The FICO credit score and strategic default


Syzmbark, Poland, features a truly upside-down house. More typical is homeowners with upside-down mortgages. Many of these owners are walking away from their homes with "strategic foreclosures."
Considered a viable strategy for managing troubled assets in an era of high unemployment, record foreclosures and government bailouts, millions of Americans are considering strategic defaults.

With almost 12 million mortgages underwater, a growing number of homeowners are simply walking away from the places they call home.

Strategic defaults, also known as strategic foreclosures, often take mortgage lenders by surprise because homeowners generally have had excellent credit histories and have previously met all their other financial obligations.

One of the distinguishing factors between a strategic default and other mortgage defaults is that the strategic default is a deliberate business decision. The homeowner has the ability to make payments but simply decides not to because the property value is less than the balance owed on the mortgage.

According to a recent Experian-Oliver Wyman Market Intelligence Report, strategic mortgage defaults rose 53 percent to 355,000 foreclosures in the first half of 2009. Prior studies found that 588,000 strategic defaults occurred in 2008, double the number that took place in 2007.

The number of strategic defaults is predicted to double again by the first quarter of 2013.

With more and more homeowners contemplating strategic default, mortgage lenders have sought out predictive indicators to discourage and prevent them by utilizing advanced credit scoring technologies.

A dynamic three-digit number reflecting an individual’s ability to repay debt, credit scores are assigned by the Fair Isaac Corporation. Credit scores play a crucial role in determining whether a borrower is eligible for a loan, the loan amount, interest rates and repayment terms.

Fair Isaac — the creator of the widely-used FICO credit score — recently introduced an enhanced version of its popular scoring model, the FICO 8 Mortgage Score. This enhanced model has made it more difficult for most consumers to secure mortgage loans.

Enhanced to better anticipate consumer behavior amid the foreclosure crisis, the FICO 8 Mortgage Score has been fine-tuned with predictive powers to assist lenders in determining which borrowers are most likely to strategically default.

Predicted to save over $1 billion by preventing 115,000 foreclosures, FICO officials claim their new model is 15- to 25-percent more accurate in predicting strategic defaults than its predecessor.

“The FICO 8 Mortgage Score’s broad availability means that all U.S. lenders and servicers can now easily access scores that are fine-tuned for mortgage performance,” said Jordan Graham, executive VP of Scores and president of Consumer Services at FICO. “By combining this superior predictive performance with the FICO Economic Impact Service, lenders are able to adjust policies and strategies quickly based upon forward-looking economic modeling.

“This is what we mean by the FICO analytic advantage: the ability to use the most advanced predictive analytics to compete and win in this highly challenging environment.”

In addition to having drastically reduced home values on an underwater mortgage, researchers have found other distinct character traits that identify potential strategic defaulters making this decision. Strategic defaulters typically have higher FICO scores, lower revolving balances, fewer instances of exceeding limits on credit cards and lower overall retail credit card usage.

In fact, their behavior is almost opposite to those of distressed defaulters. Strategic defaulters default “because they believe it is in their best financial interest, and because they believe the consequences will be minimal,” said FICO labs head and FICO chief analytics officer Dr. Andrew Jennings. Homeowners plan ahead for the credit hit they will take upon default by purchasing a car, new house and opening new credit cards before they “do the math and walk.”

“Many homeowners are being told to stop paying their mortgages,” said Carlos Reyes, a foreclosure defense attorney with the Reyes Law Group in Fort Lauderdale. “Homeowners should consider their rights and contemplate the long-ranging consequences of such an action. Making the decision to simply walk away may not be in their best interest.”

Strategic default may make “walking away” from a bad debt seem like a good thing, but it can have long-ranging consequences. Absent a deficiency judgment, homeowners will certainly suffer with lower credit scores and a drastically reduced ability to secure future credit. Higher interest rates and unfavorable terms could end up costing more in the long run than continuing to pay on an upside-down mortgage.

“Homeowners should explore all their options before strategically defaulting,” said Reyes.

