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Front Page » Business & Finance » Miami remains US foreclosures capital

Miami remains US foreclosures capital

Written by on January 22, 2014

How bad has the foreclosure crisis been in Miami-Dade County? Initial filings here dropped by 36% last year, yet the county remains the foreclosure capital of the US.

However, market watchers expect the downward trend in filings to continue this year now that the problem appears to have peaked.

“Miami is still a hot spot for foreclosure activity despite the fact we are seeing the light at the end of the tunnel,” said Daren Blomquist, vice president at RealtyTrac, a California-based firm that tracks foreclosures nationwide.

“I believe we have passed the worst of the crisis,” he said.

There were 16,704 initial mortgage foreclosure filings in the county last year, down from 26,202 in 2012. The total for 2013 includes 962 initial filings in December, down sharply from 1,913 filings in December 2012, according to the latest statistics from the Miami-Dade Clerk of Courts.

Those numbers are “lis pendens” filings, also called a notice of default. That’s the initial notice from a lender indicating that the borrower has fallen two months behind on mortgage payments. The document begins the foreclosure process.

At that point, the borrower often still has the option to sell the home as a short sale or refinance the mortgage to stay in the home. However, a property is considered to be in pre-foreclosure when a lis pendens is filed until the property is sold at an auction.

Another type of foreclosure filing – usually the second step in the process – is a notice of sale, which shows that a property in pre-foreclosure is scheduled for sale at a public auction. The third type of filing is called a sheriff’s deed, which follows an auction or foreclosure sale of a property that, at the end of a six-month redemption period, typically becomes a bank-owned property.

According to RealtyTrac, which tallies all types of foreclosure filings (defaults, auctions, bank repossessions), there were 45,896 filings in Miami-Dade last year among a total of 986,723 housing units. That’s one foreclosure filing for every 21 housing units, the highest filing rate of any county in the nation with a population of 200,000 or more.

The ratio for Florida as a whole last year was one filing for every 33 housing units – also the highest rate of any state in the nation.

Mr. Blomquist said his firm totals all types of filings because it presents a fuller picture of the extent of foreclosure activity in a given market, since an initial lis pendens might not necessarily result in a foreclosure.

The 45,896 of all types of foreclosure filings in Miami-Dade last year was actually up slightly (3.6%) from 44,284 filings in 2012, according to RealtyTrac.

While filings have markedly fallen in other foreclosure “hot spot” states such as California, Nevada and Michigan, Florida’s foreclosures cases have been taking longer to resolve because it is a “judicial foreclosure” state, Mr. Blomquist said.

In Florida, in addition to some other states, foreclosures are required to go through court. The staggering number of foreclosure cases in Florida “overwhelmed the court system,” Mr. Blomquist said. “There just weren’t enough judges to handle it.”

The number of foreclosure filings of all types in Miami-Dade plummeted to 28,380 in 2011, which largely reflects the period when banks and other mortgage servicers put foreclosures on hold while litigation over so-called “robo-signing” was pending.

Robo-signing refers to the assemblyline-like process that was used by a number of banks in signing off on documents to push through foreclosures before determining who actually held the rights to various mortgages. The issue became cloudy due to the practice by banks and other lenders of bundling large numbers of mortgages together as investment packages and selling them off to the highest bidders.

In 2012, Florida and other states announced a $25 billion robo-signing settlement with a number of banks, which then re-started foreclosures, and the number of total filings in Miami-Dade rose by 56% from 2011 to 2012.

To get a sense of how the collapse of housing prices – generally beginning in 2007 –  affected foreclosures, there were 12,171 total foreclosure filings in Miami-Dade in 2006, the peak of the market. That number grew to 25,255 in 2007; 49,697 in 2008; 72,391 in 2009, when the market bottomed out; and 65,716 in 2010, according to RealtyTrac.

Despite rebounding housing prices in recent years, more than 10.7 million homes nationwide were “underwater” on their mortgages as of September, meaning those borrowers owed more on their mortgages than the market value of their homes. However, that number was down 14% from September 2012, according to RealtyTrac.

In December, the firm found, the median price of a home in foreclosure in Miami-Dade was $120,000, or 46% less than the $220,000 median price of a non-distressed home here.

Such big bargains have attracted slews of investors who have been buying homes strictly as investments, often turning them into rentals with plans to eventually sell the properties off for profits.

However, market watchers said there are factors with the potential to add to foreclosure numbers in the future. Mr. Blomquist noted that Gov. Rick Scott signed a foreclosure fast-track bill in June that aims to move foreclosures through Florida’s court system more quickly.

Meanwhile, 46 condominium projects are in construction in the tri-county area of Miami-Dade, Broward and Palm Beach, according to Peter Zalewski, a principal of local real estate consulting firm Condo Vultures.

Those 46 projects will add about 7,100 units to the South Florida condo market east of Interstate 95 – extra inventory that the market as a whole should be able to absorb without much impact, Mr. Zalewski said.

However, he said, there are areas of concern where inventory and price levels have been rising at alarming rates: the Brickell area and the beachside communities north of Miami Beach: Surfside, Bal Harbour and Sunny Isles Beach.

He said he’s most concerned that Brickell’s condo market is overheating.

“Developers are sprinting to put their buildings up,” he added, “because the first ones [into a market after a price collapse like the last one and the first to get out] are the ones who don’t get hurt.”