Third DCA reverses Rodgers win at trial against Bank of New York

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Third DCA reverses Rodgers win at trial against Bank of New York

I really dislike this case out of my home turf, which is Florida’s 3rd District Court of Appeals that covers Miami-Dade County, Monroe County, and the Florida Keys. See chart of Florida Court Appellate Courts here:   http://www.flcourts.org/courts/dca/dca_dist.shtml There are 5 district courts of appeal in Florida. Basically, you start up at Tallahassee and move counter-clock wise around the state so that the 1st DCA is “Tally” and Jacksonville; the 2nd DCA is Tampa down to Naples, the 3rd DCA is Miami–Bank of New York v. Rodgers–and the Keys; the 4th DCA is Fort Lauderdale, West Palm Beach, and the Treasure Coast; and the 5th DCA is Daytona, Orlando, and the Space Coast.

Even though I have not been an attorney nearly as long as the Justices that sit on the bench in Third DCA in Miami, the reason I dislike Bank of New York v Rodgers so much is that the appellate court seems to miss the point entirely and ignore the rule of competent and sufficient evidence. In Bank of New York v Rodgers the court does not focus on how weak the testimonial evidence was as trial. Instead, the court focused on the defense attorney not objecting to a substitution of a party-plaintiff.

Also, appellate courts usually do not ignore, make up, or change facts that happen at the trial level. This is very fair since the appellate judges (justices) were not there at the trial. It is just a way for appellate courts to respect the decisions of trial courts. In Bank of New York v Rodgers the appellate court seemed to want the homeowner to be foreclosed on, so it found some law to throw in its decision to make its decision turn out the way it wanted to. The 3rd DCA hung its hat on the defense not objecting to one bank substituting itself for another bank. I don’t know if the 3rd DCA knows this, but it would not have mattered if Mickey Mouse Bank had subsituted for Pluto Bank. Most attorneys make their pleadings (the papers they write and file with court) match the evidence. Bank’s attorney do this, but they also seem to get ahold of evidence that matches their pleadings. They just seems to force square pegs into round holes and round pegs into square holes and get away with it much of the time.

My point is that the witness for the bank at trial did not know enough to establish competent and sufficient evidence. Basically, the witness did not have personal knowledge. You cannot testify about something you don’t know anything about. So, if the witness did not have personal knowledge or very little personal knowledge (which is not competent and sufficient) it would not matter if it was Mickey Mouse Bank, Pluto Bank, or Bank of New York.

Worse the 3rd DCA decided that this witness who lacked personal knowledge was good enough to establish that Bank of New York had standing. I don’t get it. Yes, I do foreclosure defense, but Justice Shepherd was right on. He was the dissent, which means he disagreed with the other 2 justices.

Home Foreclosures Credit Default Swaps and Interest Rate Swaps

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Home Foreclosures Credit Default Swaps and Interest Rate Swaps

Swaps as defenses to home foreclosure

Everyone has heard the expression “To Big To Fail”–in fact there was a movie made by HBO films with the same title. For me, these credit default swaps and interest rate swaps can be defenses to home foreclosure because the large banks that constructed these derivative-based, collateralized debt obligations (CDO’s), collateralized mortgage obligations (CMO’s), mortgage-backed securities (MBS’s), asset-backed securities (ABS’s), special purpose entities (SPE’s), structured investment vehicle (SIV’s) real estate market investment conduits (REMIC’s), etc., then initiated home foreclosures probably purchased a credit default swap, an interest rate swap, a total return swap, or some other type of “insurance”.

A QUICK WORD ON DERIVATIVES

The best way to explain a derivative is to start with what it is not. A stock, bond, or a mutual fund that is usually made up of stocks and bond is the common stuff and are investments. People are familiar with these “securities” because they are advertised, widely owned, and because people have them in their IRA or in the 401(k). These investments or securities are the back-bone of investing and are not derivatives. An ounce of gold, a bushel of corn or a home are also investments, but they cannot be called securities like the stocks, bonds, and mutual funds.  Derivatives are the things that you buy or sell that are based on the value of stocks, bonds, gold, corn, or real estate. When you don’t want to own a security, or more generally, an investment, but you want to make money by speculating on its future value (up or down) you are a speculator. When you own an investment or security, but want to minimize your losses in case your investment does not turn on as planned, you are a hedger. Derivatives are generally much riskier (large change in price), more volatile (quick change in price), and more difficult to understand than more traditional investments. This is why everyone was so stunned by decreasing home values. Normally, real estate is the least risky of all the above. Derivatives (swaps) based on the housing market changed everything and for a very long time, they were completely unregulated–even after Enron.

