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Beauvais, and similar recent decision by other courts, may give reason for many Miami homeowners with mortgage foreclosure situations to re-evaluate what is the best course of action to "save" their home from foreclosure. For many, focus on "foreclosure defense" instead of mortgage modification are misplaced.
Modified Mortgage Payment
A HAMP and similar mortgage modifications are typically targeted to be about 31% of gross income. The 31% amount would include principal, interest, taxes, insurance, and association.
That is, the monthly mortgage payment includes, aside from principal ("p") and interest ("i"), county property taxes ("t") and the various types of property insurance ("i"). That is, the mortgage lender is not the source of a large portion of the monthly mortgage payment.
Costs to Homeowner of Not Obtaining a Mortgage Modification
Furthermore, a homeowner should consider the economic costs of delay in the obtaining of a mortgage modification or the losing of their present home with well-intentioned, but unproductive foreclosure defense. A person should considered
- what would be the interest rate on a modified mortgage - typically starting at around 2%
- what would be the interest rate on a new mortgage on a replacement home - if the person is even able to obtain one
- what is the amount of the property taxes on their present home - is the "assessed value" being capped at a low historical amount by Florida's constitution
- will the property taxes on a new home be much higher as the "assessed" value will be closer to the market value
- the costs of moving from the old house
- the closing costs of a new real estate purchase, mortgage broker, points, and taxes on a new mortgage instrument
- accruing high costs of "forced place property insurance" until the mortgage modification is achieve - these may impact the amount of a modified mortgage payment and will increase the overall payoff due at the time of sale
- raising real estate values may increase the amount of the monthly modified mortgage payment
- costs of renting vs. ownership, including its possible income tax savings
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
Beauvais, and similar recent decision by other courts, may give reason for many Miami homeowners with mortgage foreclosure situations to re-evaluate what is the best course of action to "save" their home from foreclosure. For many, focus on "foreclosure defense" instead of mortgage modification are misplaced.
Modified Mortgage Payment
A HAMP and similar mortgage modifications are typically targeted to be about 31% of gross income. The 31% amount would include principal, interest, taxes, insurance, and association.
That is, the monthly mortgage payment includes, aside from principal ("p") and interest ("i"), county property taxes ("t") and the various types of property insurance ("i"). That is, the mortgage lender is not the source of a large portion of the monthly mortgage payment.
Costs to Homeowner of Not Obtaining a Mortgage Modification
Furthermore, a homeowner should consider the economic costs of delay in the obtaining of a mortgage modification or the losing of their present home with well-intentioned, but unproductive foreclosure defense. A person should considered
- what would be the interest rate on a modified mortgage - typically starting at around 2%
- what would be the interest rate on a new mortgage on a replacement home - if the person is even able to obtain one
- what is the amount of the property taxes on their present home - is the "assessed value" being capped at a low historical amount by Florida's constitution
- will the property taxes on a new home be much higher as the "assessed" value will be closer to the market value
- the costs of moving from the old house
- the closing costs of a new real estate purchase, mortgage broker, points, and taxes on a new mortgage instrument
- accruing high costs of "forced place property insurance" until the mortgage modification is achieve - these may impact the amount of a modified mortgage payment and will increase the overall payoff due at the time of sale
- raising real estate values may increase the amount of the monthly modified mortgage payment
- costs of renting vs. ownership, including its possible income tax savings
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
In Georgia, the statute of limitations for filing a lawsuit to collect credit card debt is 6 years. This means that if your account is inactive for six years, you have a winning defense to any credit card collection lawsuit.The clock on this statute of limitations begins to run when you last use the card or when you last make a payment. There is some authority to suggest that the creditor can restart the statute of limitations clock if you acknowledge that you owe the debt, enter a payment plan, or accept a settlement offer.If you get a collection call or letter from a creditor or collection agency on a credit card debt that has been dormant for almost 6 years, it would not be wise for you to accept the call or say anything to the caller. Instead you should contact a lawyer to speak on your behalf.The expiration of the 6 year statute of limitation does not mean that the debt has expired – it simply means that if the creditor/collection agent files suit, you can (and should) raise a statute of limitations defense and the lawsuit will be dismissed. Creditors can continue to call you to demand payment. If you choose to speak with the collection agents (which I do not recommend) you only need say the following:
The statute of limitations has run on this debt and I am under no obligation to pay this debt. If you contend that you do have the right to sue me for this stale debt, please put that assertion into writing and mail it to me. Otherwise I am hereby asserting my rights under the Fair Debt Collection Practices Act – you may no longer contact me for collection of this debt.
