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Posted on June 5th, 2014 by Mark Stopa
“Home is a notion that only nations of the homeless fully appreciate and only the uprooted comprehend.” Wallace Stegner, Angle of Repose.
Last month, I pledged to hand out $2,000 in cash each month for the rest of the year to the homeless. This month, my journey took me to downtown Tampa – the place where I’ve had more foreclosure cases than anywhere else. Upon arriving, instead of just handing out hundreds right away, I stood. I watched. I watched several men near Stetson with all of their worldly belongings in backpacks on the ground. I watched several other men near the Salvation Army on Estelle St. huddled around a plastic chess board, a few of them sleeping in the dirt, their clothes clearly not washed for a long time.
Watching them, it reminded me of that quote (above). Re-read it. Think about it. Do you know what it’s like to be homeless? Do judges? Do Plaintiffs’ attorneys? Does anyone involved in foreclosure-world know what it’s like (other than the homeowners themselves)? To fear being thrown on the street? I’ll admit it – I don’t. Oh, I counsel those in that situation, and I try to empathize with their plight. But do I *really* know what that feels like? No. That was clear to me as I watched those men, lying on the ground, dirty, hungry, and homeless.
This month, I didn’t hand out $2,000 in cash to these men I encountered. I handed out $2,100. The extra $100 wasn’t my money – it was a from a client, a wonderful man who sent me money with this letter. Read the letter. No, really – read it. That letter … that’s what it’s all about, folks. If you can’t relate to those for whom we’re fighting, then pay it forward. If you’re reading this blog, chances are you’re far better off than many others in the foreclosure crisis. Thank you, Clay Peck. Thank you for your kind words and your inspiration.
Years from now, when the foreclosure mess is all over, I don’t want people to remember Mark Stopa as the smartest or the best. I want people to know I cared. I want people to remember I always left a piece of myself, everywhere I went. Every hearing, every case, every argument, every brief … I tried. I might not truly comprehend the plight of the homeless, but I want everyone who crosses my path to know I care. Because, more than anything, that’s what’s missing in foreclosure-world nowadays.
Mark Stopa
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Posted on June 4th, 2014 by Mark Stopa
I won a trial today because the bank couldn’t prove it complied with the face-to-face counseling requirements in 24 CFR 203.604. I’ve gotten numerous foreclosure lawsuits dismissed on this argument, and it’s past time I share the argument on this blog.
Most mortgages I encounter in foreclosure-world are Fannie Mae mortgages which include the standard, paragraph 22 language. For all such mortgages, this argument does *not* apply. Unfortunately, there is no obligation to provide face-to-face counseling or to satisfy the requirements of 24 CFR 203.604 unless we’re dealing with an FHA Mortgage.
Of the 10% or so of mortgages that aren’t Fannie Mae mortgages, most are FHA mortgages. Hence, this argument applies, by my estimate, to less than 10% of all mortgage foreclosure cases in Florida. That might not seem like a lot, but if you think about the many thousands of cases pending, countless homeowner can benefit by understanding this argument. (I’m only licensed to practice law in Florida, but it certainly seems to me like this argument would work just as well in other states, particularly when you look at the out-of-state cases I’ve cited, below.)
So how do you know if you have an FHA Mortgage? Easy. Most FHA Mortgages will plainly say ”FHA” on the bottom of each page. Also, if it’s an FHA Mortgage, it will likely refer to the Regulations of the Secretary of Housing and Urban Development in paragraph 9 of the Mortgage and paragraph 6 of the Note. In particular, paragraph 9 of that Mortgage will look something like this …
9. Grounds for Acceleration of Debt.
(a) Default. Lender may, except as limited by regulations issued by the Secretary in the case of payment defaults, require immediate payment in full of all sums secured by this Security Instrument …
(d) Regulations of HUD Secretary. In many circumstances Regulations issued by the Secretary will limit lender’s rights, in case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary.
