To speed up the Florida foreclosure process, Florida’s governor Rick Scott signed a foreclosure bill into law on June 7, 2013. The law expanded Florida's expedited foreclosure process, made recovering a home after foreclosure impossible in certain circumstances, required the lender to produce evidence of the note with its complaint, and limited deficiency judgments. Read on to learn more about the new law and how it could affect you if you are a Florida homeowner facing foreclosure.
In Florida, foreclosures are judicial, which means the lender must file a lawsuit in state court. The lender initiates the foreclosure by filing a complaint with the court and having it served to the borrower, along with a summons. If you lose the case, the court will enter a judgment of foreclosure and the property will be sold to satisfy the debt. (To learn more about the difference between judicial and nonjudicial foreclosure, and the procedures for each, see Will Your Foreclosure Take Place In or Out of Court?)
House Bill 87, sometimes called the Florida Fair Foreclosure Act, made several substantive changes to how foreclosures are conducted in the state.
Just how fair is the law to distressed homeowners? In actuality, the law is both harmful and beneficial to homeowners.
Because the overriding goal of the law was to speed up the foreclosure process, it can be detrimental to homeowners.
Florida law already provided for a procedure designed to speed up the foreclosure process in uncontested cases or in cases where the homeowner does not have a legitimate defense. Previously, after the foreclosure complaint had been filed, the mortgagee (the lender) could request an order to show cause why the foreclosure should not proceed. If the defendant homeowner waived the right to be heard (by failing to file a response, by filing a response that does not contest the foreclosure, or by not showing up at the hearing) or lost at the hearing, the court could enter a final judgment of foreclosure and order the clerk of the court to conduct a foreclosure sale. (To learn more about this process and Florida foreclosure procedures in general, see Florida Foreclosure Laws and Procedures.)
Now, any lienholder (including homeowners’ associations and condo associations) may make the request to route foreclosures through the expedited process rather than through a typical court proceeding. This means that homeowners could have less time to:
To get information about options to avoid foreclosure, see our Alternatives to Foreclosure area.
Additionally, the law made foreclosure judgments final. Any action to set aside, invalidate, or challenge the validity of a final judgment of foreclosure is now limited to monetary damages when the lender meets certain conditions. This means that a victim of a fraudulent foreclosure will not get the home back if:
With this provision, the law strengthened the finality of foreclosure judgments once the lender transfers the foreclosed property to a new owner. The former owner can continue to pursue money damages against the lender, but cannot regain title to the property.
On the other hand, the law did provide a few consumer protections.
When you took out your loan, you signed both a mortgage and a promissory note. The promissory note is what establishes your liability to pay your mortgage loan. The mortgage creates a lien on the property. The holder of the note is the only party that has the right to foreclose on the property. (Learn more about promissory notes.)
Starting July 1, 2013, the plaintiff (the owner of the loan) must prove its right to foreclose by filing additional items along with the foreclosure complaint, including:
This helps to ensure that an improper party is not pursuing the foreclosure.
When a lender forecloses on a mortgage, the total debt owed by the borrower to the lender frequently exceeds the foreclosure sale price. The difference between the sale price and the total debt is called a “deficiency.” In some states, the lender can seek a personal judgment against the debtor to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount from the borrower. (Learn about methods that creditors can use to collect judgments.)
Effective July 1, 2013, the period of time in which the lender may seek a deficiency judgment is reduced from five years to one year for residential properties with no more than four dwelling units.
Additionally, the deficiency judgment cannot exceed the difference between the judgment amount and the fair market value as of the date of sale if the property is:
Deficiency judgments for short sales involving owner-occupied residential properties are limited to the difference between the outstanding debt and the fair market value. Read more about deficiency judgments.
For more articles on foreclosure in Florida, including programs to help homeowners avoid foreclosure, visit our Florida Foreclosure Law Center. To learn more about foreclosure in general, ways to defend against foreclosure, and programs to help struggling homeowners avoid foreclosure, visit our Foreclosure Law Center.