You do not have to verify your mailing address or say anything else. Just hang up.Creditors and collection agencies sometimes file suits against consumers even after the 6 year statute of limitations has passed. If the consumer does not respond to the lawsuit, or does not raise the statute of limitations defense, the collector may obtain a valid judgment which can be used to garnish wages, seize bank accounts or lien real estate.Collection agencies, debt buyers and collection lawyers who file suit on stale debt take a risk, however. If the defendant consumer hires a knowledgeable attorney, the attorney can get the lawsuit dismissed and can pursue damages against the collector plaintiff for violating one or more consumer protection statutes.If a client of mine is receiving collection phone calls for credit card debt that is older than 6 years, I will call the collection agent and ask him if he is contending that the debt at issue is subject to legal action. If the collection agent lies, we would have a lawsuit for damages under the Fair Debt Collection Practices Act and other federal laws. Most of the time the agent will acknowledge that his company cannot sue successfully but will reference my client’s credit reports.I also send the bill collector a “drop dead” letter – which is a written notice to the creditor to stop communicating with my client, with a penalty of damages if the collection agency does not stop. Unfortunately stale debt is bought and sold all the time, meaning that the drop dead letter I send to collection agency #1 will not bind collection agency #2.Delinquent or unpaid debt can remain on your credit report for up to 7 years, then it has to come off. As far as any demand for payment on “moral grounds,” I tell the collection agent to jump in a lake.Credit card companies and collection agencies buy and sell stale debt all the time. In the bankruptcy business we call this debt “zombie debt” and it is big business – generating over $1 billion in revenue. If you get the sense that the bill collection world has a lot of the “wild west” still in it, you would be correct. As a rule, I think that nothing good at all can happen if you speak directly to a bill collector or collection agent. Instead, let me do the talking.The bottom line here is this: if you owe money to credit card companies, there is very little good that can come out of conversations between you and the bill collector. Even if bankruptcy seems like a remote option, it makes sense to talk to a bankruptcy lawyer to better understand your rights and responsibilities.In my next blog post, I will discuss civil judgments issued by Georgia courts and their “dormancy periods” which are not at all the same thing as a statute of limitation.The post Statutes of Limitation in Georgia: Credit Card Debts appeared first on theBKBlog.
I meet too many smart clients who earn terrific income but their financial life is a mess. What’s more, their cell phone bills are paid in full each month, the cable bill is paid, the dog groomer was paid and even the pizza delivery guy was paid a tip, but despite all their hard work and income somehow the mortgage did not get paid and a foreclosure sale is pending. When you ask why they are 10 payments behind on the mortgage even though they earned enough to pay it in full each month they answer that some emergency or unplanned expense came up—medical bills, car repairs, etc.—and then it began to snowball from there.
When I interview most married clients they describe their financial payment system like this. I love you. You love me. Since we love each other so much let’s get married, have kids, and open a joint bank account. Let’s work hard and deposit all our money into that one account. Here is your debit card and here is mine. All month long we use the debit cards and then at the end of the month let’s meet up at the kitchen table and pay the bills. Of course, the problem is that this was a hard month. Well, the truck broke down and little Tommy needed school pictures and we had that terrible vet bill when the dog decided it could fly. There just isn’t enough money left to pay the mortgage. Yes, what we have here is a failure to prioritize.
The fact is, some bills are more important than others. Paying the mortgage is more important than buying pizza on Friday night. We all know what these priorities are: Mortgage, Utilities, Insurance, Car Payment, House Taxes, Cell Phones, etc. There are just some bills that if you don’t pay them they kick you in the behind.
Here is the trick that can save your finances and perhaps your marriage as well. Add up all the priority expenses you must pay each month and then figure out how much they come to each paycheck. For example, if you pay $1,000 for rent, $300 for utilities, $400 for a car payment, $100 for auto insurance each month, then your monthly priority figure is $1,800. If you are paid twice a month, then you need to set aside $900 per paycheck to pay the priority bills.
Now read this: Do not mix your priority money with the rest of your money. Take the first $900 of earnings on payday and deposit it into a separate bank account. Most employers will directly deposit your paycheck into several accounts. Open a new bank account and tell your payroll department to deposit the first $900 of each paycheck into the new account. You don’t want debit cards for this account. In fact, it is best if you don’t even request paper checks. Learn how to use the free on-line BillPay service offered at most banks. When the next paycheck arrives later in the month you should have all $1,800 required to pay the priority bills. Set up the BillPay service to automatically pay your priority bills on time each month. See how simple this is? Money automatically is deposited each payday and is automatically mailed to creditors each month. No more late fees. No more defaults.
The basic idea here is to build a wall between your money—divide and conquer—by keeping the priority bill money in a separate account from the money you use to pay daily expenses. Some folks call this “Envelope Budgeting” because they actually put cash into separate envelopes each payday to pay their important bills. It’s the same concept. Divide the money. Do not comingle the funds used to pay your most important bills with money used for day to day living.
The basic idea here is to build a wall between your money—divide and conquer—by keeping the priority bill money in a separate account from the money you use to pay daily expenses
Writing a budget on paper is not budgeting. Unless the budget takes action it is no more a budget than an architect’s blueprint is a home. To budget means to divide, and not just on paper but in a physical way. You need a payday action plan. Where does the most important money you earn go on payday? Into a joint account commingled with other less important money or into a separate purpose-driven account? By utilizing separate bank accounts funded directly on payday with specific spending purposes you can take control of your money and ensure that your financial goals are achieved.
Image courtesy of Flickr and Simon Cunningham
I meet too many smart clients who earn terrific income but their financial life is a mess. What’s more, their cell phone bills are paid in full each month, the cable bill is paid, the dog groomer was paid and even the pizza delivery guy was paid a tip, but despite all their hard work and income somehow the mortgage did not get paid and a foreclosure sale is pending. When you ask why they are 10 payments behind on the mortgage even though they earned enough to pay it in full each month they answer that some emergency or unplanned expense came up—medical bills, car repairs, etc.—and then it began to snowball from there.
