The Foreclosure Reform Bill awaiting Governor Scott's signature is designed to work through Florida's backlog of foreclosure cases. It could be one of those double edged swords. Below is a summary of the pending Foreclosure Reform Bill and staff analysis. Is it yet another example of the fox watching the henhouse? You decide.
GENERAL BILL by Appropriations
Committee ; Judiciary Committee ; Passidomo ; (CO-INTRODUCERS)
Caldwell ; Cummings ; Moraitis ; Rodrigues
Mortgage Foreclosures; Revises
limitations period for commencing action to enforce claim of
deficiency judgment after foreclosure action; provides for
applicability to actions commenced on or after specified date;
provides time limitation for commencing certain actions; provides
legislative intent; specifies required contents of complaint seeking
to foreclose on certain types of residential properties with respect
to authority of plaintiff to foreclose on note & location of
note; authorizes sanctions against plaintiffs who fail to comply with
complaint requirements; provides for nonapplicability to proceedings
involving timeshare interests; requires court to treat collateral
attack on final judgment of foreclosure on mortgage as claim for
monetary damages; prohibits such court from granting certain relief
affecting title to foreclosed property; provides for construction
relating to rights of certain persons to seek specified types of
relief or pursue claims against foreclosed property; limits amount of
deficiency judgment; revises class of persons authorized to move for
expedited foreclosure to include lienholders; defines "lienholder";
provides requirements & procedures with respect to
order directed
to defendants to show cause why final judgment of foreclosure should
not be entered.
Last Action: 05/03/2013 Ordered enrolled -HJ 1470
Effective Date: upon becoming a law
CS/CS/HB 87 —
Mortgage Foreclosures
by Appropriations Committee; Judiciary Committee;
and Rep. Passidomo and others (CS/CS/SB 1666 by Judiciary Committee;
Banking and Insurance Committee; and Senator Latvala)
This summary is provided for information only and does not
represent the opinion of any Senator, Senate Officer, or Senate
Office.
Prepared by Banking and Insurance Committee
(BI)
Statute of Limitations on Certain Actions
The bill reduces the statute of limitations period for a lender to
enforce a deficiency judgment following the foreclosure of a
one-family to four-family dwelling unit from 5 years to 1 year,
for any such deficiency action that commences on or after July 1,
2013, regardless of when the cause of action accrued.
The Foreclosure Complaint
The bill requires that in order to bring a complaint to foreclose
a mortgage on residential real property designed principally for
occupation by 1 to 4 families, including condominiums and
cooperatives ... under part III of
ch. 721, F.S., the complaint must establish that the plaintiff
holds the original note or is a person entitled to enforce a
promissory note. If a plaintiff has been delegated the authority to
institute a foreclosure action on behalf of the person entitled to
enforce the note, the complaint must describe with specificity the
authority of the plaintiff and the document that grants such
authority to the plaintiff.
A plaintiff in possession of the original promissory note must
certify, under penalty of perjury, that the plaintiff possesses the
original note. An “original note” or “original promissory note”
is defined as the signed or executed promissory note, including a
renewal, replacement, consolidation, or amended and restated note or
instrument that substitutes for the previous promissory note. The
term includes a transferrable record, but not a copy of any of the
foregoing. The required certification must be submitted
contemporaneously with the foreclosure complaint, and set forth the
location of the note and other specified information. The original
note and allonges must be filed with the court before the entry of
any judgment of foreclosure or judgment on the note.
A plaintiff seeking to enforce a lost, destroyed, or stolen
instrument must attach to the complaint an affidavit executed under
penalty of perjury, detailing the chain of all endorsements,
transfers, or assignments of the promissory note, and setting forth
the facts and documents showing that the plaintiff is entitled to
enforce the instrument. Adequate protection as required under
s. 673.3091(2), F.S., must be provided before final judgment.
Finality of Mortgage Foreclosure Judgment
The bill provides that an action to challenge the validity of a
final judgment of mortgage foreclosure, or to establish or
re-establish a lien or encumbrance of property is limited to monetary
damages if all of the following apply:
The party seeking relief from the
final judgment of mortgage foreclosure was properly served in the
foreclosure lawsuit;
The final judgment of mortgage
foreclosure was entered as to the property;
All applicable appeals periods
have run as to the final judgment with no appeals having been taken
or having been finally resolved; and
- The property has been acquired for value by a person not
affiliated with the foreclosing lender or the foreclosed owner, at a
time in which no lis pendens regarding the suit is in the official
county records.