Meanwhile, if your Mortgage is an FHA Mortgage, paragraph 6 of the Note that secures that Mortgage will likely look something like this …
6. BORROWER’S FAILURE TO PAY …
(b) Default. If Borrower defaults by failing to pay in full any monthly payment, then lender may, except as limited by Regulations of the Secretary in the case of payment defaults, require immediate payment in full of the principal balance remaining due and all accrued interest. … In many circumstances regulations issued by the Secretary will limit lender’s right to require immediate payment in full in the case of payment defaults. This Note does not authorize acceleration when not permitted by HUD Regulations. As used in this Note, “Secretary” means the Secretary of Housing and Urban Development and his or her designee.
That language might sound like Greek to you. Who is the Secretary? And what are the Regulations of the Secretary of Housing and Urban Development? Well, those regulations are hundreds of pages long. One regulation, however, is very simple – barely one page. 24 CFR 203.604 requires the lender provide face-to-face counseling before accelerating and before filing suit. (You don’t need to be a lawyer to find that regulation – just google it. 24 CFR 203.604.) In my experience, the face-to-face counseling required by this regulation almost never happens. It’s supposed to, but it doesn’t. (I know, it’s shocking that banks don’t do what they’re supposed to do.) As a result, this gives homeowners with an FHA mortgage an excellent defense in a foreclosure case, i.e. the lender did not comply with a condition precedent to suit – the face-to-face counseling requirements of 24 CFR 203.604.
Like any other defense in foreclosure-world, this is hardly foolproof. I believe it requires competent counsel to raise the argument properly. That said, I’ll try to take you through the argument so you can understand it.
Like most defenses, raising this issue starts at the pleading stage. When a bank alleges in its Complaint that it complied with all conditions precedent, the homeowner must specifically deny this condition precedent in his answer to preserve the issue. Once the homeowner does so, it becomes the bank’s burden at trial to prove compliance with this condition precedent, i.e. prove it provided the counseling. See Sheriff of Orange County v. Boultbee, 595 So. 2d 985 (Fla. 5th DCA 1992).
There are five exceptions to the bank’s obligation to provide this counseling, and they’re set forth right in the regulation. The face-to-face counseling is not required if: (1) the mortgagor does not reside in the property; (2) the mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either; (3) the mortgagor has clearly indicated he will not cooperate in the interview; (4) a repayment plan consistent with the mortgagor’s circumstances is entered into to bring the mortgagor’s account current thus making a meeting unnecessary, and payments thereunder are current; or (5) a reasonable effort to arrange such a meeting is unsuccessful.
Exceptions 3 and 4 rarely come up, and, in my experience, they’re difficult for the bank to prove. Exception 2, the bank not having an office within 200 miles, never comes up if the Plaintiff is Bank of America or Wells Fargo – those banks have offices virtually everywhere. It sometimes comes up if the Plaintiff is US Bank, though. That said, note that the language in the regulation is broad – within 200 miles of the mortgagee, its servicer, or a branch office of either. As a result, most foreclosure plaintiffs won’t be able to avail themselves of this exception.
Exception 1 will preclude investors from using this as a defense, but the timing here is important. It doesn’t matter if the homeowner still lives in the property at the time of trial or at the time the case was filed – the key question is whether the homeowner lived in the property within 30 days after default or within 30 days of suit being filed. See 24 CFR 203.604(b). If so, then this exception won’t save the bank, either.
Most often, if the bank did not perform the required counseling, it will try to argue it made a “reasonable effort” to do so. However, a “reasonable effort” is defined in subsection (d) as requiring both a letter be sent by certified mail offering the counseling and that the bank make a trip to see the mortgagor at the mortgaged property. In my experience, the banks sometimes send a letter offering the counseling, but the letter is often not sent by certified mail, and the trip to see the mortgagor almost never happens. As a result, this exception often won’t save the bank, either.
In many cases – the vast majority of cases, in my experience – the bank can’t show that any of the five exceptions apply. As a result, that leaves the parties arguing only a legal issue, i.e. whether face-to-face counseling is actually a condition precedent or operates as a defense to a mortgage foreclosure lawsuit in the first place.
