Borrowers get the gift of time

By Todd Ruger - Sarasota Herald Tribune, 04/15/2009

Heide and Ronald Felicita showed up in Circuit Court last week thinking this would be the hearing where they finally lose their home.

Their suitcases were packed and they removed all the pictures from the walls of their Venice home, which has been in foreclosure for nearly two years.

But like hundreds of foreclosed-upon residents in Manatee and Sarasota counties, the Felicitas got a reprieve -- weeks, possibly months, to stay in their home and try to clear their debt and work out a deal with their lender.
Since January, the rate of residents in Sarasota and Manatee counties who lost their homes to foreclosure has fallen 66 percent, going from more than 400 cases per month to just over 100.

The decline has nothing to do with the state of the real estate market or a sudden benevolence on the part of lenders.

Instead, it reflects a policy set down by 12th Circuit Court Judge Lee Haworth that has effectively stopped the fast track of summary judgments allowing lenders to quickly gain control of properties from distressed borrowers.

Last fall, as foreclosure cases overwhelmed the court system, Haworth ordered lenders' law firms to meet with homeowners starting in January and discuss alternatives to foreclosures. The judge's hope was that discussions could lead to resolutions that would prevent residents from losing their homes.

But lenders widely ignored the judge's request. So Haworth hit the law firms in the pocketbook, with a new rule requiring them to show up in person -- not just over the telephone -- for all hearings starting in March. They must also complete a checklist about the facts of the case.

Again, many lenders have failed to comply, leading Haworth and two other judges in the 12th Circuit to cancel cases, so many that their dockets are virtually bare. Last Wednesday, for example, Judge Donna Berlin canceled 20 of the 27 foreclosure cases on her docket, including the case against the Felicitas, whose attorney failed to show.

The reprieve is only temporary. Distressed homeowners still must find resolution with their lenders. Yet the extended time comes with opportunity because lenders have been more open in recent months to negotiate, and the Obama Administration is offering more help for homeowners.

"It gives us more time and, hopefully, the company will come up with something better," said Ronald Felicita, who lost his job as a home inspector in the real estate downturn. "Now, they could work with us."

Heide Felicita has found a job, but it is not enough to pay off what they owe on the house they bought 10 years ago. They are not sure where they might go if forced out of the home, but they might have to move in with relatives in Minnesota, Ron Felicita said.

The rules instituted by Haworth make the 12th Judicial District one of the toughest places to get a summary judgment, which gives the lender the property without lengthy litigation, attorneys said. Other circuits are starting to follow suit with similar rules.

"It's a new procedure, so people are not used to dealing with it," said Robert Schermer, who often makes the local appearance in court for the lenders' out-of-town attorneys. "And they don't really realize how serious the judges are, or how strictly they are enforcing it.

"They want every box checked and every spot filled in."

Other outside factors have worked to slow the pace of final judgments, including moratoriums on foreclosures from some of the country's largest lenders and new rules for refinancing loans.

But attorneys and judges say the new rules are the biggest cause. Attorneys for lenders, who mostly work at large, out-of-town "foreclosure mills" that handle cases across the state, are too overwhelmed to go through the careful review of cases and rules for each circuit.

"There have been days when the entire docket has been canceled from non-compliance," Circuit Judge Charles Williams said.

One day recently, Williams had four foreclosure hearings set. None of the hearings happened, though, because attorneys did not follow the rules.

Bradenton attorney John Fleck, who represents both homeowners and lenders in foreclosure cases, said the judges are doing the right thing if an attorney does not make sure his work is right.

"The judges think, 'If he didn't take the time to fill out the box, how can I be certain the rest of this was done correctly?'" Fleck said. "Until all these massive foreclosures, we didn't see this slipshod work."