The foreclosure mill fallout has continued. As reported in the Sun-Sentinel from an article in the Palm Beach Post by Kimberly Miller, Ben-Ezra & Katz is closing its foreclosure practice and has provided layoff notices to its employees. This follows the closure of David Stern’s foreclosure practice in March. Each of these firms is headquartered in Broward County but handle foreclosures statewide. Meanwhile, perhaps 100,000 pending foreclosure cases still have Stern’s firm as attorney of record with no staff to file motions to withdraw.

On another front, an appellate court, the 4th District Court of appeals, has ruled that the Florida Attorney General’s office does not have the authority to investigate with subpoenas Shapiro and Fishman under Florida’s Deceptive and Unfair Trade Practices Act. (a criminal investigation would be permitted but is not at issue). The Florida Bar is known to have opened investigations of numerous attorneys on foreclosure practices.

A completed foreclosure may well not be the end of the legal process for the homeowner. In Florida the lender has 5 years to seek a deficiency judgment. For example, if the home at the time of foreclosure is worth $100,000, but the mortgage balance is $180,000, the homeowner can be sued for $80,000.

There have been very few deficiency cases so far, but it is expected that lenders will eventually pursue these claims. These claims might be sold to debt buyers, similar to the sale of delinquent credit card accounts.

As a Fort Lauderdale bankruptcy attorney, I have seen the greater prevalence of suits by second mortgage holders including equity lines on the promissory note. The lenders are not bothering trying to foreclose since they would have to take over the first mortgage. Many clients have been forced into bankruptcy by these claims.

As I previously reported, the decline in foreclosure files has led to a decrease in court filing fees which provide a dedicated source of funds for the courts.

The large decrease in foreclosure filings was reported in the April 14 Sun-Sentinel. Relying upon figures from RealtyTrac, Florida foreclosures fell by 62% from the prior year.

The large reduction in foreclosure filings does not imply that the corner has turned on the foreclosure crisis. Lenders have been forced to finally deal with the robo-signers and fraud issues that have become so widespread. Foreclosure mills have been fired, replaced, or as for David Stern, closed. Hundreds of thousands of files have to be transferred, and new attorneys have to be hired. Also, there has been litigation with state attorney generals across the country. A new consent decree between loan servicers and bank regulators also will have an impact on the processing of foreclosures.

There is still no end in sight to the foreclosure mess.

More and more articles have been published documenting the continuing problems with the foreclosure crisis. A few observations here about the relationships between the subject of these articles and how they are impacting the court system and homeowners.

The Florida court system is short of money. This is largely due to the reduction in the expected filing fees from foreclosure cases. The lenders are holding off on filing these cases. Banks have delayed filing foreclosures, largely due to the conduct of their foreclosure mills. Robo-signers have become a new term in our vocabulary as a symbol of massive foreclosure fraud. Statewide foreclosure firms are being investigated by the state, and the banks and servicers have been firing their attorneys. In some instances, the banks are suing the law firms for return of their court files, and the law firms are claiming they are owed millions of dollars in legal fees. There is a scramble to hire new law firms to take over hundreds of thousands of case.

No wonder pending cases are just sitting with the court and there are fewer foreclosures being filed than expected. Simple motions filed on behalf of the homeowner can delay a foreclosure for a year.

By the way, homeowners should seriously question hiring a foreclosure defense attorney who charges by the month to delay a foreclosure. A case can be delayed indefinitely with only minimal services by the homeowner’s attorney as a result of the problems facing the banks and servicers.