Florida’s Foreclosure Process & Deficiency Judgments

In an effort to alleviate the foreclosure crisis, Florida’s Legislature recently passed a new foreclosure bill (House Bill 87).  Unfortunately, the new foreclosure law is 95% pro-bank and only 5% pro-homeowner.  From a homeowner's perspective, the biggest problem with the new foreclosure law is that it speeds up the foreclosure process by requiring the homeowner to prove to the Court in an “order to show cause hearing" that the foreclosure should be stopped.  Some additional provisions that all homeowners fighting foreclosure should know about are as follows:

The Positives

Deficiency Judgments: The time frame for the Bank to pursue a deficiency judgment against the homeowner has been drastically shortened from five (5) years to one (1) year.  That means that the Bank only has one year to pursue a collection action against the homeowner for the amount that the homeowner actually owed on the loan and what the house ultimately sold for in the foreclosure sale.  If the Bank does not initiate a collection action against the borrower within one year, the Bank loses the right to collect the deficiency judgment.

Tightened Paperwork Requirements: Banks are now required to initially identify in their foreclosure complaint whether they are in possession of the mortgage note and/or their factual basis for bringing a foreclosure action without being in possession of the mortgage note.  If the Bank is in possession of the mortgage note, the Bank must file with the initial complaint copies of the note in the Bank’s possession.  If the Bank fails to file the appropriate paperwork then there may be grounds for the borrower to file a motion to dismiss the foreclosure lawsuit.

The Negatives

Speedy Foreclosure Process/Show Cause Hearing: The Bank is entitled to a “show cause hearing” within 20 days of serving the foreclosure lawsuit.  At the show cause hearing the homeowner must prove to the Court that the foreclosure should be stopped.  If the homeowner fails to appear the show cause hearing the court may grant a final judgment of foreclosure at that time.

Final Judgments: Borrowers who have been victims of fraud and have had their homes foreclosed on will not be able to regain possession of their home once it is sold at a foreclosure sale on the grounds that they were defrauded.  The only remedy available to these particular homeowners is money damages (i.e. dollars).

In light of the congested courthouses and foreclosure epidemic, it is no surprise that Florida is getting tougher on foreclosure and foreclosure defense.  The new law requires that homeowners facing foreclosure, even those homeowners who are pursuing a short-sale or a loan modification, react quickly by filing the appropriate defenses to avoid a foreclosure sale. Under the new foreclosure law, homeowners who do not actively defend the foreclosure lawsuit will lose their homes faster than in the past. Therefore, homeowners should not rely on anecdotal stories from their neighbors about how long it takes a bank to foreclose on a home.

In order to stop foreclosure, homeowners will need to quickly develop a clear cut strategy. Whether that strategy involves a short sale, loan modification, or bankruptcy will be dependent upon the unique circumstances of the homeowner.  Under the new foreclosure law, it is even more important for homeowners to hire a reputable and experienced foreclosure defense lawyer who understands the complexities of  Florida's foreclosure process.   For a free consultation to discuss your legal matter with me please email me at dpascale@rascoklock.com or call my office to schedule an appointment: 305-476-7100.