, may be the better answer
The good news is, most homeowners don’t need to file bankruptcy to avoid a foreclosure. All they need is a good lawyer who knows how to defend a foreclosure case. Because of the way that mortgage loans were re-packaged and sold off in bundles over the last decade, many of the so-called lenders bringing foreclosure cases can’t prove that the borrower actually owes any money to them. And if they’re not the ones that have the right to collect, they’re not the ones who have the right to foreclose. Lawyers and judges call this legal concept “standing.”
Foreclosure plaintiffs have no leg for standing on
So what does a “standing” defense mean to you? Well, if you’ve ever heard of a “produce the note” defense, that’s essentially a variety of a standing defense – because in most cases, only the party holding the original note has the right to foreclose. That’s why a foreclosure complaint with a “lost note” allegation is such a problem for the court system.
But who cares? You owe the money to someone, does it really matter which bank tries to take your house?
Absolutely it does.
Here’s why: there are cases in Florida where one party, claiming the right to enforce a mortgage note, foreclosed on property, sold the property, got paid, and the borrower walked away… only to find out, some time later, that some other lender held the note, and sued them for it.
Standing: a protection against borrowers paying twice for the same loan
So, you ask, what happened in these cases? Surely the courts must have sent the second plaintiffs packing, since the debt had already been paid…. right?
The party holding the note had a right to be paid, period. And so these borrowers had to pay twice, because they didn’t challenge the right of the foreclosing plaintiff to enforce the note.
Don’t pay twice on the same debt
If you don’t mind paying for your home twice, once at the foreclosure sale and then again later when someone else shows up with the note, then go ahead – let your house go into foreclosure without a fight. But if you want to make sure that your rights – including the right to pay only once for your loan – then fight. The good news is, Florida appellate courts recognize the importance of standing – and have started to throw out foreclosure cases where the lenders can’t prove their right to collect.
So if you’re facing foreclosure, call a lawyer right away.