REO Property Listing Surge Due to Mistrust and Confusion
A Florida task force reviewing the foreclosure process concluded that the growing REO property listing in the state is due to homeowners’ lack of understanding of the foreclosure proceeding.
Task force chairwoman 11th Circuit Judge Jennifer Bailey said that homeowners in Florida missed out on many alternatives to avoid REO property listing, including federal programs, because most of them do not trust their lenders or failed to understand the process.
According to results of a statewide survey, many distressed homeowners want to work with their lenders to create possible ways to avoid foreclosure. Meanwhile, lenders are developing new types of foreclosure prevention programs and attempting to reach out to troubled borrowers.
However, these efforts proved to be ineffective because many homeowners have little understanding of the foreclosure proceeding, other than its cost, according to Bailey. She explained that most lenders failed to explain the process to distressed homeowners in a way that they would understand it.
The state task force is planning to recommend that troubled homeowners pay for their foreclosure counseling. It also plans to require mediations in all repossession cases.
According to Bailey, many homes will be saved from REO property listing if foreclosure prevention counselors can recommend programs that will best work for the troubled borrower and they can explain details of various workout programs. She added that in this case, more foreclosure cases would be settled instead of languished in court.
Data showed that foreclosure filings in the state rose four times between 2005 and 2007, resulting to case backlogs due to limited judicial resources.
On the other hand, Judge Lee Haworth requires mediation in Manatee and Sarasota counties. Under the rule, distressed homeowners of homestead properties have the option to request for mediation before lenders could file an expedited foreclosure process in court.
The state task force is to recommend to the Florida Supreme Court ways to manage all the foreclosure cases while protecting lenders and homeowners’ rights.
Bailey said that several options are available for homeowners to save their properties from foreclosures. These options include loan modification, mediations and short sales.
The task force plan to use results of the survey to ensure that it has a clear and accurate outlook of the REO property listing crisis.
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