Foreclosures Down in Florida, but Court Funding Threatened

Jul 14, 2011

The following article was published in the Sunshine News on July 14, 2011:

Foreclosures down in Florida, but court funding threatened

By Gray Rohrer

First, the good news: Florida foreclosures are down 60 percent for the first half of 2011, compared to the same period last year.

Next, the bad: The decline in foreclosures does not reflect a rebound in the housing market, but, as expected, a delay in the foreclosure process stemming from the “robo-signing” controversy and concerns over title ownership.

Even worse news? The decrease in foreclosure filing fees that help fund Florida’s court system is putting the system in peril.

A report released Wednesday by Realty Trac, a California-based company that tracks foreclosed properties, showed that one in every 78 housing units in Florida received a foreclosure filing in the first six months of the year. The rate was the eighth-highest among all states, and Florida had the second-highest total, with more than 113,600 foreclosures.

Nationwide, one in every 111 housing units received a foreclosure filing in the past six months, a 25 percent decrease from 2010.

“It would be nice to report that foreclosure activity is dropping as a result of improvements in the economy or the housing market. Unfortunately, with unemployment rates inching back up, consumer confidence weak and home sales and prices continuing to languish, this doesn’t appear to be the case,” said James Saccacio, CEO of Realty Trac.

The decrease in foreclosures can be blamed mainly on the robo-signing controversy that was revealed in October 2010, where law firms consistently rushed through faulty or fraudulent paperwork in order to process as many cases as possible so as to generate as much money as possible. Four South Florida firms, one of which has already settled with the state, are at the heart of the allegations.

In response, banks and lenders initially imposed a moratorium on foreclosures, then proceeded cautiously with new foreclosures, dumping firms they used previously.

The pauses and delays may have been a godsend for some struggling homeowners, but are likely delaying any rebound in the housing market.

“Processing and procedural delays are pushing foreclosures further and further out. We estimate that as many as 1 million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later. This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number,” Saccacio said.

The problem puts Florida’s court system between a rock and a hard place. When the boom in foreclosures hit the courts in 2008, they caused numerous delays, as county and circuit courts grappled with the onslaught. But the subsequent foreclosure filing fees allowed court funding to increase slightly after the initial downturn in the economy.

In the 2007-2008 fiscal year, Florida’s courts were funded at $477.9 million. The burst of the housing bubble and the global recession hit the state’s budget hard, and the courts received $433.2 million the next year. In the 2009-2010 fiscal year, court funding ticked up to $451.3 million, rising again to more than $460 million for the 2010-2011 fiscal year. The court funding for the current fiscal year, which began July 1, is $458.1 million.

Between the 2009-2010 and 2010-2011 fiscal years, the amount of revenues generated by foreclosure filing fees dropped by about 55 percent, from $340.1 million to $152.93 million.

The robo-signing revelations in October played a big part. Foreclosure dispositions by Florida courts dropped to 15,067 in November, the first monthly total to fall under 20,000 since February 2009. Foreclosure dispositions have remained down since, throwing off trust fund revenue projections for the courts.

The drastic drop caused a crisis in the spring, when Gov. Rick Scott had to step in to approve a $19.5 million loan to the courts in April, with additional funds provided this month, the beginning of the new fiscal year. Florida Supreme Court Chief Justice Charles Canady had warned that the courts were in danger of running out of money by May without the loan.

“For the last several years, funding for state court operations has been largely dependent on mortgage foreclosure filing fees. The drop-off in foreclosure filings has significantly impacted the revenue needed to run the courts,“ said state courts administrator Lisa Goodner.

But it looks like Canady’s work getting funding for the courts is far from over.

“Working with the Legislature and the governor to stabilize court funding is Chief Justice Canady’s top priority for the coming year,” Goodner said.

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