Wesoloski Carlson P. A. Ribbon Cutting Ceremony and Charity Event

Wesoloski Carlson P. A. cordially invites you to celebrate the addition of our name to the 848 Brickell Building at a ribbon cutting ceremony and charity event on Friday, February 26 from 5:30 – 7:30 PM on the building’s outside lobby.

Enjoy music by renowned South Florida blues band, JUKE, complimentary beverages and hors d’oeuvers as well as a raffle for prizes. Proceeds from the raffle will benefit Habitat for Humanity.

Parking will be provided free of charge in the 848 Brickell Building exclusively for this event.

Please RSVP to marketing director Alexandria Friedlander at (305) 329-1000 or to afriedlander@wesoloskicarlson.com by Monday, February 22nd.

2009 Pro Bono Erik Wesoloski Foreclosure Award

Mr. Wesoloski of Wesoloski Carlson, P.A., handles scores of matters for pro bono foreclosure clients who are unable to hire their own attorney. He has expended hundreds of hours defending countless cases, lecturing colleagues frequently and mentoring others often.

A dedicated attorney, Mr. Wesoloski uses his legal expertise, critical thinking and law firm resources to help victims of foreclosure.

November 2009 Newsletter

1. Press Release. November 1, 2009

Wesoloski Carlson, P.A., a law firm with offices in Miami and New York is opening a satellite office in Key West. “Our law firm is happy to bring our legal services down to clients in the Keys”, reports Erik Wesoloski, principal shareholder of Wesoloski Carlson.

“Residents in Monroe County must trek up to Miami to file a bankruptcy. This trip is onerous and disorientating for many, and we are glad to save them the trip and difficulty by bringing our lawyers to them.” In addition to assisting clients with bankruptcy, Wesoloski Carlson also counsels clients on asset dispositions (aka short sales), foreclosure defense, loan modifications, regular real estate transactions and trust and estates matters.

The Key West office is located in Old Town across the street from the courthouse at 302 Southard Street, Suite 201, with ample parking available on the building premises. The firm will begin taking client appointments every other Friday beginning November 6, 2009. The phone number of the Key West office is 305-517-6589.

Wesoloski Carlson is a full service law firm that concentrates in real estate and business law from its offices in Miami, New York and Key West. Nothing contained in this press release is intended to be a solicitation for legal services and is purely informational in its content.

The hiring of a lawyer is an important decision that should not be based solely upon advertisements or press releases. Before you decide, ask us to send you free written information about our qualifications and experience. Outcome or results are not guaranteed.

2. Documentary Stamp Tax on Short Sales

Florida imposes documentary stamp tax on a deed, instrument or writing that conveys any interest in real property. The tax imposed is calculated based on the “consideration” given for the transfer. Consideration includes, but is not limited, to money paid or to be paid, the discharge of an obligation and the amount of any mortgage or encumbrance. Consequently, when the seller executes the document that transfers real property to the purchaser, it is transferring an interest in real property and, thus, is taxable.

In common real estate transactions, the lender receives full payment of the loan obligation. Once the lender has determined that this obligation is satisfied, the lender then agrees to satisfy its lien on the property. On the other hand, in short sale transactions, there is a partial satisfaction rather than full satisfaction of the loan obligation. The lender has determined that given the circumstances it is willing to take present value dollars in satisfaction of the loan obligation, thus, discounting the amount of the loan by the full or partial cancellation of the amount of loan debt that is not satisfied in the short sale transaction. This cancellation of debt is valuable to the seller; however, it is not consideration for the transfer. The seller’s agreement to satisfy its lien and cancel a portion of the seller’s debt is a separate and unrelated transaction between the seller and the lender. The lender is not related to or controlled by either party and neither the lender nor any of its related parties is receiving an interest in the real property. In essence, the lender has merely evaluated its risk as a creditor and has made the decision to cancel a portion of the debt in return for payment of a lesser amount.