When I interview most married clients they describe their financial payment system like this. I love you. You love me. Since we love each other so much let’s get married, have kids, and open a joint bank account. Let’s work hard and deposit all our money into that one account. Here is your debit card and here is mine. All month long we use the debit cards and then at the end of the month let’s meet up at the kitchen table and pay the bills. Of course, the problem is that this was a hard month. Well, the truck broke down and little Tommy needed school pictures and we had that terrible vet bill when the dog decided it could fly. There just isn’t enough money left to pay the mortgage. Yes, what we have here is a failure to prioritize.
The fact is, some bills are more important than others. Paying the mortgage is more important than buying pizza on Friday night. We all know what these priorities are: Mortgage, Utilities, Insurance, Car Payment, House Taxes, Cell Phones, etc. There are just some bills that if you don’t pay them they kick you in the behind.
Here is the trick that can save your finances and perhaps your marriage as well. Add up all the priority expenses you must pay each month and then figure out how much they come to each paycheck. For example, if you pay $1,000 for rent, $300 for utilities, $400 for a car payment, $100 for auto insurance each month, then your monthly priority figure is $1,800. If you are paid twice a month, then you need to set aside $900 per paycheck to pay the priority bills.
Now read this: Do not mix your priority money with the rest of your money. Take the first $900 of earnings on payday and deposit it into a separate bank account. Most employers will directly deposit your paycheck into several accounts. Open a new bank account and tell your payroll department to deposit the first $900 of each paycheck into the new account. You don’t want debit cards for this account. In fact, it is best if you don’t even request paper checks. Learn how to use the free on-line BillPay service offered at most banks. When the next paycheck arrives later in the month you should have all $1,800 required to pay the priority bills. Set up the BillPay service to automatically pay your priority bills on time each month. See how simple this is? Money automatically is deposited each payday and is automatically mailed to creditors each month. No more late fees. No more defaults.
The basic idea here is to build a wall between your money—divide and conquer—by keeping the priority bill money in a separate account from the money you use to pay daily expenses. Some folks call this “Envelope Budgeting” because they actually put cash into separate envelopes each payday to pay their important bills. It’s the same concept. Divide the money. Do not comingle the funds used to pay your most important bills with money used for day to day living.
The basic idea here is to build a wall between your money—divide and conquer—by keeping the priority bill money in a separate account from the money you use to pay daily expenses
Writing a budget on paper is not budgeting. Unless the budget takes action it is no more a budget than an architect’s blueprint is a home. To budget means to divide, and not just on paper but in a physical way. You need a payday action plan. Where does the most important money you earn go on payday? Into a joint account commingled with other less important money or into a separate purpose-driven account? By utilizing separate bank accounts funded directly on payday with specific spending purposes you can take control of your money and ensure that your financial goals are achieved.
Image courtesy of Flickr and Simon Cunningham
I meet too many smart clients who earn terrific income but their financial life is a mess. What’s more, their cell phone bills are paid in full each month, the cable bill is paid, the dog groomer was paid and even the pizza delivery guy was paid a tip, but despite all their hard work and income somehow the mortgage did not get paid and a foreclosure sale is pending. When you ask why they are 10 payments behind on the mortgage even though they earned enough to pay it in full each month they answer that some emergency or unplanned expense came up—medical bills, car repairs, etc.—and then it began to snowball from there.
When I interview most married clients they describe their financial payment system like this. I love you. You love me. Since we love each other so much let’s get married, have kids, and open a joint bank account. Let’s work hard and deposit all our money into that one account. Here is your debit card and here is mine. All month long we use the debit cards and then at the end of the month let’s meet up at the kitchen table and pay the bills. Of course, the problem is that this was a hard month. Well, the truck broke down and little Tommy needed school pictures and we had that terrible vet bill when the dog decided it could fly. There just isn’t enough money left to pay the mortgage. Yes, what we have here is a failure to prioritize.
The fact is, some bills are more important than others. Paying the mortgage is more important than buying pizza on Friday night. We all know what these priorities are: Mortgage, Utilities, Insurance, Car Payment, House Taxes, Cell Phones, etc. There are just some bills that if you don’t pay them they kick you in the behind.
Here is the trick that can save your finances and perhaps your marriage as well. Add up all the priority expenses you must pay each month and then figure out how much they come to each paycheck. For example, if you pay $1,000 for rent, $300 for utilities, $400 for a car payment, $100 for auto insurance each month, then your monthly priority figure is $1,800. If you are paid twice a month, then you need to set aside $900 per paycheck to pay the priority bills.
Now read this: Do not mix your priority money with the rest of your money. Take the first $900 of earnings on payday and deposit it into a separate bank account. Most employers will directly deposit your paycheck into several accounts. Open a new bank account and tell your payroll department to deposit the first $900 of each paycheck into the new account. You don’t want debit cards for this account. In fact, it is best if you don’t even request paper checks. Learn how to use the free on-line BillPay service offered at most banks. When the next paycheck arrives later in the month you should have all $1,800 required to pay the priority bills. Set up the BillPay service to automatically pay your priority bills on time each month. See how simple this is? Money automatically is deposited each payday and is automatically mailed to creditors each month. No more late fees. No more defaults.
