Pains In The...

"Lenders Told They Can't Hide" By Todd Ruger
Published: Monday, October 20, 2008 at 1:00 a.m. Last Modified: Monday, October 20, 2008 at 1:23 a.m.

As more and more Florida homeowners slip into foreclosure, the law firms handling the cases for the banks have become harder to reach, those familiar with the system say. Homeowners and their attorneys, and even judges, cannot get a call back, making it impossible to dispute a debt or work out deals other than foreclosure until the case is in front of a judge.

"The lenders are just not talking to them," Chief Circuit Judge Lee Haworth said. Now, Haworth and other 12th Judicial Circuit court judges are going to force those law firms to meet with the homeowner within 45 days for a frank discussion on alternatives to foreclosure. Those discussions could center around refinancing, forgiving part of the debt or clarifying the amount required to reinstate or pay off the loan.

The Homestead Foreclosure Conciliation Program will start in December. It aims to keep people in their homes and reduce the strain on the court system from foreclosure cases, which are on pace to double this year compared with 2007. The program applies only to property registered as a primary residence under the homestead exemption. Local bar associations and legal aid organizations agreed to provide some attorneys to assist those homeowners during the meeting at no cost.

The law firms representing lenders are also required to notify any homeowner of the program, contact them and invite them to participate.

The large increase in foreclosures has strained almost every part of the foreclosure process, from serving legal papers to finding courtroom time. Coming to a solution within 45 days would avoid protracted legal battles and reduce the number of cases going through the system. Those long legal battles seem to be the only way to get law firms representing banks to return calls, Miami-based foreclosure attorney Rick Neustein said. "Most of the time they don't want to talk to us until they see this thing is being hotly contested," Neustein said. "They don't get serious until we're defending the foreclosure for nine months." Haworth said the main issue is only a small number of law firms handle the foreclosure cases for the banks for small legal fees, so they want to put as little time as possible into a case.

If the law firms do not comply with the new order, they will face courtroom sanctions that would cost them money, since it would take their attorneys more time to handle the cases. The law firms for lenders would not be able to settle the case through a summary judgment, a quick resolution to cases. The lender attorneys would no longer be able to appear at hearings over the telephone. And that lender's cases would be assigned the lowest priority for court hearing times, which may delay the case for an extended period.

Florida was the No. 4 state for foreclosures in August. Across the country, foreclosure filings in August rose 12 percent from the previous month and 27 percent from August 2007. The 303,879 filings -- default notices, auction sales notices and bank repossessions -- represent one filing for every 416 households. According to numbers provided by Sally Olsen Rackey of Sarasota's Hembree & Associates, one out of every three houses sold in Sarasota County since the beginning of the year was a foreclosure sale.