FEMA Hold on, They Aren’t Going for the Home

For community associations, when an owner goes into foreclosure, the best-case scenario is that the bank or mortgagee moves the property swiftly through the foreclosure process, and a new owner then takes possession and begins paying the assessments as they come due.  In the absolute best cases, the foreclosure process will take around a year; in the worst case, the foreclosure can take two years or more, during which time the owner is unlikely to be paying his or her assessments, and the association is experiencing the corresponding budget shortfall.  However, these timeframes are lately being unnecessarily and improperly extended in some instances, due to the so-called “FEMA hold.”

The “FEMA hold” is the shorthand used for a regulation that is actually promulgated by the Department of Housing and Urban Development.  That regulation provides that, where an area has been declared a natural disaster by the President of the United States, then a foreclosure moratorium immediately applies and lasts for 90 days.  During that time, new foreclosures may not be initiated and pending foreclosures are stayed or temporarily halted.  However, in order to qualify for the “FEMA hold”, the property being foreclosed must be “directly affected” by the natural disaster, meaning it cannot simply have been located in the natural disaster area, it must also have actually suffered some sort of damage.  In North Florida, the “FEMA hold” usually arises after a hurricane, as those are our most common natural disasters.

Despite the rule’s clear language, in the weeks after Hurricanes Matthew and Irma, banks and other mortgagees indiscriminately filed Motions to Cancel Foreclosure Sales or to Stay Proceedings in Florida counties that had been declared natural disasters, which were predicated upon the “FEMA hold” regulation.  The banks or mortgagees allege that since the county where the property is located was declared a natural disaster, the “FEMA hold” applies, and any pending action much be halted during the hold period of 90 days.

These Motions were improper for a variety of reasons. Some of them stated that the bank needed time to investigate whether the property had been damaged, which is improper because the “FEMA hold” only attaches to properties that have been damaged.  Thus, the bank or mortgagee should have investigated the property’s status before filing a motion that results in a delay of the proceedings and only filed the motion if the property as in fact damaged.  Other motions filed by the banks asked the proceedings to be indefinitely stayed, which is improper because the “FEMA hold” is only supposed to last 90 days, at the most.  And still other motions stated that the properties had been damaged when in fact they hadn’t, which is improper for obvious reasons.  Regardless of the reasons why the motions were improper, they all stood to delay the foreclosure proceedings by several months.

While these motions are improper, they are also usually granted unless another party, such as an association that has been named as a defendant, objects to them.  The courts generally grant them because, on their faces, the motions seem proper and even altruistic: the foreclosing entities are allowing relief to owners whose homes are being foreclosed upon, and who have just experienced a natural disaster.  Additionally, as foreclosure courts are state circuit courts, the judges often aren’t familiar with esoteric federal regulations.  However, the actual motivation for these motions is usually simply to delay, and to allow the overworked attorneys handling a glut of such cases a small measure of breathing room.  As such, and because these motions are improper under the governing law, associations should push back against them,

When an association is on the receiving end of a motion delaying a foreclosure under the “FEMA hold”, it should immediately confirm whether or not the property actually was damaged by the storm.  If it was not damaged, the association’s attorney should take immediate action in opposition to the “FEMA hold” motion.  When courts receive guidance as to why such motions are improper, they are usually responsive and will not grant them.  As a result, associations can avoid the unnecessary and improper delay to foreclosure proceedings that are creating budgetary shortfalls for them.