Legislation to accelerate the foreclosure process in Florida met protests last week but was not put on a committee agenda.
The state House of Representatives moved H.B. 213, or the Fair Foreclosure Act, to the judiciary committee on Feb. 8. When the committee met Thursday, the bill was not taken up, but outside the building, protesters gathered to demonstrate against it.
Rep. Kathleen Passidomo, R-Naples, introduced the bill in September.
Nearly 400,000 foreclosure filings clogged the court systems by 2009, up from 57,000 four years earlier. According to RealtyTrac, Florida foreclosure filings slowed to nearly 182,000 properties in 2011 as servicers and attorneys paused the process to correct affidavit problems in the robo-signing scandal.
The Florida foreclosures completed in the fourth quarter 2011 spent an average 804 days in the system, the third-longest timeline in the country, RealtyTrac said.
The Passidomo bill would allow any lienholder, not just the lender, to initiate an alternative foreclosure procedure. The court would then decide if a defense provides enough cause to preclude a final judgment or if another hearing is needed.
The bill also speeds up foreclosures for abandoned properties. A process server must make three attempts at least 72 hours apart to determine if the home is empty. Two neighbors must be interviewed, as well. The court then subpoenas the utility company to determine if water or electricity has been turned off. If the property is then considered abandoned, the alternative foreclosure procedure is then used.
If a promissory note is destroyed, stolen or lost, the servicer can file an affidavit "that details a clear chain of all assignments" and proves it is entitled to enforce the note.
The bill would take effect July 1, if passed.
But even to some in the mortgage industry, the Passidomo bill overreaches, said J.T. Smith, chief investment officer of the Florida-based boutique investment bank Aristar Funding Corp. Smith said speeding up the process for abandoned properties made sense, but foreclosing on the borrower based almost entirely on the bank's word isn't fair.
"We have witnessed that plaintiffs are not beyond the forging of documents, notes, deeds, etc.," Smith said. "The lending community has a ton of notes out there that were endorsed in blank, that means essentially these notes are like bearer bonds, whomever has possession is the owner. We, as lenders, made this mistake by using the endorsed in blank to save money on recording transfers, now we, as an industry, must reap what we have sowed."
Florida used a special "rocket docket" in 2010 and reduced the state backlog by 62%. Four of the five counties using the accelerated system achieved the goal or came close before funding ran out in June 2011. A Florida appellate court validated the system in a ruling last year against the American Civil Liberties Union.
While the Passidomo bill inches forward in an attempt to set a similar but permanent system, Florida Attorney General Pam Bondi reversed her stance in February and signed onto the $25 billion national foreclosure settlement with the five largest servicers.
Along with an estimated $7.6 billion in principal reduction and other relief, servicers must stick to a new set of rules in the state meant to protect borrowers from past problems.