It was unclear whether the Legislature intended to impose a tax on the amount cancelled by the lender as there was no specific provision for or definition of a short sale of real property with regards to the requirements of documentary stamps. Fortunately, current policy of the Florida Department of Revenue exempts short sale transactions. Thus, when the lender cancels indebtedness of the seller, that cancellation of debt is not included in determining the amount of consideration subject to tax under the Florida Statutes.

By Erik Wesoloski
Attorney
Wesoloski Carlson P.A.

Press Release: Moving on up.

Wesoloski Carlson P.A., a law firm with offices in Miami and New York is moving its Miami office to larger space on Brickell Avenue to accommodate their growing practice.

Wesoloski Carlson P.A. is moving to 848 Brickell Avenue, Suite 300 at the end of August. “The new office is double the space of our previous office in Miami and it will allow us to better service our clients’ needs”, reports Erik Wesoloski, partner with Wesoloski Carlson P.A. “All of our practice areas are growing. Our countercyclical loan work-out and bankruptcy practice groups continue to receive new clients every month, while at the same time we are seeing an up-tick in our real estate transaction practice group as the recession begins to subside.” 848 Brickell Avenue is a sleek and modern twelve story building in the heart of Miami’s financial district, and it is located directly across the street from dozens of restaurants and shops in Mary Brickell Village, Miami’s hottest cosmopolitan retail center.

Wesoloski Carlson P.A. is a full service law firm that concentrates in real estate and business law from its offices in Miami and New York. Nothing contained in this press release is intended to be a solicitation for legal services and is purely informational in its content. The hiring of a lawyer is an important decision that should not be based solely upon advertisements or press releases. Before you decide, ask us to send you free written information about our qualifications and experience. Outcome or results are not guaranteed.

September 2009 Newsletter

1. Real Estate Article for the Dade County Bar News

Florida has one of the nation’s highest foreclosure rates. The recession and economic crisis of the past two years has shaped the legal landscape in which the people of Florida are currently living.

The drop in property prices and the Federal government’s stimulus incentive of an $8,000 credit for first time home buyers has given many Floridians the opportunity to acquire real estate for the first time and live the America Dream of home ownership. However, the recession has also caused many distressed homeowners to lose their homes, many times due to the lack of communication between lenders and troubled borrowers.

For a homeowner about to face foreclosure, the key factor is communication with the lender in order to avoid the unfortunate result of a foreclosure auction. The reality is that in many cases, distressed homeowners are only able to speak with their lenders in a courtroom. Fortunately, attorneys in Miami-Dade County and others across the State of Florida have answered the call of public service. Hundreds of attorneys have handled pro-bono foreclosure cases through the Miami-Dade County Put Something Back program and the Florida Bar’s Florida Attorneys Saving Homes program.

At the same time, the Miami-Dade County Circuit Court, under the leadership of Judge Jennifer Bailey, took the lead in testing a mediation program for foreclosure cases involving homestead properties. This program requires mediation early on in a foreclosure case. Using mediation to achieve settlements at the beginning stages of a case rather than later in the process is a win-win for the lender, borrower and the court system which is log jammed with foreclosure cases. Troubled borrowers have an opportunity to become current on their mortgages and the court is able to lessen their load of foreclosure cases. The initial results in Miami-Dade County proved successful enough for the Florida Supreme Court’s Task Force on Residential Mortgage Foreclosure to recommend the same court ordered mediation system
throughout the State of Florida. With the Court ordering lenders and distressed homeowners to undergo mediation, the Judiciary branch has taken a leading role in solving the economic crisis. While Miami-Dade County and the entire State of Florida is still facing a challenging economic climate and rising unemployment rates, the implementation of new legal policies and probono help from the legal community is already leading to lower foreclosure rates which may be the beginning of the road to economic recovery.

2. Deficiency judgment

Many individuals who are faced with foreclosure decide to stop making mortgage payments in the belief that the lender will take back the property and any liability related to the property will simply disappear. However, before proceeding down this road, we suggest you consult with an experienced Florida real-estate litigation attorney concerning the legal implications associated with a foreclosure.

