The Florida Supreme Court recently ruled in Bartram v. U.S. Bank, that when a foreclosure action is dismissed, the state’s five-year statute of limitations is reset. Now, mortgage lenders may bring subsequent foreclosure actions against borrowers for an additional five years after the suit has been dismissed if the borrower ceases payments. This decision will likely increase the number of foreclosures in Florida.
Foreclosures in Florida
Currently, Florida has the highest rate of complete foreclosures in the country. From 2015 to 2016, approximately 55,000 foreclosure actions were initiated in the state. A likely cause of Florida’s high rate of foreclosures is a law enacted by Florida’s Governor Rick Scott in 2013. The law sped up the foreclosure process in the hopes to put more homes back into the real estate market.
Bartram v. U.S. Bank
In Bartram v. U.S. Bank, the Florida Supreme Court ruled that an involuntary dismissal or judgment against a lender does not bar subsequent actions against the borrower if the borrower continues to be delinquent on payments. A mortgage lender must still bring the subsequent foreclosure suit within the five-year statute of limitations, but a court judgment against the lender does not affect the statute of limitations. In other words, if the borrower fails to make payments again, the lender can still bring another foreclosure action if they bring it within five years of the failed payment. Thus, homeowners must still pay their mortgages, even if they have won the suit or the court has dismissed the suit brought by the mortgage lender.
The court’s decision applies to residential mortgages only, as opposed to all mortgages, such as mortgages for business properties.
What Does the Decision Mean for Mortgage Lenders?
Mortgage lenders will now have a second chance to bring a foreclosure suit against a borrower, even if a court dismissed their original suit. The mortgage company is not barred by the statute of limitations to bring a subsequent suit if the lender brings the suit within five years. Since multiple successive actions are now allowed against a borrower, it is likely that there will a foreclosure increase in Florida.
What Does the Decision Mean for Borrowers?
After this decision, borrowers with residential mortgages have one less protection against mortgage companies. Now, even if a borrower has won a suit against a mortgage lender or the court has dismissed the lenders case, borrowers must continue to make timely payments, or else risk a subsequent foreclosure action.
There is still good news for borrowers. Since the Court did not get rid of acceleration revocations. In Florida, when a court dismisses a foreclosure action, the acceleration of the foreclosure is revoked. An ‘acceleration” is a term in the initial mortgage agreement requiring a borrower to make a full immediate payment or else the lender will foreclosure on the property. Revoking the acceleration allows the borrower to continue to make payments but the borrower does not need to make a full payment on the mortgage to stop foreclosure proceedings.
Also, borrowers still have many other protections against mortgage lenders. New federal laws have given borrowers more rights during the foreclosure process. The Consumer Financial Protection Bureau has enacted laws that prohibit dual tracking halting the foreclosure action while the borrower is in the process of loan modification. Borrowers facing foreclosure should consult with an attorney to ensure that their rights are protected during foreclosure proceedings.
Authored by Robin Sheehan, LegalMatch Legal Writer
A recent suit filed against CitiMortgage has questioned the effectiveness of new rules providing protection for homeowners facing foreclosure. After the mortgage crisis, the Consumer Financial Protection Bureau (CFPB) enacted new laws to protect homeowners during foreclosure proceedings. These new laws specifically prohibit dual tracking, but it appears that at least one mortgage lender is still engaging in this practice.
What is Dual Tracking?
Dual tracking is when a mortgage lender moves forward with foreclosure proceedings while simultaneously processing the homeowner’s loan modification application. During the mortgage crisis, many homeowners lost their homes to foreclosure, even though they were in the process of obtaining a loan modification. In 2014, the CFPB banned the practice in response to the mortgage crisis. Dual tracking has also been prohibited by many states.
Under the new CFPB rules, a mortgage lender cannot initiate foreclosure proceedings until the homeowner has failed to make adequate payments on his or her mortgage for 120 days. Moreover, a mortgage lender cannot move forward with foreclosure proceedings while a loan modification application is pending. The theory is that the additional 120 days give homeowners a reasonable amount of time to begin a loan modification application.
Homeowners may also begin loan modification applications after foreclosure proceedings have been initiated to stall the foreclosure process. Under CFR 1024.41(a), homeowners may submit applications up to 37 days before a foreclosure sale. Mortgage lenders must cease the foreclosure process until:
Under the Real Estate Settlement Procedures Act (“RESPA”), a homeowner may bring a lawsuit for dual tracking violations if the above requirements are not met.
Williamson v. CitiMortgage
Cheryl Williamson filed suit in Connecticut under RESPA and other Connecticut state laws prohibiting dual tracking. According to Ms. Williamson’s complaint, CitiMortgage initiated foreclosure proceedings against Ms. Williamson in 2012 when she fell behind on mortgage payments. Ms. Williamson, however, was tentatively approved for a loan modification in October 2014. On January 26, 2015, Ms. Williamson received the loan modification documents and accepted the terms that day. The last day for Ms. Williamson to redeem by making a full payment to stop the foreclosure was February 3, 2015.
