Open Letter to the Florida Legislature, Senator Bennett, Representative Grady, and The Florida Bankers Association

I am writing to express my concerns regarding HB 1523 and SB 2270.  The bills create two and distinct classes of debtors – homestead and nonhomestead.  These bills are patterned after the Uniform Nonjudicial Foreclosure Act of 2002 UNFA.  Although presented before various state’s legislatures, UNFA was not adopted by any state.  The drafters of UNFA envisioned that the federal government would also adopt this Act and make it the law of the land.  This never materialized because of serious concerns with due process rights and other factors as listed below.

1.                  Florida is presently a judicial foreclosure state.  The bills propose to convert Florida from a judicial foreclosure state to a nonjudicial foreclosure state.  However, under Florida statutes, a mortgage shall be foreclosed equity. This is an issue that is not addressed in the bills and therefore, this bill is in violation of the Florida Constitution.  Additionally, there is a question of whether sufficient due process safeguards can be incorporated into a nonjudicial process. 

The bills as drafted penalize a homeowner who chooses to contest a foreclosure by a) making the homeowner pay the exorbitant filing fees (up to $1900 – an amount which the Florida Bankers Association believes is too much for them to pay yet they believe that a struggling homeowner can pay) and b) threatening the real possibility that they will be assessed attorney’s fees and a deficiency judgment if they contest the foreclosure and it is later determined that the homeowner did not act in good faith.  It will be very easy for creditors to establish that a homeowner did not act in “good faith.”  All you have to do is look at the documented proof of fabricated and falsified documents being filed by foreclosing entities in courts across the State of Florida to know that a creditor can very easily make it appear they have the right to foreclose and the homeowner is simply stalling. 

2.                  The notice requirement in the bills is woefully inadequate.  First, the provision provides that a foreclosure may continue even if the homeowner has not received proper notice.  Secondly, the provision excuses minor errors that are not seriously misleading.  This is language which appears to be borrowed from the revised UCC 9 applies only to a post-disposition disclosure.  A nonjudicial foreclosure is substantively different than repossessing a car or furniture.  Minor errors can be extremely harmful and cause further financial hardship to an already struggling family.  Miscalculating the accruing daily interest rate could mean the difference between whether a homeowner can save their home or not. 

Section 52.104(4) of SB 2270 contains language is that is also borrowed from the UCC and used in commercial contracts.  However, the language, which is the standard “freedom of contract” based approach, is inappropriate for residential foreclosures.  In a residential mortgage transaction, it is the lenders who draft the contracts, not the homeowners as they have virtually no say in the contract language.  This provision shifts the burden on the homeowners to prove the reasonableness of a specific standard of the contract.

3.                  The bills provide that a homeowner may request a “meeting.”  However, the meeting is informal and the creditor may send a representative, agent, servicer, or attorney to the meeting.  The bills fail to state whether the representative has the authority to make any decisions.  As you are all aware, by the time a homeowner has reached the foreclosure stage, the homeowner has had countless discussions with the creditor’s employees and/or agents which were futile.  Therefore, most homeowners will view this provision as another adventure in futility.  There is nothing in the bill that requires the creditor’s representative to be someone other than those involved in the decision to foreclose.  Homeowners should be afforded the right to a hearing before an impartial and disinterested hearing officer in order to contest the foreclosure.  Access to an impartial decision maker is an integral part of a legitimate hearing.  Without that, homeowners will view the “meeting” with skepticism and may have a chilling effect on homeowners choosing to contest the foreclosure.

4.                  The bills fail to address or incorporate any notice or opportunity for the homeowner to pursue alternatives to a foreclosure. 

5.                  The bills fail to address the issue of predatory lending.  There is well documented evidence that homeowners were induced to sign blank loan applications, loan applications and mortgage documents altered after the homeowners signed the documents, as well as homeowners promised one set of terms and conditions and then induced to sign for different terms.  Case in point is the recent Congressional investigation of Washington Mutual which revealed that these practices were part and parcel of their loan processes.  Additionally, just look into the investigation into Countrywide which also revealed that these methods were standard in the industry during the real estate “boom.”

6.                  The provision that calls for foreclosure by appraisal is grossly unfair to the homeowner as it is the homeowner who stands to lose substantial equity in their property as well as provide a windfall to creditors.  This provision only requires the creditor to obtain an appraisal and provide notice to the homeowner that unless the homeowner objects, title will transfer to the creditor and the “foreclosure amount” determined by the creditor will be credited to the homeowner’s account.  Additionally, this provision does not require any standards for valuating the property such as an inspection of the interior of the home, valuation based on the comparable value method, or any other widely accepted valuation approach.  It only states that the appraisal report “shall state the appraiser’s conclusion as to the fair market value of the collateral” without stating the method employed by the appraiser to arrive at his/her conclusion of the “fair market value.”  Furthermore, the provision does not state that a drive-by or pencil appraisal cannot be used for a foreclosure by appraisal. 

The above is just a handful of the serious issues related with the proposed bills.  I urge each and every one of you to reject these bills.  Thank you all for your consideration.