By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published July 5, 2010

Most foreclosure cases that come before Charleston County Master-in-Equity Mikell Scarborough are not contested by the property owner, according to the judge, a special circuit court judge who handles all such cases in the county.

But you wouldn’t know that if you sat in his courtroom.

During court hearings, property owners squeeze into the two benches at the back of the room, alongside a handful of lawyers in suits, sometimes spilling out the doorway. Some wait an hour or two for their turn to take a seat before the judge and tell their stories.

They are stories of jobs lost and other hard times that have made it difficult to keep current on mortgage loans. Some are stories of bad decisions.

Master-in-Equity Mikell Scarborough listens to testimony in his courtroom in Charleston County. (Photo/Leslie Halpern)

They are the stories behind the foreclosure crisis, which Scarborough says now is largely a problem of unemployment and underemployment. The volume of foreclosure cases in Charleston County has continued to increase this year, the judge said, and he doesn’t think it will slack off soon.

“It’s getting busier and busier,” Scarborough said.

As of May, one in every 277 homes in the Charleston metropolitan statistical area faced foreclosure proceedings, an increase of 82% from last year, according to the national firm RealtyTrac.

According to court data, the number of all cases referred to the master-in-equity court in Charleston County was up about 25% through the middle of June, as compared to the first six months of last year. Not all of those cases are foreclosures, but Scarborough said foreclosures are driving the increase.

The increase is taxing for the court, as well as the lawyers involved, he said.

A typical foreclosure takes about 180 days to move through the court system — double what it took a few years ago.

Cases take longer now because of the volume, but also because many stop and start as property owners try to negotiate loan modifications or other alternatives to foreclosure. If cases stop for more than six months, Scarborough said he dismisses them.

His court, like others around the state, is working through a backlog of cases that built up when the S.C. Supreme Court issued a temporary halt on owner-occupied foreclosures in May 2009. The freeze was meant to give homeowners time to apply for federal loan modification programs, which were just rolling out at that time.

“We’ve been wrestling with that ever since,” Scarborough said.

Getting the runaround
Some homeowners come to court to protest foreclosure as a result of problems encountered while seeking loan modifications. Some can’t get lenders to respond, or they are working with one bank official who says they qualify for a modification while another official with the same bank advances the foreclosure action.

“That goes on a lot,” Scarborough said.

Master-in-Equity Mikell Scarborough is seeing an ever-growing number of foreclosure cases in the county. (Photo/Leslie Halpern)

So homeowners come to plead their cases at their foreclosure hearing. These are the court proceedings during which the judge decides whether to allow the lender to foreclose and sets a date for the property to be auctioned.

During a recent hearing, one homeowner waited nearly two hours through other cases to explain to the judge that bank officials have told her she wasn’t far enough behind in her payments to qualify for a modification.

“Well, today’s your day,” Scarborough told her.

He said some banks wait until a sale is ordered before they’ll get serious about finding alternatives to foreclosure.

“They’re not going to stave it off until they actually have to,” Scarborough said.

In this case, the woman’s income had fallen, in part because child support payments for one of her children had come to an end. She told Scarborough she’d been sending financial statements to the bank monthly, as requested. But every bank official she’d spoken with told her they were still reviewing her information.

“Do you get a different person every time you call?” Scarborough asked.

“Of course,” she said.

In cases like these, Scarborough tells borrowers to call their lenders repeatedly, to ask for the same person every time, or to ask for a supervisor. He suggests they take the free loan modification help that a local nonprofit organization offers.

The power to help
Beyond the advice he gives, Scarborough uses the power he has as a judge — power to order a foreclosure, schedule the sale date or grant more time in the case — to help the people who come before him.

He might set a sale date 60 or 90 days out. That gives those homeowners who have some ability to make mortgage payments the deadline they need to prompt lenders to consider a modification, and it allows enough time for them to do so.

Scarborough asks defendants about their ability to pay. He asks whether they are employed, what kind of work they do, whether they have any other income or savings that could help them catch up on payments.

One man who came before the judge recently was unemployed but expecting a large payment from a work-related injury lawsuit in the next few weeks. Scarborough set his foreclosure sale for 90 days out and told him to get in touch with the lender’s attorneys about the forthcoming payment.

“If they’ve got the prospect of money, they’re not going to sell this property,” Scarborough told him.

Banks end up with nearly all of the properties they send to foreclosure sales, Scarborough said, and they do not want to take on more of them.

During hearings, lenders’ attorneys sit opposite property owners. Often they don’t say much, apart from the amount owed on the loan, accrued interest and attorney fees, plus whether the lender is seeking a deficiency judgment to make up for the shortfall in what a property sells for versus what is owed on the loan.

In the end, whether borrowers are able to work out their situations is between them and their lenders, Scarborough said. But his philosophy is that he can allow them their day in court, the chance to tell their story and, where possible and useful, some breathing room.

Most defendants choose not to contest their foreclosure, and Scarborough said those cases are set for sale quicker.

Many master-in-equity judges in South Carolina operate similarly, giving defendants a voice in the courtroom, even if they have no attorney or haven’t properly filed a response to the lawsuit, Scarborough said.

“I follow the law, but I give the defendant the opportunity to at least tell their side of the story,” he said.

For some borrowers, their side of the story isn’t necessarily a fight.

This spring, several homeowners showed up in court simply to ask that the foreclosure sale be set after their children had finished the school year. Scarborough asked each homeowner where his or her children attended school and when the school year ended. He set the sales accordingly.

Likely to get worse
The foreclosure crisis — which early on was a result of subprime mortgages and now is more related to job losses — could see a new phase of activity in the coming months.

“I thought that, as voluminous as our caseload was earlier this spring, that the end was in sight,” Scarborough said.

But he recently heard from a Columbia lawyer who expects that his firm soon will receive a deluge of cases involving loans that were modified under federal programs that started in 2009 but that have lapsed again.

“All it has successfully done, as I can see, is postponed this,” Scarborough said about the modification programs. “Which for some people is good.”

To help speed things up in the court system, the judge is creating a new form that attorneys filing foreclosure cases must fill out to identify how long their case is likely to take. It will allow cases that aren’t contested by the property owner to be expedited, which will help streamline other proceedings as well.

As busy as courts in the Charleston area might be, it could be worse.

The S.C. Supreme Court recently appointed a special referee to help the Horry County master-in-equity handle foreclosure cases through the end of the year.

Scarborough said recent data show that Horry County’s foreclosure caseload is more than any other county’s in the state.

“The whole county’s for sale up there,” he said.

Reach Ashley Fletcher Frampton at 843-849-3129.