You have probably read in the papers that foreclosures are down in Florida. A big reason for this is that the housing market has turned around and prices are going up. Therefore, it’s a lot easier to get out of trouble by selling the house and moving on. However, if you are “upside-down” on your loan and are having trouble making your mortgage payment, you probably don’t want to hear about the fact that foreclosures are fewer for other people.
The Florida Supreme Court has issued a ruling that could increase the number of foreclosure actions brought against homeowners in the state.
According to the Florida Bar News, as a result of the state Supreme Court’s November 3 ruling, “Lenders who have had a foreclosure suit dismissed can bring new action if the borrower continues to default after the dismissal and the case is brought within five years of nonpayment.”
The ruling had to do with the statute of limitations provision in Florida that says foreclosure on a mortgage has to be brought within five years of the borrower defaulting on payments.
Notice of Default and Intent to Accelerate
It works like this. When you miss mortgage payments, you’re in default. Your lender will probably send you a Notice of Default and Intent to Accelerate informing you that you have a right to “cure the default” by paying the bank for all of your missed payments plus fees.
The notice will also tell you that failure to cure the default will result in the bank exercising its right to accelerate payment on the loan, which means demanding that you pay off the entire balance of the loan. It’s not that they think that you can afford to pay off the whole balance, but if there’s an acceleration clause in your mortgage (most mortgages have it), your lender has to accelerate in order to foreclose. For mortgages that have an acceleration clause (most do), that means that, after breaching your contract by missing payments, your lender can demand that you either pay off the entire balance of your mortgage or be foreclosed upon. The Notice of Acceleration tells the homeowner about their right to avoid that by reinstating their loan.
Once you default and they accelerate the promissory note, the five-year statute of limitations clock starts. But foreclosure might not happen within those five years. The case could be dismissed for any number of reasons. Maybe your bank couldn’t prove that they have the standing to foreclose, or that they’re the right party in interest. If the foreclosure case was dismissed and the statute of limitations expired, it wasn’t clear how the lender could bring another foreclosure action. Until now.
After Foreclosure Case Is Dismissed
Justice Barbara Pariente of the Florida Supreme Court wrote in the November ruling:
“After the dismissal, the parties are simply placed back in the same contractual relationship as before, where the residential mortgage remained an installment loan, and the acceleration of the residential mortgage declared in the unsuccessful foreclosure action is revoked.”
Did you get that? The court ruled that, after the foreclosure case is dismissed, even due to lack of standing or lack of prosecution, the mortgage is restored to its regular terms. If the borrower doesn’t make payments after the dismissal, that’s a new default that creates a “new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action.”
But the bank doesn’t really restore your mortgage to its normal terms. It won’t make your payments even if you tried to make them. If the case is dismissed, but no loss mitigation solution was reached, you never have a chance to be out of default. This ruling allows the bank to assign a new default date for its renewed foreclosure action.
Florida has been one of the states most affected by the foreclosure crisis, and the ruling could increase the number of foreclosures in the state because it gives judges and bank lawyers a more clear understanding of how the five-year statute of limitations issue affects foreclosure cases.
Lawyers for homeowners worry that the ruling could add confusion and make it easier for banks to foreclose by setting a default date for whenever is convenient for them.
How to Deal with Your Foreclosure Case
The Florida Supreme Court ruling isn’t a victory for homeowners, but it’s not terrible either. It doesn’t change the options available to you to avoid foreclosure.
If all the talk about defaults, acceleration, and civil court procedures sounds like a foreign language to you, you’re not alone. It is complex and confusing. To get the best result you have to either get a thorough understanding of it or, even better, work with someone who does.
And great results are possible even for homeowners in terrible circumstances. The legal process can be drawn out, allowing a homeowner in default to continue to live in their home for years without making payments.
You may be eligible for a loan modification that reinstates your loan, lowers the principal you owe on your mortgage and gives you a more affordable monthly payment. Or you could exit your home without going through foreclosure through a deed in lieu of foreclosure or short sale.
If you have a problem with your home loan, consider consulting with Caroline Secor. Carolyn Secor P.A. focuses its practice in the areas of Bankruptcy and Foreclosure Defense in Clearwater, Florida. For more information, go to our web site www.BankruptcyforTampa.com or call 727-254-1704.