Florida Commercial News - Land, Development, Building, Business

Mortgage fraud is a national problem that's getting more and more rampant in our area, according to  Interthinx, a company that periodically releases its research analysis of national fraud numbers.

Its warnings are particularly dire for the Miami area, where South Florida's ranking 2nd in the country for mortgage fraud risk in 2011.  Last year, that ranking was 20, making South Florida the only area in the country with a significant increase in mortgage fraud. 

You can read the Interthinx Mortgage Fraud Risk Report for the first quarter of 2011 here (downloadable pdf format).

The report is dealing with housing scams, and the study focuses upon a review of mortgage applications provided by cooperating lenders.  Interthink scans the applications for red flags that suggest something is not quite right in an application, using its internally devised system of mortgage fraud indicators.  The report itself measures (1) overall fraud as well as four subsets:  (a) property valuation fraud; (b) identity theft; (3) occupancy fraud; and (4) falsified income reports. 

Our local area is number 1 in all these rankings, except for the falsified income report frauds.

When considering occupancy fraud, identity fraud, and property valuation fraud, things may need to be clarified.  In many cases, fraud is very much what we think it is - scam artists falsifying documents, hiding relevant information, and wrecking havock with the lending community.  There are, however, instances where the fraud is to some extent more benevolent (though fraud nonetheless).  In these cases (and this happens often in South Florida), the "fraud" is really an attempt by family members to help eachother out, in transactions where individuals close on homes that become theirs, with mortgages that are kept current. 

It is true that mortgage fraud in this area is rampant.  There are con artists taking advantage of buyers from foreign countries as well as other parts of the country (in addition to Floridians), and general mortgage fraud that fits into the category of classic white collar crime - falsifying information, hinding information, and creating deals for short term transactional profit - at the expense of others and of our economy at large. It's good to make everyone aware of these scams.

However, this new Fraud Report provides numbers that also incorporate family members that are trying to help loved ones stay in their homes, however fraudulent their actions may be.  These instances do not reflect a danger to the investing public at large, and potential buyers and investors should not be swayed by the Fraud Danger that is being discussed as being overwhelming here in South Florida.

There may be a lot of hinky mortgage applications in South Florida right now; however, in our Great Recession there are lots of applications that are disingenuous as family members try and help each other out. 

These fathers and brothers and sisters and cousins are not a danger to the incoming investor, and that should be considered when pondering the impact of this new Fraud Report.

Yesterday, Florida Governor Rick Scott flew to West Palm Beach and signed Florida Senate Bill 2142 into law at the offices of the South Florida Water Management District, enacting big, big changes to Florida's five water management districts as it eases the property tax burden on Florida homeowners and Florida business. 

This is the same bill that conservationists were asking the Governor to veto - for details on their failed challenge, read our earlier post on May 19, 2011, "Governor Scott Asked by Conservationists to veto SB 2142 Which Gives Legislative Power Over Water District Budgets."

The Governor's press release focuses not upon the shift in power issue, but instead highlights the savings that result from reducing the property taxes previously levied by the water management districts, which his office estimates to be $210.5 million in total savings to Florida homeowners. 

These are the taxes levied by four of the five Florida water management districts, a part of the Florida  Department of Environmental Protection in charge of administering flood protection programs and overseeing state water resources, including implementing plans for managing water needs during droughts, watching over aquifer recharge, well construction, surface water management, and buying lands under the Florida Save Our Rivers program.

Florida has five water management districts (see a map of the districts here), and the new law impacts them as follows:

• Southwest Florida Water Management District – 36% reduction
• South Florida Water Management District – 30% reduction
• St. Johns Water Management District - 26% reduction
• Suwannee River Water Management District – 8% reduction
• Northwest Florida Water Management District – No change

 Of course, as the Orlando Sentinel points out, the savings to the individual Florida homeowner may not be significant, since the Water District's taxes weren't that high before the change.  And, as the Miami Herald reports, conservation groups remain adamant that Governor Scott's action only serves to doom the Florida Everglades as well as other Florida environmental concerns. 

With the new Community Planning Act, the State of Florida is no longer regulating and overseeing land development in Florida, and that includes decisions on where the Urban Development Boundary will be, and what gets built outside of the UDB.  Now, the local government will be responsible for those decisions -- and that means it's now part of the job for the new mayor of Miami-Dade County. 

Who is the new mayor?  We won't know until the runoff later this month. 

On June 28, 2011, Julio Robaina and Carlos Gimenez will face a runoff election for Mayor of Miami-Dade County.  Robiana is a former city mayor (Hialeah, Florida) and Gimenez is a former county commissioner (Miami-Dade) so either man, if elected, will not be new to the business of local government.

The key for real estate investors and land developers is what the future of real estate development in the Miami metroplex.  What will happen to the Urban Development Boundary once the new mayor is elected?

This week, the Miami Herald reported on a meeting held between these two candidates and several groups concerned about the Florida environment, particularly the Miami area, where the environmental interests outlined their concerns to the two candidates in the hopes that the new local government will not lessen the growth management regulations that had been in place under the old state law. 