After presenting evidence of the facts above, the court overseeing the foreclosure proceeding initiated by CitiMortgage dismissed the case. The actions of CitiMortgage caused Ms. Williamson to miss work for count hearings. Moreover, Ms. Williamson suffered from severe anxiety and stress during this process due to the fact she has depended siblings with disabilities that rely on her. Thus, Ms. Williamson filed the current lawsuit against CitiMortgage alleging violations CFR 1042.41(g) and other state laws.
Will Ms. Williamson Win this Lawsuit?
To prevail under CFR 1024.41(g), the homeowner must meet the deadlines set forth in the statute, submit the appropriate documents and comply with the loan modification rules. Based on the alleged facts, it is likely that Ms. Williamson has met these requirements, and thus, has a viable case against CitiMortgage.
But, the case should put homeowners on notice that mortgage lenders may still be practicing dual tracking. If you are facing foreclosure proceedings, it is advisable to consult with an attorney to ensure that the proper procedures are being implemented.
Authored by Robin Sheehan, LegalMatch Legal Writer
Since the 2008-09 housing market collapse, many homes have gone into foreclosures and have been ignored altogether. Big commercial banks that held the mortgages have given up on these homes, leaving them in disarray. U.S. Bank and Deutsche Bank are but two of the major banks that have neglected these foreclosed properties. The City of Los Angeles is suing these banks for $13.4 million. Ignoring these properties has turned these once appealable pieces of property into sources of blight or centers for crime. These now vacant properties have become home to squatters and drug addicts. City aims to hold these banks responsible for the disarray. Property value and likewise property tax has dropped because of this. City has spent millions of dollars making sure these once residential centers become formidable and of value yet again. But the banks must be held responsible.
2008-09 Recession Opened Doors to Federal Investigations of Big Banks
The 2008-09 recession and the aftermath remapped the legal framework. Dodd-Frank, among the other pieces of legislation, increased government regulation over the financial sector. Numerous lawsuits have appeared since the ‘09 financial crisis. Big banks like the aforementioned have been negligent towards their consumers and borrowers. Houses have turned into zombie foreclosures, where vagabonds and drug addicts have taken up residence. This not only drives the property value down but is a catalyst for crime and other such activities.
Mortgage fraud prior to and after the recession has been an ongoing problem as well. These large corporations have the tools to evade the federal government from prosecution. Subprime mortgages, as a form of mortgage fraud, was one of the underlying causes of the recession. Dodd Frank was a response to this and since the market’s uptick, the Fed has been hammering down on these banks and the executives responsible for such crimes. It is an ongoing problem and many have successfully managed to evade the law. To date, only a few small loan officers-small fish-have been convicted of different offenses relating to the financial crash.
Los Angeles to Hold Banks Accountable For Negligence
This lack of regulation over the financial sector has given different parties, such as the City of Los Angeles, a means to initiate legal action. Although most of these cases will be settled outside of court, it gives the commercial banks a reason to become concerned. Hopefully, this will act as a deterrent. As for the increase in crime, the City will have to take it into their own hands to ensure that the problem does not continue.
At the end of the day, the big banks should be held accountable for the negligence that results from their ongoing relationship with consumers and borrowers. Derelict nature of forgotten properties has hurt both the City and the market in many ways. Dodd Frank is a stepping stone to further legislation in this arena, but a tougher stance must be adopted in order to prevent such fraudulent and negligent behavior from occurring. It is not only the City of Los Angeles that tackles these issues; both coastal sides of the country have been hit with a great deal of foreclosed homes that have been abandoned.
Authored by Sam Behbehani, LegalMatch Legal Writer
A new California law, SB 1150, requires mortgage lenders to communicate with surviving spouses and other heirs if the borrower passes away. California’s Homeowner’s Bill of Rights, enacted in 2013, expanded the rights of homeowners during the foreclosure process, but failed to provide relief for surviving family members if the decease’s mortgage lender initiates foreclosure proceedings. SB 1150 closes this loophole in California's Homeowner's Bill of Rights and cuts through red tape for grieving family members.
The Homeowner's Bill of Rights
During the housing crisis, there were approximately 4 million foreclosures nationwide. A foreclosure is the process where mortgage lenders claim possession of property after the borrower ceases to make payments. California’s Homeowner's Bill of Rights was enacted in response to this crisis, creating additional fairness and transparency during the foreclosure process.
The Homeowner's Bill of Rights provides several protections for homeowners during foreclosure proceedings. One of the most important protections is the guarantee of a single point of contact during the foreclosure process. One person or a team of people are assigned to the homeowner’s case. The person or team handles the paperwork and works to obtain loan modification decisions. The Homeowner’s Bill of Rights also restricts dual track foreclosures. In other words, while the homeowner is trying to secure a loan modification the foreclosure process is put on hold and the mortgage lender cannot take further action to foreclose.
The Homeowner’s Bill of Rights also helps redress mortgage fraud crimes. The law expanded the attorney general’s power to prosecute and investigate crimes related to mortgage fraud. Moreover, the law extends the statute of limitations from one to three years, giving prosecutors more time to address these complex crimes.
