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Canceled foreclosure sales saddle neighbors, HOAs with expenses

A house in FishHawk Ranch in Lithia stands vacant and in disrepair, with open windows and a rancid pool. The home, which has been vacant for a year, went into foreclosure in 2008, but no auction has gone forward.

DANIEL WALLACE | Times

A house in FishHawk Ranch in Lithia stands vacant and in disrepair, with open windows and a rancid pool. The home, which has been vacant for a year, went into foreclosure in 2008, but no auction has gone forward.

Kathy Lane envisioned a picturesque neighborhood with tree-lined streets when she moved to FishHawk Ranch in 2004.

These days, she stares at an eyesore.

Two doors away, the back yard of an abandoned home overflows with trash; rain pours in open windows; weeds have overgrown the lawn. The pool, filled with black muck, draws swarms of bugs.

"I was expecting well-kept yards," Lane said. "I live two doors from a dump. If it goes up in flames and catches our house on fire, who is responsible?"

The foreclosure crisis has littered the region with thousands of abandoned homes. The houses sit idle as banks have been slow to seize them in the final stage of the foreclosure process, the public auction.

Although recent headlines proclaim the worst of the housing crisis is over, the decrepit homes are a constant reminder that cleaning up the foreclosure mess remains a work in progress.

The house on Lane's street in Lithia went into foreclosure in 2008 and has been vacant for more than a year. Aurora Loan Services had set an auction for February but canceled it.

It's an oft-repeated pattern.

In the last 12 months, lenders have canceled auctions on 4,204 properties in Pinellas and Hillsborough counties. Sales have been canceled two, three, even nine times on some homes.

In many cases, banks delay seizures to avoid having to pay maintenance bills or homeowner association fees. Meanwhile, neighbors fend off vandals and thieves and worry about property values falling because of the deteriorating houses.

The repeated cancellations burden the court system.

"These never seem to go away," said Thomas McGrady, chief judge of the Pinellas-Pasco County Circuit. "It's a nuisance."

Taxpayers also pay for the delays.

Hillsborough Circuit Judge Herbert Baumann Jr. said the Clerk of Courts' workers spend hours filing paperwork when banks repeatedly cancel auctions.

"It does create more work," he said. "Clerks do expend a lot of resources on this."

• • •

No neighborhood is immune.

Even the tony streets in Tampa's Avila and St. Petersburg's Snell Isle have "lost houses."

While the homes sit in limbo, homeowners associations lose money when lenders delay taking titles. The associations may mow lawns and make minor repairs, but that forces other residents to shoulder higher assessments.

Associations have few options to force lenders to sell the homes.

HOAs can seize properties through foreclosure when owners stop paying monthly assessments. Some go a step further by renting out the seized properties to recoup lost dues. Still, those actions cost the associations thousands in legal fees.

Lane, the FishHawk Ranch resident, is baffled by the banks' inaction.

"Every day you expect a poltergeist," she said. "We have to live here."

She isn't alone.

Tampa-based Rizzetta & Co. manages more than 100 community associations with 32,000 homes in Florida, including most associations in FishHawk Ranch. The firm has been deluged in recent years with calls about the abandoned homes and delinquent assessments.

Pete Williams, a Rizzetta manager, attributes the canceled auctions to money.

"The banks never want to take ownership," he said. "They have to pay the fees going forward. The costs are considerable."

Even McGrady, the Pinellas-Pasco judge, believes money is behind the canceled sales.

"After a while, you begin to question their motives," the judge said.

• • •

On the flip side, some experts contend that the banks' slowness helps stabilize the real estate market. Putting thousands of homes for sale at once could depress prices. Letting them trickle to the market brings higher prices.

And some cancellations occur because lenders and homeowners agree to loan modifications or because homeowners and defense attorneys find errors in bank documents.

The cancellations are currently down in Hillsborough and Pinellas. But that's because lenders halted foreclosures in late 2010 amid allegations they used robo-signers and false documentation to speed up the foreclosure process.

Still, the delays have allowed some owners to live free for years and dodge assessments.

In June 2009, a Pasco judge granted U.S. Bank a final judgment to seize a home in the Valencia Gardens subdivision in Land O'Lakes. U.S. Bank scheduled the auction for September 2009 but has canceled it eight times. The most recent cancellation occurred last month.

The homeowners have lived in the home but have not paid dues to the Valencia Gardens Homeowners Association. The association is objecting to the cancellations and has asked a judge to order the bank to sell the home. Thirty-eight delinquent homeowners owe the association $56,000.

The shortfall has forced the HOA to convert water fountains into flower beds and to scale back on other projects, said Gail Spector, the president.

The group began cracking down on delinquent residents last year by threatening foreclosure lawsuits against them. Spector knows residents have lost jobs but said other homeowners shouldn't be burdened with the unpaid dues.

"You have to treat everybody the same," Spector said. "We are fixing and paying for everything. That's not fair."

Leonard J. Mankin, a Clearwater-based law firm, represents hundreds of associations across Florida. Attorney Brandon Mullis has asked a judge to sanction U.S. Bank and to force the sale of the home in Valencia Gardens.

It is now common, he said, for banks to cancel auctions seven or eight times in many foreclosure cases.

Mullis questions why lenders file court documents saying they are "negotiating or reviewing for possible loss mitigation options" when the houses have been vacant a year or longer.

He is fighting another case in Palm Harbor. The Bank of New York Mellon has canceled seven auctions — even though the homeowner defaulted on the mortgage in 2008. The bank canceled the seventh auction in February because it wanted to exhaust options to prevent the foreclosure.

Mullis scoffed.

"This action leaves the burden to fall on those neighboring residents who are forced to pay higher assessments while the property next door further deteriorates," he said.

The Florida Bankers Association disagrees.

Anthony DiMarco, executive vice president, said lenders are overwhelmed with thousands of foreclosures and aren't cancelling sales to skirt maintenance and assessments.

"They are trying to move cases forward," he said. "We'd rather keep people in homes."

Mark Puente can be reached at mpuente@tampabay.com or (727) 893-8459. Follow him at Twitter at twitter.com/markpuente.

Canceled foreclosure sales saddle neighbors, HOAs with expenses 04/28/12 [Last modified: Monday, April 30, 2012 9:37am]
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