Unfortunately, there are no Florida appellate court decisions on this point (though I’m confident that will change in the coming months). That said, I think the law is relatively clear in this regard. Since the parties’ contract – the Note and the Mortgage – require compliance with HUD regulations, the bank can’t just ignore that contract term before filing suit. To rule otherwise would fly in the face of basic contract law. That’s why a few cases from other states which have ruled on the issue explained how face-to-face counseling is a valid defense for homeowners with an FHA mortgage. See Lacy-McKinney v. Taylor, Bean & Whitaker Mortg. Corp., 937 N.E. 2d 853 (Ind. 2010); Pfeifer v. Countrywide Home Loans, Inc., 211 Cal. App. 4th 1250 (Cal. 2012).
Lacy and Pfeifer aren’t the only two decisions to rule this way, but they’re my favorites. In each case, the court explains why face-to-face counseling is (and must be) a valid defense for homeowners facing foreclosure. The analysis starts with understanding the very nature of FHA mortgages. You see, FHA mortgages are insured by the U.S. Government. That’s you and me. As such, these loans were essentially risk-free loans for the bank. If the homeowner paid, then the bank got a performing loan. If the homeowner defaulted, then the government would pay the bank in full upon foreclosure. Risk free. As these courts explained, if the government is going to foot the bill to these banks, in full, then it’s only fair that the government can impose regulations requiring these banks to do certain things in order to avail themselves of that full payment. One such regulation is, yes, the face-to-face counseling requirement of 24 CFR 203.604.
These decisions also eliminate many of the arguments the bank lawyers like to make in opposition. For instance, I often encounter bank lawyers who try to say that the HUD regulations are between the banks and the government and homeowners can’t raise them as a defense. Sorry, but that’s wrong – particularly where the bank is required to comply with those regulations in the very contract (Note and Mortgage) it signed with the homeowner.
Likewise, the bank lawyers like to argue the HUD regulations don’t create a “private right of action,” i.e. don’t allow a homeowner to sue. There are cases supporting this position, but they are a red herring. We aren’t asserting this HUD regulation as a plaintiff in a lawsuit. We aren’t bringing a private right of action. We are merely asserting this as a defense in a foreclosure case, and Lacy and Pfeifer both make clear homeowners are perfectly entitled to do so.
I have won foreclosure cases before about 12 different judges based on this argument. It may seem novel/unique, and the judge before whom I argued it today had never heard it before. But if you lay out the argument like this, and you have an FHA mortgage, I see no reason why you can’t prevail. At its core, this is really a simple argument. The parties’ own contract required compliance with HUD regulations. Face-to-face counseling is required by one such regulation. Where the bank didn’t provide the counseling, and none of the five exceptions apply, the bank can’t foreclose.
This might be my favorite defense in foreclosure cases, even moreso than paragraph 22. I just wish I had more cases with an FHA mortgage!
Mark Stopa
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Posted on June 1st, 2014 by Mark Stopa
The statute of limitations has been a hot topic in recent weeks among consumer advocates in Florida, ever since a published decision from Florida’s appellate courts. I haven’t blogged about it yet because, frankly, it’s taken me some time to really figure out exactly how I want to say this. Well, I’ve figured it out.
The application of the statute of limitations in Florida is much more significant than most of the arguments we see in foreclosure-world. This is bigger than my paragraph 22 defense or some of the other, cutting-edge arguments I’ve discussed previously on this website. In fact, as I see it, Florida’s treatment of the statute of limitations is the ultimate litmus test for the integrity of our entire judicial system.
The way the statute of limitations operates, in my view, is (or, well, should be) abundantly clear in the mortgage foreclosure context. When a bank accelerates the balance due under the Note/Mortgage, that starts the clock on the running of the statute of limitations (five years in Florida – see Fla. Stat. 95.11(2)(c)). If five years pass after that acceleration, and the bank has not filed a lawsuit, the statute of limitations bars foreclosure on that mortgage. That means, absent other liens or encumbrances on the property, it’s a free house.
