With a judicial crackdown on "robo-signing," the number of new foreclosure actions has dropped significantly as the percentage of homeowners represented by counsel at foreclosure conferences has dramatically increased, according to a report issued yesterday by the Office of Court Administration.
In an annual mandatory report on the status of foreclosure settlement conferences, Chief Administrative Judge A. Gail Prudenti (See Profile) said that while foreclosures still account for more than a quarter of the court system's civil caseload, an order designed to discourage robo-signing is seemingly responsible for a decline in new filings since a peak in 2009.
Two years ago, Chief Judge Jonathan Lippman (See Profile) required plaintiffs in residential foreclosure cases to certify the accuracy of filed documents in an effort to prevent banks from automatically signing thousands of documents that they could not have reviewed.
From January through September 2012, according to the report, 16,565 new foreclosure cases were filed, including 12,747 residential cases requiring a settlement conference. In 2009, the year before Lippman's order, there were nearly 48,000 foreclosure cases filed, about twice the total projected for all of 2012.
In her report to the governor and Legislature, Prudenti said that plaintiffs are continuing to commence foreclosure proceedings by filing a summons and complaint, but in many cases the banks apparently are not following through with a request for judicial intervention because they cannot comply with the affirmation requirement. Although statistics indicate that the total number of new filings this year will surpass last year—suggesting that the banks are slowly catching up with the affirmation requirement, the volume is nowhere near what it was in 2007 through 2010.
"Given this trend, there is an inventory of thousands of cases that have technically been commenced, but are not before the court," Prudenti said. "These cases are referred to as the 'shadow inventory.'"
In the "shadow" cases, homeowners technically cannot take advantage of a mandatory settlement conference because there is nothing before the court to settle. However, Prudenti authorized a pilot program in Brooklyn in June to permit courts to schedule foreclosure cases and settlement conferences even though there was no request for judicial intervention.
"Early reports indicate that the shadow inventory pilot is a productive effort, getting homeowners to the foreclosure settlement conferences earlier, when settlement is still a viable option," Prudenti said in the report.
That pilot program is under consideration in other courts, as is a program in Queens Supreme Court designed to make the conferences more productive, Prudenti said. In the Queens pilot, bank representatives are provided pre-conference with a complete set of documents before a meeting is scheduled with an underwriter for the bank, the homeowner and counsel.
Prudenti also noted in the report that the percentage of homeowners represented at settlement conferences has increased substantially, largely as a result of a $25 million appropriation for civil legal services in the 2012-2013 Judiciary budget. She said that while only 33 percent of the defendants in residential foreclosure matters were represented in 2011, 51 percent were represented between April and October of this year.
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