The bill defines affiliates of the foreclosing lender to include
any loan servicer for the loan being foreclosed, and any past or
present owner or holder of the loan being foreclosed, and:
a parent entity, subsidiary, or
other person who directly or indirectly controls, is controlled by,
or under common control of any such entities; or
- a maintenance company, holding company, foreclosure services
company or law firm under contract with such entities.
The bill provides that the former owner can continue to pursue
money damages against the lender. The claims of the former owner,
however, cannot impact the marketability of the property of the new
owner.
The bill provides that when a foreclosure of a mortgage occurs
based upon enforcement of a lost, destroyed, or stolen note, a person
who was not a party to the foreclosure action but claims entitlement
to enforce the promissory note secured by the mortgage has no claim
against the foreclosed property once it is conveyed to a person not
affiliated with the foreclosing lender or the foreclosed owner. That
person may still pursue recovery from any adequate protection given
pursuant to s. 673.3091, F.S., or from the party who wrongfully
claimed entitlement to enforce the promissory note, from the maker of
the note, or any other person against whom a claim may be made.
Deficiency Judgments
The bill limits the amount of a deficiency judgment on
owner-occupied residential property to the difference between the
judgment amount and the “fair market value” on the date of the
foreclosure sale. Similarly, the deficiency for a short sale may not
exceed the difference between the outstanding debt and the fair
market value of the property on the date of the sale.
Show Cause Procedure
The bill makes several revisions to the show cause process. The
bill provides that after filing a complaint, the plaintiff may
request an order to show cause for the entry of final judgment, and
the court must immediately review the request and the court file in
chambers without a hearing. If the complaint is verified, complies
with the requirements in s. 702.015, F.S., and alleges a cause
of action to foreclose on real property, the court must issue an
order to show cause why a final judgment of foreclosure should not be
entered to the other parties named in the action. The bill adds a
number of elements that must be included in the court’s order to
show cause that is sent to the other parties named in the action. The
court must set a hearing no sooner than the later of 20 days after
service of the order to show cause or 45 days after service of the
initial complaint. The hearing is no longer required to be held
within 60 days of the date of service, as required by current law.
The bill specifies that the Legislature intends that the alternative
show cause procedure may run simultaneously with other court
proceedings.
The bill adds the requirement that the plaintiff must file the
original note, establish a lost note, or show the court the
obligation to be foreclosed is not evidenced by a promissory note,
before the court can enter a final judgment of foreclosure after the
court has found that all defendants have waived the right to be
heard. If the hearing time is insufficient, the court may announce a
continued hearing on the order to show cause.
The bill exempts foreclosures of owner-occupied residences from
provisions authorizing the plaintiff to request the court to enter an
order to show cause why it should not enter an order to make payments
during the pendency of the foreclosure proceedings, or an order to
vacate the premises.
Adequate protections for lost, destroyed, or stolen notes
The bill provides that the following may constitute reasonable
means of providing adequate protection, if so found by the court:
A written indemnification
agreement by a person reasonably believed sufficiently solvent;
A surety bond;
A letter of credit issued by a
financial institution;
A deposit of cash collateral with
the clerk of the court; or
- Such other security as the court deems appropriate under the
circumstances.
The bill provides that a person who wrongly claims to be the
holder of a note or to be entitled to enforce a lost, stolen, or
destroyed note is liable to the actual holder of the note for damages
and attorney fees and costs. The bill specifies that the actual
holder of the note can pursue any other claims or remedies it may
have against the person who wrongly claimed to be the holder, or any
person who facilitated or participated in the claim.
Application and Implementation of Bill
The Legislature finds that the act is remedial and not substantive
in nature. The act applies to all mortgages encumbering real property
and all promissory notes secured by a mortgage, regardless of when
executed. The following sections are exempted from this general rule
of application:
The Legislature also requests the Supreme Court to amend the Rules
of Civil Procedure to implement the expedited foreclosure process.
If approved by the Governor, these provisions take effect upon
becoming law.
Vote: Senate 26-13; House 87-26
