Legal Magic: Turning Real Property Foreclosures Into Uniform Commercial Code Sales

When people borrow money to buy a house, they have to follow certain rules to pay it back. If they don’t follow the rules, the lender can take the house away. This process is called foreclosure. The rules for foreclosure are different in each state, and some states give borrowers more time to fix the problem before losing their home. In some states, borrowers have a right to pay back the money they owe before the house is taken away. This is called the “equity of redemption” and it’s an important right for people who own property. Florida has a law that protects this right for borrowers. The right of redemption is when a homeowner can stop their home from being foreclosed on by paying the amount owed on their mortgage, plus any expenses, before the foreclosure sale. In Florida, the courts can sometimes decide not to foreclose on a homeowner if their default is small and the homeowner has a lot of equity in their home. In the past, some homeowners would file for bankruptcy to delay foreclosure, but now they can be held personally responsible for the debt if they do this. However, it can still take a long time for a lender to take ownership of a foreclosed property. Complex financing deals involving multiple loans and ownership interests in a property may involve a mortgage loan and mezzanine loans. A lender may require the borrower to pledge their ownership interest in the property as an additional form of security. This allows the lender to foreclose on the ownership interest instead of going through a lengthy foreclosure process for the property. Some argue that this practice unfairly limits the borrower’s ability to recover their property. There is limited legal precedent on this issue, with only one case from New York addressing it. HH Cincinnati involved a request by the borrowers to stop a foreclosure sale of their properties. The court denied the request, saying the properties were not unique and the borrowers could be compensated later if they won their challenge. The court also said the borrowers still had a right to redeem the properties under the law. However, this decision goes against commonly accepted legal principles. The court’s reasoning doesn’t make sense because real estate is usually considered unique, and the borrowers realistically couldn’t come up with the money to redeem their properties in such a short time. A recent court decision in New York has been praised by some lawyers, but it could affect borrowers in Florida. The decision allows lenders to require borrowers to use their property as collateral for multiple loans. This could make it harder for borrowers to find a lender who doesn’t require this. The decision has been praised by some, but it may not be good for borrowers. It could make it easier for lenders to take borrowers’ property if they don’t pay back their loans. This is especially concerning for mezzanine loans, which are already riskier for borrowers. Allowing dual collateral in loans may take us back to a time when lenders had more control over real estate if the borrower defaulted. This is concerning because it means that even small mistakes by the borrower could lead to losing their property. This is especially worrisome because many lenders now only give loans for half or less of the property’s value, so they could end up with a big profit if they foreclose. Nontraditional lenders, who may also want to own the property, are now a big part of the market. This means borrowers need to be careful when getting a loan and make sure they understand all the terms. In Florida, it’s important for state courts to protect borrowers who are at risk of losing their property through foreclosure. They shouldn’t allow lenders to use tricky tactics to take away a borrower’s home. Instead, courts should always see a mortgage as a mortgage, and make sure borrowers have a fair chance to keep their property. This is because the right to reclaim a property after foreclosure is an important and protected right for borrowers in Florida. Martin A. Schwartz is a lawyer in Miami who specializes in real estate law. He works at a firm called Bilzin Sumberg Baena Price & Axelrod, LLP. He helps with different aspects of real estate law, and he is also involved with condominium law. Schwartz is a member of The Florida Bar and is committed to serving the public and improving the justice system.

Source: https://www.floridabar.org/the-florida-bar-journal/legal-magic-turning-real-property-foreclosures-into-uniform-commercial-code-sales/