The term DEFICIENCY JUDGMENT refers to a mortgage lender’s judgment against the borrower for the difference between the outstanding balance of the mortgage, plus costs and attorneys fees, and the value of the property foreclosed on the date of the foreclosure sale.

In Florida, a mortgage foreclosure does not automatically result in a deficiency judgment. To obtain a deficiency judgment against the borrower involved in a foreclosure, the mortgage lender must file a motion for deficiency after the foreclosure sale has taken place, and the court is then required to hold a separate evidentiary hearing on the lender’s request for deficiency liability. At that hearing, the lender has the burden of providing the court with evidence that the property’s value on the sale date was less than the balance owed. At that same hearing, the borrower also has the opportunity to present evidence which may refute the value alleged by the mortgage lender. If the court determines that the property was worth less than that of the note balance, the court will likely grant the mortgage lender’s motion for a deficiency judgment. It is important to note that the ultimate determination of value and whether to enter a deficiency judgment is within the sole discretion of the presiding judge as per Florida Statute § 702.06.

The only good news in this type of scenario is that you cannot go to jail for failing to pay a debt or a judgment. However, if judgment is entered against you and you do not pay the outstanding debt, that information can be reported to the credit bureau and made a part of your credit history for up to seven years. Further a lender who is successful in obtaining a deficiency judgment can require you to attend a deposition and give information about your income and assets. The court can also require you to provide written verification or testimony about your finances.

Finally, if a deficiency judgment is entered against you, garnishment law allows the judgment creditor to obtain a continuing writ of garnishment. This writ may order your employer to deduct money directly from your periodic wages until you have paid off the judgment. Or, in the alternative, control of your bank account may be taken in an effort to pay off the judgment. A judgment creditor may go as far as to pay a bond to the local sheriff in order to seize any personal property owned by a judgment debtor so that it can be auctioned and the proceeds applied to pay the judgment.

So, as you can see, losing your property to the lender in a foreclosure sale may really only be the beginning of a long and relentless chain of legal consequences.

August 2009 Newsletter

1. I’ve been robbed (by my bank and it is legal!) Garnishments and Set-offs

The other day a client literally ran into my law firm visibly shaken. He asks to see me immediately. My secretary whisks him into my office and before he even takes a seat, he exclaims that $6,000 disappeared from his checking account. I asked him to show me the bank statement, and a debit was reflected as going directly to the same bank. I asked him whether he was delinquent on any loans owed to the same bank. He said that he was six months late on an equity line of credit on his home which was owed to the same bank where he had his checking account.

This debit which looks and feels like a reverse bank heist, is actually legal, and it is called a set-off. A bank has a right to remove funds on deposit in an account at the same bank as a set-off against delinquent obligations owed by the depositor to the bank. This set-off right is supported by statute, common law and case law precedent. There are certain exceptions to a set-off but these exceptions are generally limited in scope to escrow accounts, also called special-purpose accounts.

Moral of the story: if you are delinquent on a car loan, mortgage loan or even a credit card to a bank where you also have a checking account, move the money in your checking account to another bank immediately!

The set-off right does not extend to deposit accounts at other banking institutions. Generally, for a bank to collect monies from a debtor who has funds in another bank’s deposit account, the bank must obtain a civil court judgment and subsequent to that, the bank must obtain an order for writ of garnishment.

In many states the civil court system is log jammed with foreclosure cases and obtaining judgment can take months. Getting the subsequent writ of garnishment to enforce the judgment can take even longer. Meanwhile, there are many limitations to the right of garnishment. For example, income benefits from insurance contracts, unemployment benefits, workers compensation benefits and retirement accounts are not garnishable. In Florida, garnishment cannot be executed against a head of household if the head of household earns less than $500 per week. Also in Florida, personal property valued up to $1,000 that is also part of the debtor’s wages is not garnishable.

So what do you do if you are facing an order for writ of garnishment: go see your friendly neighborhood consumer bankruptcy attorney immediately! Garnishments are a reality in this recession, and they will only become more prevalent because of the sheer number of deficiency judgments that are outstanding after millions of foreclosures have run their course.

