Archive for January 18th, 2011

No Response from Florida to Foreclosure Chaos

Kim Miller of the Palm beach Post openly wonders, in this article, why nobody in Florida is doing anything in response to documented problems in the foreclosure process.  To illustrate, we’re all familiar with the Florida Attorney General’s power point presentation, appropriately titled “Unfair, Deceptive, and Unconscionable Acts in Foreclosure Cases.”  The problem, of course, is that if the foreclosure fraud is this well-documented, why aren’t there any negative repercussions for anyone?  Unfortunately, as I see it, nobody will do anything.  The AG, despite its investigation into the foreclosure mills, has done nothing.  The Florida Bar has done nothing. 

But don’t take my word for it – read the article. 

By Kimberly Miller, Palm Beach Post Staff Writer

Fed up with the foreclosure chaos, the New Jersey courts demanded that banks prove the integrity of their home repossession systems or face shutdown.  To demonstrate the need for the Dec. 20 order, New Jersey cited flaws in six Florida foreclosure cases, including three in Palm Beach County, as examples.

In Nevada and Arizona, attorneys general last month sued Bank of America for a dual-track foreclosure system that offers homeowners hope with a loan modification, while at the same time taking away the home in court. Called deceptive and labeled consumer fraud in the lawsuits, the practice is also prevalent in the Sunshine State.  And on Friday, the Massachusetts Supreme Court issued a bombshell ruling against banks’ ability to foreclose on homes – a decision could reverberate nationwide.

The moves by other states to address the foreclosure morass has Florida homeowner advocates and defense attorneys asking why more isn’t being done here.  The Florida Attorney General’s Office is investigating four so-called “foreclosure mill” law firms and is part of a 50-state coalition trying to work out solutions with the banks. Also, the Florida Supreme Court assembled a foreclosure task force in 2009 and requires mediation in all homesteaded foreclosures – a program that has logged minimal success in the year since it became mandatory.  But as hundreds of homes continue to sell at auction each day and the variations of alleged malpractice mount, critics charge that Florida is burying its head in its sandy beaches, waiting for an ocean breeze to blow the whole thing over.

“This collective turning of our backs and shutting of our eyes is not working,” said St. Petersburg defense attorney Matt Weidner. “I think there is widespread delusional behavior to pretend nothing is wrong.”

And it appears clear something is wrong.  Although few dispute that the vast majority of foreclosures are on homes where the borrower has stopped paying the mortgage, a comprehensive presentation given last month by investigators in the Florida attorney general’s economic crimes division meticulously outlines problems in how banks went about taking back those homes.

The report includes pages of allegedly forged signatures, false notarizations, bogus witnesses and improper mortgage assignments. It implicates the banks, their servicers and law firms for contributing to the foreclosure conundrum.

In 2009, Florida had 399,128 foreclosures filed. Between January and October 2010, 224,400 more Floridians received foreclosure notices.  The numbers consistently ranked the state in the nation’s top three for foreclosures for much of 2009 and 2010.

“The best thing the state can do to address the foreclosure issue is to create more jobs, put people back to work so they can get back on schedule and pay their mortgage,” said Sen. Garrett Richter, R-­Naples, who heard a lengthy foreclosure presentation during a December meeting of the Senate Banking and Insurance Committee, which he chairs.

He empathizes with both struggling borrowers and homeowner associations trying to collect delinquent fees, and believes employment, more than legislation, is the answer to the foreclosure dilemma.  “I don’t think we have a massive problem with fraud in the banking industry,” he said. 

A spokeswoman for new Attorney General Pam Bondi said the office will wait to see what its law firm investigations find before making a move.  But in Florida, even the attorney general’s power to investigate is in question.

A Palm Beach County judge ruled in October that the attorney general’s office doesn’t have the authority under the Florida Deceptive and Unfair Trade Practices Act to investigate law firms . The state has appealed the ruling.

“They all say they are impotent to do anything,” said Mark Stopa, a Tampa-based defense attorney. “Part of why this whole thing has been allowed to continue is because there is very little negative repercussions.”

The Florida Bar says it can investigate individual attorneys only when a specific complaint is lodged, and has no authority to initiate its own query.

Judges are hesitant to point out flaws in foreclosure filings on their own because they say it mars their impartiality, making them an advocate for the homeowner.

Florida’s clerk of court offices are barred from policing the content of the foreclosure cases filed with them, said Sharon Bock, Palm Beach County’s clerk and comptroller.

And in the fall, as bank after bank acknowledged errors, the Florida Supreme Court said it has no power to freeze foreclosures under the state constitution or court rules.

New Jersey has not frozen foreclosures, but six of the nation’s largest lenders are expected at a Jan. 19 hearing to show proof why the courts should not stop their foreclosures.

Florida does not have the ability to follow New Jersey’s lead, said State Courts Administrator Lisa Goodner.

New Jersey’s court administrator is a sitting judge who can issue orders, while Goodner is not a judge and has no such power.

“In Florida, contested and uncontested mortgage foreclosure proceedings must be resolved in the individual trial courts through the normal litigation process,” Goodner said.

Attorney Tom Ice, of Royal Palm Beach-based Ice Legal, said the question isn’t whether Florida can use the exact same mechanism as New Jersey, but whether it can do something to address the problem. He believes it can.  “They’ve taken the position that it’s out of their hands,” Ice said of Florida’s Supreme Court. “They don’t have to sit idly by while people make a mockery of the system.”

