October 3, 2012
Photo by A.M. Holt
The number of new foreclosure cases in South Florida has increased this year after a long decline deepened by the "robo-signing" debacle that came to light two years ago, exposing major lenders' abuse of legal procedures to repossess property.
"We are unbelievably busy on the foreclosure side," said Roy Oppenheim, co-founder and senior partner of Oppenheim Law, a foreclosure defense firm in Weston. "Maybe there are less law firms doing it, or the banks are just trying to catch up right now and put as many through as possible. I can't explain it."
Mortgage lenders are on track this year for an annual increase in the number of new foreclosure cases in South Florida for the first time since 2007, according to Default Research Inc. of Mount Pleasant, Pennsylvania.
Lenders filed 9,361 initial foreclosure claims in Miami-Dade, Broward and Palm Beach counties in the first eight months of the year, about 1,500 shy of last year's 12-month total. Data from Default Research also show that the August number of initial foreclosure filings in South Florida (556 in Palm Beach County, 790 in Miami-Dade and 1,299 in Broward) was the biggest monthly number for each county in a year.
RealtyTrac also reported a spike in August foreclosure activity in South Florida. The California-based firm monitors the number of properties subject to foreclosure filings by lenders declaring default, scheduling auctions and recording repossessions. South Florida had 9,238 properties with foreclosure filings in August, up 48 percent from July and 12 percent more than in August 2011.
Still, the current pace of initial foreclosure filings in South Florida is much slower than four or five years ago. The number of new foreclosure cases in tri-county South Florida ballooned from 12,451 in 2006 to 136,373 in 2007 and then fell consecutively for the next four years, bottoming at 10,898 in 2011, according to Default Research.
A wave of lawsuits over foreclosure tactics slowed the filing of new cases. In late 2010, litigation against major banks erupted nationwide over their mishandling of foreclosure cases, including the practice of automatically signing unread affidavits and other documents, or "robo-signing" them, and submitting them in court filings to support foreclosure claims. This year, five of the nation's largest servicers of mortgage loans reached a landmark, multibillion-dollar settlement with a coalition of banking regulators and state attorneys general.
Florida's share of the $25 billion settlement in February with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC) is $8.4 billion, mostly in the form of loan modifications, principal reductions and other forms of financial relief for eligible borrowers. The banks also will make approximately $170 million of cash payments to Florida borrowers who lost their home to foreclosure from 2008 through 2011 and experienced loan-servicing abuse.
"Last year, there was a slack because of the settlement," Oppenheim said of the pace of foreclosure filings by lenders. "But then, after the settlement went through, it started to pick up again, and I just think they have this huge backlog."
Federal programs to keep defaulted mortgage borrowers in their homes cooled foreclosure activity, too. One of them is the Home Affordable Modification Program, or HAMP, which helps eligible homeowners avoid foreclosure by inducing their lenders to reduce their monthly mortgage payment. In May, about 46,000 home owners in South Florida had active loan modifications under the HAMP program, according to the U.S. Treasury Department.
But some lenders are foreclosing more of their restructured mortgages because the borrowers relapsed into default despite easier repayment terms. "Some of those loans, even with the restructuring, did not pan out, and they finally had to reach the foreclosure process," said Frank Gonzalez, a principal of accounting firm Morrison, Brown, Argiz & Farra in Miami. He is serving a term as president of the nonprofit South Florida Banking Institute, a professional development organization.
"Most of the financial institutions that we work with have dropped a bit in terms of foreclosures," Gonzalez said. "But we have some clients who are still struggling, so they keep going through the [foreclosure] process."
A growing number of new foreclosure cases could put renewed pressure on courts. Lenders filed 414,116 foreclosure cases from 2007 to 2011 at the circuit courts for Miami-Dade, Broward and Palm Beach counties, and the courts recorded 288,212 dispositions of foreclosure cases during the same four-year period. The Florida Supreme Court, which has administrative responsibility for circuit courts, established a statewide managed mediation program in 2009 to reduce the backlog of residential mortgage foreclosure cases, then terminated the so-called "rocket docket" program in December 2011.
The use of short sales and other alternatives to property repossession could help prevent foreclosure cases from overwhelming the court system again. Short sales, which allow "underwater" borrowers to sell their homes for less than their mortgage debt, are almost as common as sales of repossessed property. Data for Florida show 56,092 short sales and 65,185 sales of repossessed real estate during the 12 months ended in July, according to California-based market research firm CoreLogic.
"A short sale, for the most part, is better than a foreclosure," said Thomas Lumpkin, chairman of the board at Biscayne Bank in Miami. "It's faster, and I haven't seen the statistics, but a bank probably recovers more of the loan balance in a short sale than it would in a foreclosure."