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Archive for April 16th, 2012

The Zombie Files

Below is a well-written, informative article by Kim Miller of the Palm Beach Post, illustrating how 7,000 foreclosure cases lie dormant in Palm Beach County alone.  Make sure you comment on Kim’s article, and be sure to let her know you particularly like the quotes from me.  ;)

The zombie files: Nearly 7,000 stagnating foreclosure cases lie dormant in Palm Beach County’s courts

Nearly 7,000 stagnating foreclosure cases lie dormant in Palm Beach County’s courts, creating a payment-free limbo for some homeowners but a stain of vacant and abandoned homes in deteriorating neighborhoods.

These sleeper files, which have remained inactive for a year or longer, date as far back as 1997, according to documents provided to The Palm Beach Post by the clerk of courts.

But most are from the early years of the housing crash when lenders feverishly sought to repossess homes, unaware that the frenetic pace would cause a second crisis based on faulty documents and unlawful corner-cutting.

While an unknown number of dormant files are mistakes, such as one party forgetting to request a dismissal after an agreement is reached, others remain open but unmoving because of homeowner bankruptcy, loan modification negotiations or bank neglect.

“I have no idea what’s going on and I’m not pushing it,” said Robert Feinson, a Jupiter resident whose case has sat idle since November 2010, more than two years after his lender initially filed for foreclosure against him. “Right now, we’re just waiting to see who is going to make the next move.”

The 6,927 zombie files make up about 17 percent of Palm Beach County’s 39,252 foreclosure cases.

The banks with the largest number of dormant cases include Bank of America (670), JPMorgan Chase (602) and Deutsche Bank (546).

After 10 months of inaction, a homeowner, or the court itself, can seek a dismissal of the foreclosure based on non-prosecution . If the bank fails to react within 60 days, the case can be thrown out and the bank forced to start over.

It’s a move Palm Beach County Chief Judge Peter Blanc said might begin in earnest this summer after a one-time bump in state funding allows him to hire additional judges to tackle foreclosures and get rid of “deadwood.”

The last court-initiated weeding-out occurred two years ago when Blanc received $640,000 to add judges, he said.

“There’s a whole variety of reasons why cases were dismissed, which is sort of consistent with how the practice was all over the place in the early years,” Blanc said.

The frustration over stalled and prolonged cases can be heard in Palm Beach County Judge John Hoy’s foreclosure court.

This month, Hoy waved a calendar at bank attorneys who had missed deadlines or sought to cancel foreclosure sales for reasons such as a failure to publish the auction announcement or belief that a loan modification was in the works.

Often the claim that a short sale or loan modification is pending comes after a final foreclosure judgment is made as banks backpedal on rulings.

“This is a 2009 case,” Hoy said to one lender attorney who was seeking an extension of time. “If you can’t take care of your old cases, don’t file new ones. ”

On another foreclosure, which was filed in January 2008, Hoy was equally nonplussed.

“There are 111 docket entries in this case and we’re still screwing around on a motion to dismiss?” he asked the attorneys. “What’s going on around here?”

When the lender’s attorney couldn’t produce an endorsed note proving ownership, Hoy dismissed the case.

“I kicked them back just now to January 2008,” said foreclosure defense attorney Malcolm Harrison after Hoy’s decision. “You’ll find a lot more errors on these older cases because they didn’t know what they were doing.”

Harrison hopes the “fatal flaw” in the bank’s case will force it to modify his client’s mortgage instead of refiling the foreclosure. The homeowners have been living in their Olympia home in Wellington without making a payment for about four years.

The reasons cases may be delayed are myriad, said Guy Cecala, publisher of the trade publication Inside Mortgage Finance. They include:

  • Fear of flooding the market with distressed properties that will crash prices.
  • Concern over getting a clear chain of title.
  • Unwillingness to take on maintenance and liability for a property.
  • Negotiating a loan modification or short sale.
  • A homeowner files for bankruptcy, putting the case on hold.
  • Problems with paperwork or how a previous law firm handled a file.

After the collapse of the Plantation-based Law Offices of David J. Stern in March 2011, about 100,000 foreclosure cases statewide needed to be transferred to new attorneys.

Tampa-area defense attorney Mark Stopa said he didn’t have a hearing or trial set by a bank on any of his foreclosure cases in a year.

Stopa said he was able to get between 30 and 40 cases dismissed in the past six months because of lack of prosecution.

“That’s something I love to take advantage of, and in years past, the courts would do it on their own,” he said. “It’s a good way to clear dockets that is favorable to homeowners.”

Feinson, the Jupiter homeowner, said he tried to get a loan modification after losing his business, but found himself dealing with a revolving door of lenders and servicers. His loan traveled from LIME Financial Services to La Salle Bank to Wilshire and finally to Bank of America, he said.

The last action on his case was an unsuccessful mediation in late 2010, just when the problems with robo-signing were revealed.

“We don’t know who has the mortgage and no one seems to have any answers,” Feinson said.

Forgotten foreclosures may see a reanimation of activity following the $25 billion settlement between the nation’s largest banks and the states’ attorneys general, Stopa said.

The agreement, announced in February, requires banks to modify more home loans and outlines a standardized way to process foreclosures.

Whether the settlement is good news for home­owner Kathryn Siddons, also of Jupiter, remains to be seen. Her home has been in foreclosure since 2008 with the last action on her file taken in the fall of 2010.

But she’s also been working on a loan modification, she said.

“We got a letter two years ago saying they couldn’t find our original note and we could work on other options,” Siddons said. “I just keep reapplying (for a loan modification). I’m afraid not to because then you’re just giving up.”

Mark Stopa

www.stayinmyhome.com

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