Foreclosure Fraud Case Settled at the Florida Supreme Court


In a matter of “great public importance” that has gone largely ignored this week, the high-profile foreclosure fraud case of Roman Pino versus The Bank of New York has been settled.  According to the Florida Supreme Court, the matter was dismissed upon Pino’s “Notice –Dismiss (Voluntary Stipulation)” on July 25th.

The opportunity for a precedent setting opinion for attorney Thomas Ice, of Ice Legal, whose boutique litigation firm specializes in uncovering forged and fraudulent foreclosure documents, must mean outright success for Pino. 

Although details of the settlement were not provided in the brief stipulation before the high court, one can only speculate whether Pino received a mortgage modification, principal reduction, right to short-sale, waiver of deficiency balance, or his home free and clear. 

One thing is clear, though.  Any settlement agreement between the parties would contain a confidentiality agreement.

Neither Ice, nor Enrique Nieves – Pino’s attorney of record – were available for comment despite several messages left at Ice Legal and on their cell phone voicemail.

An appeals court in February requested that the Florida Supreme Court consider the case of Greenacres homeowner Roman Pino as a matter of “great public importance.” The decision by the 4th District Court of Appeal in West Palm Beach was unusual as neither the bank nor the homeowner had requested such a review.

“We conclude that this is a question of great public importance, as many, many mortgage foreclosures appear tainted with suspect documents,” the appeals court wrote in certification to the Supreme Court.

Had the matter been adjudicated on its merits and a decision rendered in favor of Pino, thousands of foreclosure cases could have been impacted as allegations of document fraud and robo-signing run rampant throughout the nation.

According to land records, Pino purchased his Greenacres home in July, 2006 for $203,000 by securing a $162,400 mortgage with Silver State Financial Systems. After falling behind on the mortgage, the Bank of New York moved to foreclose in October, 2008.

In their foreclosure complaint, the Bank of New York alleged that it was the owner of Pino’s mortgage note through an assignment from another lender, but did not include said assignment as part of its original complaint.

Pino retained Ice, who in moving to dismiss the complaint, argued that the bank needed an assignment in order to have standing to foreclose.

Attorneys from the Law Offices of David J. Stern in Plantation filed an amended complaint and attached an unrecorded mortgage assignment “which happened to be dated just before the original pleading was filed,” the appeals court wrote.

Stern’s now defunct law firm is one of several foreclosure mills throughout Florida that are under investigation by Florida Attorney General Pam Bondi.

Just as Pino’s attorneys were set to take depositions of Stern employees to determine how the assignment was created, the Bank of New York dismissed its foreclosure action.  Ice had wanted an opportunity to prove that Pino was the victim of fraud but was unable to do so because of the voluntary dismissal. The bank refiled the foreclosure in August 2009, and that case is pending.

In its written opinion, the Fourth District Court of Appeal agreed with the lower court’s ruling about the dismissal but because of its importance on similar foreclosure matters, sent the case to the state’s highest court in Tallahassee. One appellate judge, Gary Farmer, dissented saying he thought the trial judge could have kept the case open to litigate Pino’s claim of fraud.

“I’m not surprised at a settlement of this matter considering the allegations of forged or fraudulent documents and the risk of substantial loss to the bank,” said Carlos J. Reyes, of the Reyes Law Group in Fort Lauderdale.  “As a foreclosure defense attorney, my preference would have been for a written opinion from the Florida Supreme Court, but the client is the ultimate decision maker in any settlement discussions.”

Mortgage and Foreclosure – Florida AG joins Mortgage Foreclosure Multi State Group


Attorney General Bill McCollum announced last week an ongoing effort to rein in mortgage servicers and protect Floridians from purported deceptive and unfair practices. Along with 49 other attorneys general who are part of the Mortgage Foreclosure Multi State Group, McCollum is leading an effort to stop mortgage loan servicers from submitting alleged false affidavits in support of mortgage foreclosure actions.