A deficiency judgment can result when a bank obtains a foreclosure judgment and then auctions the real estate asset for less than what the debtor owed. Once the amount of the loss is identified, the bank can seek an order for deficiency judgment, and thereafter the bank can get an order for writ of garnishment to enforce the deficiency judgment.

The best defense against a writ of garnishment to enforce a deficiency judgment is to never let a deficiency judgment be entered. A short sale will result in the dismissal of a foreclosure action and thereby terminate the threat of a deficiency judgment. A deed-in-lieu of foreclosure will generally do the same thing. Finally, a savvy foreclosure defense attorney can negotiate away a deficiency judgment in a foreclosure action by agreeing to an order to foreclosure judgment with a waiver of deficiency in exchange for a speedy foreclosure sale.

If you were not successful with a short sale or did not hire a foreclosure defense attorney, review the docket of your foreclosure action and see a bankruptcy attorney immediately. The banks are enforcing deficiency judgments, and they are getting writs of garnishments. Also, banks are obtaining writs of garnishments on delinquent credit card judgments, car loan deficiency judgments and boat loan deficiency judgments.

In conclusion, be careful because the banks are playing hard ball.

By Erik Wesoloski
Attorney
Wesoloski Carlson P.A.

July 2009 Newsletter

1. Obama’s New Mortgage Incentive to Facilitate Modifications

President Obama’s latest set of incentives are designed to facilitate loan modifications with second mortgage servicers. This new plan builds on the Making Home Affordable (MHA) plan unveiled in February. Pursuant to this new program, the government will provide the servicer of the second mortgage with $500 upfront and $250 a year for three years for the successful modification of the loan. Additionally, the administration is unveiling a separate set of incentives for second mortgage servicers to extinguish the liens. Major U.S. lenders such as J.P. Morgan Chase, Bank of America, and Wells Fargo, have agreed to adopt the program, and it can be expected that many others will follow suit.

The Obama Administration’s set of incentives also includes one for servicers and lenders participating in the Hope for Homeowners program. Under this program servicers must agree to modify second mortgages where the first has been successfully modified. To qualify, servicers must extend the term of the second mortgage and reduce interest to match the first mortgage. If conditions are met, the government will share the cost with the servicer of reducing interest to 1% for amortizing loans and 2% for interest only loans. Announcements regarding these plans were made jointly by the Department of Housing and Urban Development and the Treasury. More information can be found on their web sites.

By Karla Burgos
Attorney
Wesoloski Carlson, P.A.

2. Service of Process

Service of process in the State of Florida is governed by Florida Statute, Title VI, Chapter 48. Service is proper when made by delivering the summons to the person to be served with a copy of the complaint, petition, or other initial pleading or paper or by leaving the copies at his or her usual place of abode with any person residing therein who is 15 years of age or older and informing the person of their contents. The statute also allows for substitute service. It states that substitute service may be made on the spouse of the person to be served at any place in the county, if the cause of action is not an adversary proceeding between the spouse and the person to be served, if the spouse requests such service, and if the spouse and person to be served are residing together in the same dwelling. Also, substitute service may be made on an individual doing business as a sole proprietorship at his or her place of business, during regular business hours, by serving the person in charge of the business at the time of service if two or more attempts to serve the owner have been made at the place of business.

If a diligent effort at personal service of process is attempted and cannot be made, Florida Statute allows for constructive service or service by publication to enforce any legal or equitable lien or claim to any title or interest in real or personal property within the jurisdiction of the court or any fund held or debt owing by any party on whom process can be served within this state.

Foreclosure service is sometimes very difficult. For example an owner of investment property may not reside in the actual property that is being foreclosed, or has abandoned the property, or may not even reside in the United States. In the Miami-Dade Circuit Court there are over 15,000 foreclosure complaints filed this year that have not yet been served. In Florida, if a homeowner is not served within four months of the filing of the complaint the case is subject to dismissal. This figure is also a concern because some of these cases are subject to constructive service and there is the possibility that a Default Summary Final Judgment may be entered without the property owner aware that a suit was even filed against them.

