The Florida Bar News - February 15, 2013

Courts get another $5 million to help move foreclosure cases

By Gary Blankenship
Senior Editor

A special $5 million appropriation to help Florida’s courts will be split between hiring more retired judges and paying for technology to speed handling of foreclosure cases.

The court system got the $5 million from part of a $60 million appropriation that came from the national mortgage settlement reached with major banks by Attorney General Pam Bondi and other state attorneys general over problems in the banks’ foreclosure operations.

Pam Bondi Lisa Goodner, state courts administrator, detailed plans for the extra $5 million at a January 24 meeting of the House Civil Justice Subcommittee, which was having a general discussion of the state’s foreclosure difficulties. The Legislative Budget Commission approved the $5 million for the courts as part of the settlement the week before.

Goodner told the subcommittee that $1.3 million will go to pay for additional retired judges to hear foreclosure cases and case managers to process and monitor the cases, ensuring they are ready for hearings when they go to judges. The remaining $3.7 million will go for technology, including converting paper documents to electronic records.

“The mortgage foreclosure cases are very paper intensive, and for the circuits still working in paper, they are drowning in paper,” Goodner told the subcommittee.

The other $55 million appropriated by the Legislature includes $35 million for down payment assistance; $10 million for housing counseling; $5 million provided to the Attorney General’s Office to help fund legal aid programs (At the request of the AG’s office, The Florida Bar Foundation provided the AG with a list of legal aid grantees previously awarded foreclosure defense funds by the Foundation); and $5 million provided to the AG’s office to reimburse the office and to continue its efforts to remedy abuses of the foreclosure process.

The panel heard from several agencies and groups with an interest in foreclosures.

Goodner noted the Legislature provided an extra $4 million this year to handle foreclosure cases that has actually allowed the courts to reduce their backlog, although not as much as hoped. The backlog has dropped from around 278,000 cases to 272,000. But that has come as the number of case filings has risen again; the absolute number of dispositions is up 23 percent from the previous year, she said.

The courts spent the extra $4 million in the 2012-13 budget — and the extra $6 million it got in the 2010-11 budget — on senior judges and case managers. The courts got no extra money for foreclosures in the 2011-12 budget.

Goodner said the extra senior judges allowed circuits to add more foreclosure dockets while the case managers made sure paperwork was complete and cases were ready to move.

The subcommittee got an overview of foreclosures in Florida from Amy Baker of the Legislature’s Office of Economic and Demographic Research.

Baker said foreclosures will likely remain high and the housing market distressed until 2016 or 2017. Foreclosures in the state have risen 20 percent in the last year, and Florida now has the highest foreclosure rate in the nation with 3.11 percent of all housing units having at least one type of foreclosure filing. Nationally, more homes are coming out of foreclosure than going in, but Florida still has the opposite trend, she said.

At the height of the economic crisis, about half of all mortgaged homes in Florida were no longer worth the amount owed. Largely because of federal programs to help distressed homeowners, that figure has dropped to 38.3 percent, Baker said. Median home prices have risen slightly, although far below their peak.

Baker compared Florida with Nevada, Arizona, and California, which like Florida had huge housing booms before the housing crash. But while Florida remains mired in foreclosures, those three states are emerging from the crisis with most of the foreclosures resolved and other indicators improving.

She noted all three states have nonjudicial foreclosure and significantly shorter foreclosure times than Florida. Foreclosures in Florida took 169 days before the housing crash and now take 853 days, the third longest time in the nation.

However, Goodner and Eighth Circuit Chief Judge Robert Roundtree agreed courts can’t entirely control how long it takes to resolve cases. Goodner noted that the national settlement with major banks ended the practice of pursuing a mortgage modification and foreclosure simultaneously, which meant cases were delayed while borrowers pursued modification options.

Roundtree, who has handled foreclosure cases, said the number of foreclosure cases has roughly tripled since the housing crisis. He also said courts are at the mercy of plaintiffs in moving the cases. Many times, a judge approves a foreclosure, and then the bank delays the final sale. In some cases, lenders seek cancellation of a sale, which reopens a case. Sometimes plaintiffs don’t push cases, the judge said.

“There is not the urgency on the part of the plaintiffs to move these cases to a conclusion that there used to be,” Roundtree said. “I don’t presume to know why. It could be the sheer volume. We see a lack of paperwork, a lack of preparedness.”

He recounted of having to set trials because the plaintiff couldn’t produce an affidavit on how much the defendants owed only to have an official from the bank testify at the trial that the affidavit could have been easily provided.

Roundtree noted there are six counties in the Eighth Circuit, each with an elected court clerk, and those six use four different computerized case management systems. While his circuit has been able to design a program to handle all four systems, other multi-county circuits might not be so fortunate when it comes to managing cases, he said.

Tallahassee attorney Pete Dunbar, representing the Bar’s Real Property, Probate and Trust Law Section, agreed with Roundtree that often plaintiffs file foreclosures and then fail to push the cases.

In addition, as the number of foreclosure cases has increased, the Legislature, because of tight budgets, has not approved any new trial judges, Dunbar said. This year, the Florida Supreme Court has asked for 65 new trial judges and one new appellate judge.

He said lawmakers need to be aware of harm to community associations from unpaid assessments for properties in foreclosure and to take steps to protect the titles of those who buy properties that have gone through the foreclosure process. Those matters, he added, are addressed in a foreclosure bill (HB 87) filed by Rep. Kathryn Passidomo, R-Naples.

Other testimony to the committee included:

• Yeline Goin, executive director of the Community Association Leadership Lobby, echoed Dunbar on the harm homeowner and condominium associations are suffering from unpaid assessments on properties in foreclosure. She said, after a foreclosure, the associations can get 12 months of unpaid assessments or 1 percent of the foreclosed amount, whichever is less. But associations often have to wait years for that, she noted.

• Lynn Drysdale agreed with Judge Roundtree that the biggest problem with foreclosures is plaintiffs. She said she’s had clients who want to pay off their mortgages but have had difficulty finding anyone to work out the settlement. In other cases, opportunities for short sales or loan modifications have been lost because of the inability to work with the lenders.

“Even when we’re trying to optimize solutions prelitigation, they’re not happening,” Drysdale said. “Please remember it’s not the consumers’ fault that the process is not working properly or the fault of the courts; it’s the fault of the plaintiffs’ attorneys.”

• Assistant Attorney General Scott Palmer told the subcommittee that the national foreclosure settlement negotiated by state attorneys general resulted in about $5 billion of assistance for Florida homeowners and an agreement to address the paperwork problems that had been plaguing foreclosures.

“We see it as a good thing because hopefully it will take a foreclosure out of the pipeline, put a home back on the marketplace, and help us get through this economic downturn,” he said.