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7 Years Later, Foreclosures Still Jam Courts

heraldtribune.com | January 12, 2014

By Josh Salman

A somber crowd begins to assemble in the lobby shortly before 8:45 a.m., when sheriff's deputies slowly usher the gathering through a metal detector and into the downtown justice center.

A single, cramped elevator lifts the throng to the sixth floor, where the small courtroom they have dreaded for years awaits. Within seconds of entering, attorneys are yelling, babies are screaming and long-time homeowners are crying.

Seven years into the foreclosure crisis, the court system designed to resolve these cases remains jammed.

Even after federal regulators tightened the guidelines for home repossessions and lawmakers in Florida took steps to relieve the system last year, foreclosure hearings continue to struggle with the same issues that plagued the process during the downturn — and created the initial backlog — according to a Herald-Tribune review.

Court officials insist they are making progress. But at existing levels, it will take more than three years to clear all the cases before them.

“It's chaotic at best,” said Jack McCabe, a Florida real estate analyst. “It still seems like one hand doesn't know what the other is doing.”

Southwest Florida's economy has rebounded considerably since a tsunami of home defaults ushered in by the Great Recession. Real estate is one again on the rise, tourism is surging and the employment outlook is brightening.

But industry watchers warn that the volume of loan delinquencies still wending their way through overloaded court systems across Florida poses a threat to that recovery.

A typical foreclosure hearing is anything but typical.

Attorneys pack the narrow hallway leading to the old courtroom, where they fight for a glimpse of the only printed docket schedule tacked to a wall.

On a cold January morning, 110 cases are scheduled — some dating to 2009.

Some lawyers find their cases have been erroneously left off the docket and will have to be rescheduled.

Others tend to vibrating cellphones or conversations about football. There is a constant shuffling of mortgage papers that breaks the uneasy silence.

Off in the corner, bank representatives coach loan servicers brought in as witnesses, while familiarizing them with case documents.

Once the crowd shuffles into the courtroom, attorneys' tables on each side of the room fill up quickly, as does the jury booth. Lawyers tote briefcases and laptops. Attorneys who miss out on the precious seats stand in the back by the door, or out in the hallway with their clients.

Every seat in the stuffy room is occupied.

A lawyer addresses the crowd, hoping to locate her witness:

“Anybody with Deutsch Bank? Deutsch Bank?”

Another attorney chimes in. “Wallace? I'm looking for Wallace!” The screams continue throughout the hearing.

Court begins promptly at 9 a.m. Hugging thick stacks of papers to their suits, attorneys form a single-file line down the courtroom's center aisle, wrapping out into the hall.

As if on a conveyor, they move to a podium as their docket numbers are called one by one. Once at the head of the line, each states his business before the judge, perhaps answers a question or two, then sidesteps over to a table to stamp final judgments as the next lawyer advances.

Cases take only minutes.

Sometimes, mere seconds.

In the back row sit recession-battered homeowners. Attorneys have dubbed the area the “trail of tears.”

The pounding of the court stamps rings in the air, as does the clerks' typing.

“Nationstar? Nationstar? Anybody with Nationstar?”

When the din gets too loud, a bailiff orders the crowd to hush.

In some cases, lenders voluntarily dismiss their foreclosures because they lack the proper evidence to proceed. Those cases will likely circle back to the docket later, as a new filing.

Others ask for extensions.

“An extension? This case is five years old,” says retired Judge Robert Bennett, hired temporarily to carve away at the backlog.

“Dismissed!”

Homeowners also win cases based on bad paperwork. One lender brings the wrong mortgage to the hearing. Another had improper signatures — reminiscent of the “robo-signing” scandal of 2009 and 2010.

Judge Bennett calls for Washington Mutual. Its attorney is a no-show.

Sensing what is about to come, the homeowner whose loan is in default with WaMu starts grinning. Bennett dismisses the case.

A few minutes later, the lender's lawyer squeezes into the courtroom, interrupting the next case.

“Too late,” Bennett says firmly.

Dozens of boom-time homes are seized by lenders in short order. Though the judge patiently grants each homeowner a say, most have little ammunition for the fight.

Loan servicers, sworn in as witnesses, robotically answer off a script of questions: Did you retrieve the records? Were the records kept in the normal course of business? Can you verify these records are accurate? Is the loan still in default?