Not too long ago, conservationists had a friend in the Governor's office.  In 2009, Governor Crist forbid by executive order Miami Dade County Commissioners' attempt to move the Urban Development Boundary so that it overlapped into the Everglades National Park and its wetlands so developers could build a Lowe's shopping plaza.  With Florida's current governor, Rick Scott, times have changed.  The Florida lawmakers are concerned with fighting the Great Recession and in passing the Community Planning Act, this type of state intervention is a thing of the past.   

Accordingly, environmentalists consider the Urban Development Boundary an election issue, and it's not the first time that the UDB has been a factor in a local government election.  Back in 2005, there was a big "Hold the Line" fight in Miami where development was seen as dangerous to the community and the UDB an important tool in keeping back real estate interests. 

What is the Urban Development Boundary? 

Also known as an "urban growth boundary," this is a line drawn on a map as a legal boundary that determines land use in the given area.  On one side of the line, real estate development can be "high density," and on the other side, it cannot.  UDBs are zoning laws designed to protect a community from rampant, uncontrolled urban growth or "urban sprawl."

Will the new Miami Mayor allow the UDB to be changed in order to help land developers from Florida, the United States, Mexico, and Latin America built in the Miami area -- bringing much needed jobs and revenue into our community?  Let's hope so. 

Remember, the Community Planning Act doesn't bar a challenge to a development on environmental grounds, it merely places the burden of any challenge upon the conservationists to prove harm will occur instead of the old way of doing things, where the developer was under the burden of proving a negative: that there would be no harm. 

Moving the UDB does not doom Miami's natural beauty.  It does help Miami become more attractive to real estate investors - and that's so very important in today's economy. 

Previously, we've covered the Catch-22 reality of today's Florida real estate market and the huge inventory of properties held as "Shadow Inventory," e.g., "Shadow Housing and ForeclosureGate: Banks are Stuck Between a Rock and a Hard Place."  Well, maybe Florida is getting some help in getting out from under all this real estate: at least Florida courts, judges and lawyers, are getting some breathing room. 

Fannie Mae Deadlines Extended

This week, the Federal National Mortgage Association (FNMA) announced that it will give Florida attorneys a big time extention: now Florida banks will have twice as long to finish a foreclosure, start to finish. 

Back in February, the Obama White House was sending out messages that Fannie Mae's days were numbered along with any future federal involvement in the national real estate market.  Some were concerned that this suggested a federal favoritism toward lenders (see "Fannie Mae and Freddie Mac Dumped by the Fed: What This Means to Florida Real Estate"). Maybe those groups will view this week's news as substantiation of their fears.

However, the reality is that Florida courts have been pushed to the breaking point with all the foreclosure filings, and when you couple that with the ForeclosureFraud paperwork nightmares (e.g., robosigning), more time seems to make good sense for everyone involved.

How Much Time?  Lots More.

Now, Florida law firms will have 450 days instead of 185 days to oversee a matter from that initial receipt of the case as a referred new matter to the actual foreclosure auction.  That's going from around 6 months to get the foreclosure done, start to finish, to around 15 months (if you tally using 30 day months). 

This isn't the same time frame for the entire country.  Florida gets the second longest time extension; New York City comes in first with 570 days.

For more details, click the link to read the entire Fannie Mae news release, "Fannie Mae Issues Servicing Standards for Delinquent Mortgages -  Standards are First Step in Fannie Mae's Implementation of the Aligned Servicing Requirements Announced by FHFA on April 28, 2011."

The various time extensions for various jurisdictions are discussed in the Servicing Guide, Part VIII, Section 104.08: Allowable Time Frames for Completing Foreclosure, and in Foreclosure Time Frames.

Today, hundreds of new laws are effective here in Florida having been signed into law by Florida Governor Rick Scott, demonstrating a controversial and concrete attempt by Florida lawmakers to resolve the state’s current economic crisis and promote a turnaround. 

This was done with the state bringing in $3,800,000,000.00 less in revenue than it had the previous year (yes, that is $3.8 billion); without raising taxes; and without closing hospitals, schools, or cutting back on health care. 

From the Florida Senate News Release of May 31, 2011:

• State spending cut by over $3 billion
• Not one penny of taxes or fees were increased
• Over $300 million in tax reductions benefited property owners and small businesses. Medicaid, the biggest cost in the state budget, was reformed with a billion dollars in savings. Highly effective teachers will be paid more, chronically ineffective teachers will lose tenure
• Florida state workers, like those in 49 other states, will contribute to their own retirement, ending a practice of taxpayers subsidizing 100 percent of public pensions.
• Expanded educational benefits for children with disabilities
• Second Amendment rights protected against local government interference
• Public funds won’t be used for elective abortions
• Golden parachutes and phony bonuses prohibited for public employees
• “Smart Cap” prohibiting state taxing and spending from rising faster than family income
• 1,100 regulations on small businesses eliminated

From the 2011 Legislative Session Report released by the Florida Senate on May 31, 2011, here are the laws passed from Florida Senate bills into law that impact Florida real estate and/or Florida land development. This, of course, does not include legislation originating in the Florida House that became law this week

(Go here for the complete Florida Senate press release and full list of Florida Senate bills that became law.)

