Condo foreclosure reform effort fizzles

Article Courtesy of The Miami Herald

By Monica Hatcher

Published May 5, 2009

Florida's condominium associations will likely face another challenging year of fighting lenders and struggling with budget shortfalls after lawmakers ended their annual session without taking up condo foreclosure reform.

Measures afloat to increase the amount of overdue association fees lenders would be required to pay on units mired in foreclosure went nowhere as lawmakers focused on cutting spending and balancing the budget in the economic downturn.

At least one lawmaker said the banking lobby also stymied efforts to resolve the growing crisis. Many condo associations overwhelmed by foreclosures and delinquent homeowners' accounts have been struggling to provide basic services to residents because they can't collect enough money from owners, including banks.

During the past year, associations have gathered in town hall meetings across the state to collect signatures and build momentum to pressure lawmakers to take up reform. They alleged banks were deliberately stalling foreclosures to avoid paying fees like other owners.

Lenders have denied this, blaming huge court backlogs for causing the delays. Also, they say they're trying to work with homeowners to resolve their mortgage problems before they foreclose, in obeyance of demands from federal and state legislators.

Associations claim current law encourages banks to postpone taking title to property because it caps the past dues they are required to pay the association to the lesser of 1 percent of the original mortgage amount, or six months in association fees.

State Rep. Julio Robaina, the Miami Republican who has made condo reform one of the central planks of his tenure in office, placed the blame squarely with the banking lobby that he said made a meager attempt to negotiate and relied on Senate allies to sit on the bill.

''We're on the brink of disaster,'' Robaina said. "Knowing that they are getting stimulus money to bail them out in hard times, I found it very disappointing they didn't have the courtesy to offer something up to help people and the mortgagees in these properties.''

His original bill would have would have increased lender liability for past-due payments for possibly up to two years while providing incentives for those who pay arrears when they initiate a foreclosure.

Another bill would have increased lender liability to the lesser of 12 months of past due fees and special assesments or 20 percent of the mortgage amount. If lenders failed to make the payment to the association within 30 days of taking title, they would lose the protection of the cap.

Tom Cardwell, general counsel for the Florida Bankers Association, said the banking industry, indeed, had been willing to work with lawmakers.

''The two sides . . . attempted to reach a compromise and agreement during the course of the session, but the session just ended before anything got into place,'' Cardwell said.

Other measures that would have established a statewide registry to manage vacant homes and another establishing renters' rights when landlords enter foreclosure also failed to make it to the general legislative body for discussion.

Robaina said the bankers won round one, but round two would come as soon as he was able to refile his association bill in the next session.

Meantime, some of Florida's community associations have reached a tipping point.

In April, utilities were cut off for at least two condo associations in Miami-Dade because they lacked the money to pay bills in buildings overrun with foreclosures.