Is the New Florida Fair Foreclosure Act Really Fair?

On June 7, 2013, Governor Scott signed the Florida Fair Foreclosure Act into law. The Act makes many substantive and procedural changes to how foreclosures are processed by the courts with the intention of speeding up the process. The Act became effective on July 1, 2013 and applies to all new foreclosure actions filed after this date, and with the exception of the provisions of Section 702.015, also applies to all foreclosure actions pending as of July 1.

Section 1 of the Act amends Section 95.011 by shortening the statute of limitations period for a lender to commence an action for a deficiency judgment on a residential foreclosure from the existing 5 years to 1 year after the issuance of a certificate of sale or lender's acceptance of a deed in lieu of foreclosure. The amendment applies to a new action for deficiency filed after July 1, 2013 but does not create a new limitations defense in an existing deficiency action.

Section 3 of the Act creates Section 702.015, and creates new pleading requirements for the plaintiff's complaint. Section 702.015 now requires the plaintiff's complaint to specifically plead the plaintiff's standing upon the filing of a residential foreclosure action. Previously, a typical residential foreclosure complaint pleads standing with a vague and all encompassing statement such as "Plaintiff owns and holds the Note and Mortgage, is the servicer of the note or is a person entitled to enforce the Note within the meaning of Chapter 673, Florida Statutes."

After July 1, 2013, the complaint in all new foreclosure actions must either allege that the plaintiff is the holder of the original promissory note secured by the mortgage or it must allege with specificity the factual basis by which the plaintiff is entitled to enforce the promissory note. Simultaneously with the filing of a new foreclosure complaint, a plaintiff must now also file either an affidavit that it is in possession of the original promissory note or, if the plaintiff is seeking to enforce a lost promissory note, it must file an affidavit that details a clear chain of all endorsements, transfers, or assignments of the promissory note from origination to the filing of the complaint.

Section 4 of the Act creates Section 702.036, which relates to the finality of a final judgment of foreclosure. After entry of final judgment of foreclosure, if a party seeks to set aside, invalidate, or challenge the validity of a foreclosure judgment, (even if the foreclosure was fraudulent), the court may not set aside theĀ foreclosure judgment and can only grant monetary damages if:

  1. Those looking for relief were properly served,
  2. The final judgment of foreclosure was entered
  3. All appeals were resolved, or no appeals were taken, and
  4. No persons involved with the foreclosed owner, or foreclosing lender, acquired the property. With the enactment of this provision, the well established premise in Florida law that "your home is your castle" has been abandoned for the sole purpose of protecting title insurance companies from paying claims on title policies issued after a sloppy or fraudulent foreclosure.

Ordering a show of cause or ammends relates to Section 6 of the Act, Section 702.10 reading that any lienholder, rather than just a mortgagee, may request an order to show cause for the entry of a foreclosure judgment in a foreclosure action. Section 6 also provides that in any action for foreclosure of non-owner occupied residential property, the plaintiff may request an order to show cause why an order to make payments during the pendency of the foreclosure proceedings should not be entered, and if the required payments are not made, why an order to vacate the premises should not be entered. The motion shall be reviewed by the court in chambers, and if the motion is procedurally correct, the factual allegations contained therein shall be deemed to be correct and an order shall be entered without a hearing. In essence, these amendments reverse the burden of proof and now require the borrower to prove why he should not lose his home to foreclosure, rather than require the plaintiff to prove its right to enforce the note and mortgage. (Did the legislature forget about robosigning . . . ?)

Section 7 of the Act enumerates certain methods of providing adequate protection where the foreclosing lender is not in possession of the original promissory note. Section 7 of the Act creates Florida Statute §702.11, under which all of the following will be considered adequate protection: (i) a written indemnification agreement by a person reasonably believed sufficiently solvent to honor such an obligation, (ii) a surety bond, (iii) a letter of credit issued by a financial institution, (iv) a deposit of cash collateral with the clerk of the court, and (v) such other security as the court may deem appropriate under the circumstances.

Clearly, the provisions of the Act will not pass constitutional muster. The Act has retroactive provisions, which are likely to be deemed an unconstitutional impairment of existing contractual relations. The Act contains provisions that affect the application of the rules of civil procedure, which are likely to be deemed an invasion of the powers of the judiciary and within the show cause provisions, creates serious due process concerns. Finally, the most troubling provision of the Act which prohibits the return of property to a homeowner whose home has been lost to a fraudulent foreclosure is certain to be deemed unconstitutional.

It is this author's opinion that the new provisions will not significantly help speed up the foreclosure process. By sitting in the courtroom to observe a few hours of Judge Rapkin's trial day "rocket docket", it is easy for anyone to see that these statutory amendments will not be effective to clear the foreclosure backlog. These statutory amendments will do nothing to remedy a plaintiff's lack of efficient representation, lack of diligence in pursuing an action, lack of preparation for trial, or lack of evaluation of the enforceability of note and mortgage, which in this author's opinion, are the real problems causing the foreclosure backlog.