Mark Stopa

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Florida’s Foreclosure Process

Shannon Boehnken discusses some eye-opening statistics on Florida’s foreclosure process in today’s Tampa Tribune. According to LPS Applied Analytics, it takes, on average, 673 days for a foreclosure sale to take place in Florida after a homeowner stops paying his/her mortgage.  That means, on average, Florida homeowners can stay in their homes for 673 days after they stop paying their mortgage.  A few things jump out at me about this. 

First, this figure is the average of all foreclosures, including uncontested cases.  For those homeowners who fight their foreclosure lawsuit with an experienced foreclosure defense lawyer, that number is sure to be higher.  Consider this another reason to fight your foreclosure!

Second, one big reason the number is so high – 673 days! – is because banks take so long, even after a foreclosure judgment is entered, to set the foreclosure sale.  There is absolutely no excuse for this delay, and that’s the point I tried to get across via my comments to Shannon. 

Bankers like to argue that the real estate market would improve if foreclosures were processed quicker (hence the quotes in the article).  It sounds like a reasonable position – prosecute foreclosures quicker, sell homes faster.  Unfortunately, that position sounds reasonable, but it’s 100% spin and is totally untrue.  The reality is that banks aren’t setting foreclosure sales on cases they’ve already won because they don’t want title to these properties.

You see, when the bank sets a foreclosure sale, that means the bank must take title (unless a third party is the high bidder, which is rare).  But the banks don’t want to take title because they don’t want to pay taxes, insurance, and maintenance expenses.  So what happens?  The banks get a foreclosure judgment, and scare the homeowner into vacating, but they don’t set the sale.  Instead, they try to find a third party who will buy the house, ensuring there is immediately a buyer in place so the bank never holds title. 

So when bankers say “we’re trying to prosecute foreclosure cases quicker to get abandoned homes on the market,” don’t believe it.  Typically, homes are abandoned because banks won a foreclosure lawsuit, and scared the homeowner into vacating, but won’t set a foreclosure sale because they don’t want title to the property.  In the interim – the time between when the homeowner vacates and the bank sets the sale and sells the property – the home is vacant.  

If you disagree, think about it like this.  Most homeowners, and my clients in particular, want to stay in their homes.  My clients leave only when they are forced to leave.  If the banks would sell the homes immediately after homeowners are forced to leave, guess what?  There would be no abandoned homes.  That doesn’t happen because banks don’t want to own the properties upon which they are foreclosing. 

Here’s the article…

TAMPA – Tampa Bay homeowners can get away with not paying their mortgage payments for about 285 days before lenders even begin to take the house back.  And if you think that’s a long time, get this: it takes about 673 days before the house is sold and the homeowner kicked out, according to data compiled by LPS Applied Analytics, which provides technology and data to the mortgage industry.

That puts the Tampa-St. Petersburg-Clearwater metro area near the top of the list for states that are slow to initiate foreclose. The Bay area is behind Maryland, Massachusetts, New York and California.

It’s no secret that Florida is no where near emerging from the real estate downturn. But data like this show just how clogged local courts are. The data also bring up some thorny issues for economists and industry onlookers who say the market won’t recover until a bulk of the distressed homes are sold.

“This data reflects that our system is overwhelmed,” said Mike Larson, a real estate analyst with Weiss Research. “It also reflects the pressure from government and others to come up with foreclosure alternatives. That’s good or bad, depending on your perspective.”

One of the reasons why it takes so long to foreclosure on Florida homes is because a judge must sign off on foreclosures in the Sunshine State. Courts are working through a backlog of tens of thousands of pending foreclosures. Some lenders halted or dramatically slowed foreclosure proceedings, amid government programs to keep struggling Americans in their homes.

Some, such as the Florida Bankers Association, have tried in the past to change Florida’s foreclosure process so a judge doesn’t have to sign off on foreclosures. Supporters say it would help improve the economy faster.  However, that could create even more problems, say consumer groups, who point to recent cases involving sloppy practices, even fraud, by lenders. At least with a judge, they say, there is some opportunity for protection for struggling homeowners.

Alex Sanchez, president and chief executive for the Florida Bankers Association, supported a legislative bill last spring that would have allowed lenders to foreclose without judge approval.  “I have Floridians emailing me, asking that we foreclose on their neighbors’ empty home faster,” Sanchez said. “They don’t want to live by the eyesore. Being a non-judicial state would streamline the process.”

There are 30 states that have a non-judicial foreclosure process, allowing lenders to foreclose on properties in as little as a month.  Under Florida law, a lender can take back a home only if it files a foreclosure lawsuit and is granted one from a judge. Because of a backlog of nearly 500,000 foreclosures, the process can take several months to a year or longer.

The proposed bill, which was sponsored by Tom Grady, R-Naples, would have changed that by allowing lenders to skip legal proceedings unless the borrower requests the foreclosure go through the courts. Lenders could have foreclosed in as little as 90 days.

The controversial bill, however, hit such resistance from foreclosure defense attorneys and consumer groups that it didn’t get very far.  “The faster we can get these properties rehabilitated and sold to someone who will clean them up, the faster our economy will recover,” Sanchez said.

Lenders foreclosing faster wouldn’t help, said Mark Stopa, a Tampa foreclosure defense attorney

“Banks want to get the judgment so they can write it off their books, but they don’t want to take title and sell the home,” Stopa said. “The LPS data shows how long it takes before they sell homes.  “I’ve seen so many homeowners move out because they lose their case and then the bank cancels the sale, and the home stays empty.”

Mark Stopa

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