Foreclosure Law Empowering Lenders Could Be 'Game Changer'
A new wave of short sales could be part of the fallout from Florida's Fair Foreclosure Act as property owners move to mitigate losses under the law that gives both new powers and new responsibilities to lenders, real estate brokers say.
The law took effect July 1, months after state lawmakers allotted millions of dollars to accelerate cases clogging court dockets.
"This could be a critical game changer," said Tony Martinez, a broker with Xtreme Realty Team in Davie. "We still haven't seen the full effects yet because it's going to take a while for most of these changes to be implemented. But when we do, we'll see a dramatic change in the timeline for foreclosures."
South Florida has been a hotbed for distressed properties for years since the housing crash. Miami ranked among the top 10 metro areas in the country for foreclosures in 2013, according to Irvine, Calif.-based RealtyTrac. Broward County foreclosure filings rose 11 percent in 2013, while December's count was 30 percent higher than November's numbers, public records show.
These cases have been taking years to wind their way through the courts. The statewide average is 944 days, or about 2.6 years. With more than 350,000 cases on dockets across Florida, the state ranks third in the nation behind New York and New Jersey for longest foreclosure timelines, according to RealtyTrac.
But Martinez, who led a recent Miami Association of Realtors conference on real estate opportunities resulting from the Fair Foreclosure Act, said the law gives broader rights to lenders and will likely lead property owners to consider short sales.
Among the changes is a provision that allows lenders to collect rental income on residential properties—a strategy previously available only for commercial buildings.
"What was happening in commercial is now happening in residential," said Roy Oppenheim, co-founder and senior partner at Oppenheim Law in Weston. "It might accelerate the foreclosure process because if people can't collect the rent, they might not continue to defend the case."
Borrowers also face pressure from lenders' ability to force a defense by filing motions to show cause—a strategy once considered too risky.
"The hope is that banks will use it," said Anthony DiMarco, executive vice president of government relations for the Florida Bankers Association. "In the past if the defendant came in and had any sort of defense, you couldn't use the order to show cause. You had to start the whole process over and go to the back of the line at that point to file suit."