Governments spend billions to stimulate economic activity but sometimes they cluelessly create great opportunities for entrepreneurs without spending a dime.
Take Florida for example.
From the 2006 South Florida Condo Crash to the present, with brief period of recovery 18 months ago, Florida has been the poster child state of the foreclosure crisis. Initially its foreclosures resulted from the national recession, which hit the state’s tourism, entertainment and retirement industries hard. Now, however, Florida is doing much better.
Today Florida’s foreclosure crisis is self-imposed, the result of laws and court rulings that have brought processing to a standstill at times. While other states move past the Foreclosure Era to a time of higher home values and healthier housing economy, Florida remains stuck in the past.
- In February and March, the metro area covering Palm Beach, Broward and Miami-Dade counties led the nation in foreclosures. Last month it was only number three.
- Florida REOs in April increased 9 percent from a year ago, and the state has posted annual increases in REOs in 15 of the last 16 months.
- Some 41 percent of Florida homeowners with a mortgage are underwater.
- Nearly one in ten, 9.7 percent, of Florida’s homes with a mortgage is in foreclosure, highest in the nation.
It takes an average of 853 days, longer than two years, to foreclose on a home in Florida. In other words, if you didn’t care about your credit you could stop paying your mortgage and in 90 days you’d receive a notice of default—except in Florida lenders don’t even bother for months since they are so backlogged. Then the clock starts to tick and 28 months later the sheriff will show up.
In fact the backlog is so bad that Florida foreclosure starts dropped 27 percent from March to April, but for the second month in a row the state posted the nations’ second highest foreclosure rate: one in every 363 housing units with a foreclosure filing.
It’s no wonder that the hedge funds, Blackstone in particular, settled in Florida after testing the water in markets like Phoenix and Las Vegas. Last fall Blackstone announced it would spend a billion on Tampa real estate. Florida’s been a boon for small investors, including international buyers, who like the climate, the rental market and the prices.
All that is about to change. Governor Rick Scott has on his desk legislation that accelerates the residential mortgage foreclosure process by speeding up the time period for homeowners to appeal. Banks would have less time to collect on unpaid mortgages and they would have to prove in more detail that they own a mortgage or explain why they can’t prove ownership. It also creates a process for others besides mortgage-holders to ask the court to speed up foreclosure cases.
Opponents of the legislation have criticized a provision that precludes victims of foreclosure fraud from recovering their homes. Under the legislation, a person whose home is improperly seized can only seek financial compensation
If the new law works as it is expected to, look for a flood of new foreclosure completions in Florida, followed by a shrinking of foreclosure discounts and foreclosure rates that are much closer to national norms.
Photo: Richard Elzey