What To Do With All Those Florida Foreclosures?

The Florida courts have a backlog of residential foreclosure cases, and the state has come up with two ways to try to complete those cases more quickly. One solution, proposed by the Florida Trial Court Budget Commission's Foreclosure Initiative Workgroup, is to allow magistrates to handle foreclosure cases. The other solution, by the legislature, is House Bill 87, which contains certain time limits and other details that would speed up the foreclosure process.

According to a report by the workgroup, as of February, Florida had 358,000 foreclosure cases pending in its state courts and will have an estimated 680,000 new cases filed over the next three years. The workgroup pointed to plaintiffs' unwillingness to seek disposition of pending foreclosure cases in an expeditious manner, as well as paperwork and procedural problems, as the culprits in the slowdown.

The workgroup developed the Foreclosure Backlog Reduction Plan, which recommended that the court amend its Rule of Civil Procedure 1.490 to expand the use of general magistrates as an alternative to the use of senior judges in processing foreclosure cases. A general magistrate is a member of the Florida Bar Association who takes the oath required of constitutional officers. Rule 1.490 currently provides judges the ability to refer foreclosure cases to magistrates, with consent of the parties. The amendment changes this to implied consent, and foreclosure cases would automatically go before a magistrate. If one of the parties does not want the case to go to a magistrate, they may object.
The amendment would allow judges to appoint the number of magistrates that they believe would be needed to expeditiously preside over the foreclosure actions. Also, the magistrates cannot practice law of the same case type, to prevent conflicts of interest.

The report was released on May 9. The change was effective immediately, and the public has until July 8 to file comments.

Matt Weidner, a St. Petersburg, Fla.-based attorney who represents consumers in foreclosure cases, sees nothing good coming from the amended rule.

‘What if the Florida Supreme Court waves a magic wand and grants all foreclosures tomorrow?’ he says. ‘These magistrates handle all the foreclosures, and you have 400,000 people out on the street. Now what?’
Weidner blames the banks for decelerating the foreclosure process. ‘They don't want it going forward more quickly,’ he says. ‘The reason for the backlog is the banks are managing the inventory in ways that suit them, and it is working. Property values are increasing.’

He adds that a speedy foreclosure is not always the best solution for consumers. Some are better off with modifications or short sales, which take time.

Others maintain the backlog is due to the idiosyncrasies of the system. Florida is a lien theory state, explains Valerie Saunders, government affairs chair for the Florida Association of Mortgage Professionals, based in Tallahassee. Most other states are title theory states.
‘In title theory states, people don't own their property. It's held in trust by a mortgage company. Once a debt is paid in full, the mortgage trustee deeds the property to the owner,’ she says.

In lien theory states, the borrower owns the property and allows the mortgage company to place a lien on it. In that scenario, the foreclosure process can be lengthy, especially for certain borrowers.

‘Throw into the mix the homeowners who file bankruptcy, and for two or three years, nothing happens, and the property is waiting, dormant, for the bankruptcy case to close. You might have somebody in the house for five, six, seven years, and they are not making mortgage payments,’ Saunders says.

She thinks H.B.87, which passed in the Senate and the House of Representatives, then was presented to Gov. Rick Scott on May 28, can help alleviate the foreclosure backlog. ‘This process is attempting not to dismiss the system we have in place but to make it go quicker,’ Saunders says.

The bill includes several provisions, including allowing other parties, such as homeowner associations, to ask the court to speed up the case. Also, judges would have to adhere to time limitations to commence parts of the foreclosure process. If Scott signs the bill, it will be effective immediately.

Dustin Owen, regional sales manager for Waterstone Mortgage Corp. in Winter Park, Fla., notes that the backlog is partly due to the 2010 moratorium, when banks halted thousands of cases to look more closely at documents that had not been properly reviewed before signing. Owen, who is also president of the Mortgage Bankers Association of Central Florida, says H.B.87 can help the housing situation.

‘We would be for anything that would get more homes through the process, so we don't lose buyers,’ he says. ‘Anything that speeds up the foreclosure process and puts inventory back to the street the quickest would be something we would support.’

Nora Caley is a freelance writer based in Denver.


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