Wednesday, September 12, 2012

Malpractice Feeding Frenzy - Real Estate Lawyers Become Food

Twenty percent of [legal malpractice insurance] claims are settled for $10,000 or less. And 63 percent of claims are disposed of with no payment at all. Probably some of the explanation for that has to do with an administrative quirk.

So says an article at http://www.cleveland.com/business/index.ssf/2012/09/post_103.html which shows these statistics



Foreclosure defense pundit Neil Garfiels of the LivingLies blog claims malpractice lawsuits will increase dramatically for foreclosure defendants because of lawyers' failure to go on a search and destroy mission against unsecured lending.  As usual, Garfield pisses up the rope with this specious assertion.

Mortgage borrowers should sue lenders for for loan fraud, breaches, torts, and legal errors.  In reality, the bulk of foreclosure defense attorneys suffer from such incompetence that they never bother looking for such flaws underlying the mortgage itself.  Instead, they bicker over robo-signing, lack of standing, complaints against MERS or securitization, and other issues in the foreclosure process,virtually all of which face certain doom.  Foreclosure defenders charge $1500 to $3500 down and $500 to $1500 a month for the service of keeping the victim in his home as long as possible.  In other words, the defender bilks the client out of money that should go to the note holder, causing the borrower's debt to mount ever higher.  Some defenders con gullible mortgagors into accepting a loan modification that leaves them owing double the value of the house and facing a terribly high baloon payment a few years later.

Such lawyers deserve malpractice lawsuits against them, particularly if they never even bothered to scrutinize the mortgage documents, loan application, and appraisal to find torts, breaches, and err0rs of consequence. 

Why?  Well for starters, a mortgagor shows the lawyer with a breach of contract complaint against the mortgagor for not paying the note off.  What should any good attorney do?  EXAMINE THE CONTRACTS and all associated documents for torts, breaches, and errors which the mortgagee or lender or lender's agents (like appraiser or mortgage broker) committed against the borrower.

An attorney commits MALPRACTICE by failing to do that first and foremost.

A competent, seasoned mortgage fraud examiner of Florida mortgages told me that he estimates over 85% of Florida single family residential real estate mortgages have appraisal or loan application fraud underlying them.

Do some arithmetic to see the importance of this.  If a lender's appraiser over-valued the property by 30%, the court could award TREBLE DAMAGES, which would come to 90% of the purchase amount.  Add to that all the money that the borrower paid the lender, and you have over 100%, enough to warrant a court-ordered rescission of the loan.  In a rescission, the parties must pay one another back all the money they paid previously.  This means the borrower gets the house free and clear, doesn't it?  Foreclosure defenders should attempt to get THAT kind of settlement, plus punitive damages, for their foreclosure victim clients.

See this stellar example.  Brown v Quicken Loans   A West Virginia law firm won about $3,000,000,000 in a court battle against Quicken loans for predatory lending practices that included appraisal fraud, exorbitant origination fees, and other violations.  The court awarded $2.1 million in punitive damages, attorney fees and costs of nearly $1 million, and the house free and clear.  A foreclosure defense attorney achieves THAT kind of result happens by doing his job diligently and correctly.

In my humble opinion, the majority of foreclosure defense attorneys deserve to come under attack by their clients for malpractice.  

Mortgagors who have no trouble making their house payments should also have their mortgages examined for torts, breaches, and legal errors.  Appraisers, mortgage brokers, and lenders have not restricted their iniquities to foreclosure victims alone.  They have cheated everyone they could, including people who pay their mortgages.  And that cheating has caused houses to sell for exorbitant prices. 

Ask yourself how single-family residences could possibly gone up so high in actual worth if they have now plummeted to 50% of their prices of 7 years ago.  The answer:  that could happen ONLY if the players in the single-family real estate sales and lending industry falsely inflated the value of homes.

Don't think home buyers have become mere victims in this process.  They did not complain when they bought a house and flipped it  a year or two later for 30% profit.  Nor did they "smell a rat" in the process.  They became no better than the person who buys an expensive product at a price so low that the seller or his supplier must have stolen it.

Sadly, I see no real justice in the real estate mess today.  Home buyers deserve the collapsing prices because they took advantage of rising prices without a squawk.  Even in the predatory case Bordas and Bordas won (above link), their client, I smell a rat.  I believe Mrs Brown knew she had borrowed more than the value of her house.  I can imagine her using the money to live high on the hog for a while.  When she stopped paying and the lender came after the house, she panicked and sought legal help.  And a thorough mortgage fraud examination ended up saving the day for her.

If you think your lender or agents might have cheated you in your mortgage, and you obtained your loan within the past ten years, contact me to get a mortgage fraud examination done.  You must gather all your mortgage related papers together and sign a non-disclosure agreement, then scan in all the documents and zip them together in an archive, pay $1500 via a PayPal invoice, and upload the documents.  You will receive a report within 7 business days.  The report will show any and all causes of action that you might have against the lender or lender's agents.

With the report in hand you can hire a competent attorney to negotiate a settlement with the lender.  If you like the settlement, you settle.  If you don't, then you may hire an attorney to prosecute a lawsuit.  You could end up with your house free and clear and a wad of walk-about money in your pocket.

Did you notice that I did not mention "securitization audit?"  Just so you don't think I missed it, I'll mention it now.  Do not, under any circumstances, waste your money on such an audit.  You can discover all the relevant information you need about the securitization at the SEC's EDGAR web site.  Take note that securitization of your loan has absolutely nothing to do with whether you signed a note and mortgage, owe the money, and must forfeit the house if you don't pay according to the terms of the note.  No matter what happened in the securitization, the note holder can foreclose the loan.

--
Bob Hurt
P.O. Box 14712
Clearwater, FL 33766-4712
(727) 669-5511
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6 comments:

Giana Forzareli said...

Wow! Those are some interesting statistics. I cam across this blog while I was looking for a philadelphia personal injury lawyer to help me with my case, instead I was rewarded with this great information. Thank you for bettering my knowledge on this topic.

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