Bad News for Homeowners
Starting July 1, amendments to the existing foreclosure law and related laws will take effect. Depending upon where you stand in the foreclosure process, namely lender, borrower, or third party, your view of the newly enacted legislation will differ. In this article, I am going to look at it from each of the perspectives to discuss the good, the bad and the ugly.
One Year Deficiency Judgements
First, as far as the good is concerned, from consumer/borrower’s perspective, the reduction of time on the statute of limitations for pursuing a deficiency judgment from five years to one year is a great thing. Prior to the change in the law, a bank had up to five years to pursue a deficiency judgment. The problem that this creates is that a borrower, who may have not received a release of the deficiency in a short sale or foreclosure, had a potential large deficiency judgment hanging over his head for an additional five years. This can lead to a lot of sleepless nights and ultimately many more bankruptcies to get a fresh start and be relieved from the deficiency. As a result of the change, any lenders who have not yet pursued a deficiency and may have obtained a judgment will have to file for a deficiency no later than July 1, 2014.
New Wave of Deficiency Motions
Of course, as I said, whether the changes are good, bad or ugly depends upon your perspective. The lenders may now be forced to pursue deficiencies and there could be a whole new wave of Deficiency Motions or actions for deficiencies in the next 12 months. This will further inundate the courts with more legal proceedings.
Homeowners and Condominium Associations
From a homeowners or condominium association’s standpoint, a new change to the law is also good in that it allows the association to file an Order to Show Cause to have a final summary judgment entered when the lender may be dragging its feet in pursuing same. The amendments to F.S. §702.10 now allow a lienholder which is also defined as a condominium association, cooperative association or homeowners’ association, to file an order to show cause as to why a judgment should not be entered. By allowing this procedure, it can help associations move matters along when banks have failed to timely prosecute an action even though all necessary papers have been filed.
Bad News for Borrowers
In the “bad” category, the changes to pursuing a deficiency while in one section are in favor of a borrower, in another section it is bad for a borrower. As the law was previously drafted, the court had discretion as to whether or not to enter a deficiency judgment. At times, even though there was a deficiency, taking into account all of the circumstances; a judge had the discretion as to whether or not to award a deficiency judgment. The legislature has taken that discretion away from the court, and it appears a deficiency will have to be entered if a bank requests it and meets its burden of proof.
Limited Negotiation Timeframe
With regard to the “ugly” of the statute, that would be the new complaint filing procedure set forth in the statute. The reality of the new statute as set forth at F.S. §702.015 is that it requires the Plaintiff to fully state and basically prove its cause of action at the time of filing the complaint, including the basis for its authority to have standing to file a complaint and whether or not it has the original note, the location of same, and if the note is lost, it must submit an affidavit in support of reestablishing the lost note.
What the legislature has done is merely move the timing of what a lender would have to do at the time of summary judgment to the beginning of the case. While in theory if the bank submits everything as required at the time of filing of the complaint the matter can move to summary judgment faster, it may merely just delay the filing of the complaint resulting in a greater “shadow inventory” of homes to be foreclosed upon. This revision may also fall into the category of bad for homeowners as once they are served with a complaint, their timeframe to try to negotiate a resolution with the lender through either a modification or a short sale may be very limited compared to the present situation, especially if the banks start using the Order to Show Cause procedure.
The bottom line is these changes may all just be “lipstick on a pig” if the banks, and the banks’ attorneys, do not have the personnel to process the foreclosure. If the personnel to process the matters, and more importantly, the money to pay the personnel to process these matters is not committed by the lenders, no act of the legislature will be a magic wand to process foreclosures more quickly. Nevertheless, I believe the net overall effect of the new legislation will be bad for a struggling homeowner.
Contact a Foreclosure Attorney
If you have a situation as we described in this article and have questions or concerns, please don’t hesitate to contact us to answer your real estate legal questions.
Martella Law Firm
18501 Murdock Circle, Suite 304
Port Charlotte, FL 33948