Homeowners, attorneys and investigators have long alleged that many of the affidavits contained within mortgage foreclosure complaints have been signed without personal knowledge of the facts asserted within them. Having recently come to light is the fact that many of affidavits were signed outside of the presence of a notary public. This process of signing documents without confirming their accuracy has come to be known as “robo-signing” and is in direct violation of Florida law.

In an effort to effectively address and investigate the robo-signing crisis, the Mortgage Foreclosure Multi State Group is now comprised of all 50 state Attorneys General, mortgage regulators and state banks. Led by Iowa Attorney General Tom Miller, plans are being made to speak with all relevant mortgage servicers to determine whether they have properly submitted affidavits or signed notices in support of foreclosure actions.

State banks and mortgage regulators are participating both individually and through their Multistate Mortgage Committee, which represents mortgage regulators from all 50 states. As a member of the Executive Committee, Florida has taken a leading role in this multistate initiative. The Executive Committee is also comprised of Attorneys General from Arizona, California, Colorado, Connecticut, Illinois, Iowa, North Carolina, Ohio, Texas, and Washington; and state banking regulators from the Maryland Office of the Commissioner of Financial Regulation and the New York State Banking Department.

McCollum previously initiated an investigation of the Florida Default Law Group, the Law Offices of Marshall C. Watson, P.A.; the Law Offices of David J. Stern, P.A.; and Shapiro & Fishman, accusing the four firms of faulty foreclosure practices. Those firms are fighting back, with one of the legal showdowns taking place last week in Broward County, where lawyers for David J. Stern presented a motion to “quash” the state’s subpoena.

Ruling for the attorney general in his efforts to subpoena the foreclosure records of Stern’s law firm, Broward County Circuit Court Judge Eileen O’Connor denied the Plantation attorney’s motion to quash McCollum’s subpoena.

O’Connor’s ruling was in stark contrast to an earlier ruling in Palm Beach County, where a judge told McCollum’s lawyers they could not subpoena the records of Tampa-based foreclosure firm Shapiro & Fishman.

Stern’s attorney said he would appeal the case to the 4th District Court of Appeal, meaning the difference between the two cases may become an issue at the appellate level. “We respectfully disagree with the judge’s ruling and plan to file an appeal,” said attorney Jeffrey Tew, who represents Stern.

While O’Connor did not provide a reason for her ruling, Palm Beach County Circuit Court Judge Jack Cox stated that “only the Supreme Court controls the conduct of lawyers in the courtroom and in court proceedings,” and that the attorney general did not have a right to subpoena the records.

Meanwhile, Stern’s support company, the publicly traded DJSP Enterprises, confirmed that it was cutting back 10 percent of its workforce. DJSP had grown to about 1,100 employees during the height of the foreclosure crisis. Lawyers from Greenberg Traurig were also retained to mount an internal investigation into allegations that its employees helped fabricate court documents in foreclosure cases.

If you would like to learn more about the mortgage foreclosure crisis or to file a complaint with the Attorney General’s Office, visit their website at www.myfloridalegal.com or call (866) 9-NO-SCAM (866-966-7226).

Source:  The Credit Report with Bill Lewis – Highlands Today, an edition of the Tampa Tribune (Media General Group) – http://www2.highlandstoday.com/content/2010/oct/17/florida-ag-joins-mortgage-foreclosure-multi-state-/  To review Bill Lewis’ entire consumer protection series, please visit http://www.williamlewis.us

William E. Lewis Jr., is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.

Foreclosure defense: Process servers allegedly filing false affidavits


Recent reports indicate that approximately 462,339 foreclosure cases were pending in Florida as of June 30.

Following foreclosure moratoriums by Ally Financial, Bank of America, J.P. Morgan Chase, and PNC Bank, the settlement of deceptive marketing charges by Wells Fargo, and the Attorney General’s investigation into faulty foreclosure practices at the Florida Default Law Group, the Law Offices of David J. Stern, P.A.; the Law Offices of Marshall C. Watson, P.A.; and Shapiro & Fishman, LLP, investigators have turned up a new problem.

Process servers are now alleged to have filed false affidavits in support of personal service in foreclosure matters.

