Consumer Finance Litigation

This past Friday, Governor Scott signed the mortgage foreclosure bill, HB 87, which purports to expedite the backlog of Florida foreclosure actions. According to the bill analysis, Florida foreclosure actions average 853 days, more than double the national average of 414. Nonetheless, as a tradeoff, the bill introduces more onerous pleading requirements on foreclosure plaintiffs and reduces the statute of limitations for deficiency judgments. Note that the entirety of the bill applies immediately and retroactively, except for the newly introduced pleading requirements in Section 702.015, which apply to cases filed July 1, 2013 and after. The legislature has expanded Section 702.10 to allow any lienholder, as opposed to just a mortgagee, to invoke the "alternative foreclosure procedure" in uncontested cases. Under the new alternative procedure, a lienholder may request an order to show cause for the entry of final judgment. Conceivably, we could see junior lienholder defendants, particularly Homeowner Associations and Condo Associations, invoking this rule to expedite the conclusion of a foreclosure by senior. Upon such request, the court must immediately review the court file in chambers without a hearing. If the court finds that the complaint is verified, complies with the new pleading requirements, and alleges a proper cause of action for foreclosure, it shall issue an order directed to the other parties to show cause why a final judgment should not be entered. The hearing on the order may not occur sooner than 20 days after service of the order, or 45 days after service of the initial complaint, or 30 days after service by publication. Any responsive pleading, affidavit, or other papers filed before the hearing that raise a genuine issue of material fact shall constitute cause for the court not to enter final judgment. The amended alternative procedure also removes the necessity of an additional hearing on attorneys' fees as long as the mortgage provides for them, and the fees are no more than 3% of the principal amount owed. Additionally, the amended alternative procedure allows a plaintiff to request the court enter an order directing the mortgagor to show cause why an order to make payments during the pendency of the foreclosure or an order to vacate the premises should not be entered. However, this avenue is unavailable to a plaintiff where the property is "owner-occupied" (note that the bill provides a rebuttable presumption that a homestead property is owner-occupied). It is unclear how a writ of possession under this bill could conflict with the federal Protecting Tenants at Foreclosure Act where the property is tenant-occupied. This amended alternative procedure is effective immediately and may be employed in pending cases. As a tradeoff to this purported accelerated procedure, the bill introduces more onerous pleading requirements on foreclosure complaints and gives the court license to sanction plaintiffs for noncompliance. Under the new Section 702.015, a complaint must contain an affirmative allegation that the plaintiff is the holder of the original note or allege with specificity the basis for the plaintiff's right to enforce the note under Section 673.3011. Further, if the plaintiff has been delegated authority to prosecute the action on behalf of the person entitled to enforce the note, the complaint must describe such authority with specificity. Perhaps most burdensome, if the plaintiff is in possession of the original note it must file, under penalty of perjury, a certification that the plaintiff is in possession of the original note, the location of the note, the name and title of the person giving the certification, the name and title of the person who personally verified such possession, and the time and date on which the possession was verified. Correct copies of the note and all allonges must be attached to the certification which must be filed contemporaneously with the complaint. The bill further requires that the original note and allonges must be filed with the court before entry of any judgment. This requirement may pose problems in counties which insist that original documents be e-filed, an obviously ridiculous position. Additionally, the bill introduces more stringent requirements where the plaintiff seeks to enforce a lost note. If the plaintiff seeks to enforce a lost note, it must attach an affidavit to the complaint that must detail a clear chain of all endorsements or assignments of the note, set forth facts showing that the plaintiff is entitled to enforce the note, and include as exhibits to the affidavit copies of the note or other evidence of the ownership and possession of the note prior to its loss. Again, Section 702.015 applies to all cases filed July 1, 2013 and after. As another tradeoff, the legislature has reduced the statute of limitations on an action for a deficiency judgment from five years to one, measured from the date of the foreclosure sale. Furthermore, the bill limits a deficiency in the case of an owner-occupied home to the difference between the judgment amount-or, in the case of a short sale, the outstanding debt-and the fair market value of the property on the date of the sale. Additionally, the legislature have given courts guidance on "adequate protection" in the new Section 702.11. In pleading a lost note count, the following constitutes adequate protection: (1) a written indemnification agreement; (2) a surety bond; (3) a letter of credit; (4) a deposit of cash collateral with the clerk; or (5) "such other security as the court may deem appropriate under the circumstances." Finally, the legislature has indicated its desire to preserve the finality of foreclosure judgments-ostensibly to protect bona fide purchasers at foreclosure sales. As long as the party seeking relief was properly served, final judgment was entered, the appeals periods have run, and the purchaser is not affiliated with the foreclosure lender or owner, the movant may recover monetary damages but may not disturb the title. For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.