Florida Gov. Ron DeSantis’ latest extension of the ban on residential foreclosures and evictions is expected to flood the courts with new filings once it is lifted, as layoffs continue to mount and federal funding runs out, real estate attorneys told The Real Deal.
“Mortgage lenders are getting nervous that the people they’re lending money to are no longer getting paid,” said Victor Petrescu, a partner at Miami-based Levine Kellogg Lehman Schneider + Grossman. The CARES Act expired on Friday, ending the additional $600 in weekly jobless benefits.
DeSantis extended the moratorium on evictions and foreclosures to Sept. 1 last week, just two days before the order was set to expire. The state’s ban on both evictions and foreclosures is meant to keep people in their homes during the pandemic, as the number of positive Covid-19 cases continues to rise in Florida. It does not provide financial relief. In fact, all payments are due when the borrower or tenant is “no longer adversely affected” by coronavirus.
Lawyers, landlords and lenders expect the governor to sign another month-long extension at the end of August. (The Federal National Mortgage Association/Federal Home Loan Mortgage Corp. moratorium has already been extended until the end of August.) Florida first put a halt to new evictions and foreclosures in early April, with monthly extensions since then.
Petrescu, who represents a number of mortgage lenders, said the series of 11th-hour extensions in Florida has provided people “with a lot of uncertainty.” More than 3.4 million people in Florida have filed for unemployment since March 15, and nearly 500,000 people have tested positive for coronavirus, according to the state.
“I can’t imagine what these people are going through. It must be like a rollercoaster ride,” Petrescu said. “It’s better than nothing, but it’s only deferring the inevitable.”
The inevitable will likely be a deluge of residential evictions and foreclosures once the stay is lifted, similar to the cluttered court dockets seen in the last recession. Judges will likely be overwhelmed with cases, experts say.
Miami attorney Sebastian Jaramillo was prepared in late June to serve hundreds of eviction notices, until the governor made a last-minute extension to Aug. 1, hours before the moratorium was set to expire.
Jaramillo, a partner with Miami-based Wolfe Pincavage law firm, said that a number of tenants are taking advantage of the ban on evictions, and choosing to not pay their rent. The freeze on both evictions and foreclosures has also delayed closings, he said.
At the same time, some landlords are working with their tenants, and lenders with their borrowers. Matthew Kramer, an attorney at Miami-based Weinberg Wheeler Hudgins Gunn & Dial, predicts that will continue “until such time as there’s more clarity regarding how long this pandemic will last.”
“I think the reality still is that even if you’re ready to foreclose upon or evict a tenant in this economic climate, does it make sense to foreclose or evict if you may not have a tenant or a purchaser of the property after you foreclose or evict?” Kramer said.
Plus, most lenders are looking for an income stream, and foreclosure is an expensive process, he added.
Still, said Kramer, “each month the order gets extended, it becomes that much more difficult determining how to proceed.”
Write to Katherine Kallergis at kk@therealdeal.com