Number of Florida foreclosures tumble
Number of Florida foreclosures tumble
Is Florida’s long bout with court-clogging foreclosure cases nearing an end? Or is the state experiencing only a temporary pause before a final flood?
Lawyers, judges, and court officials are sifting through data like a fortune teller with tea leaves trying to discern the future. What they know is this: On July 1, 2013, a new state law intended to speed up the handling of foreclosure cases went into effect. It allowed lenders easier access to summary judgment hearings in foreclosure cases but imposed tighter requirements on paperwork for foreclosure filings.
The immediate result was foreclosure filings, which had been running around 14,000 a month, fell off by more than half in July 2013, although they recovered slightly in succeeding months. Several people involved in foreclosures predicted that once banks and lenders adjusted to the new requirements in the foreclosure law, the filing rate would pick up after the new year.
But for the first several months of 2014, foreclosures have remained at about 50 percent of the previous year’s level, and those involved in foreclosures differ on whether it will stay that low. Although several reasons are given for the continued lower filing rate, one is attributed to the effort by state courts to reduce the huge backlog of foreclosure cases. For the first time in years, instead of chipping away at the problem, clerks, judges, case managers, and others have put a serious dent in the pile of cases.
Kristine Slayden, manager of resource planning for the Office of the State Court Administrator, said last July the court system had a backlog of around 329,000 foreclosure cases and by April 2014, the latest figures available, that number was 185,823. (If filings had continued at the previous rate, that number would have been 250,000 or more.)
The reduction is enough that the Trial Court Budget Commission tentatively has decided not to ask for an appropriation next year to continue using senior judges to help with foreclosures, although the TCBC will ask that the use of case managers continue, Slayden said.
“Right now, the money we’ve received [for more court resources] through the national mortgage foreclosure settlement runs out June 30, 2015,” she said.
“The idea is by that point we may have worked through the backlog enough. We think there may still be an elevated level, but they won’t be at the crisis level we have been at.”
As for the reduced number of foreclosure filings, those involved in foreclosures point to a number of factors besides the new state law. The national mortgage settlement (which gave the state courts the money for senior judges and case managers) contained billions of dollars to help troubled borrowers.
The Dodd-Frank financial reform act created the Consumer Finance Protection Bureau, which has issued regulations to help homeowners. One of those requires staying a foreclosure proceeding if it’s 37 days or more before the foreclosure sale date, if a homeowner requests help from the lender in working out the loan. Individual settlements with major banks that included billions of dollars have helped troubled homeowners.
Economic factors also played a role.
“I don’t attribute the fall-off to the new statute as much as the defense bar might,” said Ron Gaché, a Boca Raton attorney who represents plaintiffs in foreclosures. “I really feel like what has got the number down is the economy getting better, housing prices rising, people trying to save their homes more than ever. There’s been a very big push by the federal government pushing lenders to help homeowners save their homes. . . before we file suit.”
Foreclosure defense attorney Margery Golant agreed — to a point.
“It’s all of the above. The new law is definitely a factor. What they [lenders] were doing before is they were just throwing it [foreclosure cases] out there. They didn’t have what they needed [to properly do the foreclosure] and they figured they would get what they needed if they needed it,” she said.
“Until there was all of the litigation and the attorney general investigations and class action litigation and the big blowups [with robo-signing and falsified documents], no one knew how abusive the industry was and how disorganized the industry was.”
Manufactured and incomplete paperwork proved sufficient in many if not most cases, because they were largely uncontested, and, even in contested cases, many homeowners represented themselves and didn’t know how to demand the proper documents, Golant said.
She agreed with Gaché and others that other factors are playing a part.
Slayden pointed to figures showing an increase in home prices, combined with a dramatic decline in underwater mortgages where the amount owed is greater that the home’s value. Those figures show a decline in the number of homeowners who are delinquent in their payments and hence in danger of foreclosure.
Twelfth Circuit Judge Lee Haworth noted the federal law and regulations requiring workout efforts between lenders and borrowers before foreclosure. He said the 12th Circuit has maintained its mortgage mediation program (required by the Supreme Court in the early days of the crisis) and it is handling more cases.
“That [federal laws and rules] may be having an effect because when they request consideration under Dodd-Frank, that pretty much stalls it for a while until they work through those issues,” he said.
“Mediators [in the 12th Circuit] are reporting more flexibility [from lenders] on short sales and workouts.”
Palm Beach County Clerk of Court Sharon Bock said evidence in her county points to more potential foreclosure cases resolved before going to court.
Palm Beach County reflects the statewide trend of foreclosure filings dropping off by around 50 percent, but at the same time, she said the number of recorded deeds is increasing, and, interestingly, a large number of those deeds — more than 50 percent in July — appeared to be cash transactions. At least, no mortgage was filed as part of the deal.
