REVIEW ISSUES AND OPTIONS RELATED TO FORECLOSURE PROCESSES
During the nation‟s mortgage foreclosure crisis, Florida has sustained one of the highest foreclosure rates in the country. In Florida, foreclosure – the process by which a lender terminates a borrower‟s interest in property secured by a loan – is currently subject to judicial scrutiny for all commercial or residential property other than timeshare property. Litigating a foreclosure action is comparable to litigating other civil actions in Florida, in that the lender must file a complaint and obtain a court order to foreclose a mortgage. The exponential volume and the unsteady pace of foreclosures filings in this state significantly strain the state courts system.
Starting in late 2010, some large banks put a freeze on foreclosures due to potential problems with foreclosure and loan documents or insufficient service of process. In particular, attention was being drawn to “robo-signing,” a practice under which someone signs many affidavits each day. The person signing the affidavit may have no personal knowledge of the case but swears to processes that may or may not have taken place. The reduction in new foreclosure filings, in turn, placed pressure on the budget for the state courts system, which is based significantly on fees generated from these filings.
Although details of the process vary among states that employ it, nonjudicial foreclosure generally is a mechanism under which the lender does not have to secure a court order to foreclose the property. During the 2010 Regular Session, the Florida Legislature enacted a measure authorizing nonjudicial foreclosure of timeshare properties,1 under which an appointed trustee conducts the sale and distributes proceeds. In recent legislative sessions, proposals have also been introduced, but not ultimately adopted, to authorize nonjudicial foreclosure generally or for commercial property in particular.2 Recently enacted federal legislation imposes limits on the use of nonjudicial foreclosure for most residential mortgages. Specifically, the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, prohibits any contractual requirement that would impose the use of nonjudicial foreclosure as the process for mortgages on principal dwellings and for closed-end mortgages on secondary dwellings.
The mortgage foreclosure crisis has renewed attention on the foreclosure process and on related real property issues. Practitioners and judges cite variables that can separately or in convergence impede foreclosures. Examples include lending industry practices of assigning mortgages, which can complicate establishing who has authority to foreclose; failure on the part of some plaintiffs to produce documents or submit filings integral to adjudication of the matter; litigation strategies of some defendants which may be designed to forestall foreclosure for as long as possible; workload constraints that prevent judges from reviewing case files to identify problems in advance of hearings; and a depressed housing market that may create a disincentive for lenders to proceed with a foreclosure sale and assume ownership responsibility for the property.
This interim report identifies differences between judicial and nonjudicial foreclosure; examines issues that may be impeding the progress of cases through Florida‟s judicial foreclosure process; reviews responses by the state courts system to the mortgage foreclosure crisis; and analyzes prior statutory reforms designed to expedite foreclosures in this state. The purpose of the report is to provide legislators with potential avenues for reform, as well as a foundation for evaluating proposals that may arise to expedite the foreclosure process.
Full report below…