Earlier this month, for example, Lee County Judge James Thompson denied a bank's request to delay a foreclosure so it could try to complete a short sale under the government's Home Affordable Foreclosure Alternatives program. A HAFA short sale was presumably in the bank's interest, which is why it requested the delay, and it certainly was in the homeowner's interest because the program would protect the homeowner from having to pay the roughly $200,000 difference between the mortgage and the short-sale price. Whose interests did Judge Thompson's order serve?
Florida's rocket docket has been suggested as a reason why so many banks are now voluntarily dismissing Florida foreclosure cases: The banks just aren't ready to go forward. Those voluntary dismissals have two negative consequences for the banks, so they surely wouldn't undertake them lightly. The first is that the banks will have to pay new filing fees, some $2,000 per case. (The banks can recoup the costs from the proceeds of an eventual foreclosure sale.) The second is that banks can do a voluntary dismissal only once. If they file again and have to dismiss the case for some reason, it will be with prejudice.
DailyFinance spoke with Charlie Green, the clerk of the Lee County Courts, who says the rocket docket was his idea. Here's what he has to say about the docket and its ramifications:
DailyFinance: Why did Lee County start the rocket docket?
Green: When we came up with the expedited docket to try to reduce our inventory, we had properties that were sitting out there for a year or two with nothing happening. We can't have all that inventory around, it hurts the economy and everyone.
Look, I have great sympathy for some of these homeowners, but you have to understand the first wave of foreclosures were all speculators, investors who had two or three properties they were looking to flip, the properties were empty.
Let me give you an example of what was going on here in '04 and '05. I have a friend who is a real estate broker, and he closed on a vacant lot and he paid like $12,500. The day he closed at the title company, he stuck a For Sale sign on the lot. By the time he got back to his office -- a half-hour away -- he had 10 or so phone calls about the lot. He sold shortly thereafter for $28 grand. That's the kind of fever we had going on in '04 and '05. And that was the first wave of foreclosures.
Now the people being foreclosed are people who've lost their jobs. And we're very sympathetic to them and hope the banks are working with them because we all know that at some point these people are going to have jobs again. And there's lots of people who can make partial payments.
There have been reports of large numbers of cases being voluntarily dismissed by banks because the banks aren't ready. What purpose does it serve for the judge to move cases forward in these cases?
Well, for starters, despite the reports, the numbers aren't up dramatically. January's had 785 dismissals through last Monday, but last August we had 1,186 dismissals.
The banks are going to come back and refile. They can't afford to let their stockholders down, that's what I think. We have good judges, they do the right thing. Nobody was ready for the tsunami that came through a couple of years ago. Instead of saying we're not ready, and gearing up, maybe the plaintiffs' attorneys just started pushing stuff out the door. [Stats through that link include dismissals in "disposed" category.]
What do you say to concerns that the rocket docket not only affects due process rights, but perhaps even more problematically for all Floridians, the rocket docket may be creating title problems. That is, in Lee County, as everywhere else in the country, banks are having a hard time proving they have the right to foreclose. If they foreclose without the right to do so, there's an issue with the title to the property. And the way foreclosures move in Lee County, it's hard to make sure the bank has the papers right.
That's a pile of junk. It doesn't wash. Here's why: The attorneys who represent the lenders have stepped forward and filed the petition to foreclosure.
At that point they've put themselves in the position of responsibility to be sure they do have the right to foreclose. They're saying to the court, "we have the right." The judge doesn't know if the documents are bogus or not. The judge is looking at these documents bringing the foreclosure and showing what's transpired, and the judge has every right to take them at face value.
There was no opposition raised by folks until about a year ago. Maybe 1 in 100 would step forward. What we've seen in the last year is a lot of people stepping forward and trying to make a deal. And that's good because we don't want people to lose their houses.
But what's woven into this in the last year or so is a false sense of hope by some homeowners that they're going to be able to stay in their houses because of some technical glitch. This whole thing has its own dynamics.
You say the judge has the right to take the papers at face value and, initially, that's surely true. But what about after issues have been raised with the papers? And you say it's a "technical glitch," but standing issues create title problems, and that's not just a technical glitch.
That's right, it's a huge problem. Look, in the 1920s Florida had a land rush that ended up messing up many titles, so much that the legislature passed a law saying from here on out you can rely on the titles. We may have to do something like that again. Government should be able to come in and fix this problem.