Florida Legislature – Catering to Banks
The fix is in, and those of us paying attention have been saying as much for a long time now. Don’t believe me? Check out the Florida legislature’s most recent effort to cater to the whims of the banks. Florida Statute 702.065 now provides:
702.065 Final judgment in uncontested proceedings where deficiency judgment waived; attorney’s fees when default judgment entered.—
(1) In uncontested mortgage foreclosure proceedings in which the mortgagee waives the right to recoup any deficiency judgment, the court shall enter final judgment within 90 days from the date of the close of pleadings. For the purposes of this subsection, a mortgage foreclosure proceeding is uncontested if an answer not contesting the foreclosure has been filed or a default judgment has been entered by the court.(2) In a mortgage foreclosure proceeding, when a default judgment has been entered against the mortgagor and the note or mortgage provides for the award of reasonable attorney’s fees, it is not necessary for the court to hold a hearing or adjudge the requested attorney’s fees to be reasonable if the fees do not exceed 3 percent of the principal amount owed at the time of filing the complaint, even if the note or mortgage does not specify the percentage of the original amount that would be paid as liquidated damages. Such fees constitute liquidated damages in any proceeding to enforce the note or mortgage. This section does not preclude a challenge to the reasonableness of the attorney’s fees.
My thoughts, in no particular order:
1. The requirements to recover attorneys’ fees in Florida have been long-established over many decades and countless court cases. Any attorney wishing to recover fees must prove the reasonableness of those fees (both the number of hours and the hourly rate) by affidavit or live testimony. Additionally, an independent, third-party expert must opine the fees are reasonable. Any order granting such fees must contain written findings, by the judge, that the fees were reasonable. And except in contingent fee cases, the amount of fees cannot exceed what the client paid/owed to the lawyer.
In one swoop, the Florida legislature has completely changed the law in these regards. Now, there’s no need for expert testimony. Heck, there’s no need for any other proof whatsoever. Instead, the legislature has decided, in its infinite wisdom (insert sarcasm here), that 3% of the amount owed is always a reasonable fee in mortgage foreclosure cases. Hence, if the mortgage is $1,000,000, then $30,000 is a reasonable attorneys’ fee – even though the case was uncontested (which is what happens when the bank wins by “default judgment”).
$30,000 in fees for an uncontested mortgage foreclosure case? Seriously? Respectfully, this law is absolutely disgusting. If you don’t understand why, bear in mind there is no relationship whatsoever between the amount owed on a mortgage and the attorneys’ fees actually incurred foreclosing that mortgage. None. Nada. Zero. You can’t even say “well, homeowners with bigger mortgages will defend more aggressively, resulting in more fees” because the statute only applies when judgment was obtained by “default.” By definition, there is very little work done on such files, yet the banks get a rubber-stamped judgment entitling them to 3% attorneys’ fees. That’s $30,000 in fees on a $1,000,000 mortgage for a case that was uncontested. Truly appalling.
2. The only saving grace about the automatic, 3% fee is that it only applies in uncontested cases. Consider this another reason to fight your foreclosure case. After all, if you don’t fight, and you lose by default, the bank can tack on 3% to the judgment amount, and it can attempt to recoup this amount from you via deficiency judgment, whereas if you defend your case, the bank’s lawyers will have to prove the fees they seek are reasonable.
You might think a bank can’t recoup the 3% fees via deficiency, but you’d be mistaken. Look closely at the statute and you’ll see the waiver of deficiency language is only in subsection (1). Per subsection (2), a bank can win by default, tack on 3% in fees, and pursue those amounts from the homeowner via deficiency.
3. Other than contingent fee cases, I can’t ever recall seeing a situation where an attorney could recoup more in attorneys’ fees than what the client actually owes/pays. The law has been set up this way, of course, to prevent an attorney from getting a windfall against his/her opponent. By way of example, if I bill my client just $3,000, I shouldn’t get to recoup $10,000 from the other side just I beat them in court.
Despite years of established law in this regard, the Florida legislature has turned this law on its head via this statute. Now, it doesn’t matter how much the bank’s lawyers charged or received – they’ll always (in uncontested cases) get 3% of the amount owed. And if they weren’t charging 3% of the mortgage amount previously, you can darn sure bet they will now.
4. Conspicuously absent from this new law regarding 3% attorneys’ fees for bank lawyers is a reciprocal provision entitling homeowners’ attorneys to recover a 3% fee if the homeowner prevails in the mortgage foreclosure case. In every other context, Florida law ensures fee provisions are reciprocal for both sides. See Fla. Stat. 57.105(7). As far as mortgage foreclosure cases go, though, the legislature clearly doesn’t care about reciprocity – it’s all about giving a windfall to the banks.
Personally, I intend to argue that 57.105(7) makes the fee provision of 702.065 reciprocal, meaning I should recoup 3% of the mortgage amount in cases where I’ve prevailed. Unfortunately, I’m not holding my breath.
5. I’m less appalled at subsection (1), which basically directs a court to enter final judgment against any homeowner who defaults if the bank has waived a deficiency claim. I will note, however, that this portion of the statute is also rife with problems.
For instance, the statute directs that Florida courts enter a final judgment of foreclosure in uncontested cases 90 days after the pleadings have closed. “Uncontested cases,” though, are defined as those where a “default judgment” has been entered. Hence, the legislature is trying to tell Florida courts to enter judgments in cases where they’ve already entered judgments. Nonsensical? Yes, and that’s the point.
I presume the legislature intended to require judgments be entered in cases where a “default” (not a default judgment) had been entered, but that’s not what the statute says (and there’s an obvious difference between a “default” and a “default judgment” – see Fla.R.Civ.P. 1.500). Apparently, the legislature was in such a rush to enter something pro-bank, it couldn’t take the time to create a statute that makes the slightest bit of sense.
6. The fact that I have to cite the Florida Rules of Civil Procedure to explain this statute is telling, and it’s illustrative of the statute’s problems. Under Article V, Section II of the Florida Constitution, the Florida Supreme Court has the exclusive authority to designate rules of practice and procedure in all Florida courts. If the Florida legislature creates a statute which purports to set forth a rule of practice or procedure, it is acting in derogation of its constitutional authority and such a statute should be deemed unconstitutional.
Here, I’d argue that Rule 1.500 sets forth the procedure by which a Florida court can enter a judgment after a default and that the legislature’s attempt to direct courts when to enter judgment in foreclosure cases unconstitutionally infringes on the terms of the Rule. In other words, I see a fair argument that subsection (1) of Fla. Stat. 702.065 is unconstitutional, and I expect court rulings on this issue in the near future.
Speaking of the unconstitutionality of this statute, I also expect constitutional challenges to the 3% fee provision in subsection (2). If I find that law appalling, I’m sure others do as well. But it’s more than just appalling – it’s easy to couch that statute in terms of a violation of due process or in derogation of Fla.R.Civ.P. 1.525.
Putting aside the legal technicalities, Fla. Stat. 702.065 is a bad sign for Florida. It’s sad that the legislature is willing to stoop to these levels to cater to the whims of the banks. If you’ve been ignoring issues like this, get involved. Stand up and fight. Tell the legislature what you think about it. The banks are obvoiusly pushing the legislature to do what it wants … are you?
Mark Stopawww.stayinmyhome.com
Posted in Main | 11 Comments »
