Florida’s foreclosure dilemma: Who’s on first?

The following publication was written by Roy Oppenheim, Oppenheim Law for the South Florida Law Blog.

Last week, I attended “A View from the Bench,” a semiannual rite sponsored for the past several years by The Daily Business Review. For the past few years, the topic has been one that is near and dear to my heart: Foreclosures. The nice thing about these forums is that they bring together a number of judges, as well practitioners, who either represent banks or homeowners, for what I think is a lively discussion about the state of foreclosure jurisprudence in Florida and particularly in South Florida.

If I was asked to summarize the event, or provide a comment that represented the major takeaway from the four-hour seminar, I would suggest that it would be one of the remarks made by one of the jurists as it relates to the Abbott and Costello slapstick comedy team when they performed their well-known “Who’s on First?” routine. In that dialogue it becomes clear that no one knows who’s on first base, on second, or third and the whole discussion reflects a big mess.

That is the current state of foreclosure in Florida. The big issue that everyone was asking was whether the governor would sign a new foreclosure bill (HB 87) that in some ways would make it more difficult for the banks to foreclose and provide homeowners certain rights, while at the same time deny homeowners certain due process rights and have the law apply in many ways retroactively in a fashion that is unconstitutional. The proposed law would further enshrine the idea of a permanent class of retired judges who are not truly accountable to anyone.

I was surprised to find that the judges were rather hopeful that Gov. Rick Scott would veto the bill — which was placed on his desk for his signature on May 28 — because it is so unpopular and because, as they see it, will make a messy situation even worse, as in “Who’s on First?”

Speed or justice?

The crux of the problem is that the judges have acknowledged the pressure of trying to clear their personal dockets of thousands of cases, while at the same time attempting in some way to provide individuals with their due process rights and an opportunity for a fair shake and a fair trial. Needless to say, those two objectives are so diametrically opposed to one another that they create a conflict that ultimately rises to the level of an oxymoron. On the one hand, it is impossible to attempt to provide speedy justice without in some way cutting constitutional corners. It also is impossible to provide someone with a five-minute trial and call it a trial if one is going to follow all of the legal constructs in place to protect individual rights such as the rules of civil procedure, due process and the rules of evidence. Other judges who have visited Florida’s foreclosure dockets have called what they saw in these tribunals “a kangaroo court”.

There was a passive acknowledgement that at the beginning of the foreclosure crisis the process might have been improperly tilted toward the banks. However, through various appellate court rulings, that process has been made less biased. The irony is that these appellate court rulings did not break new ground, rather, they just continued to ratify existing rules of law that must be applied in all cases, whether they are foreclosure cases, criminal cases or typical disputes between two business partners.

Judges lack statistics on favorable rulings

Perhaps most notable during this open forum discussion was when Jack McCabe, a well respected real estate analyst and columnist, asked the judges to provide the number of cases in which they had ruled in favor of a homeowner during a foreclosure case. None of the judges was prepared to provide any statistical evidence that they might have ruled in favor of a homeowner at all while on the bench. A number even laughed, saying they had covered the foreclosure dockets for only a few months.

We have found in those cases that we have won that each time a judge was extremely cautious in granting either a motion for an involuntary dismissal or a verdict for the homeowner because of the clear asymmetrical results that such a ruling would provide. Simply put, by so ruling, a homeowner might never have to pay back the loan that they had once previously borrowed from a lender.

Another issue that arose was whether the banks were taking seriously the fact that they could lose some of their cases and internalizing that likelihood into their mediation posture. Many people in the audience noted that the banks had a remarkable sense of arrogance and that they were effectively discounting to almost zero the likelihood that they would be defeated in court.

Banks lack motivation to settle foreclosure cases

Because the current state of jurisprudence has a bias toward the banks, that bias gets internalized into preventing the banks from wanting to settle cases by internalizing the potential statistical likelihood of a loss. Some of the judges speculated that if there were more verdicts in favor of homeowners then banks would get the message and would begin to settle their cases and through the natural process of attrition, they would be resolved prior to trial.

On a personal note, I believe that would happen. Unfortunately, for whatever reason, certain members of the bench are concerned about their own reputations should they start to grant too many verdicts in favor of homeowners, regardless of the merits of their cases. It seems that some of these judges would prefer to be reversed on appeal than to be directly responsible for preventing a bank from collecting on a loan obligation even if basic tenets of civil procedure and constitutional law have not been met.

Clearly, the largest concern that everyone has is whether the party who is coming before the court has proper standing to invoke the jurisdiction of the court. Until now, it seemed that the standing argument had been slipped under the rug. However, the judges made it clear that based on a new appellate ruling that holds that if a bank has the original note and the original note is endorsed in blank (meaning it does not have the name of the party that it was endorsed to) and that endorsement is not dated, and there is no credible witness who can provide information and evidence to support the date and time that the note was endorsed, then the case will need to be dismissed or, in the alternative, a verdict in favor of the defendant will need to be granted.

All we can hope for is that judges will follow such new appellate rulings and if so maybe, just maybe, the banks will get the message that they need to come to the mediation table with an understanding of the substantive issues and of the possibility of losing these cases. If they finally get the message, then maybe they will start offering alternatives to homeowners so that homeowners have a realistic possibility, or even probability, of staying in their home.

From the trenches, Roy Oppenheim

Real estate and foreclosure defense attorney, Roy Oppenheim left Wall Street for Main Street, founding Oppenheim Law along with his wife Ellen in 1989 in Fort Lauderdale, Florida. He also is vice president of Weston Title and creator of the South Florida Law Blog, named the best business and technology blog by the South Florida Sun-Sentinel. Follow Roy on Twitter at @OpLaw or like Oppenheim Law on Facebook .