Will clearing foreclosure logjam revive Florida's economy?

Article Courtesy of The Palm Beach Post

By Kimberly Miller

Published September 28, 2011 


More Palm Beach County homes received first-time foreclosure notices in August than the previous month, and experts warned Wednesday that the 13 percent increase is just a trickle before the flood.


Statewide, new foreclosure filings were up 10 percent last month from July, according to findings to be released today by the Irvine, Calif.-based company RealtyTrac.


Nationally, initial notices of foreclosure were up 33 percent.


But unlike previous reports that found increases and decreases in foreclosure activity were similar nationwide, there was a marked difference in August between judicial states, where a judge is required to sign off on a home repossession, and non-judicial states.


In the 25 states RealtyTrac considers non-judicial, initial foreclosures leapt 46 percent in August from July, although they were still down 10 percent from August 2010. In judicial states, including Florida, there was only a 21 percent increase in August from July, with a 25 percent drop from last year.

A foreclosure sign sits in the front yard of a Lake Worth property.

I've been told by a number of banks' lawyers that they have cases ready to go and are just waiting for approval to file," said Mike Wasylik, a foreclosure defense attorney with the firm Ricardo, Wasylik & Kaniuk, which has an office in Boca Raton. "I've been expecting the dam to break for months now and I think there is still uncertainty about what is going to happen with regulatory actions and pending sett"lements."

Foreclosures were suspended last fall following questions about the validity of court documents used to take back homes. Activity remained on a simmer through early spring and has jumped around since then as lenders continue to patch up their foreclosure processes.

The nation's largest home lender and servicer, Bank of America, confirmed Wednesday it had ramped up foreclosures in non-judicial states, including Nevada, which saw a 31 percent increase in new filings in August from July. California, also a non-judicial state, saw a 55 percent increase.

"Strong gains like that from July to August demonstrate our progress, clearing more volume to advance to foreclosure once we pass the numerous, improved quality controls we have in place and only after all other options with homeowners have been exhausted," said Jumana Bauwens, a Bank of America spokeswoman. "The industry has not yet returned to normal or necessary foreclosure activity levels, but progress is certainly being made."

Still, lenders face more uncertainty.

Earlier this month, the Federal Housing Finance Agency sued 17 financial firms for selling Fannie Mae and Freddie Mac billions of dollars' worth of risky mortgage-backed securities that turned sour when the market collapsed.

Also, settlement negotiations continue between banks and the nation's attorneys general. The attorneys general joined last year in an effort to investigate the robo-signing scandal, penalize lenders for their paperwork missteps and help struggling borrowers.

"The banks don't know what their exposure is from past problems or that they have resolved the problems to the satisfaction of the attorneys general," said Guy Cecala, chief executive officer and publisher of Inside Mortgage Finance.

But foreclosures have not come to a complete standstill.

Last month, 715 Palm Beach County homes were sold at auction - the final step in a foreclosure - according to Palm Beach County Clerk of Courts data released Wednesday.

Just 31 percent of scheduled auctions were canceled, a decrease from a high of 51 percent in January when banks hurried to delay sales in the wake of the robo-signing scandal.

The clerk's office tallied 1,126 initial foreclosure filings last month. That's slightly higher than RealtyTrac's 926, but could be a function of when the numbers were gathered.

"We were anticipating another wave of foreclosure filings this year, based on expert forecasts, but so far an influx of new cases has yet to materialize," said Clerk Sharon Bock.

RealtyTrac has lowered its nationwide prediction of total foreclosure filings - initial notices, sale notices and auctions - for 2011 from 3 million to 2.5 million.

"As painful an issue as foreclosure is, it has to get back on track, otherwise we'll slip further and further behind," Cecala said. "The year 2011 will go down as the year that nothing got done."