Swaps as “insurance”

For foreclosure defense, many large banks and investors were compensated when your home went underwater so maybe the plaintiff in your foreclosure lawsuit did not lose as much money as they say they did–maybe. These institutions could have had swaps in place to minimize their losses, or perhaps there was a “real” insurance policy like mortgage insurance to pay the lender in case you were not able to make payments. The Federal Housing Administration (FHA) under HUD is the largest insurer of home loans.

swaps are not true insurance

In order to have true insurance, the insurer has to have an insurable interest in what or who is being insured. For example, to have an insurable (vested) interest, you can purchase life insurance on a family member or a business partner, but you cannot purchase life insurance on someone you don’t have any meaningful relation to. Why? Insurers cannot afford to pay life insurance benefits to U.S. Commandos if they wanted to insure the life of Osama Bin Laden before attacking him. Also, insurance companies are regulated by state laws, and just like banks, are required to have minimum capital requirements or cash reserves to pay out. The more cash deposits or policies a bank or insurance company has, the more cash reserves it needs in case people start defaulting on their loans for cars, homes, credit cards, school loans, businesses–or in the case of insurance companies–just in case several insured people die (life insurance), or there are several car wrecks with injuries (auto insurance), several home fires, hurricanes, land slides, thefts (property and casualty insurance), or insolvent governments that cannot pay the interest on debt they issued like Greece or Jefferson County, Alabama, etc. The great recession and the government bailouts reminded us that if banks do not have money, then no one has money.

Swaps are private contracts or agreements

These “swaps” are private contracts or agreements between large institutional investors, like banks, mutual funds, hedge funds, government bodies (small governments like Jefferson County, Alabama or entire nations like Greece, called “sovereigns” ). If you think swap sounds like a “swap meet” or a place where people go and trade things with each other–your right! In a swap, one entity is swapping its rights for another’s rights because it thinks it is getting a better deal. Most often, both entities are getting a better deal . . . at least at the time.

Swaps are used to minimize risk or to speculate

Sovereign swaps, home foreclosure credit default swaps and interest rate swaps can be structured in many different ways but they all basically have two purposes: either to minimize risk or to speculate. As you may have guessed or know by now, too much money was used to speculate. If a large enough amount of money is used to speculate, the stock market, housing market, bond market, futures market–even a horse race can be tilted in the wrong direction. For example, if you are at the horse track and everyone starts betting on one particular horse, the odds or the perceived risk that the horse will lose decreases. I say perceived risk because even though the #4 horse in the 3rd race is going off at 3 to 1 odds (looks like a winner) 5 minutes before post-time, does not mean that the #4 horse is going to win. . . it just means everyone is betting on the #4 horse because they think it will win, or they think it will win because everyone else thinks it will win. The #9 horse going off at 50 to 1 odds could be the winner.

Know that in the public financial markets like the New York Stock exchange or the more private markets (“over-the-counter”) money can be made by and increase in value as well as a decrease in value by people who are “bearish” (term more often used with traditional investments like stocks and bonds) or are going “short” or are “short” (term more often used for derivatives) because they believe an investment is going to go down in value. It sounds weird that a person can bet something is going to go down in value or “lose”, and it can get complicated, but just think of it like this: if you bet money that the Miami Heat are going to beat the Boston Celtics, then you are bullish or going long on the Heat and you are bearish or going short on the Celtics.

Everyone intuitively understands this and if you have ever made a bet that your team is going to win Saturday’s game with someone, you are in fact, a speculator, not an investor. An investor would buy stock shares in their favorite team or become a lender by purchasing a bond and loaning money to their favorite team (btw, maybe they exist, but I have not seen bonds on teams, just corporations and governments).

A complex, but easy to understand example

counter-parties, the swap buyer, the swap seller, and the reference entity.