The basic idea here is to build a wall between your money—divide and conquer—by keeping the priority bill money in a separate account from the money you use to pay daily expenses. Some folks call this “Envelope Budgeting” because they actually put cash into separate envelopes each payday to pay their important bills. It’s the same concept. Divide the money. Do not comingle the funds used to pay your most important bills with money used for day to day living.
The basic idea here is to build a wall between your money—divide and conquer—by keeping the priority bill money in a separate account from the money you use to pay daily expenses
Writing a budget on paper is not budgeting. Unless the budget takes action it is no more a budget than an architect’s blueprint is a home. To budget means to divide, and not just on paper but in a physical way. You need a payday action plan. Where does the most important money you earn go on payday? Into a joint account commingled with other less important money or into a separate purpose-driven account? By utilizing separate bank accounts funded directly on payday with specific spending purposes you can take control of your money and ensure that your financial goals are achieved.
Image courtesy of Flickr and Simon Cunningham
I want to take a moment and thank all of the people that helped make 2014 such an exceptional year. I have had the privilege and the blessing to work with some truly dedicated people this year. People who really chose to put the client first in every regard. We were able to recover hundreds+ Read More
The post Year-End Thanks As We Head Into The New Year appeared first on David M. Siegel.
The December 17, 2014 Third District Court of Appeals decision in Harry Beauvais case addresses important mortgage foreclosure issues. The Court certified the case to the Florida Supreme Court, where Bartram is already pending. Beauvais .jpg)
may give reason for many Miami homeowners with mortgage foreclosure issues to re-evaluate their position. It may given indication to many that some "foreclosure defense" measures are not going to truly "save my home" from foreclosure and that efforts would be better directed towards achieving a mortgage modification under the present opportunities offered by HAMP or other programs. A mortgage modification may be the only way for most to truly "save my home."
“Technical” (Procedural) Legal Arguments
Since 2008, certainly a lot of interesting legal issues have been raised, "won" or lost about standing, chain of assignment of notes, lost notes, mortgage-backed securities, MERS, robo-signing, bearer instruments, hearsay and business record rules of evidence, statutes of limitations, and statutes of repose. But in view of Harry Beauvais, these "wins," for many homeowners, may just be a win of a "battle" but not a win of the "war." That is, they will not be the source of what truly "saves my home" from foreclosure.
Aside from the possible unproductive costs to the homeowner, who may be better served with the non-judicial remedy of mortgage modification, "foreclosure defense" that does not truly "save" the home from foreclosure, has a cost to the judicial system and the Florida taxpayer. Many economists also argue that the delay in resolving the mortgage foreclosure crisis has delayed recovery of real estate market and the availability of mortgages to new home buyers.
Delay Counter-Productive?
Another item that may be overlooked is that a monthly mortgage payment includes, aside from principal ("p") and interest ("i"), includes property taxes ("t") and the various types of property insurance ("i"). That is, the mortgage lender is not the source of a large portion of the monthly mortgage payment. The taxes and insurance remain unaffected by any changes to the principal and interest.
Furthermore, a homeowner should consider that if the present home is lost, the mortgage interest rate for the new home - if the person is able to obtain a mortgage - is likely to be much higher than that in a mortgage modification. The property taxes on a replacement home would likely be higher as the assessed value on the present home may be locked in at a low value and the taxes on a replacement home would be based on the new higher purchase price.
What Did "Foreclosure Defense" in Harry Beauvais Achieve?
What did all the efforts of "foreclosure defense" in Harry Beauvais ultimately achieve? The answer is probably - ultimately not much at all. The homeowner only won of a "battle" and not the "war." While the Court upheld the trial court's ruling that this particular foreclosure action, on the record and arguments before it, was barred by the statute of limitations - - of greater significance, the Court held that the mortgage note and mortgage including its lien, remain valid, and there was no quieting of title in favor of the homeowner. The homeowner is left somewhat in limbo.
The "big picture" may be that the homeowner may be spending significant amounts and efforts on "foreclosure defense," but the most that can be achieved on an statute of limitations argument is to bar filing of a second foreclosure second - which would leave the mortgage note and mortgage still valid. In the meanwhile the mortgage debt - at what is probably a rate of interest higher than what would be in a modified mortgage, monthly late fees and advanced property taxes and insurance accrue. It should be noted, that in a many cases, the lender is required to buy "forced placed insurance" which is sometimes triple or more the cost of a regular policy and does not even fully cover the homeowner's interests. Furthermore, the homeowner would not be able to sell or refinance the property without paying off, the continuing to accrue mortgage debt in full.
Also to note note, as referenced below, even if a foreclosure action could not be filed on the expired mortgage note default, the homeowner may still face a "new" foreclosure action - based on a breach of covenants in the mortgage, aside from the mortgage note, which also may provide a "new" foreclosure cause of action that is not barred by the statute of limitations.
