Fla. Supremes Order F'closing Banks To "Produce The Note" In Establishing Statewide Mediation Program; Open To Both Homestead & Tenant-Occupied Homes

In Tallahassee, Florida, the Orlando Business Journal reports:

• Plagued by an ever-increasing number of foreclosure cases, Florida judges now have guidance on how to deal with them through a statewide mediation program. Florida’s Chief Justice Peggy Quince signed an order designed to alleviate the backlog. Click here to read the order. It adopts recommendations by the court’s Task Force on Residential Mortgage Foreclosure Cases that was created earlier this year.(1)

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• [Foreclosure defense attorney Roy Oppenheim] noted that mediation “forces banks to bring someone who has the ability to make a decision to the table.” Another significant part of the order requires lenders to prove they hold the note.(2) “Plaintiff’s counsel is not permitted to respond to the certification with ‘unknown,’ ‘unsure,’ ‘not applicable,’ or similar nonresponsive statements,” the order states.

• Oppenheim said [...] that the recommendation is significant because the task force found it to be a form of unfair practice. “It’s what we call legal fiction. Legal fiction is a nice way of saying a lie,” he said.

For more, see Fla. Supreme Court requires mediation in foreclosures.

(1) With respect to owner-occupied, homestead properties in foreclosure, the Florida Supreme Court order provides:

• Under this program, all foreclosure cases in the state courts that involve residential homestead property will be referred to mediation, unless the plaintiff and borrower agree otherwise or unless effective pre-suit mediation that substantially complies with the managed mediation program requirements has been conducted.

See Order, page 2-3.

With respect to residential properties in foreclosure that are occupied by individuals other than the borrower, the Florida Supreme Court order provides:

• The Court further approves the Task Force recommendation that cases involving properties that are occupied by individuals other than the borrower may opt into the managed mediation program, at equal cost to the parties, and that structural improvements, such as open calendars, be employed by courts to allow cases to move as quickly and smoothly as possible.

See Order, page 9-10. According to the Task Force recommendation, "These cases may be either tenant-occupied or occupied by other members of the family but not the borrower, or have unspecified occupants. [...] The Task Force recommends that these properties be given the choice to opt into managed mediation at equal cost to the parties." See Task Force recommendation, page 41.

(2) According to the Task Force recommendation, page 21.:

• Judges should also recognize their responsibility to ensure that in uncontested cases, the necessary evidentiary basis has been laid for the entry of summary judgment. In particular, judges should take every step to insure that the original note is produced, that the note is held in due course by the plaintiff with a right under the note to foreclose, and that the note is cancelled upon entry of the final judgment.

According to the Task Force recommendation, page 20:

• Complaints alleging lost note should only be filed upon a good faith investigation. These problems have caused the Task Force to recommend a requirement that pleadings be verified.

Editor's Note: In the event the foreclosing lender fails to produce the note and the presiding judge is inclined to allowing the foreclosure proceeding to continue, the homeowner (or his/her counsel) might consider filing a motion to require the lender to post a "lost note / lost instrument bond" in the face amount of the promissory note, plus 5 years of interest to protect the homeowner against loss that might occur in the event the purportedly lost note magically reappears in the future in the hands of another seeking enforcement thereof (in Florida, five years is the statute of limitations for the enforcement of a promissory note in Florida). For example, a lender wanting to foreclose a $500,000 mortgage should be required to to put up a five year bond for $500,000 plus five years of interest at the statutory interest rate (ie. if statutory rate is 10%, the amount of the bond should also cover $250,000 of interest - $50K/ year x 5 years - for a total of $750,000). In Florida, a court is prohibited from entering a judgment against a debtor based on a lost, destroyed or stolen note unless the creditor adequately protects the debtor against thepossibility of such a loss. Sec. 673.3091(2), Florida Statutes states:

• [T]he court may not enter judgment in favor of the person seeking enforcement [of a lost, destroyed, or stolen instrument] unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

It appears that this statute also applies in the event the foreclosure is uncontested and the homeowner fails to appear in the action.