FLORIDA IN FORECLOSURE: Recent Changes to Foreclosures Laws Could Lead to Another Wave of Foreclosures

On November 3, 2016, the Florida Supreme Court issued its decision in the case styled Lewis Bartram v. U.S. Bank National Association, N.A., which dealt with the ongoing issue of foreclosures and the applicable statute of limitations. This new decision settled an often-litigated matter of when the statute of limitations barred a foreclosure action.

First, a bit of background: when a homeowner goes to buy a property and obtain financing from a bank or lender, that lender will require the homeowner to execute a promissory note and a mortgage. The promissory note is the document that evidences the debt and includes the homeowner's promise to pay back the debt. However, since the lender is providing a large sum of money, a promise is not enough, so the lender also has the homeowner execute a mortgage, which is a security instrument. The mortgage ties the debt under the promissory note to some sort of collateral, which in residential mortgages, will be the home itself. That way, if the homeowner stops paying the lender, the lender will be able to foreclosure the mortgage, sell the home, and recover its proceeds from the judicial sale.

In Florida, an action on a promissory note has a statute of limitations of 5 years. However, a promissory note is an installment contract. This means that, for a 30-year mortgage, there will be 360 months of payments of principal and interest the homeowner must make. If the homeowner defaults on a payment and does not bring it current, the lender can accelerate the whole debt, meaning that, in addition to the missed payments, all the payments in the future also become immediately due. The lender will then seek to foreclose to recover the full sum of the debt and not just the missed payments.

In many cases, homeowners who have gone behind on their mortgages have faced foreclosure actions that eventually were dismissed and not refiled within the 5 year statute of limitations period. Recently, however, the lenders have alleged that, upon the dismissal of a foreclosure action, that the debt is "de-accelerated" and reverts back to the homeowner needing to make the monthly payments. In other words, the lenders argue that if you faced a foreclosure on a payment due, for example, on January 1, 2016, and that foreclosure gets dismissed, then the lender can instead file a new action and allege a different default date, such as the following month of February 1, 2016, and start a new foreclosure action that will not be barred under the statute of limitations. For many foreclosures that started more than 5 years ago and were dismissed, the lenders argued that they would be able to start new foreclosure actions. This is the issue that eventually went to the Supreme Court of Florida.

In its recent Bartram decision, the Florida Supreme Court sided with the banks and agreed that, in certain circumstances, a bank can re-file for foreclosure and allege a new, different default date. The Florida Supreme Court stated that, so long as a lender files a subsequent foreclosure, it must be based on a subsequent default that is within 5 years of the filing of the subsequent foreclosure action. Accordingly, many actions that were filed in 2008-2011 and subsequently dismissed may come back for a subsequent foreclosure action. This means that the Florida foreclosure mess may be extended for a few more years as some of these remaining actions are brought back into court.

If you or someone you know is having issues with their mortgage or is facing foreclosure, please call the Liberis Law Firm. We offer free consultations for foreclosures and we can help you resolve the issues with your mortgage.