Modification of Mortgage
Typically, a modified mortgage payment is targeted to be at about 31% of one's monthly income. The 31% would normally include the property taxes, property insurance, and association fees - which amount in some cases could be about 1/2 of the 31% figure - leaving only 1/2 of the 31% for principal and interest. For example, a case may be that, if the new payment is $1,500.00, $800.00 might be for property taxes, property insurance and association fees and $700.00 for principal and interest. With possible income tax benefits, the actual cost may even be less.
Statute of Limitations and Deceleration Issues
The Court in Harry Beauvais decision teaches much about "deceleration." The decision undercuts statute of limitations arguments to a large degree. The case only held that the statute of limitations came into play in this foreclosure action as the previously accelerated mortgage note had not been decelerated as the prior dismissal had been "without" prejudice. The Court held that under the applicable rule of Florida Rules of Civil Procedure, a dismissal "without prejudice"is not a "determination on the merits" and did not decelerate the mortgage note back to its original installment terms. That is, the statute of limitations ran on this "old" foreclosure cause of action before the lender filed the second action.
But the Court also held that a dismissal "with" prejudice is a "determination on the merits" indicative that the any alleged default or acceleration in the first foreclosure action was invalid or ineffective. That is, the statute of limitation never even began to run ab initio. Thereby, there would not be any issue of statute of limitations coming into play in the second foreclosure action. A second foreclosure action could be properly brought on a "new" installment payment, with a "new" default, with a "new" acceleration, which gives rise to a "new" cause of action, filed in a "new" action governed by a "new" five-year statute of limitations.
May Dismissal "Without Prejudice" Trigger Deceleration Indirectly ?
The Harry Beauvais decision held that a dismissal without prejudice does not, in and of itself, effect a deceleration. But the Court's decision did give reference on page ten to the notion that although the dismissal without prejudice in itself does not effect deceleration (i.e. is not an "affirmative act"), it could "trigger" deceleration in a different manner.
Here the Court referenced that in this instance that "[n]either the note or mortgage provides that dismissal without prejudice of the foreclosure action would negate the acceleration of the debt or otherwise reinstate the installment nature of the loan." Perhaps, this is an indication to lenders that with focus on this notion, a Court may be convinced that there is a contractual provision in the mortgage note or mortgage that is automatically triggered by the order of dismissal without prejudice.
"Legal Significance" of Language in a Complaint - Does it Also Apply to the Homeowner's Allegations? Judicial Estoppel
Otherwise references by the Court may also defeat the defense of the statute of limitations by the homeowner in a second foreclosure action. In footnote four, the Court stated that the lender's allegations in the first foreclosure complaint of acceleration were not simply "mere factual allegations", but "carried independent legal significance". This, or a similar notion, may also apply to the allegations made by the homeowner in his "foreclosure defense" in the first foreclosure action, i.e. that they too may not not be "mere factual allegations" but also carry "independent legal significance" or be otherwise of import.
If the factual allegations of the homeowner in the first foreclosure actions are also of "legal significance," they may support estoppel or otherwise defeat efforts by the homeowner in the second foreclosure action to raise a statute of limitations defense. That is, the homeowner may have alleged facts that there had not been a valid or effective default and acceleration of the mortgage note prior to the first foreclosure action. If there had not been a valid or effective default and acceleration in the first foreclosure action, the statute of limitations would not have even begun to run in the first instance and could not have run before the second foreclosure action.
It is noted that the doctrine of "judicial estoppel" generally prohibits, a litigant from taking inconsistent positions in different courts.
Foreclosure Cause of Action on Other Mortgage Covenants
One should note that Florida case law and commentators review that there are many covenants by the homeowner in the mortgage itself - aside from the covenant to pay the mortgage note installment payments. Examples of such covenants are to protect the collateral by keeping it insured or paying the property taxes. With the mortgage and its lien continuing to be valid - even if a foreclosure action on the "old" mortgage note cause of action is barred - for a very extended period of time pursuant to its statute of repose, there would in a typical case, be breaches of these separate mortgage covenants giving rise to "new" foreclosure causes of action upon which a "new" foreclosure action may be filed with "new" statute of limitations.
Conclusion
In summary, the Harry Beauvais case, although being a cold dose of reality, may prompt distressed homeowners to focus their efforts on what will truly "save my home." The opportunities to achieve a modification of a mortgage are presently probably as good as they ever will be and may, if not seized now, not be available later.
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
The December 17, 2014 Third District Court of Appeals decision in Harry Beauvais case addresses important mortgage foreclosure issues. The Court certified the case to the Florida Supreme Court, where Bartram is already pending. Beauvais may give reason for many Miami homeowners with mortgage foreclosure issues to re-evaluate their position. It may given indication to many that some "foreclosure defense" measures are not going to truly "save my home" from foreclosure and that efforts would be better directed towards achieving a mortgage modification under the present opportunities offered by HAMP or other programs. A mortgage modification may be the only way for most to truly "save my home."
“Technical” (Procedural) Legal Arguments
Since 2008, certainly a lot of interesting legal issues have been raised, "won" or lost about standing, chain of assignment of notes, lost notes, mortgage-backed securities, MERS, robo-signing, bearer instruments, hearsay and business record rules of evidence, statutes of limitations, and statutes of repose. But in view of Harry Beauvais, these "wins," for many homeowners, may just be a win of a "battle" but not a win of the "war." That is, they will not be the source of what truly "saves my home" from foreclosure.