By Javier Gutiérrez
Attorney
Wesoloski Carlson, P.A.

3. KEEP IT FOR LESS: Minimizing Secured Debt through a Chapter 13 Bankruptcy

The United States Senate recently rejected the Cram DownBill, (S. 61 / H.R. 200), which would have allowed bankruptcy judges cut the principal on primary loans when rewriting the terms of mortgages for struggling borrowers. Despite the bill’s failure, several options still remain for Chapter 13 filers, such as second loan lien slice offs and cram downs on other types of debts.

Liens can be sliced off of the debtor’s assets in Chapter13 when there is not enough equity in the asset to provide security for the full amount of the note related to the lien. A second lien mortgage is any mortgage that is subservient to the main or first mortgage on a piece of real property. A Chapter 13 filer may petition the Bankruptcy Court to slice off the second lien or other subservient liens which are lower in priority than the first lien, or primary mortgage. The first lien could then remain as the only priority for the debtor to repay in order to maintain the property. Once sliced off, a second lien essentially becomes unsecured debt, like credit card debt, which is able to be discharged. A second lien that is sliced off will likely receive some form of partial payment through Chapter 13 plan, but only after other secured debts are paid.

In contrast, the term “cram down” refers to the Chapter 13 provision that allows debtors to retain collateral as long as they offer (often a full) repayment of the current fair market value through their repayment plan which typically consists of five years (60 months). The outstanding debt is crammed down on the sometimes unwilling creditors because the amount to be repaid may not reflect the original amount borrowed. A cram down effectively reduces the amount of the secured claim on the property at the time the bankruptcy plan is confirmed. Secured debts that may be crammed down can potentially include, but are not limited to, those for investment homes, cars, boats, furniture and electronic equipment.

June 2009 Newsletter

1. Proposed Legislation Permitting First Mortgage Cram Downs Under § 1322(b)(2)

On Thursday, April 30 2009, the United States Senate voted against a controversial bill that would have empowered Chapter 13 Bankruptcy judges to reduce first mortgage principal balances on primary residences to better reflect their current values. The proposed legislation referred to as the mortgage “cram-down” law had previously passed the House of Representatives with a vote of 234-191. Although the bill seemed to be great news for people living in high foreclosure states like Florida where property values have plummeted, it is important to understand that not all debtors would have been presumptively eligible to modify home loans under the new law. What the bill proposed on its face was the removal of the anti-modification provision of 11 USC 1322(b)(2), which presently disallows modification of claims secured by the debtor’s primary residence.

However, the bill also set forth several requirements intended to prove that a debtor was unable to cure arrears and maintain monthly mortgage payments as they come due in the future. For example, the homeowners needed to show that they had tried to negotiate a voluntary loan modification with their lender. Another amendment required that the Bankruptcy Judges verify that a homeowner actually sought a modification before entering the bankruptcy process and the same Judges would haveto perform a balancing test involving a person’s income and their monthly mortgage payments before deciding whether an interest rate reduction was feasible. If after these guidelines were met leaving a debtor with the opportunity for a principal reduction, Bankruptcy Judges would then have to use Federally approved appraisal guidelines to determine a home’s current market value and there was a cap on the amount a mortgage could actually be reduced.

As such, although the proposed legislation seemed promising and would have likely helped many homeowners, it wasn’t necessarily going to provide relief for all those who turned to Bankruptcy in an effort to save their home. Now, as this has become a moot point, we will need to wait and see if and when the bill is going to be reworked for a comeback.

2. The Obama administration expanded its $50 billion mortgage aid program.

On Thursday, May15, 2009 the Obama administration expanded its $50 billion mortgage aid program, announcing new measures that would help homeowners avoid a foreclosure if they don’t qualify for other assistance. The initiatives announced Thursday are aimed at ineligible homeowners: borrowers who are unemployed or owe significantly more than their homes are worth.
Generally, there are two options for them to avoid foreclosure. The homeowner can sign the property title over to the lender in what is known as a deed in lieu of foreclosure. Or, with the lender’s permission, the homeowner can sell the property for less than the value of the loan through a short sale.

