From Jacksonville.com:
Perry Laspina was in the middle of foreclosure with the possibility of losing the house he owned in Jacksonville. Then the mail came one day in late January telling him that the house was his.
Despite the $72,000 mortgage that he barely paid anything on, despite the foreclosure … the house was his. Despite the fact that he didn’t have an attorney in the foreclosure proceedings, the mortgage holder simply gave up and walked away.
It’s a tale populated with many of the major players in the national foreclosure drama: The law firm of David Stern, the Mortgage Electronic Registration Systems (better known as MERS) and a mortgage packaged with others and sold into a securitized trust.
Here’s how it happened.
Back in 2006, Laspina, a used-car dealer based in South Florida, had some extra money and decided to buy some real estate that he could resell quickly at a profit. It was, after all, the height of the housing boom with prices skyrocketing and mortgage money easily available.
“Since everyone else was making money flipping houses, I figured I would, too,” he said.
He wasn’t familiar with Jacksonville, but his brother owned a house in Fernandina Beach and found the house on Oakwood Street in the Panama Gardens neighborhood of Jacksonville off North Main Street.
It’s an old neighborhood where most of the houses are still well-maintained.
Laspina bought the house for $80,000, putting $8,000 down and taking out an adjustable rate mortgage with EquiFirst for the remaining $72,000 with an interest rate of 9.5 percent.
Laspina wasn’t worried about the interest rate.
“It didn’t matter,” he said. “I figured I’m going to flip this house within six months, maybe three months.”
He also figured he’d get about $120,000 for it after he did a bit of work on it, mostly tearing up the carpet and stripping the paint that covered the hardwood floors.
“But right after I put it on the market, the crash came,” he said. “I couldn’t sell it, I couldn’t rent it.”
By 2008, the increases on his payments kicked in, going from an initial payment of $605 to $894 and then $1,058 in less than a year. He quit making payments, and in September of that year, a foreclosure notice was filed against him. The plaintiff was the U.S. Bank National Association, which was simply acting as the trustee for an unnamed trust that now owned the mortgage.
The court file says that Laspina lost his foreclosure case in February 2009. A sale date was set, then postponed and then cancelled, all at the plaintiff’s request, later that year.
But the next year, the plaintiff requested that it all be vacated – the suit, the judgment, all of it. In October, Circuit Judge Waddell Wallace signed the order.
In December, officials for MERS, which acted as the mortgage holder, signed and filed the documents saying it “has received full payment and satisfaction … and does hereby cancel and discharge said mortgage.”
Laspina had paid less than $1,000 toward the principal on his $72,000 loan.
That’s what happened. But there are questions about why.
“One possibility is that they did it by mistake,” said Chip Parker, an attorney who specializes in foreclosure defense. “There are just so many cases out there.”
One issue possibly complicating the case is that the plaintiff’s attorney was David Stern, whose Southeast Florida law firm became the poster child for foreclosure mills. In 2009 alone, it handled 70,000 foreclosure cases, according to news reports, and employed more than 1,000 people.
But after questions were raised about the practice, the Florida attorney general announced an investigation of possibly fraudulent paperwork at Stern and two other firms. Fannie Mae and Freddie Mac, along with many banks, dropped him as their primary foreclosure attorney.
Stern’s firm quit its foreclosure work at the end of March.
MERS is named the nominee on these loans, but it now faces lawsuits across the country seeking unpaid recording fees that normally go to local governments, and several courts have rejected MERS’ role in bringing foreclosures.
Parker also theorized that the mortgage owner simply made a business decision.
“The lender was faced with retaining new counsel,” Parker said. “Maybe it looked at the value of the property, realized it’s way, way underwater and simply not worth it.”
That appears to be the case, though the mortgage holder provided few details when contacted.
The loan was being serviced by America’s Servicing Co., a subsidiary of Wells Fargo.
“The investor on the loan, the bondholder on the trust, decided to write off the loan balance,” said a Wells Fargo spokesman, “because of the significant decreased value of the property.”
The home — two bedrooms, one bath and 1,120 square feet — is structurally solid, Laspina said. But many of the interior walls are covered with mold ever since the coils were stolen from the air conditioner.
It’s appraised at $46,000 by the Duval County appraiser’s office in a neighborhood that has inconsistent values.