Aside from the possible unproductive costs to the homeowner, who may be better served with the non-judicial remedy of mortgage modification, "foreclosure defense" that does not truly "save" the home from foreclosure, has a cost to the judicial system and the Florida taxpayer. Many economists also argue that the delay in resolving the mortgage foreclosure crisis has delayed recovery of real estate market and the availability of mortgages to new home buyers.
Delay Counter-Productive?
Another item that may be overlooked is that a monthly mortgage payment includes, aside from principal ("p") and interest ("i"), includes property taxes ("t") and the various types of property insurance ("i"). That is, the mortgage lender is not the source of a large portion of the monthly mortgage payment. The taxes and insurance remain unaffected by any changes to the principal and interest.
Furthermore, a homeowner should consider that if the present home is lost, the mortgage interest rate for the new home - if the person is able to obtain a mortgage - is likely to be much higher than that in a mortgage modification. The property taxes on a replacement home would likely be higher as the assessed value on the present home may be locked in at a low value and the taxes on a replacement home would be based on the new higher purchase price.
What Did "Foreclosure Defense" in Harry Beauvais Achieve?
What did all the efforts of "foreclosure defense" in Harry Beauvais ultimately achieve? The answer is probably - ultimately not much at all. The homeowner only won of a "battle" and not the "war." While the Court upheld the trial court's ruling that this particular foreclosure action, on the record and arguments before it, was barred by the statute of limitations - - of greater significance, the Court held that the mortgage note and mortgage including its lien, remain valid, and there was no quieting of title in favor of the homeowner. The homeowner is left somewhat in limbo.
The "big picture" may be that the homeowner may be spending significant amounts and efforts on "foreclosure defense," but the most that can be achieved on an statute of limitations argument is to bar filing of a second foreclosure second - which would leave the mortgage note and mortgage still valid. In the meanwhile the mortgage debt - at what is probably a rate of interest higher than what would be in a modified mortgage, monthly late fees and advanced property taxes and insurance accrue. It should be noted, that in a many cases, the lender is required to buy "forced placed insurance" which is sometimes triple or more the cost of a regular policy and does not even fully cover the homeowner's interests. Furthermore, the homeowner would not be able to sell or refinance the property without paying off, the continuing to accrue mortgage debt in full.
Also to note note, as referenced below, even if a foreclosure action could not be filed on the expired mortgage note default, the homeowner may still face a "new" foreclosure action - based on a breach of covenants in the mortgage, aside from the mortgage note, which also may provide a "new" foreclosure cause of action that is not barred by the statute of limitations.
Modification of Mortgage
Typically, a modified mortgage payment is targeted to be at about 31% of one's monthly income. The 31% would normally include the property taxes, property insurance, and association fees - which amount in some cases could be about 1/2 of the 31% figure - leaving only 1/2 of the 31% for principal and interest. For example, a case may be that, if the new payment is $1,500.00, $800.00 might be for property taxes, property insurance and association fees and $700.00 for principal and interest. With possible income tax benefits, the actual cost may even be less.
Statute of Limitations and Deceleration Issues
The Court in Harry Beauvais decision teaches much about "deceleration." The decision undercuts statute of limitations arguments to a large degree. The case only held that the statute of limitations came into play in this foreclosure action as the previously accelerated mortgage note had not been decelerated as the prior dismissal had been "without" prejudice. The Court held that under the applicable rule of Florida Rules of Civil Procedure, a dismissal "without prejudice"is not a "determination on the merits" and did not decelerate the mortgage note back to its original installment terms. That is, the statute of limitations ran on this "old" foreclosure cause of action before the lender filed the second action.
But the Court also held that a dismissal "with" prejudice is a "determination on the merits" indicative that the any alleged default or acceleration in the first foreclosure action was invalid or ineffective. That is, the statute of limitation never even began to run ab initio. Thereby, there would not be any issue of statute of limitations coming into play in the second foreclosure action. A second foreclosure action could be properly brought on a "new" installment payment, with a "new" default, with a "new" acceleration, which gives rise to a "new" cause of action, filed in a "new" action governed by a "new" five-year statute of limitations.
May Dismissal "Without Prejudice" Trigger Deceleration Indirectly ?
The Harry Beauvais decision held that a dismissal without prejudice does not, in and of itself, effect a deceleration. But the Court's decision did give reference on page ten to the notion that although the dismissal without prejudice in itself does not effect deceleration (i.e. is not an "affirmative act"), it could "trigger" deceleration in a different manner.
Here the Court referenced that in this instance that "[n]either the note or mortgage provides that dismissal without prejudice of the foreclosure action would negate the acceleration of the debt or otherwise reinstate the installment nature of the loan." Perhaps, this is an indication to lenders that with focus on this notion, a Court may be convinced that there is a contractual provision in the mortgage note or mortgage that is automatically triggered by the order of dismissal without prejudice.
