Bill to streamline foreclosures moves one step closer to Fla. law

TALLAHASSEE, Fla. – Feb. 28, 2012 – For the first time since the real estate crash crippled Florida’s economy and battered struggling homeowners, a bill to hasten foreclosures through the courts is headed to the full House and Senate.

A narrow 6-4 vote Monday in a specially scheduled meeting of the Senate Banking and Insurance Committee was the final hurdle for the proposal (SB 1890) to be heard by both chambers. The plan aims to reduce the amount of time a bank can pursue a homeowner for unpaid mortgage debt, while speeding foreclosures on abandoned homes and in cases where homeowners have no legitimate defenses.

Bill opponents fear borrowers will get caught up in a quickie foreclosure wheel without time to question bank documents, and argue that not only are portions of the plan unconstitutional, but that the overall proposal is unnecessary.

“Most of this bill is just totally useless,” said Sarasota-based attorney Henry Trawick, an expert on Florida’s judicial rules and author of Trawick’s Florida Practice and Procedure. “The courts already have the ability to do virtually everything they want to do here.”

Trawick blames overwhelmed bank attorneys for the delay in processing foreclosure cases. He said if the bill passes it will face a constitutional challenge on a provision that attempts to define abandoned homes so that a faster foreclosure can occur.

“Florida courts have held for many years that a person’s absence from his home does not constitute abandonment of it,” Trawick said.

House sponsor Kathleen Passidomo, R-Naples, and Senate sponsor Jack Latvala, R-St. Petersburg, amended the bill Monday to remove a portion that restricted damages from a fraudulent foreclosure to a monetary award. Homeowner advocates opposed the language because it barred homeowners from reclaiming their property.

Another homeowner protection the sponsors tout is the reduction from five years to one year that banks would have to file for a deficiency judgment against a homeowner. A deficiency judgment is basically the amount of leftover debt owed after the bank recoups money from a sale.

“Right now, that’s hanging over their heads for five years and that kind of uncertainty is one of the things in my opinion that is hampering the growth of Florida’s economy,” Latvalla said.

The proposal would allow any lien holder to hasten a foreclosure case if a property is abandoned or the homeowner does not respond with a “meritorious” defense within 20 days of being served.

Currently, only the bank that owns the primary lien can file for what is called a “show cause” order, in which a homeowner must show why the bank doesn’t have a foolproof case. If a judge sides with the bank, a final foreclosure judgment can be issued immediately.

The number of foreclosure filings on Florida properties dropped 62.5 percent last year compared to 2010, according to a year-end report released during the weekend by the Irvine, Calif.-based RealtyTrac.

The robo-signing scandal is the likely cause for the steep dropoff in filings, and recent months have seen an uptick in foreclosure activity.

There are an estimated 368,000 backlogged foreclosure cases in Florida’s courts.

Public testimony Monday against the bill touched on the issue of fraudulent foreclosure documents.

“At a show cause hearing the defendant has had no opportunity to engage in discovery or fact finding,” said Lynn Drysdale, an attorney with the Jacksonville-based Legal Aid Society. “Many of the documents filed at the beginning are false, and you can’t tell that based on their face.”

The bill would become effective July 1 if it becomes law and could be applied retroactively to current foreclosure cases.

“I’ll vote for the bill today, and I’ll vote for the bill on the floor because the only properties affected are those where the mortgages are delinquent and we need to keep that in mind,” said Sen. Don Gaetz, R-Destin. “It certainly doesn’t solve all our problems, but I’ve never voted for a perfect bill.”