Progress made in moving foreclosures, but courts brace for even more filings to come
Progress made in moving foreclosures, but courts brace for even more filings to come
Mark D. Killian
Managing Editor
An affidavit signed in California, but notarized in Minnesota, is hard for a judge to ignore — even when the foreclosure is uncontested.
That testimony was part of a presentation to the Senate Banking and Insurance Committee in December by judges and lawyers toiling in Florida’s foreclosure morass.
The courts are making progress in tackling the huge backlog of foreclosure cases — thanks in large part to supplemental legislative funding — but defective paperwork is still a big problem, and another wave of home foreclosure filings looms on the horizon.
The judges said faulty and fraudulent documentation is the main cause of delays, and the courts are bracing for an anticipated deluge of commercial foreclosures in the coming year. Court officials also discussed the limitations of the Supreme Court-ordered managed mediation program.
And a representative of the Bar’s Real Property, Probate and Trust Law Section told the panel the section is working on remedies to move uncontested foreclosures through the process quicker and reiterated opposition to nonjudicial foreclosures.
Sen. Garrett Richter, R-Naples, the committee’s chair chair, soberly noted approximately 14 percent of Florida mortgages are in foreclosure and over 23 percent are “past due in one form or another.” He said those numbers are placing “significant stress and strains” on the judicial system’s ability to resolve foreclosure cases in a timely manner.
Twelfth Circuit Chief Judge Lee Haworth, chair of the Judicial Administrative Committee made up of the state’s 20 chief judges, said the courts are making headway in reducing the backlog, but more cases continue to be filed.
Haworth said the legislatively created Foreclosure and Economic Recovery Funding Initiative, providing an additional $6 million to help the trial courts try to reduce the state’s staggering foreclosure backlog, was used to hire case managers, magistrates, and senior judges.
Without that money, the courts would have continued to fall even further behind, said 11th Circuit Judge Jennifer Bailey, who chaired the Supreme Court’s Task Force on Residential Mortgage Foreclosure Cases.
“We have finally turned that corner of closing more cases than are coming in,” said Bailey. She cautioned, though, that could change without additional resources because another bump-up in foreclosures is expected as adjustable rate mortgages and other exotic loans made in 2007 begin resetting in May.
“The process-servers tell me they have warehouses of stuff they are just waiting to file, and it is not getting filed because they are waiting to get all the documentation set,” she said, adding that no objective economic indicators tell the court anything other than delinquencies will continue to accrue.
“What I’m concerned about, quite honestly, is the commercial side of this is going to kick in fairly soon,” Chief Judge Haworth cautioned, noting commercial foreclosures are much more complicated to litigate and will take a lot more judicial labor.
From the Trenches
Judge Bailey also told lawmakers she had just come off 75 straight days handling 1,302 foreclosure summary judgment hearings, about half of which were stayed.
“And I’m ripping my hair out because it is a complete waste of time for them to see me and get a stay,” said Bailey, adding that stays drain judicial resources because they do not move cases along. “In Dade County, for example, we have had over 3,000 stays to the end of November.”
Typically what happens is a summary judgment hearing is set and the lawyers ask for a stay because of affidavit execution issues.
“We grant those stays because we want to make sure there are not title insurance problems. . . and the process is done correctly,” Bailey said. “But that is a squandered hearing.”
Plaintiffs are mostly to blame for paperwork quality control issues, Bailey said, and while most foreclosures are uncontested, she is often hesitant to rely on the summary of the evidence to dispose of the cases.
“I’ve got affidavits that were supposedly signed in California and notarized in Minnesota. I’m not out there digging for problems, but if someone hands me an affidavit that is signed in California and it is notarized in Minnesota, I can’t ignore that,” Bailey said. “That would seem to be unjust and call the evidence into question.”
Other delays are being caused by files that have been transferred from a number of foreclosure firms under investigation by the Attorney General’s Office and The Florida Bar.
“A number of institutions have pulled cases from the folks who are under investigation, but the attorneys from those firms are still the attorneys of record until somebody substitutes in for the client,” Bailey said. “That is another event where there is no forward momentum because of the investigations.”
The only delays the courts can be held accountable for is the time it takes to get a hearing, Bailey said, “and I will suggest to you [there] has never been a significant delay in getting these cases to a hearing.”
Legislative Review Committee, said the section wants 100 percent correctness and reliability of the process, while reducing the time for “completion and expense in what is a highly complex area involving literally stacks of written documents for each matter and highly emotional content, because we are dealing with individuals’ homes or property on which their businesses are built.”
Toward that end, Gelfand said one area the section is exploring is how to move forward on summary judgment foreclosures. The thought is once a complaint is filed, a hearing date is set, and it’s verified so both sides know that the facts are for real and then it can go to a judge within a short period of time.
“The bottleneck is usually not in the court system, but it is getting the paperwork filed from the plaintiff who is foreclosing — the institutional lender,” Gelfand said.
Managed Mediation
Chief Judge Haworth also briefed the committee on the managed mediation program, created by the Supreme Court in the hopes it will alleviate some of the burden on the courts.Haworth said every circuit now has a program up and running designed to give the borrowers an opportunity to talk with the servicers and the lenders.
“There was a complete breakdown of communication between those two parts,” he said. “The owners never had an opportunity to talk to the servicers and were leaving their homes, frequently without having all the options explored.”
But a high percentage of cases referred don’t go all the way to mediation, because a great number of people in foreclosure just don’t respond. Judge Bailey said one unforeseen problem is the difficulty in contacting the borrowers.
“When you are in dire financial straits, the first thing you get rid of is your land line, so the phone numbers we have are bad,” Bailey said.
The RPPTL’s said most mediated resolutions generally involve a slight reduction in the interest rate, placing the delinquent interest on the rear end of the mortgage, or extending the life of the mortgage, “but rarely do we see a reduction in principal.”
Gelfand said if a home was bought for $300,000 five years ago and is now worth only $100,000, “someone has to write that down, and if mediation is going to be successful, those properties have to be written down.”
There is also trepidation about mediation from the borrower’s perspective.
“Frequently, for a borrower to enter into mediation the borrower has to give up their secrets — say exactly where all of their assets are,” Gelfand said. “The lender has that before the borrower walks in, and, as a result, if the mediation is not successful from the borrower’s perspective, then the lender has a listing of all their assets, and, in essence, the property is underwater and any savings that they have or anticipate will be lost.”
Nonjudicial Foreclosure
Gelfand also restated the RPPTL’s opposition to nonjudicial foreclosure, citing procedural and due process concerns.
After studying nonjudicial foreclosure statutes in other states and some Florida proposals being floated, Gelfand said, the section doesn’t think they “meet the exacting standards of the Florida Constitution and Florida’s history dealing with homestead and other real property issues.”
Bills filed last year that ultimately failed would have allowed banks to foreclose from 120 days to one year after the initial notice to property owners. Property owners would have to go to court to stop the nonjudicial foreclosures, something critics said many would either not realize until too late or would be unable to afford because of the cost of foreclosure filing fees. Also, instead of an independent trustee or mediator, the banks would have been allowed to designate any employee to deal with the property owner.
Asked if nonjudicial foreclosure could work for commercial foreclosures, Gelfand said the proposals the section has seen do not meet procedural and due process concerns.
Sen. Ellyn Bogdanoff, R-Ft. Lauderdale, asked: Is it possible to do nonjudicial foreclosure in uncontested cases?
“In theory, the answer is ‘yes,’” Gelfand said. “The problem is in practice, because who is going to determine whether or not, for example, the unit owner has been served with papers and that there really is no opposition?
“You are going to have someone who is paid by the person who is foreclosing to make that decision, and that goes to the heart of the public perception of the system,” Gelfand said.
It is better for the integrity of the process if a citizen can look back at their day in court and know an independent judge has reviewed the case and treated him or her with respect and fairness regardless of the outcome, he said.
