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In this week’s Sarasota Herald Tribune, there’s an interesting and important interview by reporter Tom Lyons of Florida Foreclosure specialist  April Charney.  (You can read the complete interview here.)  You may recognize her name:  as an attorney at Jacksonville Legal Aid several years ago, Ms. Charney was one of the first voices bringing national attention to the realities of Foreclosure Fraud. She’s definitely one of the Good Guys.

And what April Charney is warning all of us is that all the news stories we’re reading about the housing market getting better (see this as just one example) is, well, something to take with a grain of sale.   Charney’s expert opinion is that the foreclosure numbers are complicated, and therefore, easily maneuvered to slant results.

Sure, they may report that foreclosure numbers are going down — but Charney’s saying don’t buy it.  Why? She’s has a lot to say, but here’s one reason that is worthy of some pondering: how mortgage servicers make their money.

Mortgage Servicers Make Money From Fees On Servicing the Mortgage.

One of Charney’s reasons to be wary is that we’ve still have the situation of servicers of home loans running the show and they aren’t the ones that take the hit on a foreclosed mortgage.

Mortgage servicers are financial institutions that defaulting home owners will deal with — they will be sending the notices that the mortgage payment is late, how much is due, what the options are after the mortgage payment is late.  The servicer’s employee will be making the phone calls asking why the mortgage payment is late and when the servicer can expect payment.

However, it’s often not their property that is involved here.  As a servicer they are looking at the money they are getting from servicing the loan.  The bank who loaned the money to buy the house has contracted with this servicer to handle dealing with collecting that note, “servicing” it.

And guess what?  Those mortgage servicers get higher fees when the loans go bad. It’s not bad news to a mortgage servicer if the home owner gets behind in mortgage payments: that’s when they start making more money on that account.  As long as they sit in the catbird’s seat of being the middleman here — until the bank takes control — the servicer is the one making money via fees paid to it by the bank who owns the lien on the home.

So, makes sense – what Charney is suggesting: if they stretch out the bad loan servicing, it just means the servicer gets more fees in their pocket.   It’s in the best interest, profit-wise for the mortgage loan servicer to delay that foreclosure filing as long as possible so they can bill the bank who owns the loan as long as possible.  Or to keep folks in what Charney dubs “default limbo.”

Florida Foreclosures in May 2012

We all know that Florida is one of the hardest hit areas of the country in this Foreclosure Fraud mess.  How bad is it?  According to RealtyTrac, in May 2012 one out of every 340 houses in Florida got a foreclosing filing.  That’s a lot of foreclosures.

Larry Tolchinksky’s Tip:

According to RealtyTrac, the Florida reality is that 1 out of 340 housing units in the state received a foreclosure filing in May 2012.  In Broward County, that number was 1 in 676 units, with 1199 foreclosure properties on file in May.  Miami Dade County is off the chart: 1 in 256 housing units, and 3860 foreclosure properties last month.  That’s just a snapshot of one month, the month of May 2012.

In May 2012, Florida was one of the top states for foreclosures gearing up — though Miami-Dade and Palm Beach Counties saw most of this action.   Given the large numbers of underwater mortgages out there, and the reality that there are defaulting notes being serviced by mortgage servicers but not yet in official foreclosure arenas, and it’s a dismal thing to consider.

If you are a Florida home owner with a mortgage, then consider getting proactive about your situation now.  Foreclosure defense lawyers aren’t as expensive as you may think (most, like our firm, offer flexible options) and it’s very important for you to plan for your future and have contingencies in place.

We’re not out of this mess yet.

Consider this:  the Florida Supreme Court is going to rule in Roman Pino v. Bank of New York, and if the case goes one way, then literally thousands and thousands of foreclosures will be wiped off the table and banks will face big liabilities for filing fraudulent documents in foreclosure suits and then dismissing and refiling the foreclosures when the bad paper was discovered.  For details, read our earlier post on this major pending case.

If you have questions or comments, please feel free to Chat with Larry in the comments below, at or (954) 458-8655.

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