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July 1, 2013
Foreclosure bill becomes law

By Gary Blankenship
Senior Editor

A bill to speed up the handling of foreclosure cases in Florida courts has been signed by Gov. Rick Scott.

Scott signed HB 87 on June 7 and it became effective with his signature.

He was heavily lobbied on the measure.

Critics contended it didn’t provide enough time for defendants with legitimate claims to find lawyers and raise those claims, and in some cases the law would prevent those who are fraudulently foreclosed from getting their homes back.

Rep. Passidomo Supporters said the legislation was needed for courts to attack more than 350,000 foreclosure cases backlogged in the state courts and also give a way for homeowners’ and condominium associations to force the completion of foreclosures when they are owed unpaid fees and assessments.

The bill:

* Cuts the statute of limitations for banks to seek a deficiency judgment against a foreclosed homeowner from five years to one year. The amount of the deficiency would be limited to the difference between the amount received in the foreclosure sale and the fair market value of the house at the time of the sale, not the amount of the original mortgage.

* Requires higher paperwork standards for lenders filing foreclosures, to include showing that the plaintiff has the right to foreclose.

* Allows show cause hearings in foreclosure cases using the summary judgment standards to speed the resolution of foreclosure cases, and at those hearings defendants will have to claim a specific, allowable defense to forestall the foreclosure.

* Allows homeowners’ and condominium associations with liens on unpaid property assessments to file for a show cause hearing if the lender does not.

* Mandates that “innocent” third parties who buy foreclosed homes cannot be divested of those homes if that foreclosure was later found to be fraudulent. Instead, the original owner will be limited to collecting monetary damages from the lender or party responsible for the fraud.

“It will accomplish its purposes with undefended cases and to the extent the court needed any help to get rid of those — and I’m not sure they did — it should help get those on to judgment as quickly as possible,” said Royal Palm Beach attorney Tom Ice, who defends foreclosures and who lobbied against the bill. “The ones I am concerned about are the ones who have hired counsel and defend [the foreclosure] and expect due process. . . . It means we attorneys defending homeowners are going to have to be quick on our feet and not miss any deadlines.”

He questioned whether lenders will partake of the faster foreclosure procedure, noting that the prior procedures were rarely used. To apply the new law in existing cases, lenders may have to refile much of the paperwork to comply with the tougher standards in the new law.

Ice also said homeowners’ and condominium associations might have difficulty intervening in cases to speed foreclosures. The law, he noted, requires an accurate statement of the mortgage amounts owed by the borrower for the show cause hearing and he’s not sure how the associations will be able to acquire that information from banks.

Ice predicted legal challenges to the law. One constitutional challenge may be that the law infringes on the Supreme Court procedural rulemaking authority because it spells out how foreclosures will be handled. A second, more serious, challenge, he said, is likely over the provision that limits a homeowner who was wrongly foreclosed to monetary damages instead of reclaiming the home if it was purchased by an innocent third party.

That provision, Ice said, “is taking away the court’s power to correct itself” when error or fraud is involved in the foreclosure.

“It’s like the bank can turn around and say, ‘Ha, tricked you!’” he said. “Never before in the United States has a law been passed to allow that. It’s like a statute of repose on robbing a bank. If they can last 30 days without anyone discovering it, then ‘we get to keep the money, now.’”

William F. “Fletch” Belcher, chair of the Real Property, Probate and Trust Law Section, said the section strongly supported the bill and had a hand in writing it with House Sponsor Rep. Kathleen Passidomo, R-Naples. Passidomo wrote an article on the impact of the bill for an upcoming issue of the section’s newsletter, Action Line.

Belcher said the bill will address multiple problems: blighted neighborhoods from empty properties locked in foreclosure litigation, cases becoming logjammed in the courts, and the difficulty of junior lien holders, such as homeowners’ and condominium associations, to enforce their liens.

“This bill is truly a mixed bag,” Belcher said. “There are things in there for and against every interest group.”

The most controversial parts, he said, are the sped-up show cause hearing and the protection for innocent third-party buyers of foreclosed properties. But those sections have protections, including that paperwork and service requirements must be scrupulously followed.

“If the complaint states what it’s supposed to state and it’s properly served, then the court enters the show cause order, which basically gives the owner a short period of time to show that he or she has a defense to the foreclosure,” Belcher said. “It makes the owner make some sort of effort to show there is a defense, that there is an issue to be tried, and there is a defense to the foreclosure. If the defendant can’t do that, then the court is required to go ahead and enter a foreclosure order.”

As for the irrevocability of the final sale, he said, that only comes after there is valid service, a valid foreclosure order, and all appeals have run.

“If the final judgment gets reversed on appeal, then the safe title provision doesn’t kick in,” Belcher said.

While the new law can’t necessarily force banks to file foreclosures on their own to speed pending cases, he said it gives judges more tools. And foreclosures are different from normal civil cases where judges usually let the parties determine the pace of litigation. Because of the volume, Belcher said, judges “are driving the trains. They are setting the hearings and setting the trials, and not the lenders.”

Providing the homeowners’ and condominium associations with liens for unpaid assessments the ability to seek a show cause hearing also will speed the process, he said.

Asked about his reasons for signing the bill, Scott’s office sent a video clip of the governor answering that question to reporters. In the clip, Scott said: “It’s going to help make sure we have a timely foreclosure process so our families can make sure that they can keep their homes and make sure we get back to work. Home prices are up; new home construction is up, just like jobs are back.”

[Revised: 12-15-2014]