Foreclosure defense attorneys claim to have documented a number of cases where process servers filed false affidavits. While investigating the law firms that employed “robo-signers,” state investigators are also closely examining service of process in a number of cases.

Recent foreclosure defense cases allege homeowners never received a court summons even though they still occupied their home, while others allege that process servers did not take the required steps to locate them or filed false affidavits about whom or when they delivered papers.

According to the lawsuits, some process servers violated rules related to the personal delivery of legal papers. Like robo-signing foreclosure documents without reviewing them for accuracy, a number of homeowners are now alleging they were never served with foreclosure papers.

Once rare, “bad service” of process has become more common as lenders and their attorneys speed thousands of foreclosure cases through “rocket dockets” that are designed to clear an ever growing backlog.

“With the foreclosure debacle, it’s become more complicated,” says Carlos J. Reyes, a foreclosure defense attorney with the Reyes Law Group in Fort Lauderdale. “For the sake of expediency, process servers are being rushed. As they are paid by the piece, they have an interest in earning a higher income.”

Homeowners involved in foreclosures are required to receive a summons and complaint personally delivered by a process server. Repeated attempts at personal service are required before court permission can be obtained to publish a legal notice in the alternative.

Some process servers have allegedly cut corners. One recently claimed she could not find a homeowner facing foreclosure on a second home, despite conducting extensive record checks. This held true even though the foreclosure complaint clearly provided a primary home address in Connecticut.

Lenders and attorneys typically contract their summons delivery work to large process serving firms, who sub-contract to private independent servers. In her deposition to state investigators, former Stern paralegal Tammie Lou Kapusta, testified that summons serving procedures were a “complete mess,” with homeowners routinely complaining they never received papers.

She and another former employee, Kelly Scott, said their managers told them move forward with the foreclosures anyway.

Investigators also questioned staff at Stern’s firm regarding billing practices that involved serving multiple parties at an address and billing for each one.

“Good service of process is crucial”, Reyes said. He has heard of homeowners losing their home because they never received a summons and missed filing dates or court hearings.

While a court summons must be accepted by an adult, state law does not require it to be served upon the property owner. No one has to sign, verifying receipt, “which makes it easier to say the person was served, when they weren’t,” Reyes said.

Laws governing the service of process vary from state to state. In Florida, there is no statewide licensing or regulating body for process servers, and rules vary greatly among the 20 judicial circuits.

Among the largest with operations in ten states is Tampa-based ProVest. Although ownership interest by the law firms has been denied, they maintain support staff at the Law Offices of David J. Stern and Shapiro & Fishman in Boca Raton. Marshall C. Watson also uses ProVest.

While ProVest declined to comment on specific cases, company president James Ward stated they “utilize properly licensed or authorized independent contractors” and require them to “fully comply with state and local guidelines.”

To learn more about the mortgage foreclosure crisis or to file a complaint with the Attorney General’s Office, visit their website at www.myfloridalegal.com or call (866) 9-NO-SCAM (866-966-7226).

Source:  The Credit Report with Bill Lewis – Highlands Today, an edition of the Tampa Tribune (Media General Group) – http://www2.highlandstoday.com/content/2010/nov/07/foreclosure-defense-process-servers-allegedly-fili/ To review Bill Lewis’ entire consumer protection series at the Highlands Today, visit www.williamlewis.us.

William E. Lewis Jr., is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.

Strategic Default and the FICO or VantageScore


Strategic default is a conscious decision to walk away from a mortgage that is underwater. These defaults take lenders by surprise as borrowers often have excellent credit records and meet all of their other financial obligations. The point of a strategic default is to cut losses on a home that has substantially depreciated in value and negative equity that can never be recovered.

Considered as a viable strategy for managing troubled assets in an era of record foreclosures, high unemployment, and government bail-outs, millions of Americans are considering strategic default or strategic foreclosure. With almost 28 percent of all mortgages underwater, a growing number of homeowners are contemplating this strategy.

