Fighting Foreclosures in Florida

In late September 2010 several lenders abruptly halted their sale of foreclosures to review thousands of legal documents for errors and inconsistencies. Evidence surfaced that lenders and their associates had been approving the sale of foreclosures for thousands of homeowners often without reviewing files.  These “robosigners” were employed by national lenders such as Bank of America, JP Morgan Chase and Wells Fargo. After a short moratorium, lenders resumed processing foreclosures, yet have continued to face allegations of fraud from local defense lawyers and lawmakers on Capitol Hill.

Florida is one of 23 states where foreclosures must first be approved by a court. Recent reports declare that those rules have been breached by banks and affiliates.    A vast number of homeowners have been caught in the middle as banks have admitted to regularly foreclosing on homeowners who were in line for a mortgage modification.

South Florida’s courthouses have amassed a backlog of more than 100,000 pending foreclosure cases, and hundreds of new filings are added each week.  A former Miami-Dade County judge stated that the housing crisis overwhelmed the court system and the rush of foreclosures has quadrupled judges’ caseloads over the past three years.

Lawmakers and judges have joined forces to speed along the foreclosure process, though their practices have come under scrutiny; the Florida Legislature provided a $9.6 million grant in 2010 and set a goal of reducing the backlog of foreclosures by 62 percent within a year.  Some believe that this “incentive” has shifted the focus and favors lenders while neglecting homeowners’ rights.

A Glimmer Amidst the Glut….

The new Florida Attorney General Pam Bondi plans to enhance the efforts to go after robosigners and law firms who have engaged in unscrupulous practices.  Associate Deputy Attorney General Trish Conners stated, “We expect in this new administration to beef up the resources working on this issue in the economic crimes unit, only then can we ensure the integrity of the process is back.”

On a national scale, a fund is being worked out by state general attorneys whereby home owners could receive compensation if it can be proven that homes were lost due to improper foreclosure practices. The fund would be set up by major lenders to help insulate these banks from thousands of individual lawsuits stemming from improperly processed foreclosures identified in late 2010.  Details of the fund were being finalized in November 2010, with the expectation that a program would be introduced in early 2011.

A pivotal court ruling on January 7, 2011 in Massachusetts may set the precedence for dealing with foreclosures.   The Massachusetts Supreme Court ruled that two foreclosures were invalid because the bank did not follow proper steps to show the authority to foreclose on a home.   Banks will need to change their practices to reflect greater due diligence in their quest to foreclose on homeowners.  This court ruling may be particularly beneficial to homeowners who are presently in the midst of short sale negotiations, loan modifications and refinancing existing loans.

To Buy or not to Buy….

Purchasing a foreclosure may be very tempting, especially if the market price for a foreclosed property is too good to pass up or if the majority of available homes to purchase happens to be foreclosures.

Should you decide to purchase a foreclosure, make sure to consult with an attorney; the legal ramifications of purchasing a foreclosure should be discussed before putting in an offer.  Foreclosures are often sold on the open market and, given the robosigning phenomenon and questionable practices by banks, it is essential that an attorney be involved.  An attorney will ensure that property and title rights are obtained without the possibility of future recourse action by the bank.  Your realtor will represent your interest in the transaction, while your attorney will represent your rights to the property.

Sources: “Foreclosure Ruling May Be Good News for Homeowners.” MarketWatch (Jan 11, 2011), Service of Florida , Realtor Magazine( November/December 2010). The Miami Herald, Toluse Olorunnipa (Jan 2011)

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