Foreclosure Process

With fewer foreclosures court money may dry up

Posted on Thursday, March 17, 2011

Florida state courts could be forced to shut down April 1 and furlough staff and judges if a budget shortfall caused by a drop in foreclosure filing fee revenue isn't addressed by the Legislature, Miami-Dade Circuit Chief Judge Joel Brown said Thursday.
If courts do not receive emergency funding before then, Brown said, "That's it. We close. We furlough."
The remarkable drop in foreclosure filing fee revenue came as lenders slowed foreclosures to deal with allegations of irregularities. It may have been a welcome relief for underwater homeowners, but the plunge caused an "immediate, urgent situation" for Florida courts, state Supreme Court Chief Justice Charles Canady said Thursday.
"We have an estimated shortfall of a little over $72 million" for the year ending June 30, Canady told the Daily Business Review in a telephone interview.
"The money has dried up," State Courts Administrator Lisa Goodner told the News Service of Florida on Wednesday.
Brown said there is no contingency plan to keep minimum court operations running, including time-sensitive cases in criminal, domestic violence and juvenile divisions. He said a shutdown would deal irreparable harm to business in Florida, which depends on an efficient court system to handle disputes.
When Legislators funded the courts last year, they relied heavily on foreclosure filing fees. Every foreclosure came with a filing fee that was deposited in the State Courts Revenue Trust Fund. No foreclosures, no filing fees.
To make matters worse, the money was pouring in so fast when foreclosures were rampant that lawmakers shifted judicial branch appropriations to take advantage of the heavy cash flow. Lawmakers created the trust fund in 2009 specifically to fund the courts and cut drastically the amount of general revenue going to the judicial system.
In contrast to the days of record-breaking foreclosure filings, the courts now have a "cash-flow problem," Canady acknowledged.
"Last year, it was a very robust trust fund," Goodner said. "This money is funding 90 percent of our budget."
She told a House committee last week that without some solution, staff furloughs may be necessary.
But Canady said Thursday the focus is on curing the four-month budget crunch without curtailing staff and court operations.
"We certainly hope and expect that we will be able to avoid any situation where there would be furloughs," Canady said. He expects to "go forward without any disruptions."
Canady is working on proposed solutions, and talks are ongoing among the courts, governor's office, House and Senate.
One option is likely some sort of loan, Goodner said. Another is moving money around in the system. There are cash reserves in some other court-related trust funds, but the courts would need legislative approval to shift the funds. Goodner said there was broad agreement that something would be done.
"I'm hoping that this is something we can resolve in the very near future," Canady said.
Still, the situation is pressing.
"If we were not able to secure a way to make sure we had funding through the end of the (fiscal) year, it would have a serious impact on the citizens of this state," Goodner said. "We would simply not be able to keep the doors open."
She also said lawmakers anticipated a slowdown in foreclosures would eventually force the state to look again at court funding, though the current plunge in cases wasn't expected.
"Everybody has known that this can't go on forever," Goodner said. She said there had been an expectation the trust fund would remain in the black through July and the system's general revenue budget would be restored. Now, lawmakers may be under pressure to look at that in the coming year.
"Foreclosure filing fees are inherently cyclical," Canady said. He added that he wants to find a "stable, reliable source of funding that would not put us in situations like this."
Jose Pagliery, DAILY BUSINESS REVIEW





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