While borrowers are contemplating strategic default, lenders are seeking predictive indicators to prevent them through advanced credit scoring technologies.

A dynamic number reflecting an individual’s ability to repay, credit scores are assigned by companies like Fair Issac or VantageScore. They play a critical role in determining where an individual is eligible for a loan, the loan amount, interest rates and repayment terms.

Fair Isaac, creator of the widely-used FICO score, recently introduced an enhanced version of its popular scoring model, the FICO 8 Mortgage Score. This model will make it tougher for most consumers to secure mortgage loans.

Offered as a credit rating product directly by the Equifax, Experian and Trans Union consumer reporting agencies, and not nearly as popular, the VantageScore is also undergoing significant changes.

Both credit-scoring models have been enhanced to better anticipate consumer behavior amid a foreclosure crisis and tough economic times. Specifically, they have fine-tuned their predictive powers to assist lenders in determining which borrowers are likely to strategically default.

According to a recent Experian-Oliver Wyman Market Intelligence Report, strategic defaults rose 53 percent in the first half of 2009, to 355,000 foreclosures. Previous studies found that 588,000 strategic defaults occurred in 2008, double the level that took place in 2007.

“Many borrowers are being advised to stop paying their mortgages,” says Carlos Reyes, a foreclosure defense attorney with the Reyes Law Group in Fort Lauderdale. “Making the decision to simply walk away is bad for the homeowner. Borrowers should consider their rights and contemplate the long ranging consequences of such an action.”

While the details of FICO and VantageScore credit scoring models are proprietary, some facets of each are known.

Fair Issac introduced the FICO 8 Mortgage Score in October 2010. VantageScore 2.0 will be introduced next month.

Claiming to save in excess of $1 billion by helping to prevent 115,000 foreclosures, FICO officials indicate their new model is 15% to 25% more accurate in predicting strategic defaults than its predecessor.

“The FICO 8 Mortgage Score’s broad availability means that all U.S. lenders and servicers can now easily access scores that are fine-tuned for mortgage performance,” said Jordan Graham, executive VP of Scores and president of Consumer Services at FICO. “Moreover, by combining this superior predictive performance with the FICO Economic Impact Service, lenders are able to adjust policies and strategies quickly based upon forward-looking economic modeling. This is what we mean by the FICO analytic advantage: the ability to use the most advanced predictive analytics to compete and win in this highly challenging environment.”

When the VantageScore debuted in 2006, it was based on an analysis of 21 million credit files over a two-year period. To devise its new scoring model, dubbed VantageScore 2.0, the company examined a larger set of credit data over a longer period of time.

VantageScore 2.0 is based upon an analysis of 45 million active credit reports. Those reports came from 15 million anonymous consumers whose credit histories were examined across the Equifax, Experian and Trans Union consumer reporting agencies. VantageScore’s updated scoring system also covers overlapping three-year time periods from 2006 to 2008 and 2007 to 2009 to account before and after the recession.

As a result, the improved VantageScore 2.0 has been dubbed a “recession-era credit scoring model.”

“We’ve recently experienced a variety of economic scenarios, including an increase in foreclosures in the housing market and changing payment hierarchy among consumers,” said Barrett Burns, President and CEO of VantageScore Solutions. “Building VantageScore 2.0 using a blend of consumer behaviors from 2006-2009 produces greater score stability over time.”

For consumers, what is most important about the improved VantageScore is that it places more emphasis on certain areas of your credit behavior, and less emphasis on others.

The single biggest change with VantageScore 2.0 is that shopping for credit or opening new accounts could impact more than it had previously. Under VantageScore 2.0, recent credit activities, such as submitting new credit applications, now account for 30% of the score. Under VantageScore 1.0, inquiries and recent credit activities comprised just 10% of the score.

Likewise, account balances and length of credit history are of less significance under VantageScore 2.0. They now account for 9% and 8%, while under VantageScore 1.0, they accounted for 15% and 13% of the score.

