It seems counter-intuitive that the state’s foreclosure crisis continues unabated at the same time the housing market is making a comeback. But that’s exactly what is happening. Despite rising housing prices and a jump in construction starts across the state, the number of foreclosure filings continues to climb in Florida.
That’s why two bills being considered by lawmakers in Tallahassee deserve support. Although not perfect, they appear to be well-meaning attempts to stanch the foreclosure backlog while preserving the rights of homeowners. There is a provision in one that is harmful to the newspaper industry that, naturally, we hope is dropped. But the bills thoughtfully address a formidable challenge.
In a recent RealtyTrac report, the state distinguished itself in a number of unflattering ways. Among them:
Florida accounts for 20 percent of the foreclosure inventory in the nation, far more than any other state.
One in 32 housing units received a foreclosure filing in 2012, the highest rate of any state.
It takes, on average, 853 days to complete a foreclosure in Florida, the third-highest number of days in the nation.
Closer to home, in the judicial circuit incorporating Tampa, there are 22,000 foreclosure cases pending, 8,000 of which are at least three years old. About 1,000 new cases arrive each month, compared to 300 before the housing crash. According to RealtyTrac, nearly 11 percent of residential loans in Florida were in foreclosure at the end of 2012.
That means the foreclosure tsunami will continue to crash ashore for the foreseeable future. Unfortunately, finding ways to unclog the staggering caseload continues to vex the judicial system. A court-ordered mediation program meant to divert the cases away from the courtroom and into mutually agreeable settlements failed to fulfill its promise. Consolidated court dockets that tried to dispense of cases by the bushel instead inspired the epic fraud known as robo-signing. And legislative bills meant to speed foreclosures from start to finish in as little as 90 days trampled on the rights of homeowners and, thankfully, never became law.
Those shortcomings are largely addressed in a Senate bill (SB1666) by Sen. Jack Latvala, R-Clearwater, and a companion in the House (HB87) by Kathleen Passidomo, R-Naples. They would ease the caseload by holding irresponsible lenders accountable for the ownership claims they make, by giving condominium and homeowner associations a seat at the table when delinquent borrowers affect their communities, and by speeding the process along without shifting the burden — and cost — of contesting a foreclosure onto the homeowner.
In return it asks judges to determine the validity of cases earlier in the process. Of course, no bill can guarantee against abuses. It is well chronicled that some judges involved in “rocket dockets” were granting judgments without the proper vetting of ownership claims by lenders. That lack of due diligence, and the sense of urgency created by the accelerated judicial calendars, promoted the robo-signing scam that left an indelible mark on the mortgage industry. So there is a bit of faith in these measures that the lessons learned are applied by judges being asked to arbitrate these claims in a more active way. But it is a leap of faith worth taking.
Among the worthy provisions in the bills:
Stricter requirements for lenders to prove their ownership of the mortgage upfront, and potential sanctions if ownership is falsely claimed.
The hiring of retired judges to reduce caseloads. They would be paid $350 a day, at an estimated cost of $1.6 million a year.
Protections for homeowners who unwittingly buy a foreclosed property and later face legal threats over their ownership because of the prior legal entanglements.
A shortening from five years to one year the time a lender can pursue deficiency judgments against the owners of foreclosed properties. Deficiency judgments represent the difference between the money lenders obtain from selling a foreclosed home and the amount the previous owner still owed.
There is one provision in the Senate bill that is of dubious benefit to the public. Rather than require public notice of foreclosed properties to be published twice in a newspaper of general circulation, as current law requires, the Senate bill allows for the publication of that notice on a website to be maintained by the clerk of the court.
This change would limit the public exposure of those notices to those who know where to search for them on the Internet. The House bill finds no need to change the current public notification law. A note of full disclosure: Newspapers, like the one you are reading, stand to lose revenue if the notification laws were changed and are lobbying against the provision.
There is ample blame for the foreclosure crisis. Homeowners borrowed beyond their means. Lenders extended credit recklessly. Investors gambled and lost. The fallout continues to touch every corner of the economy. Neighborhoods suffer when abandoned properties fall into disrepair. As property values drop, local governments lose tax revenues.
Advocates for the rights of homeowners may take issue with calls to accelerate the foreclosure process. But the need to clear the backlog and get these homes back on the market is undeniable. With slight modifications, these bills offer a tenable solution.