Proposed Foreclosure Law Designed to Accelerate the Foreclosure Process

February 18, 2013

Earlier this month, the House Civil Justice Subcommittee approved a bill designed to accelerate the foreclosure process in Florida. Republican, Kathleen Passidomo, sponsor of HB 87, frames the bill as a way to speed up the foreclosure process while ensuring due process. But, lenders and borrowers alike are fearful of some of the Bill's provisions.

The current Bill, which is a revision of a bill that died last year in the Senate, provides liability for entities that wrongfully claim to be holders of or entitled to enforce lost notes. Thus, the Bill might provide an incentive for the "foreclosure mills" to have their paperwork in order before filing suit. However, this penalty of perjury is not a new concept to the judicial system. The problem has not been whether there is a penalty for perjury, but rather whether a judge will deem evidence to be fraudulent. Discovery requests that attempt to uncover facts and evidence related to the validity of a lender's evidence are almost always objected to on grounds of relevance. And these objections are rarely overruled when challenged in court. The borrower's only hope is that the evidence (usually related to transfer of a loan) is defective on its face. In which case, the evidence is usually just disregarded as flawed--rather than deemed fraudulent.

The Bill would also require homeowners to show cause as to why a foreclosure judgment should not be entered when the lender appears to have its paperwork in order. This is problematic because some court systems have a knack for disregarding the rules of civil procedure in an attempt to read between the lines and judge a case before the issues have been fully developed. Some fear that allowing judges more discretion, at the expense of bright line rules of procedure, might lead to more wrongful foreclosures.

Passidomo also noted that the Bill attempts to beef up the Uniform Commercial Code's requirements of proof for a lost note. However, this focus on procedures for a lost note is misplaced. These suits hardly ever boil down to establishment of a lost note. The cases are most often solved on grounds of a purported note endorsement, as lenders argue that the notes are negotiable instruments. Improperly viewing these promissory notes as negotiable instruments allows lenders to get around establishing a chain of title for the loan, whether consideration was paid for the promissory note, and so on--essentially any detail that might support whether a plaintiff is actually owner of the note.

In summary, as long as courts are willing to disregard defects in a plaintiff's case--and judges are given more discretion to do so--all the penalties in the world cannot help instill due process in this process. For further detail on the implications of HB 87, read Chip Parker's blog on the subject.