Short Sale Scandal: Florida Home Faces Forfeiture Action After Michigan Supreme Court Justice Allegedly Hid Florida Home From Bank: Fraud Is a No-No – Another Lesson for Having a Florida Short Sale Lawyer

Posted By on November 27, 2012

Florida short sale stories don’t just involve people that live in Florida.   There are people from all over the country that have underwater mortgages who are looking for ways to solve that problem.  And one big example in the news these days:  Diane Hathaway, a Justice on the Michigan Supreme Court.

That’s right: a judge living up in the Detroit neighborhood of Grosse Point was having mortgage problems.  So, with her co-owner husband, attorney Michael Kingsley,  Justice Hathaway decided to short sale their home — which they did, with the approval of their lender, ING Bank.   Nice and easy so far.

Unfortunately, now Justice Hathaway and her husband are facing some big trouble because the United States Attorney has sued them – going on the record that these two legal eagles have done some bad, bad things to get that short sale approved by ING Bank.

According to the U.S. Attorney’s office, the couple own a home here in Florida that they didn’t want to reveal when they applied for the short sale of their Grosse Point home, so, along with one other property, they transferred title to a third party “straw man,”  Kingsley’s daughter,  until the short sale was approved and completed.  Immediately after the short sale was completed, the Florida home and the other property were transferred right back to them.

As a result, they are now facing a federal complaint of civil fraud in the short sale of the Detroit home, and a federal attorney has filed a forfeiture action to take title to their Windermere, Florida home.  (Windermere is up near Orlando and it’s a very pretty lakeside community.)   No criminal charges have been filed (yet?), but there’s talk that Hathaway should resign from her spot on the Michigan Supreme Court.

Larry Tolchinsky’s Tip:

It’s no surprise to Floridians that someone living in Detroit wouldn’t want to give up their home here in Florida.  We get it.  However, this judge and her attorney-husband should have known better – assuming for the sake of argument that the federal allegations are true.

We’ve written before about “hardship letters” for short sales and how important it is to be strategic and thorough in presenting your financial situation to your bank when you want to get approval on a short sale of your home.  It’s dangerous to do so without legal guidance and support, and for Florida short sale lawyers it’s no surprise that many short sale requests are turned down when hardship letters are prepared and presented without legal advice.

However, the Michigan Supreme Court Justice who is about to lose her Windermere, Florida home because of a short sale negotiation is providing a lesson of another sort:  it is dangerous, foolish, and unethical to try and misrepresent things to a lender when you’re trying to get a short sale of your home.  It’s a little hard to see how successful this couple can be at any kind of ignorance of the law defense here — she’s sitting on the highest state court in the State of Michigan, after all.

And this story’s far from over.  First of all, even though criminal actions haven’t been filed, there’s still time for those charges to be made.  And then there’s the possibility of the bank filing its own action — after all, it was the “mark” here, agreeing to sell the $1.5 million home for $850,000 and writing off $600,000+ from their books (Michigan law deals with deficiencies similarly to Florida, so it looks like the bank agreed to write off the difference as part of the short sale agreement).

Fraud in a short sale is a serious matter.  One more reason to get an knowledgeable and experienced Florida foreclosure defense lawyer on your side as soon as possible.  There are lots of legal avenues to you in dealing with your bank to save your home, to modify your note, or to short sale the property.   Most Florida firms, like our law firm, offer reasonable rates and a free, initial consultation.  You just need to make the effort to call.

Do you have questions or comments? Then please feel free to Chat with Larry in the comments below, at info@hallandalelaw.com, or (954) 458-8655.  If you have a specific situation, please call or email Larry because he can’t answer specific fact questions in general comments.  He’s happy to take your call.

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