Short sales are often seen as preferable to foreclosure because they don’t harm a borrowers’ credit record as much as a foreclosure. The new program would install standards that would speed the process for buyers and sellers by making it more efficient. Under the plan, incentives would be provided for mortgage servicers and borrowers to pursue short sales. Financial incentives include $1,000 to servicers for a successful short sale, and borrowers may receive up to $1,500 to assist with relocation expenses.

So far, 14 companies have signed up and will be paid for each loan they modify. And to further entice mortgage companies to participate, the government is offering payments totaling up to $10 billion to compensate them for the risk of falling home prices.

May 2009 Newsletter

1. How does Loan Modification help the consumer?

Indeed many lenders are granting loan modification in order to help homeowner retain ownership. If you have a mortgage loan, you shall, in some ways, be able to modify. It is a great option to avoid foreclosure and maintain ownership of your property.
To many families the effect of foreclosure can be far reaching and even cause a complete disintegration of the family. The media have reported suicide cases linked to the effect of foreclosure. It is a reality that some lenders will reduce principal to facilitate a loan modification. Options Arms were originally designed to accommodate sophisticated borrowers and investors. The abuse of Options Arms by unscrupulous mortgage brokers and lenders catering to unrealistic borrowers created more chaos in the real-estate market.

For many homeowners, it is a win situation to have the possibility to re-amortize their loan to a longer 40 or 50 years having their owed obligation to the bank added to the principal so that their will retain ownership, afford their monthly payment, not disrupt their family dynamics and further aspire to salvage the American Dream of homeownership.

Many lenders, with the assistance of the stimulus plan, are awarding better and better loan modifications. We have assisted many of our clients in obtaining modification with terms as low as 1% interest payment for the term of the loan and reduction of principal owed.

It is now a proven truth that loan modification is already helping many families re-stabilize their finances , maintain ownership of their home , revitalize their credit rating and most of all help them weather the storm.

2. Brief Synopsis: F.S. 501.1377 violations involving homeowners during the course of Residential foreclosure proceedings

On October 1st, 2008 the State of Florida enacted a new law aimed at protecting homeowners who are in default on their mortgages, in foreclosure, or at risk of losing their homes due to nonpayment of taxes from fraud, deception, and unfair dealings with foreclosure rescue consultants or equity purchasers.

Some of the protections in the new law will prevent con-artists from rescuing homeowners by signing them into predatory loans, getting them to sign over their property unwittingly, or just pocketing a fee to negotiate with the lender and then disappearing.

The new law imposes two requirements on foreclosure rescue consultants, which the law defines as anyone who is offering to help stop, delay, or avoid foreclosure. The first requirement is that the consultant must provide a written agreement, give the homeowner a full day to review it before signing it, and then allow the homeowner three days to cancel after signing. The written agreement must fully describe all services to be provided and disclose the right to cancel the arrangement. The second requirement is that the foreclosure consultant cannot ask for or accept any fees for services until the consultant has provided all services listed in the agreement.
Anyone violating the provisions of the new law commits an “unfair and deceptive trade practice,” and could be sued by victims or by the state for those violations. Violators could be liable for damages, attorney’s fees, and civil penalties of up to $15,000 per violation.

3. Fannie Mae Pilot Program: Pre-approved Short Sales

The Wall Street Journal first reported in late 2008 that Fannie Mae would be pairing up with Countrywide Financial, now Bank of America, on a pilot program that would run from the end of December 2008-March 2009. Specifically, under this pilot program, Countrywide would determine the acceptable listing price for a given property, and then, the buyer would be sought using that “pre-approved” price. The pilot program was to be limited in scope, involving a few cities only, and the selected properties were exclusively Fannie Mae backed loans serviced by Countrywide.
Now, that the pilot has been completed, Fannie Mae is analyzing the program’s success to decide whether it will formulate a similar, nationwide, program Such program would streamline the short sale process, so that the parties to the transaction could close on a short sale in less than 30 days, rather than the typical 60-90 days from date of submission of the short sale offer and financial package. Fannie Mae can follow in Freddy Mac’s footsteps, in this regard, as they have been having considerable success with these streamlined short sales.

