Archive for March 20th, 2011

Foreclosure, Vacant Houses, and the Economy

Bankers love to argue the way to improve the economy is to accelerate the foreclosure process so as to “get foreclosed homes onto the market faster.”  They argue, in response to stories like this, that homeowners defending foreclosure cases only extend the economic downturn. 

My response?  Read this.  Incredibly, at present, 18% of Florida homes are vacant.  18%!!!

Think about that for a moment.  It’s not “one in five homes are in foreclosure.”  It’s not “one in five homes are behind on mortgage payments.”  It’s “one in five homes are vacant.”

Do you think vacant homes help the economy?  Obviously not.  In fact, I’d argue vacant homes harm property values more than anything else.  After all, vacant homes become eyesores, are not maintained, encourage break-ins, and decrease the values of neighboring properties. 

Now ask yourself this – do you think my clients leave their homes vacant?  Let me answer for you – heck no.  My clients live in their homes and maintain them.  Typically, if you drove by, you’d never know my clients were facing foreclosure.  By contrast, when you drive by a vacant home, you almost always know.   

So why are houses vacant?  Easy.  It’s because of banks.  Banks foreclose, and then they don’t sell the houses to anyone – often because they never even list the house for sale.  So the houses sit, vacant, for weeks, months, even years …. to the point that 18% of homes in Florida are vacant. 

So you tell me – how is rushing through foreclosure cases – and creating even more vacant homes – going to help the economy?

Mark Stopa

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Florida’s Foreclosure Process – Save Your Money

In its ongoing coverage of Florida’s foreclosure crisis, today’s St. Pete Times has a good article about an under-reported aspect of the foreclosure process – the sheer length of the process and the ability of homeowners to save money in the meantime, potentially getting back on their feet while their foreclosure case is pending. 

At present, 633 days pass, on average from the time a Tampa-area homeowner misses a mortgage payment to the end of the foreclosure process.  Bear in mind – that’s the average, i.e. it includes all of the cases where the homeowner does not even try to defend.  Hence, undoubtedly, the number is larger for some homeowners, particularly those who defend the foreclosure lawsuit.

I’m quoted in the article, and while I can’t say I use terms like “free rent,” I think the article conveys the point pretty well – it can be a long process, so defend your case and save your money. 

Amid the foreclosure epidemic, this might pass for good news: a nationwide report says Tampa Bay homeowners can skip 21 mortgage payments before getting booted to the curb.  That’s a benefit, if you want to call it that, of the staggering number of foreclosures in Florida.

The bay area ranks among the worst areas in the country — 633 days — in the length of time from missing a mortgage payment to the end of the foreclosure process, defined as when a bank takes possession. The Cape Coral-Fort Myers region is longest with 675 days.

“My clients love it,” said Mark Stopa, a Tampa Bay foreclosure defense attorney. “I encourage them to take of advantage of the free rent.”

Six other Florida metro areas rank in the top 10.  The Sunshine State ranks second in the country with an average foreclosure process of 638 days to New York’s 664, according to LPS Applied Analytics, which tracks 40 million mortgages.  The national average in January was 507 days; it was 251 in January 2008, according to LPS.

With 2.2 million mortgages now delinquent by 90 days or more, foreclosures will take even longer to process, said Herb Blecher, LPS senior vice president. The focus so far has been on preventing foreclosures, he said.

“At some point it has to peak,” Blecher said. “We need now to clean out the pipeline.”

Experts say an increase in mortgage defaults, clogged court systems and lengthy loan modifications prevent lenders from processing cases quicker.  And they point to other factors as well: The foreclosure moratorium imposed last fall by banks amid allegations that thousands of legal documents were signed improperly; and more defense attorneys fighting to keep homeowners in their houses. The moratorium added 21 days to the foreclosure process, according to LPS.

Stopa said his business has boomed since 2008. 

The firm currently represents 1,000 homeowners in foreclosure cases, and Stopa said none have lost their homes yet. But he warns them to save cash in case they’re evicted.

More people, Stopa said, are fighting banks as they learn about missteps by lenders. “The public has become aware of their rights,” Stopa said. “The banks have been forced to do their job better. It’s just a slow process.”

The foreclosure process in Florida faces another drag.

With the collapse of the David J. Stern Law Firm, once Florida’s most prolific foreclosure mill, 100,000 cases statewide could be in jeopardy.

The latest foreclosure snapshot comes at a time when homes sales are inching up, but sales prices keep dropping. Experts caution that prices would plummet if banks flooded the market with more seized homes.

But the housing market cannot recover until homes exit foreclosure, said University of Central Florida economist Sean Snaith. The foreclosures are a necessary step, but the lengthy process hurts the economy, he added.

“In the big picture, it’s bad,” Snaith said. “It keeps us in the housing purgatory.”

Once homes exit foreclosure, real estate agents prefer them over short sales, where a bank agrees to accept less for the home than is owed on the mortgage. Leslie Griffin, managing broker at Prudential Tropical Realty in Tampa, said buyers usually walk away frustrated after waiting months for a bank to accept offers on a short sale.

“It impacts our job,” she said. “A foreclosure is easier to sell.”

The process is quicker in other states. Foreclosures bypass courts and judges in 27 states. Court action isn’t needed in Michigan, Arizona, California and Nevada — other states with high foreclosure rates. The process ranges from 392 days in Arizona to 511 in California.  Florida requires judges to referee the foreclosure process.

Last year, the Florida Bankers Association tried unsuccessfully to change the law so judges didn’t need to sign off on foreclosures.

Another downside to lengthy foreclosures is that more homeowners could enter the process through “strategic default.” The term describes borrowers who can pay their mortgages but stop because they owe more than the home is worth.

Scott Samuels of Remax Metro in St. Petersburg deals with bank-owned properties.  He noted the large subdivisions in Hillsborough County where borrowers bought similar-sized homes just before the bubble burst. Some owners have defaulted and live rent-free while others keep paying their mortgages, he said.

“Psychologically, it’s got to have an effect on the neighbors who pay,” he said. “It has to make them wonder why they keep paying.”

Mark Stopa

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