By Gary Blankenship
Bills to streamline the residential mortgage foreclosure process advanced in both the Florida House and Senate as they neared mid-term of their 2013 Regular Session.
Both chambers added a provision making it easier to hire retired judges to hear the cases, and the Senate version also featured a controversial proposal requiring some notices of foreclosure sales be placed on Internet sites rather than printed legal notices in newspapers.
Both bills drew criticism from a grassroots citizens group that said the bills failed to punish banks that flooded courts with faulty paperwork in the robosigning scandal and won’t give homeowners enough time to explore all their defenses.
The bills — HB 87 and SB 1666 — have several provisions in common:
* The statute of limitations for a bank to seek a deficiency judgment against a foreclosed homeowner is shortened from five years to one year.
* Banks are required to file complete and correct paperwork showing they are entitled to foreclose on the property.
* Plaintiffs would be able to seek a streamlined “show cause” procedure to expedite a foreclosure. Defendants would be required to show a legitimate defense at the show cause hearing or the foreclosure would be speeded to conclusion.
* Condominium and homeowners’ associations which have unpaid fees and assessments on a property in foreclosure would be able to intervene to seek a show cause hearing if the plaintiff failed to do so.
* Third parties buying a foreclosed property would be protected from losing the property if a defect was later found in the foreclosure process. The foreclosed owners in those cases would be limited to recovering monetary damages.
* Retired judges hired to hear foreclosure cases would be exempted from the requirement that state employees could not return to state employment for one year after retiring.
The Senate bill also contains a provision allowing the second of the two required foreclosure sale public notices to be placed on an Internet site that meets certain specifications. Costs for that placement would be limited to $50, which is less than the $80 to $90 or more such a notice would cost in a printed publication, according to the bill sponsored by Sen. Jack Latvala, R-Clearwater.
Latvala, speaking at the Senate Banking and Insurance Committee where his bill had its initial hearing, said the change was justified because only 40 percent of homes have access to newspapers, while more than 80 percent have online access. However, critics said minorities and older residents have less online access and that many people, especially in rural areas, rely on printed public notices.
In response to a question at the House Judiciary Committee, sponsor Rep. Kathleen Passidomo, R-Naples, said while there is an existing expedited foreclosure process, it does not work,
“It’s ineffective and inartfully drawn. It requires too many hearings, and it is not expedited, and the real problem is it allows the borrower to file any kind of defense,” she said. “What we need are borrowers who file meritorious defenses.”
Passidomo added that the bill attempts to require all parties to act in good faith.
“There is no single bad actor in this process,” she said. “The lenders are slow in proceeding; borrowers are hiring counsel who are being paid to keep them in their homes; and the courts are clogged. This bill addresses all three issues.”
It also, Passidomo said, gives condominium and homeowners’ associations, that can’t collect on fees and assessments while a property is in foreclosure, a way to speed up foreclosures so they can collect back payments.
Representatives of the Mortgage Justice Group attended both the House and Senate committee meetings to criticize the bills. They contended that no change is needed, and the reason cases are backlogged in the courts is foot-dragging by banks because of faulty paperwork. They also said more than 90 percent of foreclosures involved either faulty or missing paperwork, but banks generally prevailed anyway.
“You can only expedite foreclosure by denying Florida property owners their due process and property rights,” said Robert Sublette, one representative from the group.
“The homeowners are scared to death, and they are scared to death because they find themselves abused in their local courts, and the reason is the process is not working properly,” said Woody Ryan, another member of the group. “If the banks were made to produce the right documents, it wouldn’t take this law.”
The bills also have produced a split in the legal community. The Bar’s Real Property, Probate and Trust Law Section, which worked with Passidomo on her bill, has endorsed the legislation, but several lawyers representing consumers and homeowners have opposed it.
The Senate Banking and Insurance Committee voted 7-3 at its March 20 meeting. SB 1666 had three more committee stops, including the Senate Judiciary Committee.
HB 87 passed the Judiciary Committee 12-6 on March 28 and now heads to the House floor.