FICO scores range from 300 to 850 points. The VantageScore ranges from 501 to 990 points. Even though I manage credit wisely, I was recently surprised to learn that my FICO score from Equifax was 837 while my VantageScore was an almost perfect at 988.

Source:  The Credit Report with Bill Lewis – Highlands Today, an edition of the Tampa Tribune – Media General Group. http://www2.highlandstoday.com/content/2010/dec/05/strategic-default-and-the-fico-or-vantagescore/

To review Bill Lewis’ entire consumer protection series at the Highlands Today, visit www.williamlewis.us.

William E. Lewis Jr. is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.

U.S. Supreme Court Rules Against Debt Collector


Debt collectors can no longer claim ignorance of the law as an excuse for violating the Fair Debt Collections Practices Act (FDCPA) while attempting to collect a debt.

On Wednesday, the United States Supreme Court handed down a ruling that severely restricts the “bona fide error” defense under the Fair Debt Collection Practices Act for debt collectors that send erroneous collection notices.

In a 7-2 ruling, the high court ruled that collection law firms could not use misinterpretations of the law in a “bona fide error” defense under the FDCPA.

In the matter of Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, Karen Jerman sued an Ohio law firm for violating the FDCPA when it attempted to foreclose on her home following payment on the mortgage. In its initial collection notice, the law firm sought written proof that Jerman paid her Countrywide Home Loans mortgage. Absent proof of payment or a written dispute within 30 days, the debt would be presumed valid. Jerman hired an attorney to meet the written requirement, although the FDCPA does not explicitly require consumers to submit disputes in writing.

Specializing in real estate and foreclosure law, Carlisle admitted that its initial validation notice intended dispute claims to be submitted in writing. After Jerman sued, the firm argued that it should not be held liable under the FDCPA because the violation was an unintentional or “bona fide error.” Carlisle defended the matter asserting a “safe harbor protection” stating they were unaware that “written” disputes were not required under the FDCPA.

Although consumers are often instructed by debt collectors to submit written disputes, no such language exists under the Fair Debt Collection Practices Act. In this instance, Carlisle argued that said “bona fide error” was the result of a clerical mistake.

The lower court sided with Jerman, noting that while Carlisle had violated the FDCPA, it was not liable under the Fair Debt Collection Practices Act for damages as the violation was unintentional or a “bona fide error.” An appeals court decision affirmed that ruling, sending the case to the United States Supreme Court.

In an opinion written for the 7-2 majority by Justice Sonya Sotomayor, the high court stated that “ignorance of the law will not excuse any person, either civilly or criminally.” Carlisle had argued that misinterpretations of the law were written into the Fair Debt Collection Practices Act. Sotomayor and the majority disagreed, noting that ignorance of the law was not explicitly written into the FDCPA.

Justice Anthony Kennedy, in a dissent joined by Justice Samuel Alito Jr., said the high court’s decision “aligns the judicial system with those who would use litigation to enrich themselves at the expense of attorneys who strictly follow and adhere to professional and ethical standards.”But Sotomayor spoke directly to that objection in the majority opinion, writing, “We do not foresee that our decision today will place unmanageable burdens on lawyers practicing in the debt collection industry.”

“Debt collectors should be treated like anyone else when violating a federal statute,” said Scott Kleiman, a foreclosure defense attorney with Kalis & Kleiman. “The Supreme Court decision keeps intact an important reason for debt collectors to abide by the law. While strong financial incentives encourage the collection of delinquent debts, continued unlawful behavior will not be excused and punished to the fullest extent of the law.”

The case originated when Carlisle – acting as a debt collector – sent a notice and foreclosure complaint to Jerman, requiring her to submit any dispute “in writing” within 30 days. The “in writing” language was included in the notice based upon legal authority from other jurisdictions. 

Although Countrywide Home Loans subsequently dismissed the foreclosure action, Jerman turned to the Icove Legal Group, a Cleveland-based public interest law firm that filed a class-action suit on behalf of her and other homeowners who received the erroneous notice. “This case will have a far-reaching impact within the debt collection industry as consumer laws in a number of states have ‘bona fide error’ statutes identical to the Fair Debt Collection Practices Act,” stated attorney Ed Icove, in applauding the 7-2 majority decision.

