2009 Pro Bono Erik Wesoloski Foreclosure Award

December 22, 2009

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

December 22, 2009

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
Wesoloski Carlson P.A.

Press Release: Moving on up.

December 22, 2009

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

December 22, 2009

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

December 22, 2009

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
Wesoloski Carlson P.A.

July 2009 Newsletter

December 22, 2009

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
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
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

December 22, 2009

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.