Sound too good to be true? It’s not. Or, well, it shouldn’t be. You see, the statute of limitations bars relief in virtually any legal context imaginable. If anyone wants to file a civil lawsuit in Florida and does so after the statute of limitations has run, the relief requested would be 100% barred (so long as that defendant raises the statute of limitations as a defense). It doesn’t matter how righteous that plaintiff’s cause, it doesn’t matter how damaged/injured that plaintiff may be … the statute of limitations is a black-and-white rule which all judges lack discretion to ignore, no matter how sympathetic the plaintiff. Breach of contract, fraud, negligence, virtually any criminal case except murder – you pursue it after the statute has run, you’re out of luck.
The concept of a “free house” might turn some people off (particularly those who chose to keep paying their mortgage during the Great Recession). I get that. But where the law works this way in every other context – preventing plaintiffs from obtaining relief when they waited too long to file suit – why should it be any different when it comes to a bank foreclosing on a mortgage? If the bank doesn’t file suit soon enough, then bank can’t foreclose that mortgage, even if it means the homeowner gets (or should get) to keep that house without fear of that mortgage being foreclosed.
Lest you think this is purely an academic or hypothetical discussion, let me assure you – it’s not. I have procured free houses for clients via the statute of limitations. Not often, and no, I don’t want to start getting flooded with calls for this (for reasons which I’ll explain more, below), but I’ve done it. It can work, at least in theory. In fact, it should work on a wide-scale basis – throughout Florida. You see, banks have been so, indescribably inept at prosecuting their own cases, there are many hundreds, perhaps many thousands of foreclosure cases throughout Florida for which the statute of limitations is (or should be) a defense. Yes, I’m talking a complete bar to foreclosure … on thousands of properties. Perhaps many thousands.
You must think there’s a catch. Sadly, there is (and I’ll get to that), but there shouldn’t be. Let’s go through the legal analysis.
Under Fla. Stat. 95.11(2)(c), the statute of limitations for mortgage foreclosure is five years. That’s simple enough, but what starts the running of that five year clock? Well, that depends on whether the bank has “accelerated” the balance due under the Note/Mortgage. ”Acceleration” may sound like a complicated term, but it’s really not. Acceleration does *not* mean the date a homeowner stopped paying the mortgage or the date the bank first sent a letter. Rather, “acceleration” is where the mortgage holder took some “clear and unequivocal” action to declare the full amount due under the Note/Mortgage. Typically, that means the date the bank fist filed suit to foreclose that mortgage (as virtually every foreclosure complaint I’ve ever seen includes language reflecting the bank accelerated the balance due).
Let’s back up a step. The payment obligations set forth in the Notes/Mortgages with which we deal in foreclosure-world are called installment contracts. In an installment contract, the borrower is obligated to pay not just one payment, but numerous payments on a regular and ongoing basis – the normal, monthly mortgage payments. If the borrower defaults on payment(s) and the bank does not accelerate the balance due, then the statute of limitations only operates to bar the monthly payments that should have been made more than five years ago. Let’s give an example. Suppose you stopped paying your mortgage in February of 2008, but your bank is totally asleep at the wheel and has never done anything at all to demand payment, file suit, or do anything else to accelerate the balance due. Unless your Note/Mortgage has an automatic acceleration clause (possible, but rare), that means the statute of limitations bars the bank from suing you for the February 15, 2008 payment and every payment through May 15, 2009 (because five years from May 15, 2009 is May 15, 2014), but the payments that were due on June 15, 2009 and thereafter are not barred (I’m writing this blog on June 1, 2014), nor are all payments thereafter. In fact, the five-year statute would not even have begun for all payments due as of today through the maturity of the loan in 2034.
If the bank accelerates the balance due, however, that totally changes the analysis. When the bank “accelerates” the balance due under the Note/Mortgage, that is the bank’s way of saying “you have defaulted, and we aren’t waiting for the future payment deadlines to demand payment. Instead, we are declaring all amounts that would have been owed in the future, i.e. all amounts that would have been paid through 2034, to be due *right now*.” That act of acceleration is what triggers the bank’s attempt to foreclose.
