Years to go before foreclosures return to ‘normal’
Years to go before foreclosures return to ‘normal’
The number of foreclosures being filed in Florida courts has tapered off, but it will be another five years before the level returns to “normal.”
The Florida House Subcommittee on Civil Justice got that prediction from state economic forecasters and court officials at a February 4 meeting. Representatives also heard that housing values are improving, leaving fewer underwater.
Amy Baker, coordinator of the Legislature’s Office of Economic and Demographic Research, told the subcommittee that the housing boom began in Florida in 2002-3 and peaked in 2005-06. 2007, as the housing boom lost steam and the economy slid into deep recession, foreclosures were on the rise.
The first foreclosures were from homeowners who used “exotic” financing, such as subprime mortgages, Baker said, and that was followed by a second wave from people who were hurt by the recession and could no longer make their house payments. Florida quickly became among the worst, if not the worst, state for foreclosures.
On paper, Florida still looks bad, Baker said, but things have actually dramatically improved. The state still has the largest number of properties in foreclosure and the highest percentage of mortgages in foreclosure. But not quite three years ago, 12.96 percent of all mortgages in Florida were in foreclosure, and that has dropped to 3.73 percent, she said.
Baker said there are four “upstream” indicators that affect the number of foreclosures, and three of those have improved, indicating that foreclosures should keep declining. They are:
* The percentage of underwater homes — where the outstanding mortgage balance is worth more than the market value of the home — has dropped from almost 50 percent to around 15 percent.
* The use of “exotic” mortgages, which once reached almost half of all new home sales, has dropped significantly.
* Property values, which plummeted in the housing bust, are rising again, up around 7 percent in 2014 and expected to rise 5.6 percent this year.
The only problem indicator is unemployment, which remains slightly above the national average, Baker said, adding that about 40 percent of those out of work are long-term unemployed.
State Courts Administrator PK Jameson told lawmakers that state courts are making progress in reducing the backlog of foreclosure cases, with the number dropping to around 142,000 in August 2014. Two years earlier, it had been more than two and a half times that number.
Jameson said more than $20 million appropriated by the Legislature over the past two years has helped reduce the backlog, and she said a further request would be made in next year’s budget for case managers and technology to address the workload.
Eighth Circuit Chief Judge Robert Roundtree, vice chair of the Trial Court Budget Commission, noted that courts only become involved in foreclosures when a case is filed. He added that sometimes neither party is eager to pursue the foreclosure; borrowers don’t want to lose their homes, and lenders are reluctant in a slow housing market to take over a property and become responsible for property taxes, community association or condominium fees, and other expenses.
The number of foreclosure filings peaked in the 2008-9 fiscal year at 406,473 and dropped in the 2013-14 fiscal year to 99,029, Jameson said. They are projected to be at 86,300 for the current year and run between 83,000 and 108,000 for the next five years before returning to the “normal” pre-crisis level of around 74,864 in fiscal year 2019-20.
Pete Dunbar, representing the Real Property, Probate and Trust Law Section, said changes made in a 2013 law to hasten the foreclosure process have helped improve paperwork in foreclosure cases. A provision giving standing to community and condominium associations to push along foreclosures when they are owed back fees and assessments also has helped the backlog.
He said the section supports continuing to use retired judges to handle foreclosure cases and allowing judges to appoint ad litems when the case involves someone who is disabled or deployed overseas in the military.
