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Foreclosures: Good News and Bad News

The good news: the foreclosure rate in Florida is dropping. The bad news: Florida is still 3rd overall in the U.S. for number of foreclosure filings, and the "Orlando-Kissimmee" metropolitan area is the ninth highest, with one in every 117 housing units in foreclosure. RealyTrac released its numbers today and concluded about Florida:

Florida posted the third highest state foreclosure rate, with one in every 168 housing units receiving a foreclosure filing in October. A total of 51,911 Florida properties received a foreclosure filing during the month, a nearly 6 percent decrease from the previous month and a decrease of 4 percent from October 2008. It was the first year-over-year decrease in overall Florida foreclosure activity since July 2006.

According to the article, Nevada and California exceed Florida in foreclosure filings, and four states accounted for 52 percent of the nation’s total foreclosure activity in October: California, Florida, Illinois and Michigan.



Submitted by CFBLA member Walter F. Benenati (wfb@creditattorneypa.com):

I recently had a meeting with John Paré, Regional Deputy Attorney General, to discuss the ongoing problems my clients have faced with debt settlement firms taking advantage of their financial plights. Time and time again, we hear clients tell us how they forked over $5000 to a company only to have them sit idly by while their life goes to shambles. That is usually the point when they come see us for help. 

I am happy to see that the AG's office is starting to fight back against this unregulated field that  has exploded seemingly overnight. Here is the news release:


    ~ Two lawsuits filed alleging excessive fees and conduct defrauding
                      consumers and damaging credit ~

 TAMPA, FL – Attorney General Bill McCollum today announced his office has  filed two lawsuits on behalf of Florida consumers against five debt  settlement-related companies. According to the Attorney General’s  lawsuits, the businesses promised consumers they could pay off their debts  for a fraction of the amount owed, but instead collected large up-front  fees and left customers with little or no money to pay creditors.

 “These victims were hit with a one-two punch: they paid substantial  up-front fees for services not provided as promised, then ended up with  increased debt, ruined credit, lawsuits, bankruptcy and more,” said  Attorney General McCollum.

 One of the lawsuits was filed against Texas-based CSA-Credit Solutions of America, Inc., a self-proclaimed debt settlement industry leader. The lawsuit alleges that CSA unlawfully charges significant advance fees  before completing or, in many instances, commencing performance of its  debt settlement services. CSA offers to settle consumers’ debts at approximately 50 percent of their balance within 12-36 months and, according to the lawsuit, falsely represents the success rate of its program.

 Under the CSA plan, consumers are instructed to stop paying their creditors and start a savings account supposedly to accumulate enough funds to allow CSA to negotiate a lump sum payoff of the debt.  However, for the first three months, CSA withdraws 85 percent of the funds for its  own fees, leaving the consumers with little or no money to negotiate a  settlement with their creditors. Additionally, while the consumer is trying to save enough for the lump sum payoff, he or she may suffer increased penalties for nonpayment to creditors, lawsuits, damage to  credit scores, bankruptcy and more. The Attorney General’s Office has over 140 complaints, but estimates the company has thousands of Florida  victims.

 “We see clients who are desperate for help after being victimized by  disreputable debt relief companies,” said Thomas DiFiore, Staff Attorney  and Team Leader for the Bay Area Legal Services Inc. “The Attorney  General’s consumer protection initiative is exactly what our clients  need.”

 The second lawsuit filed names Clearwater-based ADA of Tampa Bay, Inc., which does business as American Debt Arbitration. The lawsuit also names the company’s principal Glenn P. Stewart, as well as Arizona-based entities Nationwide Asset Services, Inc., Service Star, LLC, and Universal  Debt Reduction, LLC. The lawsuit alleges the defendants promise to help  consumers pay off their debts at significant savings, but fail to  adequately disclose the true cost of their services. Also allegedly withheld from consumers is the fact that the companies collect at least  the first three months’ of payments as fees, in violation of Florida law,  before the consumer can start accumulating any funds for settlement and  before any services begin. During the “savings” period, consumers are  counseled to cease all payments to and communications with their  creditors. As a result, consumers suffer great financial harm and can be subject to increased penalties and lawsuits.

 The lawsuit against CSA has been filed in Hillsborough County Circuit Court, and the lawsuit against ADA, et al has been filed in Pinellas  County Circuit Court. Both lawsuits petition the court for full victim restitution, injunctive relief, and civil penalties for each violation of  Florida’s Deceptive and Unfair Trade Practices Act.

 The Attorney General’s Economic Crimes Division has been focusing on  abuses within the debt settlement and debt relief industries and continues  to actively investigate and pursue cases in this area. Debt relief  services under review include debt settlement, debt management, debt  negotiation, credit counseling, credit repair, and credit card rate  reduction services. The office is currently investigating the practices of  over 70 debt relief companies and is litigating five cases.

 Consumers should be cautious when signing up with debt settlement firms.
 Consumers who have been victimized by these companies or other debt relief  programs are encouraged to file a complaint with the Attorney General by  calling 1-866-NO-SCAM or by filing a complaint online at  http://www.myfloridalegal.com.



Foreclosure Scammer Steals Houses

As a follow-up to my previous post, consider this case from the Tampa Bay area. A St. Petersburg jury found that the owner of a "foreclosure rescue" firm was guilty of scamming a 60-year old widow out of her home. The owner, Gideon Rechnitz, convinced the retired woman to deed her house over to him as part of the foreclosure defense "strategy." The problem was, the woman remained liable for paying the mortgage, and Rechnitz apparently had no intention of ever returning the woman's home to her. This is a cautionary tale for consumers: if you are facing foreclosure and need help, call an attorney and avoid so-called "foreclosure defense" companies.


Mortgage Fraud, Foreclosure "Rescue" Scams are Rampant

Florida Attorney General Bill McCollum addressed the Central Florida Bankruptcy Law Association last Friday at their annual seminar. He noted that Florida is the second highest foreclosure state in the U.S. (after Nevada), and the second highest mortgage fraud state (after California). Not only was there near-record fraud in the making of the mortgages, but now the current schemes center around so-called "foreclosure defense."

Mr. McCollum told CFBLA members that the AG's office is currently prosecuting about 40 criminal mortgage fraud cases, some 40 civil mortgage fraud cases, looking into a further 80 cases where mortgage fraud is suspected, and another some 80 cases of interest where the AG is interested in the initial facts.

McCollum pointed out that pursuant to Florida law, in particular, §501.1377, foreclosure defense firms are prohibited from accepting any payment in advance, no matter what form that payment takes. McCollum said that Florida Courts are interpreting the section broadly, and that even so called "forensic" mortgage services fall under the same rule. So, homeowners should not agree to pay any of these services up front, until a modification has been obtained.

If you are a homeowner facing the possibility of foreclosure, your best bet is to attempt to workout a modification with your lender, and if that fails, contact an attorney. If you cannot afford a private attorney, you can contact legal aid or the Orange County Bar Association for help.


60% of Modified Mortgages Re-Default

According to this article on the MotleyFool website, a recent report by the Office of Thrift Supervision and the Comptroller of the Currency detailing the amount of redefaults, or troubled loans that find their way back into default after modification, some 60% or more ultimately find their way back to default:


Of the modified loans 30 or more days delinquent, here's what it found:

Modification Date (2008)

Three Months After Modification

Six Months After Modification

Nine Months After Modification

12 Months After Modification





















Source: Comptroller of the Currency, Office of Thrift Supervision, June 2009.


Perhaps the most alarming statistic is that almost half of modified mortgages are back in default within three months following the modification.

The take-away for most homeowners who are working with their lender to come up with a modification to prevent foreclosure on their home: don't take just any modification that the lender offers, even though you may be so happy to get a response that you're tempted to accept anything. Make sure the modified loan is one that you can comfortably keep up with. Otherwise, insist on more workable terms. You may need to consult with an attorney if you need help.

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