Tougher standards for getting evidence into the record is having a profound effect on the number of new residential foreclosure cases being filed in Florida, a panel of circuit judges told a hall of defense attorneys.
However, as homeowners win more dismissals, defense attorneys are finding the homes come with a catch — title insurance is virtually impossible to get.
The state of residential foreclosures prompted lively exchanges Friday at a conference bringing together judges and defense attorneys.
Throughout the discussion, attorneys vented their frustration over court procedures. They cited numerous situations where judges bent over backward to accommodate lenders seeking foreclosure.
Broward Circuit Judge Sandra Perlman acknowledged plaintiffs delays were a problem, but the appellate courts give them great leeway. Until that changes, she said trial court judges will feel obliged to grant continuances.
If there is a silver lining for homeowners, it's that a new Florida law and recent appellate decisions have made lenders shy about filing new cases.
New filings in Palm Beach County, for example, dropped 61 percent in July from the previous year. They were down 61 percent in August and 51 percent in September.
Chief Broward Circuit Judge Peter Weinstein noted new filings in his circuit are similarly down.
A new law that took effect July 1 requires plaintiffs to acknowledge in foreclosure complaints that all documentation needed to prove a case is in their possession.
An Aug. 28 decision from the Fourth District Court of Appeal put banks on notice that their expert witness must have direct knowledge of the authenticity of records being submitted as evidence.
Foreclosure defense attorney Roy Oppenheim of Oppenheim & Pilelsky in Weston said a Sept. 25 decision from the Second District added insult to injury for lenders. In Focht v. Wells Fargo, a pro se defendant got a dismissal reversed because the bank could not prove her loan was an asset of a residential collateral securities trust when the trust was created.
The Second District certified a question to the Florida Supreme Court asking if banks could cure their inability to prove standing at the inception with documents showing standing was acquired after the lawsuit was filed. Broward Circuit Judge William Haury said he would be very surprised if the Supreme Court accepted the case.
"The filings are falling because the banks can't certify the chain of custody," Oppenheim said.
Even so, banks win most cases that go to trial.
But homeowners are getting dismissals based on lenders' inability to show they have standing and expired statutes of limitation, Oppenheim said. Banks must file lawsuits within five years of the notice of default.
Where homeowners get a dismissal, he said their property is still bound by a mortgage.
"Our underwriters won't give them title insurance. They're concerned someone will come back, put a lis pendens on the property. They don't want to buy litigation," Oppenheim said.
These homeowners may be free of a money judgment to live in their homes, rent them or pass them on to their children, but they cannot sell them.
Oppenheim speculated this could lead to new forms of title insurance business where some entrepreneur would be willing to take on the risk by charging a higher premium. In the alternative, he said homeowners or their successors could negotiate with the banks for a mortgage release, and banks have incentives to negotiate.
"Every year the banks wait, the release is worth less and less," he said.
Adolfo Pesquera can be reached at (954) 468-2616.
From Wall Street to Main Street, Roy Oppenheim is a Florida real estate attorney focusing on foreclosure defense and loss mitigation.
He is a guest legal blogger for Yahoo! Homes and comments regularly on real estate law and policy in the national media. Oppenheim Law reports the highest rating (A-V) conferred by Martindale Hubbell Law Directory, the most respected directory of lawyers and law firms in the U.S.He is also the creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel.