Experts: Florida Mortgage Foreclosure Crisis Awaits

The fear of foreclosure has South Florida residents on edge.
Thousands of homeowners in Broward and Palm Beach County can’t make their monthly Florida mortgage payments on time and have been getting stern letters from lenders threatening to seize their properties.

As the housing market slump continues, analysts predict a surge in foreclosures this year and next that will add to the glut of homes already for sale and further depress property values that have declined since last summer.

“It has the potential to get very ugly,” said David Levin, a housing consultant in Palm Beach County.

Jayne King, fell behind on the monthly Florida mortgage loan payments on her adjustable-rate loan, filed for bankruptcy and promised to repay as much of her debts as possible.

A lawyer worked out a plan with her Florida mortgage lender that allowed her to keep the house. “I’m one of many people caught up in this whole cycle,” said King, 55, a retired teacher and native Floridian.

Across South Florida, unexpected medical bills, rising homeowner’s insurance, property taxes and other costs of living have plenty of lower- and middle-income consumers on the verge of losing their homes.

But experts mostly blame the trouble on unconventional home loans made to risky borrowers hoping to get into houses and condos that shot up in value during the housing boom from 2000-2005.

The number of people facing foreclosure has been building since January.

• In April, the number of consumers behind on Florida mortgage payments in Broward County ballooned to 1,135, compared with 248 a year ago.
• The number of people with late payments also rose sharply just to the north in neighboring Palm Beach County, from 174 to 814.
• Actual foreclosures increased in both counties but at a much smaller clip.

Homeowners with late payments typically are at least three months behind and have been notified that their lenders intend to foreclose.

People who secured adjustable loans found out that they couldn’t afford the monthly payments once Florida mortgage rates rose.

Traditionally, homeowners encountering trouble have avoided foreclosure by selling their homes quickly or by getting Florida refinance help.

When the housing boom last year turned into a bust, however, it caused a glut of inventory to sit on the market, meaning that cash-strapped homeowners couldn’t count on fast sales to bail themselves out.

Florida mortgage refinancing isn’t as easy now because home values are flat or dropping and lenders are tightening credit standards as more borrowers with weak credit default on home loans.

“A lot of these people, God bless them, weren’t qualified to go into home ownership,” said Lewis Goodkin, a Miami-based housing analyst.

RealtyTrac of Irvine, Calif., reports that late mortgage payments and home loan foreclosures in South Florida this year are most prevalent in the western reaches of Broward and Palm Beach counties.

Not coincidentally, those were the areas flush with homes in construction and apartments converted to condos during the past several years.

Many people who bought in the suburbs were short-term investors either looking to “flip” properties for quick profits or move within a few years, said Shiela Kiniry, a Fort Lauderdale lender and state director of the Florida Association of Mortgage Brokers.

Now they’re stuck with properties they can’t sell and wilting under the strain of paying two Florida mortgages.

“I have to believe a lot of those people wanted to jump on the bandwagon while they still had the chance,” Kiniry said. “It seemed wonderful when they put their money down. Unfortunately, the market’s not the same.”

Even those not struggling to make Florida home mortgage loan payments should care about what’s happening, analysts say.

Homeowners behind on Florida mortgage payments typically don’t maintain the properties, which reflects poorly on entire areas, says Jim Banford, who runs Real Estate Asset Disposition Corp., a West Palm Beach company that sells foreclosed homes for lenders.

Once the lenders take back the properties, they’ll reduce asking prices to compete with the record number of homes already on the market.

“That weighs down the values of all the surrounding homes,” he said.

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