Lee County’s number of “zombie foreclosures” — in which a house is abandoned by the owner but still not under control of the lender — fell by almost half over the past year, according to a recent RealtyTrac report.
But in Florida, that could be the result of the slowing pace of foreclosures in recent months, some authorities say. Hindered by new state regulations, lenders are finding it harder to start new foreclosure proceedings even when the house is vacant.
The law requires that before filing, a lender must produce the note — a document that proves the right to foreclose on a loan. Some alternative documents may also be filed under the law.
RealtyTrac vice president Daren Blomquist said the number of foreclosures in Florida had been increasing steadily until July 2013, when the law took effect.
“They dropped so precipitously, so suddenly,” after July, he said. “It appeared to us that was caused by that law.”
Statewide, the number of vacant foreclosure houses dropped 34 percent compared to 23 percent nationally.
In Lee County, there were a total of 1,994 homes vacated by their owners in the third quarter, down 47 percent from a year earlier. In Collier there were 341, down 42 percent.
Banks likely are “triaging the product” — holding off filing foreclosure on cases in which it might be difficult to prove immediately that the note is available, said Fort Myers-based real estate broker Denny Grimes. “That goes into the pile to do later.”
Anthony DiMarco, executive vice president of the Florida Bankers Association, said that “I think the law had a role in things slowing down” but that “it’s probably more complicated than that.”
The process has also been slowed by changes in U.S. Consumer Financial Protection Bureau rules on how a lender has to deal with the borrower during the course of a foreclosure, he said.
The new state rules for showing the note probably are a good thing overall, said Aaron Gordon, corporate general counsel for LM Funding LLC, a Tampa-based financial service company that manages the receivables of community associations.
“There’s no more of this ‘We’re going to take your word’ that the lender actually has possession of the note, he said.
Without the tough new requirements, he said, lenders often won judgments in which ownership of the note was in question. “The judge just absolutely rubber stamped it.”
Still, Gordon said, when the process is slowed down it harms the homeowners’ and condominium associations that have to deal with the loss of maintenance fees from a residence that’s nobody’s home.
“People not paying the mortgage probably aren’t paying dues either,” he said. “It starts to affect other people in the community. It hurts everybody.”
Blomquist said that when new foreclosures slow down, it creates the possibility of a growing number of abandoned houses on which no foreclosure action has begun.
That’s a difficult category to count, he said. “It’s hard to know how many are in that category.”