Don’t believe the real-estate hype: Home foreclosures are already a looming threat
Recent headlines in this newspaper, such as June 18’s “Another housing bubble doesn’t necessarily mean a market collapse | Opinion,” have made it seem like South Florida’s booming real estate market could never face a downturn as catastrophic as the one during the Great Recession. But many experts are sounding the alarm bells of a looming housing crisis that is already affecting too many of our neighbors.
Those of us who see the foreclosure system up close are very worried about what will happen after June 30, when the moratorium on foreclosures of government-backed mortgage loans is scheduled to end, and a wave of defaults not unlike those we experienced in 2008 will hit our communities. A proposal by the Consumer Financial Protection Bureau is in the works to extend the moratorium for some homeowners until next year. But details aren’t finalized, and it’s almost certain that those currently facing foreclosure and eviction will not be protected.
In the meantime, many of our loved ones and relatives are struggling to avoid eviction after seeing hours cut, businesses fail or in some other way running into financial trouble during the pandemic shutdown. An estimated 10 million Americans are behind in their mortgage payments, and 1.7 million are 90 days past due, four times as many as before the pandemic.
You’d think banks would want to find a way to work out modifications or payment plans that will keep people in their homes paying off their mortgages. But the reality is that lenders have no incentive to help homeowners. They have spent the last decade bending Florida law in their favor, giving them even less reasons than they had in 2008 to accommodate borrowers.
Roughly half of all mortgages are federally backed. This means there is a backlog of cases likely to be filed as soon as the moratorium is lifted. In 2021, only about 650 foreclosures were filed in MiamiDade County through the end of May. By comparison, in 2019 more than 2,500 foreclosures were filed. The pent-up demand is obvious. The looming wave of foreclosures threatens to deluge a court system that is already backlogged. The Miami-Dade Circuit Court has already discussed potentially using retired judges to handle foreclosures, a return to the disastrous “rocket docket” system of the Great Recession, in which the main goal was to maximize how many people per day the court system could eject from their homes.
Another blast from the past, unfortunately, is likely to be a constant drumbeat of exposés showing how banks are showing up in court to foreclose on people using fraudulent documents, such as the infamous “robo-signed” notes that became a byword for the chicanery inside financial institutions a decade ago. Back then, as part of a national, $25 billion settlement, the largest banks promised they would never, ever again systematically engage in that practice, cross their hearts and hope to die. Unfortunately, as it is clear that mortgage servicers are not currently staffing up to deal with the coming wave of foreclosures, it is almost a guarantee that many will once again resort to the same type of illegal corner-cutting they swore off then in order to resolve foreclosure actions now.
Homeowners will be the ones to suffer the results, as they already are. Case in point: the consumer group Floridians for Honest Lending reviewed 2019 foreclosure filings in Broward and Miami-Dade by big banks and uncovered 369 signatures of names synonymous with the robo-signing scandal. In Miami-Dade, 310 homes had been sold at auction since January 2019 that included those fraudulent endorsements, 21 of which were sold during the COVID-19 pandemic. Miami-Dade Judge Beatrice Butchko earlier this month found that Bank of America and their attorneys committed perjury, presumably to avoid scrutiny on their fraudulent documents.
Market boosters will claim we are nowhere near where we were during the global financial crisis, pointing to the fact that mortgage underwriting standards are different to the ones prevalent at the turn of the century, as well as the existence of generally different market dynamics. Like they did in 2008 when they unfairly scapegoated the innocent homeowners ruined by the global financial crisis as “irresponsible borrowers,” they are likely to wave away warnings or suggest any crisis will be limited to a small group of borrowers. Yet just like it was over a decade ago, the main issue is not the borrowing decisions of individual families, but the systemic fraud and corruption within financial institutions.
Yes, the economy is coming back as Florida put the pandemic behind us. But a wave of foreclosures is coming, and our political leaders need to step up for homeowners who deserve fairness, transparency and accountability, which was absent after the 2008 crash.
Margery Golant is a Broward-based attorney and nationally recognized expert on mortgage foreclosure. She has testified before Congress about foreclosures and was named Consumer Protection Attorney of the Year by the Consumer Protection Law Committee of the Florida Bar.