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December 15, 2012
Entities hope for a share of $300 million foreclosure settlement

By Jan Pudlow
Senior Editor

Sitting in an escrow account since April, $300 million in foreclosure settlement money has waited for an agreement between Attorney General Pam Bondi and legislative leaders on how those funds can be spent.

Keeping their eyes on the prize are:

* State Courts Administra-tor Lisa Goodner, who says she has been promised $5 million to help with Florida’s foreclosure backlog of nearly 380,000 cases and technology needed to move cases faster;

* Jane Curran, executive director of The Florida Bar Foundation, grappling with the critical drop in IOTA funding, who proposed that $10 million go directly to the Foundation with the infrastructure in place to distribute funds to legal aid associations, as Bondi had supported; and

* Kent Spuhler, managing partner of Florida Legal Services, who is reluctant to give specifics because he said the details are still being negotiated.

Pam Bondi No one will really know for sure until January, after the Joint Legislative Budget Commission meets again, whether the desperately needed money will be distributed directly to legal aid organizations experienced in representing people facing foreclosure, Curran and Spuhler agree.

It’s easier, Spuhler said, to describe the problem. He frets about losing about 150 lawyers, primarily at local legal aid programs, even as Florida has the dubious distinction of the highest foreclosure rate in the nation. One in every 312 homes in Florida is in some stage of foreclosure in October, according to a November report released by RealtyTrac.

“Homeowners are still facing foreclosure, and they are facing the consequences of foreclosure, and it’s incredibly destabilizing for families,” Spuhler said.

“Things are getting worse, and that’s why it’s critical that this gets decided. Plus, the vast majority of the mortgage settlement is supposed to go to homeowners to help them save their homes. It’s difficult for homeowners to take advantage of that,” he said, without the help of legal representation.

The help can’t come soon enough, these three agree. They are cautiously heartened by a news release on November 2, announcing that Bondi, Senate President Don Gaetz, and House Speaker Will Weatherford support a plan for allocating the remaining $300 million recovered for Floridians in a national mortgage settlement.

Originally, Bondi had argued that the settlement money didn’t need to go through the Legislature and that she had the authority to decide how it should be spent. But legislative leaders disagreed, saying the Legislature has the sole legal authority to appropriate state dollars.

Finally, negotiations produced a compromise.

Bondi, Gaetz, and Weatherford joined in a unified voice, issuing this statement: “The plan ensures that the entirety of these funds will be spent consistent with the terms of the settlement agreement, but also that the funds will be allocated through the legislative process. . . .

“At the next meeting of the Legislative Budget Commission, with the support of Gaetz and Weatherford, Bondi will seek approval for budget amendments to disburse $60 million of the settlement funds. Bondi anticipates proposing that the $60 million will be used to fund down payment assistance for Floridians, foreclosure-related legal assistance and counseling, state court initiatives to ease the foreclosure backlog, and Attorney General’s Office enforcement efforts.”

The balance of the funds, that trio of elected officials said, will be allocated through the appropriations process in the upcoming legislative session, which means most of the settlement dollars won’t be spent until the next fiscal year begins July 1.

“Gaetz and Weatherford have agreed to support the appropriation of approximately $200 million for housing-related purposes, consistent with the terms of the settlement agreement,” the statement continued.

“Although the specific appropriations must be determined through the legislative process, possible use of these funds include foreclosure prevention, neighborhood revitalization, affordable housing, homebuyer or renter assistance, legal assistance, counseling, and other housing-related programs.

“Finally, consistent with the discretion afforded her under the settlement agreement, Bondi will designate approximately $40 million of the settlement funds as additional civil penalties.”

Bondi said: “This plan gets much-needed assistance to the homeowners and communities suffering the effects of the foreclosure crisis, and ensures that the settlement funds are spent with the transparency, accountability, and flexibility that come from the legislative process.”

That’s in addition to about $7.5 billion in expected mortgage assistance that Floridians are supposed to receive directly from banks, as part of the landmark national $25 billion joint federal-state agreement with the nation’s five largest mortgage servicers over foreclosure abuses and unacceptable nationwide mortgage servicing practices.

Wells Fargo, JP Morgan Chase, Bank of America, Citi, and Ally/GMAC agreed to the national settlement, after allegations surfaced that fraudulent documents were used to foreclose on homeowners.

As of September 30, Bondi said in a separate November 19 news release, the nation’s five largest mortgages servicers have provided more than $3.6 billion in borrower relief to Floridians, with an additional $1.3 billion in modification relief in the pipeline. The servicers reported that 48,998 Floridians have benefitted from an average of $73,663 in relief per borrower. Consumer relief can include the following: first and second lien modifications; enhanced borrower transitional funds; facilitation of short sales; deficiency waivers; forbearance for unemployed borrowers; anti-blight activities; refinancing programs; and benefits for members of the Armed Forces.

Florida borrowers who lost their homes to foreclosure between January 1, 2008, and December 31, 2011, and who may be eligible for payment under the foreclosure settlement must file claims by January 18, 2013, Bondi said, adding that forms have been mailed to qualified borrowers.

“Florida was one of only two states in the country that negotiated a guarantee in the settlement,” Bondi said. “The fact that servicers report $3.6 billion in relief to Florida’s borrowers within the first eight months of implementation is a promising indication that obtaining a minimum commitment from the banks has been effective.”

If all goes according to plan and OSCA receives $5 million, Goodner said the money will be used for two purposes: to effectively whittle down the backlog of foreclosure cases, numbering 379,577, as of September 2012, and to help with technology so judges will be able to work with an electronic court record to move cases more efficiently.

“What we understand from a number of our circuits, where they don’t have much automation, part of the workload is the amount of paper they have to contend with that requires a lot of time and effort,” Goodner said.

Some courts, such as Manatee County, have efficiently used electronic records, and the foreclosure backlog there is only 6,795.

An example of a “paper-intensive” county, Goodner said, is Miami-Dade, where they are trying to get through 51,723 backlogged foreclosures.

“It’s not for lack of effort or desire or will to do this,” Goodner was quick to add.

“It’s just resources that have stymied the effort in some circuits, more than others. That’s what we’re trying to address.”

The plan on how to spend the money will be hammered out by the Trial Court Budget Commission, she said, after receiving proposals from chief judges and court administrators on how they would go about using additional resources.

Meanwhile, Goodner, Curran, and Spuhler hope the promises they’ve heard from Bondi and legislative leaders are fulfilled as soon as possible.

“We don’t have details on how much or when it will be distributed. Right now, it’s all sort of promises and you hear a number. And then we’ve heard different numbers,” Spuhler said. “Every day we are working to nail that down. I think it’s January before we really know.”

[Revised: 06-06-2014]