opinions leave muddy waters in their
wake.
Bartram is a prime example. The
appellate court ruled that dismissal
of the bank's first foreclosure case did
not bar a second one, but only if the
second one was "a foreclosure action
for default in payments occurring
after the order of dismissal in the first
foreclosure...."
be based on a default after the order of
dismissal in the first case. Any default
within five years prior to the second case
is within the statute of limitations and
should be a viable basis for the second
case. According to Bartram, a borrower
could start submitting regular payments
immediately after dismissal of his first
foreclosure case and arguably prevent
a second foreclosure even though the
payments are several years in arrears.
is the indication that mortgage payments
delinquent more than five years are
uncollectible.
and escrow advances. It could also pose
an accounting nightmare as servicers
struggle to make servicing platforms
reflect reductions in principal balances,
accrued interest accounts, and escrow
accounts based on court rulings that
do not match the transaction history of
the loan.
Full Debt Accounting
should be averted in most cases if
courts pay close attention to the loan
documents. Fannie Mae/Freddie Mac
standard residential loan documents
(and the like) include "full debt"
promises by the borrower. Since the
borrower promises to pay the full
of installments) courts should not
deduct the amount of "time barred"
installments. For example, the note in
Bartram contains the following payment
terms. Paragraph 1: "... I promise to
pay $650,000..., plus interest...."
Paragraph 3: "If on March 1, 2035, I
still owe amounts under this Note, I
will pay those amounts in full on that
date...." The mortgage contains similar
language: "Borrower shall pay when due
the principal of, and interest on, the debt
evidenced by the Note...." Paragraph 1.
These terms obligate the borrower to
pay the full debt even where courts rule
that installments more than five years old
are uncollectible.
Loan Documents
documents would enable the mortgage
industry to exert control over future
cases and reduce the room for judicial
interpretation.
First, add "deceleration" clauses.
Although Florida courts seem to have
accepted the concept of deceleration
interpretation if the loan documents
contained an express deceleration
provision, much like the express
acceleration provision in most notes
and mortgages.
This provision should state that the
lender can withdraw an acceleration
of the debt at any time and that
acceleration is automatically withdrawn
by the dismissal of any lawsuit on the
note or mortgage.
Second, add express language in
which the borrower promises he "will
pay the full debt even if some or all
of the installment payments become
unenforceable by operation of law."
Servicing
foreclosure procedures can also be
updated to help lenders.
whenever a case is dismissed. Even if
there is no express deceleration provision
in the loan documents, the lender is on
higher ground with a deceleration notice
than without.
Lastly, servicers can instruct
foreclosure counsel when they file repeat
foreclosure cases to allege two separate
breach dates in the complaint. The first
date should be the contractual due date
according to the note. This is important
for transparency and for calculating
the correct debt balance when the
time for judgment arrives. The second
date should be a date after dismissal
of the previous case in order to meet
Bartram's "after the order of dismissal"
requirement at least until the Florida
Supreme Court speaks. The complaint
should clearly state that it is being filed
based on the second breach.
have raised a high stakes legal issue:
Did the filing of the dismissed case
accelerate all future payments so that
five years later no legal action can be
filed? While the tide of judicial opinion
currently favors the mortgage industry,
it is too early to tell how it will turn out.
Nevertheless, there are concrete steps
the mortgage industry can take to create
more favorable conditions in future
cases and leave less room for judicial
interpretation.
Home Loans, Inc., Case No. 14-20759-CIV-KMW (U.S.
S.D.Fla. July 29, 2014).
5 Id. (certified question); Isaacs v. Deutsch, 80 So. 2d 657,
Lippincott, 392 So. 2d 931, 933 (Fla. 5th DCA 1980).
1362035CIV, 2014 WL 3767668 (U.S. S.D.Fla. July
31, 2014).