Article Courtesy of The Orlando Sentinel

By Mary Shanklin

Published January 18, 2013 

Florida led the nation in foreclosure activity last year, and Orlando had the second-biggest increase in foreclosure filings among the state's major metro areas, according to a new report.

The Orlando area had a 64 percent increase in filings during a year in which the nation as a whole saw such activity decline. The four-county metro area also ranked eighth among U.S. cities for total filings in 2012, more than double the national rate, according to a report released Wednesday by the real-estate-research company RealtyTrac.

The news comes as Orlando homeowners and real-estate professionals were celebrating a year that had ended with a small increase in the number of existing-home sales and double-digit percentage increase in prices.

Several factors are conspiring to create a market with both rising prices and mounting foreclosures, said John Tuccillo, chief economist for Florida Realtors.

Florida's court-based foreclosures have been taking so long that properties going through the process now will not be listed for sale for months or years, he said. Distress sales are either foreclosures or short sales, and an increase in foreclosures usually means a decrease in short sales on the market.

And that means prices can rise even as the number of foreclosures do, too.

"The [foreclosure] filings that we see now are really not connected to the market, because they're not going to get on the market for two years," he said.

In addition, properties that make it through foreclosure and are now bank-owned are not getting into listings because cash investors are purchasing them directly from the lenders.

Francisco Molina, a struggling south Orange County homeowner, said Central Florida would not be besieged by foreclosures if lenders were more willing to modify their mortgages. Molina put $180,000 down on his four-bedroom home when he bought it in 2005 at the height of the homebuying frenzy. But since 2009 he has been trying unsuccessfully to get the lender, Wells Fargo, to reconfigure his monthly loan payments so he can better afford them.

"I have waited and waited and waited for them to approve it," the rental-car employee said.

Foreclosure filings in Florida jumped 53 percent last year, even as the nation's other hardest-hit states — California, Arizona, Nevada and Michigan — saw their foreclosure woes begin to dissipate. That may be because Florida requires banks to process foreclosures through the judicial system, which has been taking much longer, while those other four states do not call for the same level of judicial oversight.

Even though the nation as a whole experienced a 3 percent decline in foreclosures in 2012, activity was up in 25 states — 20 of which are judicial-foreclosure states.

Another reason for the sharp increase in Florida's pool of foreclosures last year: The nation's major mortgage lenders held off on pursuing foreclosures during much of 2010 and 2011 while investigating allegations that they had improperly signed or processed some of the mortgage documents involved. The five biggest lenders eventually reached a $25 billion mortgage-aid agreement with most of the country's attorneys general to settle those allegations.

In Florida, fallout from that legal morass spread throughout the state last year, hitting Orlando harder than most of the state's other major metropolitan areas. Only Tampa reported a bigger jump in foreclosure activity.

Orlando's home prices relative to those of other U.S. cities were low enough to draw in buyers, said Daren Blomquist, vice president for RealtyTrac.

"These seemingly conflicting trends demonstrate that prices reached a low-enough level to create a floor of demand and absorb additional foreclosure inventory without a hit to home prices," Blomquist said. "Of course, much of the foreclosure activity that occurred in 2012 will not be listed [for sale] and sold until 2013."

Month-to-month foreclosure court actions can be erratic, but for Metro Orlando the year ended on a note of declining activity, with filings down 4 percent in December compared with November.