IRVINE, Calif. – Sept. 11, 2014 – Newly filed foreclosures jumped 24 percent in Florida last month compared to a year earlier, a spike that marked the first annual increase since early 2013 and led to speculation about whether a long-predicted flood of home repossessions had arrived.
According to a report from the company RealtyTrac, which measures foreclosure filings nationwide, 6,468 Florida homes fell into foreclosure in August, which was a 74 percent increase from the previous month.
The rise in new cases kept Florida in the top spot on a nationwide foreclosure ranking, a place it’s held for 11 consecutive months.
RealtyTrac analysts and foreclosure defense attorneys had different ideas on what caused the increase in new filings, but agreed it was likely a combination of factors;
• Banks catching up on a 2013 state law that requires them to have specific paperwork before filing a foreclosure.
• A faster court system giving lenders more confidence to pursue a foreclosure.
• The sunset of a federal tax break on short sales.
Daren Blomquist, vice president of RealtyTrac, said he links Florida’s increase in new filings to the so-called “fast track” foreclosure law that went into effect July 1, 2013.
The law gives lien holders a way to more quickly process a foreclosure through the courts in certain situations.
But it also requires lenders to have specific documents at the time the foreclosure is filed, including proof of loan ownership, such as the original note, and that they are the correct party to foreclose. If a note is considered lost, affidavits filed under the penalty of perjury are required to attest to the veracity of the foreclosure.
In August 2013, the month after the law went into effect, new foreclosures in Florida dropped 43 percent compared to the previous month and have stayed low since.
“We believe that drop was artificially caused by the law, specifically the requirement that forces servicers to file a lost note affidavit before starting foreclosure if they have lost the note,” Blomquist said. “The August numbers are an early indicator that servicers are finally starting to adjust to that new requirement, and we would expect to see more increases in foreclosure starts in the coming months.”
RealtyTrac measures three types of foreclosure filings – the initial notice, notice of sale and final judgment.
One in every 400 Florida homes had a foreclosure filing in August. In Nevada, which ranked second nationally, one in every 524 homes had a foreclosure filing. Maryland came in third at one in every 532 homes with a foreclosure filing.
“We’ve been talking about a second binge coming through,” said South Florida foreclosure defense attorney Roy Oppenheim about new foreclosure filings. “We’ve tried to anticipate it.”
But Oppenheim believes the bulk of the new cases are homeowners choosing foreclosure over doing a short sale after the Jan. 1 expiration of the Mortgage Debt Relief Act. The act allowed borrowers to exempt forgiven mortgage debt from counting as income.
Without the tax exemption, a homeowner forgiven $150,000 in debt could end up owing the IRS $42,000 in taxes, depending on the tax bracket. The industry group Florida Realtors is hopeful Congress will pass the tax break after the November elections and make it retroactive to Jan. 1. A homeowner may owe an unpaid loan balance to a bank after a foreclosure, but lenders only have one year to file to collect that debt.
“When the government chose not to renew the exemption, there were unintended consequences,” Oppenheim said.
Copyright © 2014 The Palm Beach Post (West Palm Beach, Fla.), Kimberly Miller. Distributed by MCT Information Services.