South Florida Courts Finally Take Steps to Move Foreclosure Backlogs

Palm Beach County's courts have hired two senior judges and six case managers to help work through a foreclosure backlog of about 52,000 cases.

Their salaries are being paid with $640,000 — part of a one-time statewide allocation of $6 million to help clear an estimated backlog of 500,000 foreclosure cases in Florida. The Palm Beach County Clerk and Comptroller was given $403,000 out of a statewide allocation of $3 million.

Meanwhile, Palm Beach and Broward County courts both are beginning foreclosure mediation programs this month, under an order from Florida's Supreme Court. The mediation programs will force lenders or loan servicers to try to work out a new deal before the lender can ask for a judgment against the homeowner.

The mediations are supposed to give owners and lenders a chance to see whether an alternative to foreclosure, such as a loan modification, deed in lieu of foreclosure or short sale, is an option. The mediation is free for borrowers, who will have to meet with a financial counselor and provide tax and paycheck stubs before the session. Borrowers also can opt out of the mediation.

Lenders are charged a fee of $750 per case, which pays for the counselor, mediator and administrative costs of the program. The fee is based on the assumption that a successful mediation can be accomplished in one two-hour session. Judges often hear from borrowers that they have been unable to reach bank representatives, that they speak with a different person every time or that their paperwork is repeatedly lost.

Lenders complain borrowers ignore them or turn in wrong or incomplete paperwork.

The mediation is supposed to streamline communication, with both lender and borrower requesting documents up front through the mediator.

Phil Gross, a principal with the Miami-based Yale Mortgage Corp. states:
"A lot of times we try to contact the borrower and they don't want to talk to us and it's adversarial. "But when they see a letter from a mediator, they'll usually contact the mediator."

Gross said about 75% of his mediation sessions are successful, usually resulting in a year of reduced mortgage payments.

The process for the mandatory program doesn't begin until a foreclosure is filed. The mediator then contacts the borrower. A mediation session cannot be scheduled earlier than 60 days or later than 120 days after the filing.

Anthony DiMarco, executive vice president for government affairs for the Florida Bankers Association, said bankers worry that the mediation will become a way for borrowers to further stall the process.

DiMarco states:
"If we can have meaningful information exchange, then we're all for it. If it's just a delaying tactic, it's not helpful."

Palm Beach County Chief Judge Peter Blanc said moving foreclosures through the system is intended to get vacant homes back on the market and improve overall property values.

Blanc said:
"What I hear is there are homeowners and condo owners not in foreclosure who are being hurt because properties in foreclosure aren't being maintained."

In Palm Beach, Blanc said the new employees will increase the number of summary judgments processed from 1,000 per week to 2,000.

A motion for a summary judgment is typically filed by the lender following a homeowner's answer to the foreclosure filing. If the owner does not object to the foreclosure, it can be a quick proceeding in favor of the bank.

Homeowner activists fear increasing the rate at which summary judgments occur is unfair to borrowers, but Blanc said the court wants to be fair while also reducing the backlog.

"We want to be efficient, but not rush," Blanc concluded.