A bitter fight is brewing in Tallahassee over whether banks should be allowed to bypass court hearings in foreclosures. According to reports, the Florida Bankers Association has offered up state lawmakers a new legislative proposal that would create nonjudicial foreclosure procedures in the state, thus allowing a financial institution or servicer to sell a foreclosed home at auction in as little as 90 days after a filing notice.
Currently, Florida is one of only 13 states where foreclosures have to go through state courts, a process that allows homeowners to stave off auction sales and evictions by up to 18 months, or longer if they successfully challenge bank actions.
Supporters of the idea think the foreclosure process is in desperate need of an overhaul: too many foreclosures are clogging up court dockets (23,000 cases alone in Lee County on the Southwest coast of the state), and are forestalling a market recovery by letting homeowners stay in their houses – when they could be out renting or buying. In a non-judicial process, banks could take over homes before they fall into neglect and get a chance to recover their losses more quickly through another sale or through rental income. As part of the change, the industry would be willing to give up recourse against outstanding debt.
Opponents, such as legal aid workers for homeowners, argue this could remove a valuable legal safeguard against lenders or servicers that may not have the legal authority to foreclose because they can’t prove they own the loans. Mortgage holders could also lose a negotiating tool to modify underwater loans with uncooperative lenders and servicers.
The FBA’s proposal would only be effective for new foreclosure filings after July 1, but that’s a ways down the road: FBA president Alex Sanchez says the group is still looking for a sponsor to introduce a bill when the legislature reconvenes in March.