The entire United States Supreme Court opinion can be read at http://www.supremecourt.gov/opinions/09pdf/08-1200…

Source:  The Credit Report with Bill Lewis – Highlands Today, an edition of the Tampa Tribune. http://www2.highlandstoday.com/content/2010/apr/25/us-supreme-court-rules-against-debt-collector/columns-welewisjr/

William E. Lewis Jr., is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.

Florida Attorney General Cracking Down on Foreclosure Mills


Homeowners, attorneys, and Florida’s judiciary have long sounded the alarm over insufficient or fraudulent documents being used to take thousands of properties from unsuspecting homeowners in the foreclosure process. Not only has the Florida Supreme Court amended the rules of civil procedure in relation to home foreclosures, judges throughout the state have reversed foreclosure sales, dismissed cases for insufficiency, and created additional steps to ensure the proper filing and disposition of cases.

Coming on the heels of an investigation into the Florida Default Law Group, Florida Attorney General Bill McCollum announced Tuesday that his office has launched a new investigation into allegations of unfair and deceptive actions by three law firms handling residential foreclosure cases in the Sunshine State.

Handling over 35 percent of all foreclosure cases in the state of Florida, the investigation names the Law Offices of Marshall C. Watson, P.A.; the Law Offices of David J. Stern, P.A.; and Shapiro & Fishman, LLP. The Florida based law firms were hired by loan servicers to begin foreclosure proceedings when consumers were in default on their mortgages.

The Attorney General’s Economic Crimes Division is investigating whether documentation may have been fictitiously created and filed with Florida courts to speed up foreclosure processes, potentially without the knowledge or consent of the homeowners involved. Thousands of final judgments of foreclosure against Florida homeowners may have been the result of the alleged improper actions of the law firms under investigation.

Because many mortgages have been bought and sold by different institutions multiple times, key paperwork involved in the process to obtain foreclosure judgments is often missing. On numerous occasions, fabricated documents have allegedly been presented to courts in support of a final judgment against homeowners. The investigation will focus on whether these law firms created and filed improper documentation with Florida courts in an effort to deceptively strip Floridian’s of their homes.

The attorney general’s investigation will also look at whether the law firms created affiliated companies outside the United States where the alleged false documents are being prepared and then submitted to the law firms for use within the Florida court system.

“On numerous occasions, allegedly fabricated documents have been presented to the courts in foreclosure actions to obtain final judgments against homeowners,” stated Attorney General Bill McCollum. “As Attorney General, my job is to protect the rights of all Floridian’s by investigating unlawful activities and putting a stop to deceptive practices. To this end, my office will continue to investigate.”

News of the Florida Default Law Group investigation led to a number of complaints from homeowners and attorneys about the Law Offices of Marshall C. Watson, P.A.; the Law Offices of David J. Stern, P.A.; and Shapiro & Fishman, LLP. Subpoenas were served on each of the law firms demanding documents dating back to Jan. 1, 2008. The subpoenas also seek information on 18 specific foreclosure cases, in addition to general information about the law firms’ operations.

Defense attorneys who have long reported widespread fraud in home foreclosure cases called Tuesday’s announcement from the state’s chief law enforcement officer a “bombshell” for Florida’s foreclosure system.  “The fact that Bill McCollum is expanding his investigation into potentially unfair and deceptive practices should be commended” said Fort Lauderdale foreclosure defense attorney Scott Kleiman of Kalis & Kleiman. “The attorney general doesn’t spend limited state resources investigating these types of cases without reason.”

According to McCollum, 245 complaints have been filed against the Florida Default Law Group while 48 complaints have been filed against The Law Offices of David Stern. The Law Offices of Marshall C. Watson and Shapiro & Fishman each have 12 complaints pending. A number of other complaints are under review and additional subpoenas may be issued.

