What has Florida done now? A new Florida law may make it virtually impossible for a homeowner to obtain an attorney to fight a foreclosure action in state or bankruptcy court. While I do not think the original intention was to prohibit homeowners facing foreclosure from obtaining legal representation, the poorly written legislation does just that.
Fla. §501.1377, which becomes effective October 1st, is shocking and appalling. Who would have drafted legislation so outrageous and poorly crafted as to effectively prevent homeowners from obtaining legal representation? Foreclosures are drowning our underfunded court system and hardworking people are being forced to the streets. Now, more than ever homeowners need legal representation to make sure the mortgage companies are playing by the rules. While there does need serious regulation and strong penalties for the “equity purchaser” industry, because homeowners are being tricked into signing over the equity in their homes, our elected officials must do better than Fla. §501.1377. This new law would even seem to prevent a homeowner from obtaining an attorney to seek legal recourse against an “equity purchaser”who violated Fla. §501.1377.
Chip Parker, a Jacksonville Bankruptcy Attorney, who has been following Fla. §501.1377 as it made its way in becoming another poorly written law made a blog posting on the Bankruptcy Law Network Blog on June 5, 2008, which I have posted part of his posting below. His blog positing outlines how Fla. §501.1377 could affect attorneys and homeowners needing legal representation with a mortgage foreclosure.
Now, obviously homeowners facing foreclosure need protection from opportunists and scam artists, commonly referred to as “equity purchasers.” However, consumer attorneys provide a last line of protection for the homeowner by defending him in foreclosure proceedings and seeking protection in bankruptcy court.
The new law defines a “Foreclosure-Rescue Consultant” as a person who directly or indirectly makes a solicitation, representation, or offer to a homeowner to provide or perform, in return for payment of money or other valuable consideration, foreclosure-related rescue services. “Foreclosure-related rescue services” means any good or service related to, or promising assistance in connection with stopping, avoiding, or delaying foreclosure proceedings concerning residential real property or curing or otherwise addressing a default or failure to timely pay with respect to a residential mortgage loan obligation.
The original bill included, as an exception to the definition, “A person licensed to practice law in this state when rendering foreclosure-related rescue services in the course of his or her practice as an attorney at law.” However, on March 6, 2007, the Committee on Financial Institutions voted to recommend a strike-all amendment. The amendment, “Narrows the exemptions for entities that are considered a ‘foreclosure-rescue consultant’ by removing lawyers, real estate brokers, and mortgage brokers.” See House of Representatives Staff Analysis dated March 14, 2008. The final version signed by Governor Christ removes attorneys as an exception to the definition. Therefore, attorneys are subject to the law.
So what if attorneys are required to comply with the new law? After all, more regulation of lawyers can never be bad, right? Wrong. This law actually prevents lawyers from helping homeowners in crisis!
PROBLEM NUMBER 1:
Under the new law, attorneys cannot represent a homeowner in state court or bankruptcy court without first having the client sign a very specific retainer agreement. Every lawyer does this anyway, so that is not a big deal. However, the client must be given one day to review the agreement before signing it and another three days after the agreement is signed to rescind it. The client cannot waive these time periods.
On its face, this minimum, mandatory 4 day period seem reasonable, but it has a disastrous effect. A homeowner served with a foreclosure complaint has twenty (20) days to file a responsive pleading, and since a lawyer will not file a responsive pleading until the mandatory period runs, the law effectively shortens the period for timely responding by at least four (4) days!
Even worse, a client seeking bankruptcy protection is under the same 4 day period. If a person’s home is scheduled to be sold at a sheriff’s sale, only a Chapter 13 bankruptcy can stop it. If that person seeks the assistance of an attorney within four days of the sale, the attorney cannot help, and the house will be sold!
PROBLEM NUMBER 2:
If the waiting period provision were removed from the new law, lawyers would STILL no longer represent homeowners in state court or bankruptcy court because under the new law, an attorney cannot charge or collect a single penny from a client until all legal services are completed. Furthermore, the law essentially requires a lawyer to front all litigation or bankruptcy related expenses. Once again, on its face, it seems like good news for consumers, but what lawyer is going to front the costs or litigate against a mortgage company or file a bankruptcy without getting paid along the way? Not a single one.
Chip Parker, Bankruptcy Legal Network, June 5, 2008 Posting.
The new law defines a “Foreclosure-Rescue Consultant” as a person who directly or indirectly makes a solicitation, representation, or offer to a homeowner to provide or perform, in return for payment of money or other valuable consideration, foreclosure-related rescue services. “Foreclosure-related rescue services” means any good or service related to, or promising assistance in connection with stopping, avoiding, or delaying foreclosure proceedings concerning residential real property or curing or otherwise addressing a default or failure to timely pay with respect to a residential mortgage loan obligation.
The original bill included, as an exception to the definition, “A person licensed to practice law in this state when rendering foreclosure-related rescue services in the course of his or her practice as an attorney at law.” However, on March 6, 2007, the Committee on Financial Institutions voted to recommend a strike-all amendment. The amendment, “Narrows the exemptions for entities that are considered a ‘foreclosure-rescue consultant’ by removing lawyers, real estate brokers, and mortgage brokers.” See House of Representatives Staff Analysis dated March 14, 2008. The final version signed by Governor Christ removes attorneys as an exception to the definition. Therefore, attorneys are subject to the law.
So what if attorneys are required to comply with the new law? After all, more regulation of lawyers can never be bad, right? Wrong. This law actually prevents lawyers from helping homeowners in crisis!
PROBLEM NUMBER 1:
Under the new law, attorneys cannot represent a homeowner in state court or bankruptcy court without first having the client sign a very specific retainer agreement. Every lawyer does this anyway, so that is not a big deal. However, the client must be given one day to review the agreement before signing it and another three days after the agreement is signed to rescind it. The client cannot waive these time periods.
On its face, this minimum, mandatory 4 day period seem reasonable, but it has a disastrous effect. A homeowner served with a foreclosure complaint has twenty (20) days to file a responsive pleading, and since a lawyer will not file a responsive pleading until the mandatory period runs, the law effectively shortens the period for timely responding by at least four (4) days!
Even worse, a client seeking bankruptcy protection is under the same 4 day period. If a person’s home is scheduled to be sold at a sheriff’s sale, only a Chapter 13 bankruptcy can stop it. If that person seeks the assistance of an attorney within four days of the sale, the attorney cannot help, and the house will be sold!
PROBLEM NUMBER 2:
If the waiting period provision were removed from the new law, lawyers would STILL no longer represent homeowners in state court or bankruptcy court because under the new law, an attorney cannot charge or collect a single penny from a client until all legal services are completed. Furthermore, the law essentially requires a lawyer to front all litigation or bankruptcy related expenses. Once again, on its face, it seems like good news for consumers, but what lawyer is going to front the costs or litigate against a mortgage company or file a bankruptcy without getting paid along the way? Not a single one.
Chip Parker, Bankruptcy Legal Network, June 5, 2008 Posting.
These good intentions have created yet another mess. Lets hope all is corrected before Fla. §501.1377 takes effect October 1, 2008. Otherwise, if you plan on hiring an attorney to protect your legal interests in a foreclosure action you need to hope your home goes into foreclosure prior to October 1, 2008.
2008 Florida House Bill No. 643 Fla. §501.1377
www.flsenate.gov/data/session/2008/House/bills/billtext/pdf/h064302e1.pdf
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