If you can believe that, maybe you can believe this. Now, just imagine that you (a counter-party), instead of betting $20 bucks with your buddy that Heat (the reference entity) are going to win, imagine you can place a bet for $20 dollars that the Celtics are going to lose. This is the way the financial markets work: maybe I don’t want to buy company stock in the Celtics hoping it goes up in value, maybe I want to sell short–not quite the same as short-selling a home–(sell now at a high price and buy back later at a low price).

Now, imagine that you as a Heat fan can bet that the Celtics will lose by 10 points or more or you can bet that the Heat will win by 10 points or more, or both, if you want. Now imagine that you still want to bet on the Heat, but you think the Heat will barely pull it off. The problem is that you only “win” if the Celtics lose by 10 points or more, or in the more usual case when betting, if the Heat wins by 10 points or more. This is because the Heat are favored by 10 points–this is the “spread”, sound familiar? As a loyal Heat fan who loves his team, you still don’t want to see your favorite team lose and lose $20 so you the counter-party and “swap-buyer” find another ”counter-party” and “swap seller”–who will “insure” your bet for some of the difference if the Celtics lose by 10 points or less (or the Heat win by 10 points or less) and who will pay you $10 so that you only lose $10 instead of the whole $20 bet you made. You may even find someone who will reimburse you the whole $20 dollars instead of just $10. If you do find a guy that will pay you the full $20, he is an even bigger speculator and sounds like AIG.

a reinsurer

Now imagine there is another guy out there who thinks that the Celtics will lose by 10 points or more (or the Heat will by 10 points or more) and so he is willing to take money now to “reinsure” the guy who insured you. This is because the guy who insured you thinks the Heat will win by 10 or more (or the Celtics will lose by 10 or more) but is still afraid he will have to pay you $10. This is how swaps continue to grow and compound one another, but we are not done.

Hang in there. There may be a Celtic fan out there who wants to bet on his home team just like you want to bet on your home team, but he realizes that he can only make money if the Celtics win. However, he sees an opportunity to make money even if the Celtics lose, which would certainly make him feel a little better if his Celtics did lose. In order to make some money and feel better if his Celtics lose, he decides to be a “swap seller” himself. So this Celtic fan enters into a swap from the guy that insured you. You just paid money to this counter-party to insure you in case your favorite team–the Heat–loses. This same counter-party, the one who insured you, and the one who bought reinsurance figures he is pretty well covered, so he would now like to bet “against” the Heat by using the money you paid him by paying the Celtic fan as a swap-buyer in case the heat loses by 10 points or less.

The three main parties here are the Celtics fan, you the heat fan, and the middle-man. The other party was just a reinsurer to show that insurance companies buy insurance.

Now. the Celtic fan is afraid that his speculation will cost him. Remember he wanted to make money just in case his team lost. Remember the 10 points spread is locked in and you the Heat fan would normally not get paid unless you ”beat” the 10 point spread, but the Celtics fans get paid if they win by one points or 25 points. So the Celtic fan does something similar to what you did when you hedged your bet:  the Celtic fan finds or tries to find someone who will cover his bet (remember he made money as a “swap-seller” to the guy who insured you), and reduce his losses if the Heat win by 10 points or more or even win by 10 or less (if that swaps is available and depending on much faith the Celtic fan has in his team) .

So the Celtic fan does find someone who informs him that there are people just betting on the 10 points spread and not on who actually wins–true speculators who are running “naked swaps”–naked because they don’t care who wins, they are not season-ticket holders and don’t own stock shares in the teams. These are the Lakers fans and they don’t care if the Heat or the Celtics win, they just want to make money, so they bet a LOT of money that the Heat will win by 10 points or less and can accept and will cover the Celtic’s fan new bet that the Celtics will lose by 10 points or more (or that the Heat will win by 10 points or more).

CONCLUSION

As you can see, these swaps grow enormously and are compounded and multiplied. Any party to a swap agreement can find a counter-party to hedge their bet or to speculate. If they start regretting their bet, they can find someone who will cover that bet or they can buy reinsurance and that reinsurer may buy reinsurance or go out and enter into swap agreements to hedge or speculate himself. These “bets” or swaps are priced and just like any other security or derivative, they go up in value and down in value depending on how the market changes.

Home Foreclosures Credit Default Swaps and Interest Rate Swaps

Suing in civil court for criminal acts and prosecutorial discretion

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Suing in civil court for criminal acts and prosecutorial discretion.

