Can the Court Sanction an Attorney for Delaying a Foreclosure?

by Lisa Magill

Can the Court Sanction an Attorney for Delaying a Foreclosure?

YES - says the Fourth District Court of Appeal.

The housing market crisis that led to the massive wave of foreclosures forced thousands and thousands of people to find a new profession or line of work. Real estate agents and mortgage brokers were out of work and many had to re-position themselves in the new economic reality. Attorneys did so as well. Many attorneys lost their real estate and bank related business and therefore turned to other areas of the law.

It takes less than a second to find about 18,600,000 results for "foreclosure defense attorney" on Google. Many of these attorneys are excellent - discovering the 'robo-signers', false or forged documentation and other illegal or just bad practices on the part of lenders, mortgage servicers and/or certain law firms. However, more is not always better when it comes to handling lawsuits, especially in the eyes of the overburdened Judges.

The Fourth District Court of Appeal recently upheld an award of attorney's fees, costs and sanctions against a law firm in an amount over thirty-eight thousand ($38,000.00) dollars. The Court found Section 57.105, Florida Statutes applied to attorneys representing borrowers in foreclosure cases if 1. actions taken in the lawsuit were shown to be for the primary purpose of delaying the case (allowing the borrower to stay in the home without paying) and 2. the attorney knew or should have known those actions were not supported by the material facts of the case.

Here's what happened in this case - the bank filed a foreclosure lawsuit against the borrowers. The borrowers hired an attorney/law firm to represent them in the case. The attorney filed documentation with the Court claiming that the bank violated certain aspects of the Federal Truth in Lending Act. The bank responded with proof it did comply with the Federal Truth in Lending Act, demanding a retraction. The Judge was not happy about this situation obviously and, after various hearings, issued an order requiring payment of the bank's attorney's fees, costs and sanctions for the delay. The appellate Court affirmed the ruling.

While this case involved a bank, the same issues often arise in cases filed by condominium or homeowners associations. The Courts are awarding sanctions in favor of community associations when lenders or debtors use the system to delay a case when they know their position doesn't have merit.