While the Homeowner Bill of Rights provided much relief to loved ones, it did not extend these rights to surviving family members, and thus, the California legislature enacted SB 1150
SB 1150 aims to provide further protection for surviving family members facing foreclosure and closes a loophole in the Homeowner Bill of Rights. Normally, new widowed spouses and/or other heirs take on home ownership responsibilities when the mortgage holder passes away. This new law primarily helps seniors, particularly women, as women tend to outlive men by 7 years. Before the law was enacted, surviving family members, not listed on the mortgage, would have difficulties contacting mortgage lenders. There were many instances where mortgage lenders would refuse to speak with the family member without a Power of Attorney from the deceased relative or would request to speak to the deceased directly.
With the enactment of SB 1150, mortgage servicers are required to communicate basic information about the mortgage to surviving family members and also explain options for mortgage term modification. Surviving family members can also enjoy other protections laid out in the Homeowner’s Bill of Rights, such as the single point of contact guarantee. The family members are also able to assume the mortgage and modify it. Without this new law, it would often take several years for a surviving family member complete the loan modification process, during which the mortgage lender was advancing the foreclosure process. This red tape led to many preventable foreclosures for grieving family members.
Is SB 1150 a Good Idea?
There is no doubt that SB 1150 significantly helps surviving family members, but many opponents of the new law argue that it will have a negative impact on the economy. These critics contend that SB 1150 creates more risk for lenders, since it allows parties that are not on the original mortgage loan to interfere with foreclosures. This increased risk could affect the availability of credit and increase the cost of mortgage loans. Moreover, many lenders might leave the mortgage lending market, leading to job losses.
Despite these criticisms, the potential problems created by SB 1150 are overshadowed by the benefits. Homeownership is one of the primary methods families build wealth in the United States. The law reduces only unnecessary foreclosures by allowing grieving families that are able to assume the mortgage a chance the prevent foreclosure.
Authored by Robin Sheehan, LegalMatch Legal Writer
It’s not quite Halloween but zombie properties have been haunting the housing market for some time now. These are properties that have been left vacant as a result of the 2007-08 housing market collapse. These so called “zombie” properties went through foreclosures and have been left vacant. Banks have been trying to bid these houses off to buyers but the rate of purchase has been rather stagnant. These kinds of homes are located everywhere, from the Manhattan residential areas to Silicon Valley where real estate has become a new venture. Of course, the key economic principle of supply and demand plays a huge role here. The problem is that these homes are in terrible condition and cost of repair is so burdensome that it has kept interested buyers and investors away.
One legal issue that could potentially come up with these vacant properties is a rather old property concept known as adverse possession. Adverse possession is a method of acquiring title to real property by way of possession. More colloquially, it is known as squatter’s rights. The best way to explain this concept is by way of an example. Let’s say a person trespasses onto a piece of property and remains there for an indefinite period of time--the person uses the property as it were their own and no others claim a right to the property during that duration. Over the course of time, this land can legally become the property of that squatter.
The essential elements of adverse possession are: 1) person must have actual possession over the property 2) person must use the property adverse to what the true owners of the property want 3) use of the property has to be made in a way that the legal owner is aware of this and 4) continuous use of the property. Adverse possession is a form of trespass. The trespasser becomes rightful owner of the property if certain conditions are met.
Now, with regards to the zombie property, there have been numerous cases in the past few years where certain individuals have decided to take up residence on such property. Typically, such property belongs to the bank and so this becomes recognized as trespass. However, if the bank does not take measures to remove the squatter, then the squatter might be able to claim legal ownership of the property. Of course, as laid out above, the bank must have notice of such possession before the clock starts running. There is much case law addressing adverse possession and whether or not the squatter can legally be entitled to the property.
For the most part, courts have sided with the legal owner and will deem the action a trespass with civil action readily available to be made against the squatter. For many of these cases, the bank or other legal owner is completely unaware that the squatting is taking place. Big commercial banks like Wells Fargo have an extensive list of real property that is under their possession and it is only natural for some property to go unnoticed. There has to be notice of the squatter’s behavior and it is only when the legal owner disregards the squatter’s actions that the clock starts ticking. Adverse possession is a state law issue and the specifics vary from state to state. Ultimately, the benefit of the doubt will be given to the legal owner as it is their rightful property and only under extreme circumstances will the squatter be legally entitled to the property.
Other Methods of Obtaining Property
Another method of attempting to control a piece of property is another rather old doctrine—easements. Easements are somewhat different than adverse possession. Adverse possession is about possession, so there is actual legal possession over the property; with easements it is more about use rather than possession. There are many different kinds of easements, but essentially easements allows one to make use of property that does not legally belong to them and to indefinitely make use of the property if certain conditions are met. These terms are very similar to the ones outlined for adverse possession.
Prescriptive easements practically function the same way as an adverse possession action. Remember that easements are about use, not possession and hence possession is not always required before use is allowed. The bottom line is that there are various means for individuals to come into possession and control of certain pieces of property without having to take out a mortgage or dealing directly with the big banks or other lenders.
Authored by Sam Behbehani, LegalMatch Legal Writer