While this program sounds promising, real estate professionals have expressed skepticism in one regard. There is great concern that Fannie Mae’s pre-approved short sale prices will be over market value. It appears that Fannie Mae has gained a reputation for over-valuing homes. If this was to happen, the program would not be helpful to anyone. Hopefully, however, the mortgage giants received that memo, and will fairly price homes, so as to make this program one of the first truly promising solutions to this real estate market crisis.

March 2009 Newsletter

The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you free written information about our qualifications and experience. Outcome or results are not guaranteed.

ARTICLES
1. Assignment of Mortgage.

2. What is the attorney-client privilege? Does a realtor really represent you? Why hire an attorney and not a mortgage broker?

3. Tax Consequences: Foreclosure v. Short Sale

1. Assignment of mortgage

Foreclosure is the process by which a financial institution (e.g., your bank/loan servicer) can reclaim your home and/or land if you fail to make timely mortgage payments. In a foreclosure action, the bank files a complaint with the state court to foreclosure the property. Oftentimes, banks do not have the right to bring such action due to lack of an assignment of mortgage. An assignment of mortgage is a written document which serves as proof of transfer of a loan obligation from the original borrower to a third party.

First and foremost, it is important for you to understand the legalities of foreclosure and your rights for mortgage foreclosure solutions. There are two basic documents involved in a bank loan transaction, the promissory note and the mortgage. The note is a contract that details the terms of a promise by you to pay a sum of money to the bank. The terms of a note typically include the principal amount, the interest rate if any, and the maturity date. It also may contain provisions concerning the bank’s rights in the event of default, which may include foreclosure of your property. The mortgage is a method of using property, real or personal, as security for the performance of an obligation, usually the payment of a debt. It gives the bank the right to take away your property if you do not pay as it is specified in the note.
Essentially, the mortgage is what gives the bank the right to foreclose.

The note, by itself, is considered to be an unsecured debt. On the other hand, the note accompanied with the mortgage comprises a secured debt. The difference between these two is that a secured debt allows the bank to force sale of the property, which in turn permits satisfaction of the loan in case of default by you, the borrower. However, without the mortgage, banks cannot force sale of the property to satisfy the debt.

In many cases, when a bank lends you money to purchase a home, it will subsequently sell the note along with the mortgage to investors in the secondary market. The secondary market manages mortgages that were originated in the primary market. It consists of investors, both public and private, who buy the mortgage notes. This allows the mortgage lenders to replenish the cash reserves, so that they can originate more mortgages to more consumers. In this way, the investors profit from the interests that the mortgages charge.

Furthermore, it should be noted that when a loan is sold in the secondary market, the bank is no longer the owner of the note and mortgage. However, the bank’s rights under the mortgage are not automatically assigned to the investors. In order to assign such rights, an assignment of mortgage is necessary. Generally, a title search of the property is conducted to determine whether an assignment of mortgage has been recorded. If an assignment does exist, then a defense is available to delay your case and/or prevent foreclosure of your property.

Once your situation is completely assessed, a mortgage foreclosure solution can be recommended. We are here to work on your behalf to come up with the best course of action to prevent foreclosure. Our team of attorneys specializes in helping clients who have fallen behind on their mortgages payments and who wish to avoid foreclosure.

2. What is the attorney-client privilege? Does a realtor really represent you? Why hire an attorney and not a mortgage broker?

The attorney-client privilege is the basis for which confidential communication must be protected when legal counsel is sought. The idea of the privilege is that it belongs to you, not the attorney, and hence only you may waive it. The confidential communication covered by this privilege may be written or oral, but it must occur under the existence of legal counsel. It also covers the initial consultation with a potential attorney, even if you later decide not to retain the attorney’s services. This important privilege extends beyond death and will only be waived under those circumstances in very rare cases.