“You’ve got to conclude somewhere you’re getting people transacting, not going through the court system and paying cash at the short sale or on a regulation buy-sell deal,” she said.
“It could be the owners themselves are selling prior to the foreclosure.”
Bock said the backlog of foreclosure cases in her county has gone from around 31,000 to less than 20,000, and the number of her employees working on foreclosure has gone from 50 — plus overtime — to around 25.
In 2004 and 2005, before foreclosures began spiking, Palm Beach County had around 5,000 foreclosure cases a year. That peaked at around 20,000, and even in 2011 there were 12,000, she said. Now it looks like this year will be around 7,000.
As Slayden put it, “We don’t have the fire hose of cases flowing in.”
The question for many officials is, will foreclosures stay that low and continue downward, or will there be another spike?
Slayden said the official state forecast is that foreclosures will tick slightly upward through next June, rising from 7,000 to 10,000 a month.
She noted that the number of Floridians who are behind in their mortgage payments has dropped dramatically.
In March 2013, the number in arrears was 18.9 percent (and that was a decline of more than 15 percent from the previous year), but by March 2014, it was 14.3 percent. For June 2014, the number had fallen to 11.2 percent.
“That number has gone down because of these [mortgage assistance] initiatives and because the economy is definitely improving. People get rehired; they make a little more money, and some of them are able to become current,” Slayden said.
Bock said the lessening of the number of homes underwater on their mortgages — helped by increasing home prices — means if people have to move, there is a better likelihood they can sell their house and they are discouraged from letting their homes go into foreclosure.
“When you are no longer underwater and you have to move, the chance is you are transacting in the open market and not the foreclosure market,” Bock said.
April Charney, who represents foreclosed homeowners and has taught classes on handling foreclosures, thinks the fall-off in foreclosures is temporary.
She said the decline has been caused by the requirement that lenders conduct meaningful attempts to help borrowers before a foreclosure can be filed and because of the complexity of the state’s new foreclosure law.
But she said about 70 percent of attempted loan modifications fail, plus many adjustable interest rate mortgages will have higher interest rates kicking in now and next year, which will push more people into delinquency.
Golant noted that at the height of the foreclosure crisis, lenders supposedly were offering ways to work out troubled mortgages, but borrowers were never able to contact the right people or found themselves in a nightmare of paperwork that ultimately did little good.
“We’re still seeing all kinds of nonsense in the loss mitigation application process,” she said.
“I don’t know if it will work better than it did before. I hope so. There are so many times people are in a position to work things out, and they can’t get the attention of the people who can work it out.”
Anthony DiMarco, executive vice president of the Florida Bankers Association, said just as the interplay of mortgage relief programs, the new state law, and an improving economy have helped lower foreclosures, those influences will determine whether foreclosure filings increase.
On the one hand, DiMarco said, with rising home prices there will likely be fewer “strategic” defaults — typically investors who had underwater mortgages when housing prices dropped and decided to walk away to minimize their losses. He also said buyers of mortgage-backed securities are more realistic about allowing workouts for troubled loans. However, lenders are becoming more familiar with the new state law and how to comply with its strictures in foreclosure cases.
“Even if the numbers don’t go up, I think it’s something we’re going to have to slog through,” DiMarco said. But, “If you miss your payment today, we don’t file Monday. You’ve got to be behind a little bit, then we will work with you.”
Gaché said even though filings are down, it’s too early to let up on the extra efforts to resolve cases, particularly the use of senior judges to hear cases.
Both he and Slayden agreed that while the backlog of cases is down, many of those were, in Slayden’s term, the “low-hanging fruit” of cases that were the easiest to resolve. In some instances, it was dismissing cases that had been dormant for years.
Judge Haworth, who has dealt with the foreclosure crisis in the courts since its inception, is also worried about letting up too soon.
“If we bet on the crisis being over and it’s not, we’ll be caught flat-footed for sure,” he said. “If we get hit with a new surge, we’ll be back where we were in 2008.”
Golant noted the foreclosure system and attitudes about it have changed since the economic crisis hit and the housing market collapsed.
When foreclosures initially started hitting the courts, almost no property owners contested them, perhaps because many were owned by “flippers” or investors who decided to walk away rather than incur more losses.
Consequently, Golant said, when lenders flooded the courts with incomplete, poorly prepared, and sometimes fraudulent paperwork, it was sufficient to secure the foreclosure.
But from less than 10 percent contesting a foreclosure, Golant now estimated that perhaps as many as 20 percent object. That in turn requires more court time and a stricter standard for paperwork and procedures, not to mention allowing for all of the borrower assistant programs and regulations that are in place.
“It doesn’t mean the crisis is over by any means,” Golant said. “I think a lot of people in the court system think so. I don’t think so, but I hope so. I see everywhere houses that are rotting away, that were foreclosed years ago. They were caught up on the conveyor belt and pushed out. They could have been worked out.”