Florida AG warns of commercial foreclosure crisis - Bizjournals.com

Florida AG warns of commercial foreclosure crisis - Bizjournals.com

A day doesn’t go by without some talk of the residential foreclosure crisis in the media. But the severity of that problem could be overshadowing yet a bigger problem looming on the horizon: commercial foreclosure.

Florida Attorney General and gubernatorial candidate Bill McCollum wrote a letter to Florida House Speaker Larry Cretul Friday bringing the potential commercial foreclosure crisis to the Legislature’s attention and sharing what his office has been doing about it since 2007.

“As I learn more about the potential for massive commercial real property mortgage foreclosures, I am convinced that swift legislative remedial action this legislative session would avert some of the more devastating consequences of such foreclosures,” McCollum wrote in the letter.

The Attorney General’s office created the Interagency Mortgage Crisis Task Force in 2008 designed to help educate and assist homeowners about to go into foreclosure. The task force has hosted community forums on the problem, providing distressed homeowners with access to lenders, counselors, voluntary bar associations, and state and federal housing and finance agencies.

However, commercial foreclosures have the chance to have an “even greater potential to negatively impact the state and national economies” over the next four years, McCollum said. Nearly $1.4 trillion in commercial real estate loans will reach the end of their terms between 2010 and 2014, and may spawn defaults, according to a February report of the Congressional Oversight Panel.

That could trigger economic damages to financial institutions, small business and families across the nation, McCollum said.

“As one of the largest markets in the nation for commercial real estate loans, Florida faces a significant risk of financial loss,” he said. “In anticipation of this crisis, the Legislature may wish to review current Florida law and the finding of the Congressional Oversight Panel.”

Other large states with similar demographic and growth issues already have put laws in the book that could ease the pain of commercial foreclosures. Florida should look at those laws to emulate here, McCollum said.

One example of the laws passed in other states is the “one action” rule where all claims can be consolidated into a single action or lawsuits seeking relief from borrowers personally before proceeding against the collateral can be prohibited. Other laws seek to establish a clear methodology for deficiency judgments, right of redemption and foreclosure defenses so that there are no ambiguities in the process.