Article Courtesy of The Tampa
By Susan Taylor Martin
November 16, 2016
There will be no "free houses'' for Floridians who
have defaulted on their mortgages but continue to live in their homes
In a major opinion, the Florida Supreme Court has ruled that lenders can
resume foreclosing at any time, even if they have taken no action in
years. Previously, they had to act within five years of when the
borrower first defaulted.
While a boon for
banks, the ruling is a blow to thousands of delinquent
borrowers who hoped that their cases would be
permanently dismissed and that the banks could no longer
collect on the outstanding mortgage debt.
"This case resolves an important issue for Florida, one
of the states hardest hit by the foreclosure crisis,''
said Michele Stocker, a Fort Lauderdale lawyer who
represents lenders. "The decision effectively removes
the unfair notion that people can live in a home for
free after an extended period of time. It could help
clear out the backlog of cases that have been sitting
around for a while.''
By some estimates, a ruling in favor of borrowers and
against lenders would have wiped out as much as $400
million in real estate-related debt obligations in
"This ruling comes as no surprise,'' Stocker said. "Any
other ruling would have created such havoc in Florida as
it pertains to foreclosures and properties. I don't
think the Florida Supreme Court would have wanted to dip
its toe into that.''
The Florida Supreme Court has ruled that a
five-year statute of limitations does not apply in mortgage
foreclosure cases. That means lenders can resume foreclosing at
any time even if they have taken no action in years.
Matt Weidner, a St. Petersburg lawyer who represents delinquent
homeowners, agreed that the ruling was expected but said banks should
have been more diligent in foreclosing.
"Get used to living in a world where the banks always win,'' he said.
"Even before this (ruling), you can't deny that the courts had a radical
pro-business, pro-bank, pro-insurance company tilt. There was never any
way the court was going to tell the banking industry they can't collect
on billions of dollars' worth of loans.''
The high court's ruling last week came in the case of Lewis Bartram, who
defaulted on a $650,000 mortgage on his home in Ponte Vedra Beach. In
2006, the law offices of David Stern began foreclosure proceedings but
the case languished along with thousands of others when Stern's firm
collapsed amid allegations of fraud and mismanagement.
In 2011, Bartram's case was dismissed after his attorneys argued that
the five-year statute of limitations had run. U.S. Bank appealed,
however, and in 2014, Florida's 5th District Court ruled in the bank's
favor. Bartram then appealed to the state Supreme Court.
At the heart of the case was the issue of "mortgage acceleration.'' Most
mortgages have an acceleration clause that allows the lender to sue for
the entire loan amount immediately, starting a five-year clock on the
foreclosure process. The 5th District ruled that the dismissal of U.S.
Bank's lawsuit in 2011 negated the original 2006 acceleration date and
reset it to 2011, giving the bank more time to foreclose.
In their ruling, the justices agreed. They said the statute of
limitations for banks to file a foreclosure suit resets each month that
the borrower defaults on a mortgage payment. That means a bank can file
suit more than five years after the borrower first defaulted. It also
means borrowers can't stay in their homes forever without paying.
"The decision finally brings some clarity to the issue and will allow
judges who have been reluctant to rule on foreclosure cases to move
forward with ones that have been pending for years,'' Stocker said. "Now
everyone knows what is and what isn't permissible.''
Weidner, though, said the justices were excusing the "bad conduct'' of
lawyers in the Bartram case and others.
"There's no reason why a bank acting diligently should not and could not
comply with existing law and complete foreclosure,'' he said. "But we
have a court system stepping in and giving them a gift.''
If it speeds up foreclosures, the ruling is likely to help Florida
homeowner associations. After the housing crash, thousands of unit
owners defaulted on their dues. Associations had to take over the
properties and maintain them or try to rent them out while waiting for
the banks to foreclose.
At the same time, the ruling likely will put a chill on the popularity
of HOA foreclosure auctions. Some companies quickly discovered there was
big money to be made by getting temporary title to homes by bidding just
high enough to pay off the delinquent dues, often only a few thousand
dollars. Then they could rent out the homes for months or even years
until the banks foreclosed.
The Florida Attorney General's Office is investigating one company,
Tampa-based HOA Problem Solutions, that got its start through auctions
and has rented out dozens of homes in foreclosure in the Tampa Bay and