If the Government will not prosecute, and will not give you your day in Court because you were wronged by the criminal acts of another, you can make your own day in court.

Prosecutorial Discretion

I never see prosecutorial discretion come up on TV Shows or movies. If it has, I missed it. Prosecutorial discretion just means that I could walk out of a bank with a gun, a bag full of money, get into a get-away car and the prosecutor could say, “Eh, so what?” and not charge me at all. True, but not likely. If it is an elected Prosecutor–many are–they would never get reelected if they let bank-robbers go, but yes, legally they could do it. But prosecutors can also be very aggresive if they want to. In the Casey Anthony trial, I think most of America thinks she is guilty or was at least heavily involved. The State Attorney of Florida (the prosecutor) went for a first degree murder charge. I cannot remember if she was offered any plea bargain–probably not. So, in a situation like this, you have to go to trial because the prosecutor is not giving you a choice. My point is that the State Attorney could have gone for second degree murder, third degree murder, or manslaughter, which is easier to prove. First degree capital murder is not supposed to be easy to prove. That is why only the most experienced and senior prosecutors will try those types of cases. The point is that with prosecutorial discretion, some prosecutors in State or Federal Court are more aggressive than others.

Suing in civil court from criminal acts

Sometimes prosecutors decide not to sue (file criminal charges) somone and you want them to. This is because some prosecutors offices prefer to prosecute certain types of crimes and other prosecutors offices prefer to prosecute other types of crimes. One office may be big on prosecuting street crimes, but not big on white-collar crimes. One office may be big on prosecuting cocaine, but not marijuana. All prosecutors offices will prosecute alleged drunk drivers–all of them. The reasons for this selective prosecution could be the budget, public opinion, pressure from the media, pressue from voters, pressure from the head prosecutor like the Attorney General for the State of Florida, the Attorney General for the Commonwealth of Kentucky, or maybe the U.S. Attorney General when in Federal Court. Or, it could be a pet-peeve of the prosecutor that runs that particular district, circuit, county, branch, division . . .whatever. If a prosecutor will not file charges against somone, and you have been “harmed” physically, mentally, monetarily, most all states and jurisdictions permit you to “take the law in your own hands”–no, not like that–by suing somone in civil court. I will use the Florida and Kentucky and Kentucky statutes because that is where I am licensed for now.

Florida

In Florida the relevant statutes are Chapters 772.101 and 772.102

Kentucky

In Kentucky, the relevant statutes are Chapters 431.080 and 431.082 I hope suing in civil court from criminal acts is something new and that you can use, if necessary. But use it wisely and carefully as you cannot sue someone for fun or to get even or to teach them a lesson. There are claims called, malicious prosecution, vexatious litigation, and abuse of process that could then be used against you. Always consult with an attorney.

Suing in civil court for criminal acts and prosecutorial discretion

Protecting Tenants at Foreclosure Act

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Protecting Tenants at Foreclosure Act

For landlords and tenants the same rules apply:

Questions about the Protecting Tenants at Foreclosure Act (PTFA) seem to be coming up on the web lately. There are questions from tenants–ususally–but there are also landlords or soon-to-be-landlords who have questions. The PTFA was designed to protect tenants who ran into a bunch of terrible situations.

common scenarios

The Protecting Tenants at Foreclosure Act was passed because so many foreclosures were happening–and are still happening–that tenants were often forgotten about. These are the common scenarios in no particular order of occurence:

  1. The bank forecloses and does not include the tenant in the lawsuit.
  2. A tenant moves in, pays a deposit, then finds out his new landlord is about to be foreclose out of his old house.
  3. The landlord pretended to still own the house when it had already been sold at a foreclosure sale, short-sale, or had been (deeded) deed-in-lieu to someone else, so the landlord–who really does not own the property took someone else’s rent money. Does this mean that the tenant has to come up with the rent and deposit again?
  4. Tenants currently live in the property, find out that their landlord is in foreclosure, and leave.
  5. Tenants currently live in the property, find out that their landlord is in foreclosure, then theorize that they do not have to pay rent anymore.
  6. Maybe the biggest one, property is sold at foreclosure sale, certificate of sale is issued, property (should be) is transferred by a deed, or a deed in lieu (of foreclosure), or via a short-sale, the new landlord comes along and says, “Get out.”

