NEW SURGE IN PHANTOM MORTGAGE FORECLOSURES?

By
Real Estate Attorney with THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY
https://activerain.com/droplet/5dWF

A recent article in the Miami Herald notes the spike over the past 3 months in foreclosure filings in South Florida and other key states.  The article which derives much of its information from reports by Attom Data Solutions shows a more than 35% year over year increase in foreclosures.

The theory for the increases has to do with credit crunches resulting from various economic issues that are causing borrowers to be late with mortgage payments or even underwater (once again).

Our office however is seeing instead the surfacing of old mortgage defaults - defaults that go back as much as a decade - on mortgages that usually have been traded amongst investors.  We call these "Phantom Mortgages".  These investors may feel that the time is right to foreclose and bring the property to market.

So why the delay by the investors?

There can be several reasons for delaying a foreclosure.  Carrying costs is a primary one.  Lenders do not want to pay taxes, insurance, maintenance and association fees on a vacant home.  Delaying foreclosure may not save on real estate taxes or insurance, but maintenance and association fees not being paid for 6, 8 or 10 years is a huge savings.  In addition, the market value is better now than years ago.  So the likelihood of a third party purchase at the foreclosure sale becomes more likely, thus avoiding the lender taking the property back and then having to market it, maintain it, etc. until sale.

Are the lenders barred by the lapse of time?

Foreclosures are based on the non-payment of a promissory note.  The statute of limitation on the enforcement of a promissory note (in Florida) is 5 years after it matures.  The law is generally that maturity is when the note says so (a specific date) or the date the lender accelerates the maturity date because of a default of the promissory note terms.  However the law is now that each monthly default (if default of payment) constitutes a new default even if the note was declared in default and accelerated by the lender.  So a note in default for 10 years can still be the basis of the foreclosure, but the court will only allow the amount to be collected to go back the 5 years from the present time.

So what we are seeing is the surfacing of foreclosures that were dismissed for various reasons and instead of fixing documentation right away, lenders sat on the unpaid mortgages and  now we are seeing the movement of these phantom mortgages.

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Copyright 2018 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make.  This article is for information purposes and is not specific advice to any one reader.

 Richard Zaretsky, Esq., ZARETSKY LAW GROUP, 1615 FORUM PLACE, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660  RPZ@ZARETSKYLAW.COM - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide www.ZARETSKYLAW.com

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Gabe Sanders 09/04/2018 11:00 PM
Topic:
Mortgage / Finance
Location:
Florida
Groups:
Investors
Short Sales and Forclosures ONLY
Florida Realtor® Network
PALM BEACH COUNTY SHORT SALES
Legal Aspects of Short Sales, Foreclosures, Loan Mods
Tags:
florida foreclosure attorney
foreclosure attorney palm beach
florida foreclosure defense lawyer
foreclosure defense lawyer palm beach
mortgage investor representation

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Rainmaker
1,648,641
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

I tell my short sale clients that the light at the end of the tunnel they see is not salvation but an oncoming train - and it is being driven by the bank seeking to foreclose.  I have seen an aggressive uptick also here in the DC metro area

Aug 23, 2018 06:56 AM #1
Rainmaker
280,033
Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney

DC is definitely an area of activity, Lise.

Aug 23, 2018 08:28 AM #2
Ambassador
3,771,263
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Richard- Had not heard of Phantom Mortgages but it's interesting to read about and to note that they are popping up. 

Aug 25, 2018 01:48 PM #3
Ambassador
3,771,263
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

                    

                             Thank you, Richard. 

Aug 25, 2018 05:24 PM #4
Rainmaker
3,183,955
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Interesting observation....and wonder how many other markets will see this activity.

Aug 26, 2018 05:14 AM #5
Rainmaker
4,796,451
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

Thanks for clearing up the mystery of the increasing foreclosures in Florida, Richard.  I saw this statistic in the news and was a bit confused as to why it was happening.

Aug 26, 2018 06:33 AM #6
Ambassador
1,805,285
Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

Not seeing any sign of it here - yet. It's interesting and definitely a good idea to be aware of this - thanks for the explanation too. D

Aug 26, 2018 07:50 AM #7
Ambassador
3,912,285
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Can't say I am seeing this here in SoCal but I may be wrong...seems to be I saw something about the rate of foreclosures increasing here. It's helpful to know about this and add to the knowledge base.

Aug 26, 2018 02:04 PM #8
Rainmaker
487,348
Paula Hathaway, REALTOR, LBA
Douglas Elliman Real Estate - Southampton, NY
...The Most Informed Agent In The Hamptons!

Hi Richard: We have had an uptick in foreclosures--actually we had so few the first go around that I wondered if this may start to happen! I see that in each of our Hamlets here we have at least 3-4 foreclosures a week---that is a huge number here! No one is talking about it though. I have seen many mortgage companies started doing the reorganizing thing about a year ago and sure enough now that the musical chairs has stopped with all the mortgage brokers, now comes the foreclosure avalanche...Great post; thanks for sharing this information!

Aug 26, 2018 02:50 PM #9
Rainmaker
3,172,559
Endre Barath, Jr.
Berkshire Hathaway HomeServices - Beverly Hills, CA
Realtor - Los Angeles Home Sales 310.486.1002

Excellent post and clearly we have virtually no Foreclosures in my market, just as we have virtually no short sales either. Endre

Aug 26, 2018 07:26 PM #10
Rainmaker
280,033
Richard Zaretsky
THE ZARETSKY LAW GROUP - Board Certified Real Estate Atty and AUTOMATED LAND TITLE COMPANY - West Palm Beach, FL
Florida Real Estate Attorney

Kathy

Thank you for the repost - it certainly increased the comments!

Aug 27, 2018 07:19 AM #11
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Richard Zaretsky

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