As major subprime lenders are forced to stop foreclosures in Florida and several other states because of questions about how they’ve been handled, policymakers are realizing that several efforts to deal with the huge foreclosure backlog haven’t done all that much to help.
The state has set up volunteer lawyer programs. The state Supreme Court has ordered mediation for lenders and borrowers and the Legislature set aside millions of dollars to allow senior judges to specifically handle foreclosure cases. Yet, the latest numbers from national real estate watcher RealtyTrac found that one in 155 Florida homes received a foreclosure notice in August, second only in the country to Nevada.
“We haven’t seen a lot of results yet,” said Kent Spuhler, director of Florida Legal Services, which has orchestrated a team of volunteer attorneys over the past two years to help families navigate the foreclosure process. “Unfortunately, all the efforts that kind of voluntary modifications for homeowners haven’t seemed to work.”
The crisis was magnified this week by news that GMAC Mortgage, one of the nation’s largest subprime lenders , was placing a moratorium on foreclosure cases in 23 states, including Florida, because of allegations that the company did not follow proper protocol in dealing with the cases. It is estimated that 10 to 15 percent of Florida mortgages are from the company.
U.S. Rep. Alan Grayson, R-Orlando, also sent a letter to the Florida Supreme Court asking that it freeze all foreclosure cases involving the law offices of Marshall C. Watson, P.A.; Shapiro & Fishman, LLP and David J. Stern, P.A., which are being investigated by Attorney General Bill McCollum. The court, however, said it doesn’t have the authority to do that.
“Allegations of fraud in particular foreclosure actions must be raised and adjudicated at the trial court level. Trial court errors are subject to appellate review,” Chief Justice Charles Canady wrote in response.
Some critics have alleged that some of the courts are simply sending cases through without really reviewing them.
Spuhler said he doesn’t believe that’s true, across the board. He noted that the money that has enabled the courts to dedicate some judges specifically to foreclosures and many judges now have the proper amount of time to review the cases. But it doesn’t seem to hold true in all judicial circuits, he added.
“Unfortunately in some places, we know where they view their job as to clean out the docket and they’re not hardly looking at anything, which is another reason why we have to get lawyers for homeowners in the mediation process,” Spuhler said.
The courts have been bogged down with foreclosure filings over the past few years, making it difficult for the courts to swiftly dispose of the cases. A special committee appointed by the Supreme Court recommended a mediation process that has been started in all of the judicial circuits.
The numbers in the state courts have started to trend downward though. According to the latest numbers from Office of State Court Administrators, from January though August 2010, the courts saw 181,151 foreclosure filings. That’s down significantly from 272,677 during the same period in 2009 and 233,775 in 2008.
The bankers as a whole, at least in Florida, don’t necessarily think the changes have helped them either. Many banks have seen their reputations tarred because problems with subprime lenders like GMAC and others, and have been overwhelmed with the amount of work that has resulted from the crisis.
Florida Bankers Association President Alex Sanchez said reputable bankers are working with borrowers and have been since the recession began.
“For our banks, foreclosure is the last option,” Sanchez said. “I know Florida families that haven’t paid in two years.”
By Kathleen Haughney
The News Service of Florida
