The Florida legislative session is in full swing, and there's been a lot of attention towards the typically idiotic bills created by the most idiotic body in one of the more idiotic states. Yes, we have an anti-Sharia Law bill. And the decision that Stand Your Ground is working so well that it shouldn't be amended. But not much attention has been directed to Florida House Bill 87, An act relating to mortgage foreclosures.Currently the foreclosure process, at least according to conventional wisdom, takes too long. The average length of the foreclosure proceeding is almost two years and this bill looks at making that process shorter.
Of course, the first question is if there is actually a problem. Florida led the nation in completed foreclosures in 2012. It isn't as if courts are sitting empty either. NPR reported on the foreclosure backlog in Florida, including trial that took a total of three minutes. The NPR story said that 1 in 32 homes in Florida receive notice of default, more than double the national average. Certainly, the number of homes in foreclosure is a problem. And realtors say that the lack of homes available is preventing a full turn around in Florida's housing market. So, at first glance it seems logical to get people out of their foreclosed properties and get these new buyers into them.
But who are these buyers? It isn't that people are flocking to Florida. And those 1 in 32 who are losing their homes are not buying new ones (since they are going to be unable to get a loan). So, who is buying it? A recent article in the Chicago Tribune offered a possible answer: (quoting Florida real estate consultant Jack McCabe)
opportunities out there, but mostly, they're being taken advantage of by foreign buyers who have cash and by hedge funds who are buying homes at the rate of several hundred at a time and fixing them up to be rented out. Those two groups are probably doing 70 percent of the deals. One hedge fund recently bought 970 (foreclosure) properties in one sale, and you've got these others that are picking off 20, 30, 50 or 100 at a time.
We're not, by any means, back to a normal, healthy market where the buyers are the retail-type owner-occupants buying their American dream. Floridians haven't, for the most part, been able to participate in these buying opportunities, partly because getting a mortgage is so much harder these days.
We're seeing a great transformation of wealth, as these properties are going to be owned by big corporations, and many more people will be renting rather than owning for a period of years.The thing slowing down the foreclosure process, according to the NPR story and other experts I've talked to, is that many times the banks have lost the initial paperwork. Or, at least they claim to have lost it. After the roboform scandal, it is possible that they realize that the paperwork they have was not properly recorded in the first place, and so they don't want to take it into court. In either case, the banks have screwed up. They are the ones who are preventing these things from moving along. "I lost the paperwork but you should trust that I had it and it was valid" is enough to get you laughed out of any court, even those on daytime TV. But not in Florida. In Florida when enough banks screw up that it means that the entire legal process slows down it isn't a failure of the banks, but of the laws.
So, House Bill 87 will fix things for the bank. You don't need the actual paperwork. You just need to sign an affidavit saying that you do have the legal right to foreclose on the home. It is then up to the homeowner to prove that you don't. How exactly does he do that? The bill doesn't say. Because apparently they believe that a false foreclosure could never happen. Except those 700 ones involving military homeowners recently uncovered. The story also discusses at least 20 cases where the homeowner was completely up to date on payments but were nonetheless foreclosed upon. Admittedly, many of these were in states that have adopted the more streamlined procedures that Florida is considering. False foreclosures are more difficult here because the court procedure makes sure that the banks have their ducks in a row before proceeding. But instead of taking the news of wrongful foreclosures as a sign that other states should adopt the Florida model, we decide to get rid of our homeowner protections.
So, big banks and corporations drive the push to get people home loans that they aren't qualified for and can't manage because they know they can re-sell them in mortgage baked derivatives and pass along the risk to someone else. When the banks go to foreclose they don't have the right paperwork and it takes longer to move the process along. And this is bad because other bankers want to buy those homes as investment opportunities. So, Florida decides that what we really need to do is to change the system to help out these bankers. Because why should they be punished for not actually having the stuff they need in court.
Oh, and when these people are pushed out of their homes guess what? They'll be renting some of those new hedge fund owned investment properties.
The prospects are even more dire for people face wrongful eviction. If the bank swears that you refinanced with an ARM at one rate and you didn't...how are you going to prove that? How can you prove that you didn't sign a contract? That you didn't make an agreement? What if you were a victim of some of the mortgage fraud where people stole the identities of others to get refi-loans, and you don't hear about it until you are foreclosed upon. How can you prove you never agreed to anything? Currently, the banks have to bring in the paperwork and you get to view it in discovery. You can see that it isn't your signature or that numbers were falsely filled in later. But if Bill 87 passes you are out of luck.
And the worst part (yes, it gets worse) is that if you are a victim of wrongful eviction you can't get the house back. The law would make it so that you can still sue for a wrongful eviction action but that the only damages will be monetary. The bill doesn't say what the value will be set at, but I suspect the banks will argue that the value of the home is what it sold at auction for. Much reduced from the actual value, not to mention potentially inappropriate when what you really want is the home your family has lived in for years.
Florida House Bill 87 isn't getting much press attention. I'm hoping to change that, but I know that I'm just a single person. But look into the bill yourself and share the information with others. Let's get the media talking about this! If it is such a great law then getting more attention won't harm anyone. And since it is going to fundamentally alter the way the foreclosure process is done, it doesn't seem right for it to be hidden away.
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