"Legal Significance" of Language in a Complaint - Does it Also Apply to the Homeowner's Allegations? Judicial Estoppel
Otherwise references by the Court may also defeat the defense of the statute of limitations by the homeowner in a second foreclosure action. In footnote four, the Court stated that the lender's allegations in the first foreclosure complaint of acceleration were not simply "mere factual allegations", but "carried independent legal significance". This, or a similar notion, may also apply to the allegations made by the homeowner in his "foreclosure defense" in the first foreclosure action, i.e. that they too may not not be "mere factual allegations" but also carry "independent legal significance" or be otherwise of import.
If the factual allegations of the homeowner in the first foreclosure actions are also of "legal significance," they may support estoppel or otherwise defeat efforts by the homeowner in the second foreclosure action to raise a statute of limitations defense. That is, the homeowner may have alleged facts that there had not been a valid or effective default and acceleration of the mortgage note prior to the first foreclosure action. If there had not been a valid or effective default and acceleration in the first foreclosure action, the statute of limitations would not have even begun to run in the first instance and could not have run before the second foreclosure action.
It is noted that the doctrine of "judicial estoppel" generally prohibits, a litigant from taking inconsistent positions in different courts.
Foreclosure Cause of Action on Other Mortgage Covenants
One should note that Florida case law and commentators review that there are many covenants by the homeowner in the mortgage itself - aside from the covenant to pay the mortgage note installment payments. Examples of such covenants are to protect the collateral by keeping it insured or paying the property taxes. With the mortgage and its lien continuing to be valid - even if a foreclosure action on the "old" mortgage note cause of action is barred - for a very extended period of time pursuant to its statute of repose, there would in a typical case, be breaches of these separate mortgage covenants giving rise to "new" foreclosure causes of action upon which a "new" foreclosure action may be filed with "new" statute of limitations.
Conclusion
In summary, the Harry Beauvais case, although being a cold dose of reality, may prompt distressed homeowners to focus their efforts on what will truly "save my home." The opportunities to achieve a modification of a mortgage are presently probably as good as they ever will be and may, if not seized now, not be available later.
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
The December 17, 2014 Florida Third District Court of Appeals decision in Harry Beauvais case addresses important mortgage foreclosure issues. The primary discussion of the Court was that a dismissal "with" prejudice is "on the merits" and a disposition of the parties rights. On the other hand, a dismissal "without" prejudice is not "on the merits" and the parties "are simply placed back in the same contractual relationship with the same continuing obligations."
In this case, since the first foreclosure case was dismissed without prejudice, the existing "same contractual relationship" they were placed back into was that of an accelerated mortgage note with the statute of limitations running. The statute of limitations to bring this foreclosure action had expired prior to the filing of the second foreclosure action.
The Court further held that since the mortgage note remains accelerated "there were no 'new' payment due, there could be no 'new' default upon wich a 'new' cause of action (and newly-commenced statute of limitations) could be based"
But, the Court reversed the portion of the lower court's order "which canceled the note and mortgage and quieted title in favor of the property owner. That is, the Court held that the determination regarding the statute of limitations bar on the foreclosure cause of action, "does not compel a conclusion that the mortgage itself is null and void." The Court held that the continued validity, enforceability and termination of the mortgage is governed by Florida statute of repose.
That is, until the time limit of the statute of repose, there can arise foreclosure causes of action. Neither the lien nor the debt were extinguished.
Dismissal With Prejudice is "On the Merits", Lender and Borrower's Issues, Claims, and Defenses Whether Actually Adjudicated or Not
The Court reviews on page 15, that a dismissal with prejudice, disposes of issues "actually adjudicated" and "every justiciable issue as well," that it is "on the merits", and further cites case law that "judgment on the merits does not require a determination of the controversy after a trial or hearing on controverted facts. It is sufficient if the record shows that the parties might have had their controversies determined according to their respective right if they had presented all their evidence and the court applied the law." That is, an order of dismissal with prejudice served to "adjudicate" the "merits of the lender's claims" as well as "the borrower's defenses."
Dismissal Without Prejudice is Not "On the Merits"
On page 16, the Court explains that since a dismissal without prejudice is not "on merits." That is, it does not dispose of the rights and issues of the parties. The rights referred to are the lender's rights expressed as a foreclosure cause of action and the borrower's rights expressed as defenses.
That is, the issues of the rights and issues of the parties regarding default, acceleration and foreclosure were not disposed in the first case as the order was without prejudice. Without such a disposition, the cites the Supreme Court's statement in Singletary v. Greymar Associates, 882 So. 2d 1004, 1007 (Fla. 2004) that the parties "are simply placed back in the same contractual relationship with the same continuing obligations." The contractual relationship the parties in this case were placed back into was that of an accelerated mortgage note upon with the statute of limitations running.
Summary
In short, the Court's decision in this case is based on whether or not there was a determination of the rights and issues of the parties in the first case - that is, whether there was a determination "on the merits" or not. The Court explained that "with prejudice" is "on the merits" and "without prejudice" is not "on the merits".
The Court's review of to Olympia Mortg. Corp. v. Pugh, 774 So. 2d 863 (Fla. 4th DCA 2000), indicates that the "voluntary" or "involuntary" nature of the dismissal is not of import.
