New Florida Foreclosure Bill- The Good, The Bad and The Ugly

As many of you have heard, HB87 (link to full text of the Bill) passed in the House and the Senate and will become law unless Governor Rick Scott vetoes it, which is not expected.

This will generally only apply to all NEW foreclosures filed AFTER July 1, 2013.

The “Order to Show Cause:  Monthly Mortgage Payments” discussed below WILL apply to all current AND future filed cases.    If you own investment property, please take note of this.

The Good

Statute of Limitations– Banks now only have 1 year to pursue a deficiency judgment (difference between the judgment against you and what they sell the property for) instead of the current 5 years.

Pleading requirements:  The new bill imposed a few new pleading requirements for banks:

  1. The foreclosure plaintiff must plead it is the “holder” or its specific factual basis to foreclose in its Complaint.  This codifies what defense attorneys have been arguing in motions to dismiss for many months – it’s not enough to say you’re entitled to foreclose, you have to plead ultimate facts.               
  2. If the plaintiff is suing on behalf of another entity, it must identify the document which sets forth that authority.
  3. The plaintiff must file a certification under oath, upon filing suit, that it possesses the original Note.  If the note is lost, it must file an affidavit detailing the chain of assignments/transfers and must attach documents showing how ownership was acquired.

The Bad

Order to Show Cause:  (expedited foreclosure process)  ANY lienholder (including condo associations and homeowners’ associations) can ask the Court to issue an Order to show cause, typically under a month from filing the case, stating that the homeowner must come to court and show the court why it should not enter judgment for the bank.  If the homeowner doesn’t file the appropriate paperwork/defenses, a foreclosure judgment is entered at that hearing.

While this may sound like a horrible process to institute, it is actually very similar to a little-used statute that has been in existence for some time- Fla. Stat. 702.10.  Except that this new version now enables ANY lienholder (as opposed to just the bank), such as condo associations, to request the show cause hearing.  I personally have only seen 702.10 used two (2) times total in hundreds, if not thousands, of foreclosure cases I have worked on.

The truly bad part of this new method is this.  Let’s say a bank files a foreclosure action, and then the condo association moves to show cause as the bank is not moving the case.  But the bank hasn’t filed the correct paperwork yet fore judgment in the case to even be able to foreclosure itself.   What does the judge do at that point when the condo association requests the show cause hearing?  This will just cause even more court time and resources to be wasted without any visible results.  It does not appear this was completely thought through before this portion was enacted.

The Ugly

Finality of Judgment:  Previously, once a final judgment is entered in a mortgage foreclosure case, the homeowner had 1 year under Fla.R.Civ.P. 1.540 (or many years when alleging fraud) to go back and challenge a foreclosure judgment.  Under this new bill, this procedure is all but eliminated once the property is sold at auction to a third party (not the bank) and the appeal time has run.  The homeowner is precluded from getting title to the property back, even if the foreclosure was wrongful.  The homeowner’s remedy is now limited solely to claims for money damages.

There is currently questions floating around regarding the constitutionality of this provision, as it seems to trump Fla.R.Civ.P. 1.540, which would be unconstitutional as the Florida Supreme Court has the exclusive authority to create rules of practice and procedure in our courts.

Order to Show Cause:  Monthly Mortgage Payments:  If a residential property is not owner-occupied (an investment property as most call them) the bank can ask the court to force the owner to now make monthly mortgage payments to the bank in the amount showed on the Note during the foreclosure case.  If those payments are not made, then the owner loses possession of the property, even before the case is over.  The homeowner can still defend the lawsuit.  Any amounts paid will be credited to the balance that you owe the lender at that time.

There are 2 glaring issues with this provision.  First, what happens to all of those payments made in cases where the bank does nothing and the case is dismissed, or the homeowner is victorious?  It does not appear that the homeowner is entitled to any of those monies back; which could total tens of thousands of dollars. The bill is silent towards this issue.

Second, this conflicts with federal law- the Protecting Tenants at Foreclosure Act of 2009.  This federal law protects bonafide tenants who have leases in properties that are foreclosed on from eviction.  Under this law, the tenants are permitted to stay until the end of their written lease, or in the case of a month to month tenant or without a written lease, they are afforded 90 days to vacate the property.  Now what happens when the owner fails to pay per the above provision and “loses possession” in the middle of the case?  What happens to the tenant?  Again, the bill is completely silent as to this issue.

It is even more important under this new Bill for homeowners to contact a qualified foreclosure defense lawyer immediately when served with foreclosure papers.  If you were served with foreclosure papers, contact our office immediately to preserve your rights.

If you own an investment property, or do not live in the property, contact us immediately as the “Order to Show Cause:  Monthly Mortgage Payments:” above DOES apply to you as of July 1, 2013 whether you are currently in foreclosure or not.


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