Florida’s Foreclosure Process

Posted on January 18th, 2011 by Mark Stopa

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

www.stayinmyhome.com

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