Mortgage Note and Mortgage Not Invalidated
Of most importance, the Court held that, even though the statute of limitations barred this foreclosure cause of action, the mortgage debt remained valid and the mortgage lien remained valid as its continued validity is governed by the mortgage statute of repose statute.
The implications of this holding may be that in virtually all cases the lender will be able to bring a new foreclosure action - not on the old cause of action, but on a "new" cause of action on the mortgage. It appears that most or all typical residential lenders will quickly hold a "new" foreclosure cause of action based on the breach of the mortgage covenants to pay "new" property taxes and "new" insurance premiums. If so, it appears that it is virtually impossible for a statute of limitations consideration to ever bar a "new" foreclosure action as there will always be "new" foreclosure causes of action arising until the very long mortgage statute of repose - in the typical case 20 to 25 more years - has expired on the mortgage lien.
Mortgage Modification
Beauvais, and similar recent decision by other courts,
may give reason for many Miami homeowners with mortgage foreclosure situations to re-evaluate what is the best course of action to "save" their home from foreclosure. It is clear now that many "foreclosure defense" measures in foreclosure court are not going to truly "save" their home" from foreclosure and that efforts would be better directed towards achieving a mortgage modification, which is available without court action and even without the expenditure on hiring a lawyer. The opportunities to obtain a mortgage modification under HAMP or other programs may not exist in the future or if they exist, the terms may not be as favorable.
Mortgage Modification Application
A person may complete the mortgage modification application documents online at www.documods.com and upload, fax or mail them to their lender. In many cases, the HAMP rules require the lender to stop the mortgage foreclosure while the mortgage modification application is being considered.
“Technical” (Procedural) Foreclosure Defense
That is, In most cases, winning a foreclosure defense "battle" in court is not going to win the "war" to save the home. Since 2008, certainly a lot of interesting legal issues have been raised, "won" or lost about standing, chain of assignment of notes, bearer instruments, lost notes, mortgage-backed securities, MERS, robo-signing, hearsay and business record rules of evidence, acceleration, deceleration, statutes of limitations, and statutes of repose. But in view of Harry Beauvais, "wins" on these issues, are in most cases just a win of a "battle" but not a win of the "war."
Costs to Homeowner of Not Obtaining a Mortgage Modification
Another item that is often overlooked is that a monthly mortgage payment includes, aside from principal ("p") and interest ("i"), county property taxes ("t") and the various types of property insurance ("i"). That is, the mortgage lender is not the source of a large portion of the monthly mortgage payment.
Furthermore, a homeowner should consider the economic costs of delay in the obtaining of a mortgage modification or the losing of their present home with well-intentioned, but unproductive foreclosure defense. A person should considered
- what would be the interest rate on a modified mortgage - typically starting at around 2%
- what would be the interest rate on a new mortgage on a replacement home - if the person is even able to obtain one
- what is the amount of the property taxes on their present home - is the "assessed value" being capped at a low historical amount by Florida's constitution
- will the property taxes on a new home be much higher as the "assessed" value will be closer to the market value
- the costs of moving from the old house
- the closing costs of a new real estate purchase, mortgage broker, points, and taxes on a new mortgage instrument
- accruing high costs of "forced place property insurance" until the mortgage modification is achieve - these may impact the amount of a modified mortgage payment and will increase the overall payoff due at the time of sale
- raising real estate values may increase the amount of the monthly modified mortgage payment
- costs of renting vs. ownership, including its possible income tax savings
Statute of Limitation - Dismissal With Prejudice Does Decelerate
Many prior foreclosure action may have been dismissed "with" prejudice - they thinking being that this was good for the homeowner and bad for the lender. But Beauvais indicate that it is just the opposite. A homeowner would be better off with a dismissal "without" prejudice and a lender better off with a dismissal "with" prejudice.
May a "Not on the Merits" Dismissal "Without Prejudice" Trigger Deceleration, Althought Not "In and Of Itself ?
The Harry Beauvais decision held that an dismissal without prejudice does not, "in and of itself", effect a deceleration. But that is only ruling that it does not "in and of itself", which give indication that deceleration may be triggered in a different manner. The Court reviewed that an "affirmative act" is required to decelerate a accelerate note.
On page ten of the decision, the Court reviewed the provisions of the mortgage and/or note, apparently on the possible notion that the dismissal without prejudice (although not "in and of itself") could trigger (constitute an "affirmative act") deceleration of the the note and thereby reinstate the original installment payment terms.
Here the Court referenced that in this instance that "[n]either the note or mortgage provides that dismissal without prejudice of the foreclosure action would negate the acceleration of the debt or otherwise reinstate the installment nature of the loan."
Issues of Estoppel?
The Court also made reference that the "factual allegations" of the lender "carried independent legal significance." This raises questions of the legal significance of the "factual allegations" of the homeowner in the "foreclosure defense" efforts.
That is, some foreclosure defenses are allegations that the plaintiff was not the holder of the note and have standing to bring the first foreclosure action, it may. If the involuntary dismissal without prejudice was based on such a finding by the court, this may raise some type of equitable estoppel for the homeowner to take the inconsistent position in the second foreclosure action that there actually had been an acceleration in the first action - without a prior acceleration, there was accrual of a cause of action and the statute of limitations never began to run.
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
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