“The systemic issue is how tens of millions of dollars worth of property is changing hands in this dilapidated courthouse,” Matt Weidner, an area real estate attorney, said following the hearing. “Foreclosures are the redheaded stepchild of the legal system. It just doesn't seem to have any dignity at all. This is the mess that we created.”

Judicial systems in Southwest Florida and throughout the Sunshine State remain burdened by a backlog of home defaults dating, in many cases, to the real estate market's swoon.

Even as the number of new foreclosures wanes, and lenders increasingly cut deals for those still behind, it will take local courts years to clear up pending cases.

Doubts are rising, too, about whether the state will continue funding its foreclosure task force long enough to get that done..

There were 11,880 active foreclosure cases in the 12th Circuit, comprising Sarasota, Manatee and DeSoto counties, as of Oct. 31, the latest data available.

That backlog was down by 2,229 cases from June 30, and the level has fallen by 4,749 cases since the summer.

Even so, the region's estimated foreclosure backlog stands at 40 months, according to the Florida State Courts Administrator.

Since July 1, just 1,039 new foreclosure filings have entered the 12th Circuit, a slowdown experts attribute to improved property values and an increased willingness by banks to approve short sales and modify borrowers' loans.

But problems persist with some older filings.

Of the 3,268 home defaults that were settled during that time, nearly 44 percent were dismissed without a final judgment — meaning those foreclosures will most likely cycle back into the system at some point, and further add to the backlog.

The trend has played out across Florida, where 272,470 foreclosures remain pending, and 42 percent of the cases adjudicated since the start of the fiscal year in July were dismissed without a final disposition, records show.

“It's the Wild, Wild West,” said Charles Gallagher, a local foreclosure defense attorney. “It seems like people have become a little numb to it now, but this is not kosher. You have defendants in murder case getting more due process than these people losing their homes. It's fast-food justice.”

The state has allocated $4 million to relieve overwhelmed courts with retired judges, trained case managers and special magistrates in the areas hardest hit by the housing recession.

Another $1.3 million was provided in February, records show.

But because the state money is earmarked on an annual basis, court officials are never sure when the cash will run dry. Firing, then re-hiring, people, and training that is required of new workers annually, has become an arduous task, said Judge Lee Haworth.

“We don't have a lot of ways to retain them as long as the Legislature is uncertain,” Haworth said. “There seems to be intent to sustain the whittling down of cases because I think we're doing some good. If given the tools, we can get this done. Things are going to better, but we're probably looking at a couple more years.”

Meanwhile, a new law aimed at fast-tracking foreclosures signed by Gov. Rick Scott last year has instead slowed the process. That is because national banks are struggling to comply with the new rules, many of which do not apply in other states, Haworth said.

The $25 billion National Mortgage Settlement inked in early 2012 also appears to have brought confusion.

Plaintiffs' attorneys are regularly unprepared for hearings, observers say, involving the same issues that led to the federal mortgage penalty.

“Because of the large volume, these law firms are going to continue to have these problems because they have more cases than they can handle,” said Haworth, who has spearheaded foreclosure reduction efforts regionally.

“It's frustrating for us because we do all the work to prepare the case, and when an attorney on either side is not ready the case has to be re-filed.”

As a result, foreclosures take an average of 929 days from start to finish in Florida, according to industry researcher RealtyTrac Inc.

By comparison, Arizona — another state rocked by foreclosures — processes home defaults in an average of 240 days.

“The court process is a large factor in why the Florida numbers are going the other way from the national numbers,” RealtyTrac Vice President Daren Blomquist said. “It's also why Florida continues to have more foreclosures than any other state six years after the crunch.”

Alma Thomas was not sure what to expect when she appeared for her foreclosure hearing recently.

The 76-year-old, single grandmother was poised to lose her Sarasota home of four decades after defaulting on a $175,000 mortgage she got from People's Choice Home Loan in 2006, court records show.

When she hurt herself managing a pair of coin-op laundries, Thomas was forced to quit working and soon fell behind on her bills.

In early 2009, People's Choice started foreclosure proceedings, but the case was dismissed twice because of lender errors.

This time around, the People's Choice lender failed to show for the hearing, prompting the judge to toss the case and start the process over — five years after the foreclosure filing.

“I hardly didn't have nothing to say,” Thomas said. “The judge looked at me and smiled and told me it was dismissed. It just felt so good.”

 

Back to January 2014 Archive

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