The moral of the story is that under the Protecting Tenants at Foreclosure Act, new landlords or owners, banks or a real live person, have to give the tenants living in the property a 90 day notice if they intend on moving into the property and kicking the tenants out. If the new landlord is not moving in then tenants can live out the terms of their lease.

But, really, truly, before Protecting Tenants at Foreclosure Act was enacted, the common law of England has been around for centuries and states that tenants are in privity of contract and privity of estate, which means they have a right to be there under the lease contract that is assigned to the new landlord; and (limited) rights in the land just like the property owner has rights in the land. If this does not make sense, think of this way: if you are a tenant, you leased the LAND, not whoever owns it.

If you like where you live and someone buys it, you can put up a fight to stay there until yoru lease runs out. You might not want to stay there becasue if the landlord wants you out and you want to stay, he or she might not want to repair the sink or toilet.

25 Billion Dollar Mortgage National Settlement filed in Federal Court

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25 Billion Dollar Mortgage National Settlement filed in Federal Court

25 Billion Dollar Settlement Flow Chart.  It’s official, the 25 Billion Dollar Mortgage National Settlement filed in Federal Court today makes it a good day for struggling homeowners.

Since the announcement on February 9th http://www.justice.gov/opa/pr/2012/February/12-ag-186.html., it took just a little over a month before the national settlement was filed in Federal Court.  The Federal Government has a dedicated webpage devoted for the largest settlement ever http://www.nationalmortgagesettlement.com/ between the government and private companies. This settlement is even larger than the multi-state tobacco litigation in the 1990′s.

United States District Court for the District of Columbia

The settlement was filed in the D.C. Federal Court http://www.dcd.uscourts.gov/dcd/. Though it is still a proposed settlement and not final, it will most likely not change very much and probably not at all, in my unofficial opinion.

The Big Five: Bank of America, Wells Fargo, J.P. Morgan Chase, Citigroup, and Ally Financial.

The national settlement is between the five largest mortgage servicers:  Bank of America, Wells Fargo, J.P. Morgan Chase, Citigroup, and Ally Financial; three Federal Departments: Department of Treasury, Department of Housing and Urban Devlopment, and the Department of Justice, not including the offices and agencies within those departments. The national settlement also involved the States Attorney Generals of states across the country and the bank regulators within the states. This is the official press release from the U.S. Department of Justice.

25 Billion Dollar Mortgage National Settlement filed in Federal Court

http://www.justice.gov/opa/pr/2012/March/12-asg-306.html.

FHA Lowers Mortgage Insurance Premiums for Homeowners

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The Federal Housing Administration (FHA), which is an agency of the Department of Housing and Urban Development has announced that it will lower insurance costs (reduce insurance rates or insurance premiums) to homeowners. See story from cnbc at http://www.cnbc.com/id/46642204.  Many mortgage companies, mortgagees, banks, or home loan lenders (all are creditors) require homeowners to pay the insurance premiums to insure the loan. Part of the money that you pay to the loan servicer goes to home loan insurance. The mortgage (which permits foreclosure) is collateral for the promissory note.  But on top of that, mortgage insurance or home loan insurance is intended to reimburse the creditor lender in case there is a foreclosure sale and the bank does not get all of its money back that it lent to the mortgagor or homeowner. Enter the FHA. The FHA insures approximately 1/3 of all home loans. Why would they do this? Simple, to encourgage banks to loan money to people to buy homes. If the bank knows its loan is backed by the Federal Government through the FHA, then it will feel much more comfortable about lending money to you.

The big truth is that the Federal Government likes homeownership because it promotes stability, families, reduces crime; creates a tax base (mom and dad work); stimulates bank loans to mortagors (mom and dad); stimulates loans to construction companies to build homes, roads, schools, shopping malls, shopping centers, grocery stores, gas stations, barber shops, dry cleaners, more corner banks, churches, synagogues, mosques; the government knows where everyone lives because everyone will have a driver’s license and vehicle registrations, and it makes the census that occurs every 10 years go easier. . . .tell you what . . .just get in you car or get on your bike, or go running around the neighborhood and look at all the things home ownership promotes.