Lenders eye home loans in limbo

Ruling opens door to banks pursuing stalled foreclosures

Delinquent South Florida homeowners could be getting long-delayed foreclosure notices after a court ruling cleared the way for lenders to revive cases that have stalled for years.

The Florida Supreme Court ruled last month that lenders can refile foreclosure cases against owners still in default, even if the cases started more than five years ago, beyond the statute of limitations.

“It definitely gives banks more privileges to bring cases back to life,” said Jerry Tepps, a foreclosure defense lawyer in Sunrise.

Among those worried about what happens next is Adam Broder, who paid $386,000 for a two-bedroom condominium in Delray Beach in April 2005, just before the housing market collapsed.

He stopped making payments in 2009, he said, and hoped to get a mortgage modification. Instead, his lender, BAC Home Loans Servicing, filed a foreclosure action that BAC later dismissed voluntarily, records show.

The case has been in limbo for seven years.

“I just want to settle at this point and get on with my life,” said Broder, 36. “But the ruling gives [BAC] as much room as they want to start all over again.”

It’s unclear how many other Florida homeowners will face foreclosure as a result of Bartram v. U.S. Bank National Association.

Craig Waters, a spokesman for the Florida Supreme Court, said officials aren’t counting on a significant increase in foreclosures as a direct result of the ruling. Waters said it was unusual for Florida judges to throw out cases based on the statute of limitations, even before the opinion was released.

For the 2016-2017 fiscal year, the Office of the State Courts Administrator estimates that nearly 61,900 foreclosures will be filed statewide — and the courts office doesn’t project that number to increase during the next five years.

Still, attorneys and industry analysts say they expect the Bartram ruling will lead to hundreds or thousands of refiled cases that were on hold until the Florida Supreme Court ruling.

“Banks have been keeping a bunch of cases in their back pockets,” said Thomas Ice, a real estate attorney in Royal Palm Beach. “They’re saying, ‘Let’s wait and see what happens in Bartram before we start spinning our wheels.’ ”

Even if the foreclosure caseload increases, it almost certainly wouldn’t jeopardize Florida’s housing recovery, said Daren Blomquist, a vice president of ATTOM Data Solutions, a real estate research firm in Irvine, Calif.

Blomquist said the extra cases actually would be good for the market because banks would finally resolve open foreclosures and put more homes up for sale. “In a market starved for inventory, this would be welcomed by buyers and investors,” he said.

During the housing meltdown that began in 2006, lenders filed foreclosures by the tens of thousands, but cases often were dismissed on legal technicalities by lenders or judges. In some instances, mortgage companies didn’t have witnesses in place for trial; in others, the judges ruled that homeowners were improperly served foreclosure papers.

Lenders later refiled cases, sometimes after lengthy delays, prompting homeowners to challenge the statute of limitations as a defense.

The uncertainty continued to drag out foreclosures, and critics argued delinquent borrowers were benefiting by getting to stay in homes for free while the cases played out.

“Is it fair for the people who maybe got two or three jobs to make their mortgage payments?” said Guy Cecala, publisher of the Inside Mortgage Finance newsletter.

The Florida Supreme Court heard the Bartram case in 2015 and issued its ruling on Nov. 3.

Homeowners who have been delinquent for longer than five years can expect to start hearing again from their lenders, said Roy Oppenheim, a real estate attorney in Weston.

Oppenheim said he’s advising clients not to call their mortgage companies to find out the status of the cases.

“Keep your head down and your mouth shut,” he said. “If [the lenders] find you, then do whatever you have to do to defend yourself.”

Although the court’s ruling favors lenders, it does provide hope to owners who want to keep their homes, said Ice, the Royal Palm Beach attorney. While lenders can refile cases that were started more than five years ago, they can’t collect on missed payments beyond five years, Ice said.

He cited as an example a hypothetical homeowner who defaulted in 2007. The foreclosure was filed in 2008 but later dismissed. In refiling the case now, the lender can collect only the missed payments going back to 2011. The missed payments from 2007-2010 are wiped out.

Ice said homeowners and their attorneys should make sure the lenders aren’t trying to collect more past-due payments than they’re allowed.

What’s more, he said, lenders may be willing to settle these older cases rather than go through the hassle and expense of foreclosure.

“Nobody’s getting a free home, but you’re in a much better position now to negotiate a settlement to keep your house,” Ice said.

Anthony DiMarco, a spokesman for the Florida Bankers Association, said the court ruling brings clarity to the issue and provides an avenue for lenders to be repaid, even if homeowners have been delinquent for many years.

DiMarco agreed that there is room for negotiation.

“I can’t speak for every lender, but [in general] they want to work with you to modify the loan as best they can to keep you in the home,” he said. “That’s the No. 1 goal.”