Gov. Scott's plan to speed foreclosure process draws mixed reactions

By TOM KNOX, Business Writer

Local foreclosure activity at a glance:

Number of properties in some stage of foreclosure:

Florida :

August*: 23,569

July: 22,377

August 2010: 56,877

Volusia County:

August: 486

July: 626

August 2010: 1,734

Flagler County:

August: 142

July: 89

August 2010: 193

*Most recent data available

SOURCE: RealtyTrac

DAYTONA BEACH -- Gov. Rick Scott wants to improve the state's housing market by removing the courts from the foreclosure process, a move supporters say will help prevent long delays.

Critics say removing the courts from the process would give too much power to lenders and removes protection needed by homeowners. Plus, courts would lose more than half of their funding received from foreclosure fees.

Scott and Republican leaders in the House and Senate have expressed interest in changing the process this year, although specifics have yet to be determined.

State lawmakers last year did not pass a bill to change the process.

"Right now it takes more than 600 days to get through a foreclosure," said Lane Wright, Scott's press secretary, in an email. "That's just too long. When foreclosures take that long, fewer people want to lend money to homebuyers and the market can't recover."

Florida is one of 20 states that require all foreclosures to go through the court system. It has the country's second-highest foreclosure rate, with 23,569 properties in some stage of foreclosure in August, according to Irvine, Calif.-based research company RealtyTrac.

At 757 days, Florida trails only New York in wait time for foreclosure proceedings. Other states that don't solely rely on courts but still have a high amount of foreclosures can average 400 days and up, according to Jacksonville-based real estate data company Lender Processing Services.

But taking the courts out of the process means less oversight for residents, critics say, especially in hard-hit Volusia and Flagler counties.

Flagler has at times held the highest monthly ratio of foreclosures in the state since the foreclosure crisis hit.
Sandy Upchurch is program manager for the court-sanctioned voluntary mediation program in the 7th Judicial Circuit, which covers Volusia, Flagler, Putnam and St. Johns counties.

The program began in July 2010 and is run by Daytona Beach-based Upchurch Watson White & Max Mediation Group.

"We know there have been problems with banks in their documentation, and how we can take courts out of it is beyond me," Upchurch said.

Late last year, major lenders began halting both types of foreclosures throughout the U.S. after allegations of "robo-signing" took hold.

Robo-signing is when lenders quickly and improperly sign foreclosure documents without inspecting them for accuracy. It occurred because lenders were anxious to put those homes on the market as quickly as possible. That oversight also enabled foreclosed-upon homeowners to more easily challenge their foreclosures.

It's unclear so far if both residential and commercial properties might be changed.

Last year, the Florida Banker's Association tried and failed to remove the judicial process from commercial properties only, but even that would have a serious fiscal impact to the courts.

Without addressing how the courts would make up lost fees they receive from foreclosure filings, the bill stalled, said Anthony DiMarco, executive vice president of government affairs with the Florida Banker's Association.

The association pushed hard for the changes last year and is doing the same now.

Florida courts are budgeted to get 60 to 65 percent of their funding from foreclosure filing fees, said Lisa Goodner, Florida State Courts Administrator.

But because so many foreclosures aren't moving through the courts, "that amount of revenue is just not coming in," Goodner said in an email.

"We haven't fully finished our package -- everything's on the table including more funding to the court system," DiMarco said. "We're willing to pay the fee that's there, but we'd like it to be reduced."

The backlog in Florida has been so severe that the state had set up separate courts and brought in retired judges to handle foreclosure cases. That ended in July.

Those judges are largely gone statewide, though a few still work cases in Flagler County, said Clerk of Courts Gail Wadsworth.

She is worried about what a change might do to her overworked court.

"My question for the governor would be, 'How are you going to replace the money that funds the court system?' " Wadsworth said.

The county processed 936 foreclosures in circuit civil court from June 2010 to July 2011. That's down from a high of 2,764 from 2008 to 2009, so fees have already been diminished.

A foreclosure filing fee for a home with a mortgage value of $50,000 or less is $400. It costs $905 if the value is more than $50,000 but less than $250,000, and $1,905 for a home worth more than $250,000.

Any change would likely only impact future foreclosures.

Banks might pay the courts to add people who can speed up the current logjam, but they wouldn't be able to make foreclosures already in the process leave the courts.

"I don't believe it would be retroactive unless an agreement had it in there," DiMarco said. "This would be for tomorrow's mortgages, so we wouldn't be in this quandary next time this happens. People have very short memories, unfortunately."

Dan Spearman, a loan originator at Port Orange-based Gulfstream ... Your Mortgage Source, said any change wouldn't directly impact the company because it doesn't service loans. Speeding up foreclosures would help the whole industry, though, because it would help establish where the housing market is at, he said.

"At the same time, I'd hate to see people at risk of losing their home -- their largest asset -- not have their due process," Spearman said.

Joy Cook, a 46-year-old Palm Coast housewife, also sees a benefit in the courts and the amount of time they can give a distressed homeowner.

In September 2009 her home's lender, one of the country's biggest, foreclosed on the house belonging to her and her husband, William, who's in the Navy.

They bought the house with an adjustable-rate mortgage in late 2005, when the market began to surge in Flagler County.

By 2009 Joy had lost her job in property management and the couple owed more than $200,000 on a house that was worth half of what they bought it for.

The Cooks unsuccessfully tried modifying their loan and eventually heard about the mediation program run by Upchurch. They reached an agreement with the lender in July to slash the principal balance owned down to its current worth.

"I think that's important, especially if it's your only line of defense at the very end," Cook said.

The next Florida legislative session begins in four months.

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