New options could ease burden on court system.
Tampa Bay Business Journal – by Michael Hinman Staff Writer – Friday, April 16, 2010
TALLAHASSEE — The Florida Legislature is considering bills that could respond to some issues plaguing the housing industry and possibly prevent future problems.
House Bill 1523 is getting early attention from mortgage lenders and brokers. It would expand the foreclosure process to skip overburdened courts completely and shift some of the work in avoiding home repossession to the banks.
“The first people who are usually aware of any type of problems in a mortgage is the lender,” said Matthew Augustyniak, president and CEO of Horizon Realty International Inc. in Sarasota, which focuses on pre-foreclosure short sales. “This is a perfect scenario for the banks to be able to say, ‘Hey guys, you have a foreclosure imminent. We have some options for you.”
The bill, introduced by State Rep. Tom Grady, R-Naples, and since modified in committee, would create three options when a mortgage goes into default.
A bank could elect to go through the court system, as is standard now, paying fees up to $1,900 and forcing the property into a foreclosure auction. Another option would be a non-judicial process called foreclosure by appraisal, where a debtor’s account is credited with the appraised value of the property on foreclosure, lowering the total amount owed and avoiding the auction.
However, in light of recent regulatory changes banks could become more proactive in the short-sale process — a move some say allows the bank to recoup more of its losses — early in the process by allowing lenders to list properties and set prices. Typically it has been the homeowner who had to initiate short sales in a process that typically takes months to complete.
“It’s good, because banks can lose between 50 and 60 percent [of potential recovery] by forcing a home into a foreclosure auction,” Augustyniak said. “Working with Realtors right away, banks can keep the foreclosure market down, push through home sales, and get these bad loans off their books much more quickly and inexpensively.”
But banks may not be too ecstatic about these options. John Anthony, a principal attorney with Anthony & Partners in Tampa who typically represents banks in foreclosure proceedings, believes lenders could end up collecting less against bad loans than they do now.
“The trade-off in the current proposed legislation is that any lender resorting to the option of non-judicial foreclosure would be required to give up the ability to recover a deficiency judgment against the borrower,” Anthony said. “There is no justification for requiring lenders to sacrifice a legally appropriate deficiency as a tradeoff to improving the practical speed of the foreclosure process.”
The shadow rental market has been given a bit of a reprieve, at least when it comes to single-family homes and condominiums facing foreclosure.
House committees have rejected two bills that would have required notification to renters that property was in foreclosure — while giving them the first chance to buy — and allow condo associations to recoup unpaid assessments by directly collecting rent from a leasing tenant.
Other bills, including one that provides a foreclosure “bill of rights” and one to better split doc stamps among affordable housing funds, are making their way through the Legislature with hopes of being under Gov. Charlie Crist’s pen by the end of spring.