As a result of legislation passed in the recent session of the Florida Legislature, there are several changes relating to Florida’s foreclosure laws.
FINALITY OF MORTGAGE FORECLOSURE JUDGMENTS
Most significantly for the title insurance industry, the new law, known as House Bill 87 in the legislature, creates Section 702.036, Florida Statutes, which provides for the finality of mortgage foreclosure judgments.
Under the terms of this new law, as long as certain conditions are met, the party seeking relief (the title holder or an entity holding an interest junior to the foreclosing mortgagee) may recover monetary damages but may not disturb the title. The conditions are as follows:
- The party seeking relief was properly served.
- Final judgment was entered.
- No appeals were filed during the allowable period.
- The property has been acquired for value by a person or entity not affiliated with the foreclosing lender or foreclosed owner.
This provision will protect innocent purchasers of the property and enhance the marketability of titles that have been subject to foreclosure. While those whose property interests were wrongfully eliminated through the foreclosure process will not be able to recover title, they will be able to seek monetary damages against parties that wrongfully foreclosed on the property.
LOST, DESTROYED OR STOLEN NOTES
The new law also addresses situations involving a lost, destroyed or stolen promissory note. Once a foreclosure is completed, a person who claims to be the actual holder of the note will have no claim against the property after it is conveyed to a bona fide purchaser for valuable consideration provided the purchaser is not affiliated with the foreclosing lender or prior owner. However, the rightful holder of the note may pursue damages from the party who wrongfully claimed to be the owner or holder of the note, from the maker of the note, or any other person against whom the actual holder may have a claim.
STATUTE OF LIMITATIONS FOR DEFICIENCY JUDGMENTS
This bill also amends s. 95.11, F.S. to provide a one-year statute of limitations for an action to enforce a claim of a deficiency related to a note secured by a mortgage against residential property that is a one-family to four-family dwelling unit. The limitations period begins on the 11th day after a foreclosure sale or the day after the mortgagee accepts a deed in lieu of foreclosure. Previously, a lender had five years from the date of the foreclosure sale to file a deficiency action.
This bill also amends s. 702.06, F.S. to limit a deficiency decree in the case of an owner-occupied home to the difference between the judgment amount, or in the case of a short sale, the outstanding debt, and the fair market value of the property on the date of sale.
While the new law will allow us greater protection when insuring titles that have come through the foreclosure process, offices must keep in mind when insuring a sale of property in foreclosure if scheduled foreclosure sale is not cancelled the new law could make it more difficult to set aside certificates of title issued in error. Thus, offices must be more diligent in making sure the foreclosure sale is cancelled before the foreclosure sale takes place. This will require better communication with foreclosure attorneys to advise them the mortgage in question is to be paid off or has already been paid and the absolute necessity of stopping the foreclosure process.
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