A TARP (Troubled Asset Relief Program) inspector general audit has revealed a serious backlog in the processing of HAMP home loan mortgage modifications. This delay can lead to many losing their homes before even being entered into a trial mortgage loan modification. According to the report, the number of homeowners waiting to learn whether they will be accepted for relief has risen 65% between November and May. Of the 221,000 application backlog, Ocwen has 61,000 applications that remain to be reviewed. The report also mentions banks such as JPMorgan, CitiMortgage and Select Portfolio Servicing as having very slow mortgage modification processing times.
Under the Home Affordable Modification Program (HAMP) banks receive financial credits for modifying mortgages. The banks agreed to this after threatened lawsuits by attorney generals and the government over their creation of bad home loans.
Unfortunately for homeowners, courts, especially in Florida, are trying to get rid of the huge numbers of foreclosure cases on their dockets. This can often lead to a situation where a home can be sold prior to the bank even reviewing the homeowner for a mortgage loan modification.
The Third District Court of Appeal has ruled that, despite the equities involved, the owner of a home at the time of the sale is entitled to the surplus remaining after the sale. A third party buyer had argued that it would be inequitable to give the ex-homeowner the surplus as it would amount to an unearned windfall. The Court ruled however that the legislative intent is clear and the ex-homeowner is entitled to the surplus.
Banks who foreclose on properties are often stuck with outstanding late fees owed to condominium associations. However, under Florida law, there is a safe harbor provision whereby foreclosing banks are only liable to condo associations for one years worth of late fees or one percent of the mortgage, whichever is less. In a recent case, a Broward County Circuit Court found that the same safe harbor does not apply to Fannie Mae, as Fannie Mae bought the loan, but was never assigned the underlying mortgage. Fannie Mae had argued that it should fall under the safe harbor provision which protects first mortgage holders, their successors and assigns. This is of course good news for condominium associations in Florida.
Florida’s Fair Foreclosure Act, in effect July 1, 2013, gave banks one year to sue for deficiency judgments on foreclosed homes. A deficiency judgment is the difference between what was owed to the bank in the foreclosure and the amount the bank recouped on the foreclosure sale. Previously lenders had five years to sue on the deficiency.