Several proposals being considered by state lawmakers would fundamentally change the mortgage foreclosure process in Florida. The proposals seek to change Florida from a “judicial foreclosure” state that relies on the courts to govern the process, to a “non-judicial foreclosure” state that relies primarily on private lenders to govern the process. In most cases the change would allow lenders to bypass the court system and oversee the foreclosure process from start to finish.

Support for the change rests largely with lending institutions beset by the costs associated with a staggering foreclosure backlog. They argue that the current process results in substantial delays that can be remedied in part by a non-judicial process; that borrowers often get scant attention from judges handling heavy caseloads; and that neighborhoods could benefit from an accelerated foreclosure process that puts homes back on the market in as little as 90 days.

In the wake of these proposals, the Collins Center for Public Policy examined the potential impacts of changing to a nonjudicial foreclosure state. For the past year, the Collins Center has administered residential mortgage foreclosure programs in three of Florida’s 20 judicial circuits. This has provided the Center with a unique insight into the current crisis. While it is true that the foreclosure backlog presents a daunting challenge for lenders, care needs to be taken to preserve the rights of homeowners when considering solutions. It bears mentioning here that:

  • Anyone who has bought a home is its owner. The bank that provided the money has only a security interest in the home to secure its loan.
  • If the homeowner defaults, the bank gets the house only by foreclosing its security interest – its mortgage.
  • The Florida Supreme Court has ordered that an effort must be made for all foreclosures to go through mediation, a process jeopardized by the proposed changes. The mediation process gives credit counseling to the homeowner and makes sure the bank in fact has a valid security interest. Many foreclosure suits have been brought when the lender cannot show it has a valid security interest.
  • Lenders, through these proposals, want the right to take a homeowner’s residence without a judicial proceeding unless the homeowner goes through the cost and turmoil of bringing a lawsuit to stop the process.

There is ample blame to go around for Florida’s present foreclosure crisis. Homeowners borrowed beyond their means. Investors gambled and lost. Lenders extended credit without due diligence. In the aftermath, thousands of borrowers are clinging to their homes, neighborhoods are struggling, and lenders are sorting through the wreckage. Easing the crisis is a worthy goal, but not at the expense of a homeowner’s right to have a day in court.

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Balancing Economic Interests and Fairness in Florida’s Residential Mortgage Foreclosure System