Reverse Foreclosure Ruling could give embattled associations relief

The days of banks delaying the foreclosure process to avoid financial responsibility for distressed residential properties may be coming to an end.

In a “reverse foreclosure,” a Miami-Dade Circuit Court judge has forced a bank to take title to a property from a homeowners association. The HOA had agreed to waive its rights to the property.

“It’s new, and it addresses what we think is a huge problem in Florida,” attorney Ben Solomon said of the strategy. Solomon and David Arnold of North Bay Village’s Solomon & Furshman represented the South Miami-Dade homeowners group in the case.

The association had foreclosed on the home and obtained title but couldn’t sell it because of the bank’s lien. The bank had foreclosed but hadn’t pursued the case over a period of 2½ years, Solomon said, leaving the homeowner’s association stuck with a home and no one paying dues.

Florida law says that banks are only required to pay 12 months in past-due homeowners’ association dues — the lesser of six months or 1 percent of the mortgage, in the case of condos, Solomon said.

“Their liability is capped. Plus, once they take title, they’re liable for attorney fees and taxes,” he said. “With all their upside-down mortgages, they don’t want to take on that additional liability until they find a buyer. So they’re simply not pursuing the cases they’ve filed.”

“That stalling is crippling our clients,” he said.

Solomon said his firm is taking the most “flagrant” cases to court, telling the judge that as the defendants in the foreclosure, they want a summary judgment against themselves. Then they request an immediate sale date, waiving their rights to a waiting period. He said the firm has filed another 82 similar reverse foreclosure requests in courts around the state.

The association in this case, Keys Gate Community in Homestead, has 3,000 homes and owns title to about a dozen of them through foreclosures, Solomon said. The reverse foreclosure can only be filed after a homeowner is out of the picture and the home is legally the property of the homeowner’s association.

“That waiting period protects the consumer, but banks are taking advantage of the judicial backlog, and then in many cases they are canceling the sale date and resetting it,” he said. “What we did was tell the judge, we don’t need more time.”

HSBC Bank USA, which acted as trustee in the case, declined to comment.

Quick Transfer

Circuit Judge Jerald Bagley granted the homeowners’ association motion, and the title was awarded to the bank the same day.

“We’re not saying they need to complete a foreclosure more quickly than normal,” Solomon said. “But there’s no good reason why that lender has taken 2½ years to foreclose on this particular unit.”

Attorneys familiar with foreclosure cases said the tactic was innovative.

“This was pretty ingenious,” said Alan Kluger, a commercial litigator who has represented financial institutions and associations in foreclosure cases. “It’s basically saying, ‘Hey, they want this [house.] Give it to them.’”

“Banks understand if they take title, they have all these responsibilities, so they decide not to. It’s a business decision,” said Kluger of Kluger Kaplan Silverman Katzen & Levine.”The banks are doing this all over town.”

Jorge Gonzalez del Valle, a foreclosure attorney, also said the case was unique.

“It’s an interesting twist to file for a summary judgment against yourself,” he said. “When banks delay like that, they’re really avoiding their obligations. The people who are getting screwed are the condo associations. What the association has done is get the bank to pay sooner rather than later. The associations are starving right now. They need their dues paid now.”

Solomon credited Miami-Dade Clerk of Courts Harvey Ruvin with helping his client get the title transferred quickly after the judge signed the order. Ruvin said his office is working on ways to limit the number of times and reasons cases can be delayed.

“One of the problems is that we’re setting these cases, and we keep getting a lot of delays and resetting of dates without any basis,” he said. “We’re trying to tighten up the criteria for getting a reset, because those create additional costs.”

There are more than 115,000 open foreclosure cases in Miami-Dade, with 7,000 more being filed each month, he said.

“The quicker we can move these distressed properties through the process and into the hands of somebody who will pay a mortgage and pay taxes and pay their dues, the quicker we can get our economy back on track,” he said.

Bill Raphan of the state condo ombudsman’s office in Fort Lauderdale, said he applauded anything that helped associations struggling to deal with so many distressed properties.

“We get so many calls about these kinds of problems,” he said. “Anything that would provide some kind of relief for these associations that are in such dire straits would be welcome.”

Source: http://www.dailybusinessreview.com/news.html?news_id=60105