Oil Spill Economic Recovery Act

(passed as SB 2156)

This major legislation is designed to help coastal Northwest Florida recover from the economic consequences of the Deepwater Horizon Oil Spill.  The bill provides that three fourths of all fine and settlement monies paid by B P or other responsible parties coming to the State of Florida would be used to benefit Escambia, Santa Rosa, Okaloosa, Walton, B ay, Gulf, Franklin and Wakulla counties.

The legislation also provides a preference for Northwest Florida in the use of state economic development programs and tax incentives for the next three years.  The bill calls for a multi-state cooperative agreement among Gulf states to monitor industry safety practices and influence federal policies regarding offshore oil and gas exploration and includes a $30 million appropriation to help expand and attract businesses, create jobs and diversify the region’s economy.

Elimination of Government Agencies, More Jobs in the Private Sector

(passed as SB 2156 and HB 143)

As Chairman of the Senate Appropriations Committee with jurisdiction over transportation, tourism, trade and economic development, Senator Gaetz championed legislation to eliminate the Florida Department of Community Affairs, eliminate the Agency for Workforce Innovation, and eliminate the Office of Tourism, Trade and Economic Development.

This bill achieves $8.6 million in recurring savings by eliminating job-killing functions of the Department of Community Affairs and overlapping unnecessary functions of other state government agencies.  The legislation turns over more authority and responsibility for planning to local governments and simplifies permitting for businesses and individuals.

A streamlined Department of Economic Opportunity will be a one-stop for businesses and local EDCs seeking state support for job creation activities.  The current protracted and complicated approval process is vastly simplified with the Governor given more latitude to approve projects and attract new businesses.

Under this legislation, the state is doing more to encourage private sector job creation.  To promote tourism, VISIT FLORIDA funding is increased from $26,647,961 to $34,899,209.  The Quick Action Closing Fund, used to close deals to bring higher paying jobs to Florida, is increased from $16 million to $42 million.  Commercialization of public research – or bringing university-level research to market with products that can be made in Florida – is funded at $10 million, up from $2 million.  Funding in the amount of $5 million is provided to promote our state’s military bases and the hundreds of thousands of jobs linked to the bases. The state’s ports will be improved with a $117 million appropriation, including widening the Port of Miami to accept larger ships following the expansion of the Panama Canal.  Overall, the economic development, trade, tourism and transportation budget is increased from $6.1 billion to $6.7 billion.

Support for Military and Veterans

(passed as HB 1141, HB 95, and HB 227)

Florida-based military members deployed in war zones don’t have to pay property taxes during the months they are deployed.  Families of members of the military killed in action and families of law enforcement and firefighters who died in the line of duty are given free lifetime entrance passes to Florida parks.  Uniformed military and overseas voters are permitted to use a federal write-in ballot to ensure that all military votes are counted in all elections.

Constitutional Amendments

The only way the state constitution can be amended is if 60 percent of the voters agree.  Constitutional amendments may be proposed either by petition or by a super majority vote of the Legislature, but in either case, voters at the next general election must approve any changes.

This session, among others, four proposed constitutional amendments will be on the November, 2012, general election ballot:

1.       Cap on Taxing and Spending (passed as SJR 958) Called “Smart Cap,” this proposal would limit revenues collected by state government to only the amount collected the previous year, plus an annual adjustment based on a combination of population growth and inflation.  This provision would stop legislators from using inflated revenues in good times to expand government and spend more.

2.       Health Care Freedom (passed as HJR 1) This provision protects Florida citizens from the “Obama-Care” federal mandate to purchase health coverage dictated by the federal government.

3.       Cap on Non-Homestead Property Taxes, Elimination of “Recapture Rule” (passed as HJR 381) This proposal would prohibit local governments from increasing property taxes by more than 5 percent per year on non-homestead property.  Current law limits non-homestead tax increases to 10 percent per year. The constitutional provision also allows the Legislature to prohibit increases in the assessed value of homestead and non-homestead property if the just value of the property decreases.  This would in effect repeal the controversial “recapture rule.”

4.       Disabled Veterans Property Tax Discount (passed as SJR 592) SJR 592 would grant partially or totally disabled veterans an enhanced property tax exemption on their homesteads.

Of note: Special Budget Provision/Septic Tanks

Provision placed within the new budget laws that protects December 2010 moratorium on the unpopular septic tank mandate objected by so many Florida property owners.  During the regular session of the Legislature, Senator Evers, with Senator Gaetz’s support, then sponsored SB 168, which would have permanently repealed the mandate.  Unfortunately, Senator Evers was unable to pass his bill.  Therefore, Senator Gaetz placed in SB 2002, the state budget, a provision which prohibits the Department of Health from implementing the mandate – in other words, the moratorium continues.