If you are the victim of a mortgage foreclosure fraud, file a complaint with the Attorney General’s Office by calling (866) 9-NO-SCAM (866-966-7226) or by visiting their website at http://www.myfloridalegal.com.

William E. Lewis Jr., is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues

Strategic Foreclosure 101 – Walking Away From Your Home


Many Americans are wondering how to deal with an underwater mortgage in these tough economic times.  Florida has been hit harder by the housing crisis than any other state in the nation. While some can afford to continue making payments on their home, many across the state have been pushed into foreclosure as home values have decreased anywhere from 15 to 55 percent or more.

Aside from a loan modification, we have all heard the terms foreclosure, short-sale, and deed-in-lieu of foreclosure. Each of these terms spells trouble for the homeowner – loss of home, reduced credit score, and negative social stigma. Although lenders in February filed fewer foreclosure actions in Florida compared to a year earlier, a new strategy is on the horizon, an idea coined “strategic foreclosure.”

If you purchased your home at the peak of the real estate market from 2004 to 2006, your value has substantially dropped. Although irrelevant to some borrowers as they can afford the payment and plan on residing in their home for a decade or more, others have simply stopped paying in the hope of forcing a short-sale or reduction in principal.

Should you walk away from your mortgage even if you can afford to pay? Millions of Americans are asking themselves that same question. Some borrowers feel they have a legal, moral, and ethical obligation to make payments notwithstanding a substantial drop in value. With almost half of the residential mortgages in Florida underwater, a growing number of individuals are contemplating walking away from the place they call home.

If you can resolve yourself to possible litigation and a lower credit score for several years, walking away may be a smart business decision. Right now, only a small percentage of borrowers are contemplating this technique. A recent study, though, found that approximately 32 percent of homeowners nationwide would consider walking away from their mortgage if the value of their home continues to decrease.

While “strategic foreclosure” makes perfect economic sense, many homeowners do not choose this course of action out of shame, guilt and fear. Underwater homeowners continue to stress over their mortgage payments to avoid the consequence of foreclosure and a perceived negative social stigma within the community. This is especially so when a borrower has the financial ability to pay.

Although almost 17.4 million homes nationwide are underwater, one must consider the adverse implications of “strategic foreclosure” before walking away. First, and foremost, is the loss of your home. Have you purchased the home across the street at half the amount of your current mortgage? Do you plan on renting? Are you aware that a “strategic foreclosure” will have the same impact on your credit score as a loan modification, judicial foreclosure, short-sale, or deed-in-lieu of foreclosure? Are you aware that you can be sued for any deficiency balance on your home?

“Borrowers who are underwater on their mortgages would be better off financially if they walked away from their homes,” says Scott Kleiman, a foreclosure defense attorney with Kalis & Kleiman. “They don’t because of their moral and ethical obligation to pay their mortgages.”

Borrowers who had a good credit history before they walk away through “strategic foreclosure” can usually rebuild their good name and reputation within a couple of years. In a recent study commissioned by the global information services company Experian, approximately 588,000 borrowers nationwide simply walked away from their homes in 2008. This is up 128 percent over 2007. From all indications, 2010 will be a banner year as the social stigma of foreclosure and simply walking away from your home will have dissolved amid the mortgage meltdown.

Just like former “Beverly Hills 90210” star Brian Austin Green – who has advanced a “strategic foreclosure” strategy in an effort to short-sale his $2 million Hollywood Hills home – you too can ride the wave of the future.

As a homeowner, you can afford to make your mortgage payments but are underwater to the point of no return. As a borrower, the American dream of owning a home is lost as it will maintain negative equity for a decade or more. “Strategic foreclosure” may be the first step toward a short-sale and walking away from yourhome.

http://www2.highlandstoday.com/content/2010/mar/14/lc-strategic-foreclosure-101/columns-welewisjr/

William E. Lewis Jr. & Associates is a solutions based professional consulting firm specializing in the discriminating individual, business or governmental entity. To learn more, tune into “The Credit Report with Bill Lewis,” a daily forum for business and financial news, politics, economic trends, and cutting edge issues on AM 1470 WWNN.