The house next door sold for $65,000 in January after selling for $91,000 in 2003. A house across the street sold for $153,500 in 2008. But another a couple of houses away was purchased from a bank for $23,000 a year ago after selling for $140,000 in 2006.
“It’s a good neighborhood,” said Jackie Painter, whose family first moved to Panama Gardens in 1958. She spent most of the past decade in Michigan, but when she wanted to move back south, she moved to the neighborhood where her younger sister and 99-year-old mother still live.
“Some of the houses were in really bad shape for awhile,” she said. “But people have come in and fixed them up. They’re good neighbors. We get a little riff raff, a few prostitutes will walk down the street, but when they see us watching, they scatter.”
Goldman cautioned about anyone expecting to duplicate Laspina’s good luck.
“I don’t think it’s representative,” he said. “Someone won the lottery here. There’s a lot of people out there saying they can get you your house free, but they’re just selling you something. It’s a one-in-a-million thing.”
As for Laspina, he plans to clean the mold, mow the lawn and try to sell the house. “I could certainly use the money,” he said.
How in the world do you get rid of that much mold?
With that much mold, would the owner even be able to sell it without disclosing, well, that it once had THAT much mold? That’s my question…
Good news, bad news:
Good news – you get to keep the house free and clear!!
Bad news – you get to keep the house!
Fix the AC and R&R the drywall for 8 to 10k and your good to go.
I wonder if the owner of the snake infested house somewhere in Idaho gets to keep it for free. *Shudders*
This is a moral hazard that sets a bad pressidant.
Probably the bank said, “Mold filled house worth maybe $23k in good condition: aw, screw it” and decided it was simpler and cheaper to give up instead of fighting over a near worthless property.
Agreed, the bank saw this as a major liability and literally would rather give it away, than to repair and re-sell. The risk of future lawsuits is too great.
Back in 2006, Laspina, a used-car dealer based in South Florida, had some extra money and decided to buy some real estate that he could resell quickly at a profit. It was, after all, the height of the housing boom with prices skyrocketing and mortgage money easily available.
“Since everyone else was making money flipping houses, I figured I would, too,” he said.
LOL
(1) A used-car dealer thinking he could make some moolah by flipping houses; (2) Wasn’t familiar with Jacksonville area; (3) Adjustable rate mortgage with a 9.5% interest rate?
Yeah, I’ll file this one under: one taco short of a combination plate…
I can’t believe no one has said…
well what do you know, someone actually is “just going to give it away!”
My favorite line from the article:
“We get a little riff raff, A FEW PROSTITUTES will walk down the street, but when they see us watching, they scatter.”
are we talking cockroaches or prostitutes here?
My family is from North Florida and I lived in Jacksonville beach for about 1 yr. For this guy to buy a place in Downtown Jax because his brother lived in Fernandina would be like visiting Encinitas and then buying in the sketchiest part of Vista.
@Booty Juice:
The mold is so pervasive and visible, I would have to imagine that there is an equal amount of mold in the studs and under the hardwood floor. However, since the house was given to him free and clear it is still worth the trouble to rehab the place.
I wonder if there is tax implication for having his loan discharged? He borrowed all that money, but only paid $1000 on the principal. Wouldn’t that suggest that he was in effect “gifted” $71,000?
Check the coils on the air conditioners and make sure they are in good condition at all times if you live in Florida. Lessons learnt. I am glad I live in SD and I don’t need to own an AC.
Actually you would want to strip down to the studs and then treat with Clorox to kill the mold. Its a simpler version of what was done to houses in New Orleans after they were flooded. I.E. you may not have to replace the electrical system, (depending on the age of the wiring. If old wiring changing it out while the house is down to studs makes sense because you are basically back to that state of construction. (Same applies depending on condition with plumbing). Of course you also have to be careful not to hit the 50% limit that triggers building code updates.
Honestly, I don’t think this will be a “one in a million” occurrence. The David Stern firm was charging a flat $1300 fee for foreclosures. You can bet that whoever picks up the mess that is those abandoned files will be charging many times more to complete them. There are A LOT of properties that aren’t worth it. What’s interesting about this one is that they actually filed paperwork making a clear title. Most are just sitting in some kind of limbo.
Boy, really brings home why houses in Mexico are stone/cement block and tiled on the inside. Get a spritzer of bleach and you’re good to go.
Yeah Mexico, where a 4.2 quake kills 25,000 people and does $2,000 in property damage.