Florida Foreclosure Laws that Help and Hurt Homeowners

Florida's foreclosure laws changed in 2013—both to the benefit and detriment of homeowners.

By , Attorney (University of Denver Sturm College of Law)

In Florida, foreclosures are "judicial," which means the lender must file a lawsuit in state court. The lender initiates the process 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. Judicial foreclosures generally take a long time.

To speed up the Florida foreclosure process, Governor Rick Scott signed a foreclosure bill (House Bill 87) into law on June 7, 2013. Specifically, the law:

  • expanded Florida's expedited (fast-track) foreclosure process
  • made recovering a home after foreclosure impossible in certain circumstances
  • requires the lender to produce evidence of the promissory note with its complaint, and
  • limits deficiency judgments.

House Bill 87, sometimes called the "Florida Fair Foreclosure Act," made several substantive changes to how foreclosures are conducted in the state. But just how fair is the law to distressed homeowners? In actuality, the law is both harmful and beneficial to homeowners.

How the Law Hurts Homeowners

Because the overriding goal of the law was to speed up the foreclosure process, it can be detrimental to homeowners.

Expedited Foreclosure Process Expanded

Florida law already provided for a procedure designed to speed up the foreclosure process in uncontested cases or in cases where the homeowner doesn't 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 doesn't 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.

Now, any lienholder, including homeowners' associations and condo associations, may make a request to route foreclosures through the expedited process rather than through a typical court proceeding. (Fla. Stat. § 702.10).

In a fast-track foreclosure, you'll have less time to arrange a loan modification, forbearance, repayment plan, short sale, or deed in lieu of foreclosure, or to prepare to transition out of the property.

Foreclosure Judgments are Final

Additionally, the law makes foreclosure judgments final. Any action to set aside, invalidate, or challenge the validity of a final judgment of foreclosure is limited to monetary damages when the lender meets certain conditions.

So, a victim of a fraudulent foreclosure will not get the home back if:

  • the homeowner was properly served in the foreclosure lawsuit
  • the final judgment of foreclosure was entered
  • the appeals periods have run (with no appeals having been taken or, if an appeal was taken, it has been resolved), and
  • the property has been bought by a person not affiliated with the foreclosing lender or the foreclosed owner at a time in which no lis pendens regarding a suit to set aside, invalidate, or challenge the foreclosure appears in the official records of the county where the property is located. (Fla. Stat. § 702.36).

With this provision, the law strengthens 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 can't regain title to the property.

How the Law Helps Homeowners

On the other hand, the law provides a couple of consumer protections.

Lender Must Produce the Note

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.

As of 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:

  • a certification that the plaintiff is in possession of the original promissory note, or
  • if the note has been lost, a lost note affidavit with a clear chain of all endorsements, transfers, or assignments of the promissory note. (Fla. Stat. § 702.015).

This requirement helps to ensure that the proper entity is pursuing the foreclosure—that is, the foreclosing party has "standing" to foreclose.

Deficiency Judgment Statute of Limitations Reduced

When a lender forecloses, the total debt the borrower owes sometimes exceeds the foreclosure sale price. The difference between the total debt and the sale price is called a "deficiency." In some states, including Florida, the lender can seek a personal judgment (a "deficiency judgment") against the borrower to recover the deficiency. Generally, once the lender gets a deficiency judgment, the lender may collect this amount from the borrower.

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. The one-year time frame starts on the day after the court clerk issues a certificate of title to the buyer who purchased the home at the foreclosure sale. (Be aware that, in certain circumstances, the lender can get a deficiency judgment as part of the foreclosure action.)

Additionally, the deficiency judgment can't exceed the difference between the judgment amount and the home's fair market value as of the date of sale if the property is:

  • owner-occupied and
  • residential. (Fla. Stat. § 702.06, Fla. Stat. § 95-11).

Also, deficiency judgments for short sales involving owner-occupied residential properties are limited to the difference between the outstanding debt and the home's fair market value. (Fla. Stat. § 702.06).

Getting Help

If you need more information about how foreclosures work in Florida or want to learn whether you have any potential defenses to a foreclosure, consider talking to a foreclosure lawyer.

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