Florida Statute of Limitations
Florida has a 5-year statute of limitations on mortgage foreclosures.
The statute of limitations is a time limit to bringing on a foreclosure action. It does NOT pertain to how long the foreclosure action takes. The statute of limitation does not expire if the limitation runs out during the foreclosure process.
Acceleration in a loan agreement requires the borrower to pay off the entire loan amount immediately. Even though a borrower might have only missed a few years of payments, future payments (that they have not yet defaulted on) are immediately due as well.
The question before the Florida Supreme Court (in layman’s terms)
What happens if a foreclosure is filed and then dismissed?
Is the clock reset following the dismissal? or
Does the servicer/trustee still need to bring the second foreclosure suit within 5 years of the original default?
3 Relevant Cases
US Bank v. Bartram: Fifth District Court of Appeals
Continuing Default Theory:
Dismissal nullified the acceleration of the loan
Payments now continue to come due each month
Those new payments are now the defaulted ones.
Lender could bring a second foreclosure action because the statute of limitations is now 5 years after the new acceleration date.
Evergrene Partners v. Citibank: Fourth District Court of Appeals
Agrees with US Bank v. Bartram
“the claims of acceleration and subsequent acts of default have never been adjudicated on their merits”
“any acts of default still within the statute of limitations may be raised in a subsequent suit.”
Deutsche Bank v. Beauvais: Third District Court of Appeals
Disagrees with both prior rulings - Dismissal does not nullify the acceleration
Lender did not reinstate the loan following the dismissal
“Since five years elapsed between the acceleration and the filing of the underlying suit, the action is barred by the statute of limitations.”
“The mortgage is declared null and void “
The Florida District Court of Appeals opinions on US Bank v. Bartram and Evergrene Partners v. Citibank agree that while individual payment defaults that are more than 5 years old may be subject to a statute of limitations, each payment default that is less than 5 years old creates a basis for a subsequent foreclosure and/or acceleration action. Deutsche Bank v. Beauvais disagreed with that ruling.
Bartram is appealing to the Florida Supreme Court. (Case No. SC14-1265)
“The certified question should be rephrased as follows, and answered in the affirmative: Does acceleration of payments due under a note and mortgage in a foreclosure action trigger application of the statute of limitations to prevent a subsequent foreclosure action by the mortgagee unless there has been an effective reinstatement of the mortgage and thereafter payment defaults occurring subsequent to the reinstatement?”
In the two case studies that follow, the foreclosure was initiated early on but was later dismissed by the Court because the Plaintiff (which is the Servicer or Trustee) failed to show up to a hearing. If the Florida Supreme Court upholds the Deutsche Bank v. Beauvais decision, then a failure by a Servicer or Trustee to show up to a hearing can null and void the mortgage note. Investors will then take a massive loss on the loan by losing all principal, accrued interest, advances and fees. If the Florida Supreme Court agrees with Deutsche Bank v. Beauvais ruling, then are investors liable for Servicer errors? Unfortunately, investors will never know what caused the loss, as it will appear just like another 100%+ severity. That would not be good.
Regardless of the Florida Supreme Court ruling, there are 353 Non-Agency loans totaling $43,972,201 in Florida, which are now over 5 years delinquent and have never been subject to any foreclosure action. Unless there is some other issue, the borrowers can petition the Court to null and void their mortgage notes.
For more information, please see our Commentary dated 1/20/2015 “Non-Agency RMBS: OMG - Statute of Limitations on Foreclosure Action”
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