There are limits to this privilege that may apply depending on the situation being adjudicated. For instance, confidential disclosure about a future crime is not protected as the attorney is required to reveal such information to enforcement officials. However, communications regarding past crime or fraud are within the attorney–client privilege and may not be disclosed without your consent. Thus, said privilege is the strongest where a client seeks counsel’s advice to determine the legality of conduct before taking action. If the attorney breaks the privilege without your consent or court order, you can seek to suppress the attorney’s testimony or seek to have the case dismissed. Moreover, you could sue the attorney for malpractice for invoking the privilege without court order or your consent.

It is important when hiring a realtor to decide how the realtor will be working for you and what duties they do or do not owe you. In Florida, realtors are presumed to be “Transaction Brokers,” unless a single agent or no brokerage relationship is established in writing. A transaction brokerage is a form of limited representation which does not create a fiduciary relationship. The transaction broker does not affirmatively represent you, and no fiduciary duties exist, except for the duty of accounting and the duty to use skill, care, and diligence. Thus, the transaction broker is not a fiduciary of any party.

In contrast, a fiduciary relationship does exist between you and your attorney. Remember that the attorney-client relationship is one of confidence meaning that an attorney cannot divulge any information obtained in the course of representing you, unless otherwise agreed. It allows you to be open and honest with your attorney in order for you to get the best and most competent legal advice and representation.

3. Tax Consequences: Foreclosure vs Short Sale

A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed. If you transfer title on your home, whether voluntarily through a warranty deed or grant deed, or involuntarily through foreclosure, you might be subject to taxes, even if you sold your home at a loss, either on a short sale or by foreclosure.

Too often, real estate practitioners are unaware of the tax liabilities arising from the cancellation of debt and fail to advise their clients accordingly. Whenever real estate is sold, whether in a standard transaction or foreclosure auction, there are potential tax consequences for the seller. The IRS considers any canceled mortgage debt ordinary income, which means that the amount forgiven is taxed at the same rate as the seller’s salaries. In addition, the IRS will require the lender to file a 1099-C form, thus, the seller will receive a copy of the same to use in filing income taxes.

For purposes of illustration, assume that the balance of the mortgage is $300K, the short sale accepted by the bank is $260K, and the property sold at the foreclosure auction for $260K. Keep in mind that the amount of the debt canceled or forgiven will differ between a foreclosure and a short sale. The short sale amount is the amount the lender has agreed to forgive you from the sale of your home prior to being foreclosed.

For instance, if you and the lender work out a short sale before the foreclosure and the bank accepts $260K when you owed $300K, then you would have income to show.

The difference between what you owe and what the bank accepts is counted by the IRS as forgiven debt and is taxable income. It is as if the lender gave you $40K, which was then used to pay down the mortgage. However, this is only if there is an agreement between you and the bank to proceed with a short sale. Otherwise, if such agreement does not exist, then you do not receive the forgiven debt.

In the case of a foreclosure, if you owe $300K and the house was purchased at the foreclosure auction for $260K, there is no tax due. In this situation, where the house is ordered to be sold to satisfy the mortgage debt, the bank probably had a judgment against you for the full $300K owed on the mortgage. Even though the house was sold for a loss at the foreclosure auction it does not mean that the bank forgave any of the debt. The house was only sold for less than what was owed. Therefore, no portion of the amount owed was forgiven and there is no taxable income. Thus, there is just a loss on the forced sale of the property. As a result, you will not be responsible for paying the difference between the $300K that was owed and the $260k that the property was sold for at the foreclosure auction.

Be aware that if the lender forgives you or writes off your debt it must send you and the IRS a Form 1099-C at the end of the year. While you may not receive this form from the creditor, the creditor may have submitted one to the IRS regardless. Thus, it is imperative for you to list the income on your tax return. If not, you could get a tax bill or, worse, an audit notice, which in turn could end up costing you more than just the original tax bill.

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