Mortgages, Student Loans & Bankruptcy Mortgages

Two of our local judges recently posted an article regarding their travels through the Real Estate Collapse and resulting Foreclosure Crisis. Their analysis reassembles four chapters in a yet unfinished volume. Some of this insight follows:

In the first chapter the jurists note, “Liberalized credit, inflated real estate appraisals, unsustainable repayment terms, securitization of mortgage loans, and sloppy lending practices gave rise to the Great Recession.”

Next, they note, “In 2005, before the housing market crash, there were only 57,106 foreclosure filings statewide. By 2009, the number of filings exploded to 399,118.Some law firms engaged in unethical practices, taking shortcuts in establishing the necessary proofs. There was massive fraud in preparing affidavits.Their clients also engaged in sloppy record keeping, which caused an inability to produce original notes, proof of ownership, and authentic records of payments.“

Their version of chapter three in the story recalls, “In 2010, the Florida Supreme Court ordered mandatory mediation of all residential mortgage foreclosure cases, and local rules were adopted to facilitate mediation of mortgage foreclosure cases… the Federal Government was also encouraging settlements through the“HAMP” program. In December, 2011, the Florida Supreme Court terminated the managed mediation program for residential mortgage foreclosures. By June, 2012, there were377,707 pending active mortgage foreclosure cases in Florida Circuit Courts, according to the Office of State Courts Administrator (“OSCA”),an agency of the Florida Supreme Court.“The unfinished saga closes by discussing Florida‘s recent“Foreclosure initiative.” They cite, “The Florida Legislature modified foreclosure laws. The Statute of Limitations for deficiency judgments was shortened from five years to one year as of July 1, 2013, through the Florida Fair Foreclosure Act.““Parties may agree to vacate a final judgment and reinstate the mortgage loan, no matter how old, if they can show ‘compelling reasons’ to do so. The result has been that pending cases gradually declined from 377,707 in June, 2012, to 329,171 in June, 2013, to 159,491 in June, 2014, and 94,419 in March, 2015. In the Nineteenth Judicial Circuit (Indian River, Martin, Okeechobee,and St. Lucie counties), the pending cases declined from 13,699 in 2012 to 10,791 in 2013, to 4,370 in2014, to2,628 in March, 2015. Some problems involve cases which cause additional litigation, such as whenthe homeowner is trying to get mitigation but the sale is not canceled in time, and the property is unintentionally sold to a third party bidder. The new owner may engage in litigation to confirm the sale.There are instances of the wrong legal description having been used and not discovered for many years.““The new procedures are posted on the Nineteenth Judicial Circuit’s website at circuit judge who is assigned to hear residential foreclosure cases has posted his/her procedures on that is apparent that courts recognize the causes and effects of overly aggressive lending and legal maneuvering that resulted in financial disaster for so many people. While many would like to believe that this was all a one-time “blip” in the history of real estate, as Judge McManus and Judge Coxpoint out, the future is yet to be seen.What‘s more apparent is that in spite of “best efforts,” all parties were unprepared for the financial ruin that followed. lt could be that bankruptcy would have been a better solution,asfewer people would still be carrying questionable burdens that would have been resolved long ago.

Last month I discussed a bankruptcy case where a 45-year-old woman was not allowed to discharge her student loans under the “undue hardship” standard, because the court felt she failed to pay a portion of a one-year increase in income of $1,000 toward her student loans.(The woman had never had income over$10,000 a year, from public assistance).

This month we consider another case involving a single mother with two sons, who was able to convince the court that over $112,000 in student loans should be discharged under the “undue hardship”standard.

The case is Acosta-Coniff v. ECMC. An article by Steve Rhode in the Huffington Post notes:

According to court records, “Coniff is a 44-year-old single mother with two sons. She earned a Ph.D.from Auburn and teaches high school. At the time she filed her petition in bankruptcy,she had take home pay of$2,950 per month plus an additional $500 per month in child support. Based upon the evidence offered, the Court calculates that the monthly payment would be $915.00 per month.” The Judge went on to say, “lt is readily apparent that Coniff could not make that payment and support herself and her children with a minimal standard of living if forced to repay the loan.”

lf anything, the two cases show that there is anything but a “standard,” and such cases are largely left up to the individual judges’ interpretations and opinions, thus furthering the case that Congress needs to amend the Bankruptcy Code to allow the discharge of student loans in a fashion that resembles the statutes pre-B.A.P.C.P.A., or at least turn the clock back to the 1978 rules.

The case is being appealed by the lender. For a more detailed review go to:

Asnoted lastmonth, everyone should be contacting their elected officials to seek allowance of discharge of student loans in bankruptcy. lt touches everyone-students, graduates,children,parents, and in many cases even grandparents. lts everyone‘s problem.


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