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Nightmare continues for Florida foreclosure system

Florida courts continue to struggle with a backlog of more than 368,000 pending cases, according to Jane Bond, a Florida foreclosure attorney at McCalla Raymer. It’s a nightmare, attorneys say — one with no end in sight.

“It’s not as bad as it seems. It’s much, much worse,” said David Rodstein, a foreclosure attorney with the Rodstein Law Group.

Bond and Rodstein chaired a panel at the Mortgage Bankers Association annual mortgage servicing conference in Orlando, Fla. The state is suffering from an ailing housing market. Home prices dropped 41% from 2006. Nearly half of all borrowers are underwater. Distressed properties abound. Unemployment is at 9.9%. And as it tries to clear the backlog of foreclosures, the state is going nowhere fast.

“The judges are frustrated. The attorneys are frustrated. The servicers are frustrated. Everyone is frustrated,” Bond said.

The average foreclosure in Florida takes nearly 800 days to complete, more than twice the national average, according to RealtyTrac.

Rodstein said 40% of foreclosures filed by servicers are contested by the borrower because of a very efficient bar system in the state. It’s helped create a cottage industry of delays, displacing an earlier system not any fairer.

“Borrowers can hire these attorneys for a small monthly payment — much less than the mortgage — and the attorney can come in and easily delay the case for year plus,” Rodstein said.

But the delay recently has much to do with some attorneys’ own mistakes.

Massive firm David J. Stern ceased foreclosure work in March after coming under investigation for robo-signing and other document problems. The entire firm crashed later in the year. Several other firms came under investigation as well.

The result was almost a complete freeze on the system. What had been a 60,000 foreclosure filings per month pace slowed to less than 19,000, according to Bond.

The Florida Bar News reported in November that the court system, which operates almost entirely on foreclosure fees since the crisis, had to take out a bridge loan to continue operating as the robo-signing correction paused the process.

An accelerated “rocket docket” that had made some progress through the backlog closed in the summer when funding ran out.

Servicers had to spread out the Stern cases among many more firms. Consent orders signed with regulators in April capped the amount of files a servicer could have with one law firm. One bank, Bond said, went from having six representatives in the state to more than 26 after Stern folded.

Defense attorneys aren’t letting up for what they claim to be a system still under abuse by the servicers. According to a survey released Wednesday by the National Consumer Law Center, 90% of defense attorneys claimed clients were foreclosed on while waiting for a modification, a practice banned by consent orders last year.

“Until rigorous national mortgage servicing standards that are enforceable by homeowners are put in place by the federal government, banks will continue to seize homes illegally and routinely,” said NCLC attorney Diane Thompson.

The problems aren’t over for Florida or the rest of the country either. According to Lender Processing Services (LPS), roughly 1.7 million mortgages are more than 90 days past due but not yet in the foreclosure process.

“Unless you’re a servicer with a very geo-centric model, you’re having to deal with different state policies that are changing month to month,” said said Rick Sharga, executive vice president at Carrington Mortgage Services. “The tendency is to almost throw your hands up in the air.”

The state legislature is working on speeding up the process. The Florida Senate passed H.B. 213 last week to allow servicers to use an alternative court process that could potentially limit the amount of hearings per foreclosure and would loosen affidavit requirements.

After delaying the bill last week, a second committee in the Florida House of Representatives passed the bill Wednesday for the floor to vote.

If signed into law, the bill would take effect in July. Servicers and the courts will need more time to implement it as well. Until then, the backlog remains.

“We don’t have a paradise,” Bond said at the conference, which is being held next to the Walt Disney World. “We have the opposite.”

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