Tuesday, February 16, 2010

What is the bankers’ solution? Non-judicial foreclosures in Florida.

It is no surprise that millions of Floridians living in common interest ownership communities want to make bankers be better neighbors. Rather than stalling on their foreclosure actions and allowing the rest of the community to continue to pay to upkeep their property, these folks want lenders to (a) foreclose more quickly (b) pay more in terms of past due assessments owing on the property and (c) pay for any special assessments levied for repairs or property maintenance throughout the pendency of the foreclosure action.

What is the banking industry’s response this Session to such calls for reform? A new non-judicial foreclosure procedure!

The Florida Bankers Association (FBA), the 400-member-strong lenders’ lobby, has come up with a bill, The Florida Consumer Protection and Homeowner Credit Rehabilitation Act, to establish “non-judicial” foreclosures in Florida by July 1. Twenty-eight other states use non-judicial foreclosures or a combination of same with traditional judicial foreclosures.

What’s a non-judicial foreclosure? Banks would bypass the courts to accelerate foreclosures against defaulting homeowners. Judges would no longer rule on foreclosure cases so clogged court dockets would no longer be an issue.

Sounds good, right? What is the catch? Well there are a few things to worry about should non-judicial foreclosures become the norm in Florida.

The law would apply to mortgages entered into after July 1 so it would do nothing to ease the current backlog.

Non-judicial foreclosures must conclude in no less than three months and no more than a year. Currently, most foreclosures in Florida take over a year to 18 months to conclude or even longer if the foreclosure is contested. The jury is still out as to whether or not this shortened time frame will work to an association’s benefit.

There are constitutional issues involved should the non-judicial foreclosure process be used for homestead property.

The non-judicial foreclosure process provides only for informal meetings between creditors and debtors so the Florida Supreme Court’s newly created mandatory mediation for lenders and homeowners would be rendered ineffective.

Even after homeowners are evicted, banks can still pursue them for unpaid mortgage debt. However, banks will waive that right if homeowners avoid trashing or stripping the house before the new owner takes over.

Many homeowners are opposed to the non-judicial foreclosure process and others see it as not doing enough to make lenders the good neighbors they want in their community. The Florida Legislature convenes on March 2nd. Right now the bill does not have an official number or bill sponsors. Stay tuned.

No comments:

Post a Comment