via:NakedCapitalism/Yves Smith

Florida Governor Floats Huge Gimmie for Banks: Taking Foreclosures Out of the Court System

Posted: 25 Jun 2011 12:47 AM PDT

Florida continues to show a rather disconcerting willingness to throw its citizens’ rights under the bus to help the banks. The state created special foreclosure courts to clear up a substantial backlog, which might not have been such a bad idea if they had been properly implemented. However, they were staffed with retired judges, many of whom seemed to put speed over due process. There have been numerous reports of judges refusing to hear motions or evidence presented by borrowers, to the point where the ACLU contested the procedures used as violations of due process.
To some degree, this has become moot since these kangaroo courts are expected to be shuttered (they required an extension of funding to continue). Moreover, new foreclosure filings have slowed in Florida as a result of the robo-signing scandal. The revelation of widespread abuses by banks has led some judges to dismiss cases with dubious documentation; judges are also complaining that banks are seldom coming to hearings on foreclosure cases.
Never fear, with government bought and paid for in America, someone was certain to try a fix. The Florida governor has, in effect, suggested that if banks can’t meet the existing requirements for foreclosure, then the solution obviously is to lower them. From a Daily Business Review article on a speech Florida governor Rick Scott made to the state bar association (hat tip Lisa Epstein):

The governor called on judges and lawyers to look for ways to cut court costs, improve efficiency and clear up the foreclosure backlog “as quickly as possible.” The clogging of the courts by foreclosure cases is discouraging businesses interested in moving to Florida, Scott’s main priority, he said.
“It scares people … and is clearly having an impact on the economy,” he said. “I’m looking for The Bar to come forward with suggestions on how to clear this up. Maybe we should consider nonjudicial foreclosures.”
Scott encouraged judges to carefully review verdicts to look for “meritless” cases.
“If we have a huge verdict that seems ridiculous, that adversely impacts companies who want to come to this state,” he said.

The connection between a foreclosure overhang and companies’ willingness to move to Florida seems pretty strained (and who are these business champing to relocate to Florida, anyhow? The idea that this is a meaningful number of entities in a weak economy sounds like wishful thinking). Scott presumably subscribes to the widely-discredited Mellonite logic that foreclosing rather than trying to do deep principal mods for borrowers that have viable incomes and flooding the market with foreclosure sales would somehow be an economic plus.
And look how he would like to square the circle: by turning Florida from a judicial foreclosure state (where the foreclosure has to be approved by the courts) to a non-judicial foreclosure stat (where the lender merely has to advertise the pending foreclosure and can then foreclose if the owner does not go to court to oppose the action). The good news is I am pretty sure this is easier said than done (lawyers please pipe up). I believe that in non-judicial states (or at least most of them), the bank has the deed, while in judicial foreclosure states,the borrower is the owner of the house, but has granted the lender a lien against it. That’s why lenders have to go to court: to enforce their rights under the lien. So even if there was interest in Scott’s idea, I don’t see how it could be applied retroactively.
Note that Scott floated this trial balloon after giving lip service to the rule of law:

Scott, who holds a law degree from Southern Methodist University and who was once a partner at a large Dallas law firm, spoke of his “great appreciation” for the law and called lawyers “the stewards of our government.”

The irony is that as Florida officials appear to have few compunctions about waiving well established legal protections for borrowers, judges in Michigan are so concerned about questionable practices that they are increasing them. From Daily Kos last week:

Early last month (May 2011) the Michigan Appellate Court ruled that the Mortgage Electronic Registration System (MERS) was a bunch of asshat jerks who needed to get their butts kicked soundly and sent to bed without their billion dollar bonuses.
Also they ruled that MERS could no longer foreclose on peoples’ homes by publishing the foreclosure in the papers. Oh no…not MERS. No More. Now they need to actually show up in court and prove they have the authority to foreclose on a house.
That’s a problem for MERS because they generally can’t. It’s a problem of their own making. Some clever scheme to buy and sell and divvy up mortgages and bank notes to make a lot of extra money by selling air. Wait. No. That’s not quite right…by selling the concept of air.
Muskegon County Judges, however, have taken it a step further. They’re now halting ALL foreclosures from ALL entities by advertisement, requiring everybody actually show up in court and present the bank note. They actually want a foreclosing party to prove they have the right to foreclose. I know, what a drag, right?….
Foreclosures in Muskegon County have dropped from about 75 per week to about 2 per week.…
Why?
Because banks CANNOT prove in a court of law that they hold an interest in the debt.
Let me say that again…banks CANNOT PROVE in a COURT OF LAW that they hold an interest in the debt.
Think about that for a moment. The moment the courts simply require that a bank prove it has an interest in the indebtedness of the property it’s foreclosing on, 97% of the foreclosures stop.
Banks are the victim of their own shenanigans.
They weren’t satisfied with the honest dollar they got lending money for mortgages, and started to play stupid games. And now, nobody….NOBODY…NOBODY knows who holds the actual interest in your house.
This isn’t some crackpot theory. It’s becoming glaringly obvious. Banks cannot prove in a court of law that they hold an interest in your property. And it’s their own fault.