According to a new report from Condo Vultures, foreclosure filings in South Florida slipped by 21 percent to less than 20,000 actions initiated in the tricounty region in the first quarter of 2010 on a year-over-year basis compared to more than 25,000 filings during the same period in 2009.
The quarterly drop was exacerbated by a 20 percent decrease in foreclosure filings in March 2010 following a 19 percent drop in February and a seven percent drop in January, according to the report.
All three South Florida counties experienced a decrease in foreclosure filings - also known as a Lis Pendens or a Notice of Default - between January and March of 2010 with actions tumbling by 33 percent Miami-Dade County, 22 percent in Palm Beach County, and 12 percent in Broward County, according to the Condo Vultures report.
"The federal government programs coupled with the pure financial feasibility of working with troubled borrowers to keep them in their homes is translating into lenders filing fewer foreclosure actions in South Florida," said Peter Zalewski, a principal with the Bal Harbour, Fla.-based real estate consultancy Condo Vultures, LLC. "Lenders now know that a foreclosure action will take 18 months and at least $100,000 to complete in South Florida, which is three times longer than and twice as expensive as back in 2007 when the crisis first began. Once the bank owns a troubled property, the residence usually sells for about the same amount as a comparable short sale, which can be completed in a fraction of the time.
"Bankers are smart people so it is no surprise to see a change in strategy and the drop in foreclosure filings given the pure economics of the situation."
Even before a foreclosure notice is filed, a lender typically waits about 90 days before initiating the action. Once a lender finally does repossess a property, the bank inherits the responsibility of settling up outstanding liens on the property that live on after the foreclosure, such as property taxes, past-due condo association maintenance fees, and open permits.
Compare the foreclosure scenario to a short sale where a borrower who owes more than the property is currently worth brings in a buyer to pay the current market value for the underwater property. This means an immediate loss for the bank but the situation is predictable.
To complete a short-sale, a bank can unload the property in a matter of weeks without having to invest additional dollars as is the case with a foreclosure proceeding.
Lenders initiated 33,000 foreclosure filings in 2007, 76,000 in 2008, and 97,000 in 2009. Based on the first quarter of 2010, South Florida is on pace to record fewer than 80,000 foreclosure filings putting this year on par with 2008, according to the report.
Miami-Dade County, where Coral Gables, Miami Beach, and Sunny Isles Beach are located, is experiencing the biggest decrease in foreclosure filings, slipping to less than 4,600 filings in the first quarter of 2010. By comparison on a first quarter basis, Miami-Dade experienced more than 6,800 filings in 2009 and nearly 5,400 in 2008.
Palm Beach County, where Boca Raton, Delray Beach, and West Palm Beach are located, experienced the second biggest drop in percentages in foreclosure filings in the first quarter of 2010 as lender filed more than 6,300 actions. Lenders filed more than 8,100 actions in 2009, but only 5,000 actions in 2008, according to the report.
Broward County, where Fort Lauderdale, Hollywood, and Pompano Beach are located, experienced the littlest drop in foreclosure filings in the first quarter of 2010 as nearly 9,100 actions were initiated compared to 10,300 actions in 2009. In the first quarter of 2008, lenders initiated nearly 7,400 actions in Broward, according to the report.