Let’s use that same example (i.e. you stopped paying your mortgage in February of 2008), but instead of the bank sitting by and doing nothing, suppose it accelerated the balance due on May 15, 2008, then did not file suit in the ensuing five years. On that fact pattern, based on what I believe is a very simple application of the statute of limitations under basic case law, any attempts by the bank to foreclose that mortgage should be barred by the statute of limitations. Unlike the prior example, where the bank could take the position that more payments were due in the future, there are no more payments due after May 15, 2008 because the bank accelerated all future payments and declared them due on that date. It doesn’t matter that the Note/Mortgage had payment obligations running through the year 2034 – when the bank accelerated the balance due on May 15, 2008, it declared all of the future sums due as of May 15, 2008. So when five years passed after May 15, 2008 without the bank filing suit, the statute of limitations should bar foreclosure of that mortgage. In other words, the “acceleration” of the balance due acts to move up (or “accelerate”) the maturity date of the Mortgage.
(Significant aside – the statute of limitations does not require a lawsuit to be finished within the operative time period, merely filed.)
Up to this point, I’ve given this argument without any case citations because, frankly, I think the law is just that clear. In my view, it’s not even reasonably debatable. Unfortunately, this is a highly politicized judicial climate in which we now live. If you’ve read this blog previously, you know I’ve lamented this concept in the past, i.e. how a small number of uber-wealthy investors associated with Fannie Mae (people like Bill Clinton) are essentially controlling the manner in which foreclosure cases are handled on the ground level by pressuring the Florida Supreme Court and Florida legislature (which, in turn, pressure our circuit court judges) to push through foreclosure cases as quickly as possible so those investors can buy foreclosed houses in bulk for 15-20 cents on the dollar. Anyway, the climate being what it is, banks aren’t going to lie down on the statute of limitations and lose the ability to foreclose on thousands of mortgages without a fight. So they crafted an argument contrary to that set forth above.
Before I get to the bank’s argument, I want you to read all of the case law on the issue. That’s where I became convinced I was right – not just from Florida law, but from all of the case law from all of the jurisdictions showing how the statute of limitations works in this context.
Under a long line of Florida cases, once a bank accelerates the balance due on a Note/Mortgage, that triggers the running of the five-year statute of limitations in Fla. Stat. 95.11(2)(c), which statute bars foreclosure if suit is not filed in the ensuing five years. See Travis Co. v. Mayes, 160 Fla. 375 (Fla. 1948) (“The rule is also settled that when a mortgage in terms declares the indebtedness due upon default of certain of its provisions or within a reasonable time thereafter, the Statute of Limitations begins to run immediately after the default takes place or the time intervenes.”); American Bankers Life Assurance Co. of Fla. v. 2275 West Corp., 905 So. 2d 189 (Fla. 3d DCA 2005) (reversing foreclosure judgment and remanding with instructions to grant judgment for homeowners based on the statute of limitations); Central Home Trust Company of Elizabeth v. Lippincott, 392 So.2d 931 (Fla. 5th DCA 1980) (“The statute of limitations may commence running earlier on an installment note for payments not yet due, if the holder exercises his right to accelerate the total debt because of a default or other reason. … To constitute an acceleration after default, where the holder has the option to accelerate, the holder or payee of the note must take some clear and unequivocal action indicating its intent to accelerate all payments under the note, and such action should apprise the maker of the fact that the option to accelerate has been exercised. Examples of acceleration are a creditor’s sending written notice to the debtor, making an oral demand, and alleging acceleration in a pleading filed in a suit on the debt.”); USX Corp. v. Schilbe, 535 So. 2d 719 (Fla. 2d DCA 1989) (“foreclosure of the mortgage is time barred by section 95.11(2)(c) and the enforceable life of the mortgage lien ended by operation of section 95.281 prior to the commencement of their action”); Greene v. Bursey, 733 So. 2d 1111 (Fla. 4th DCA 1999) (“Where the installment contract contains an optional acceleration clause, the statute of limitations may commence running earlier on payments not yet due if the holder exercises his right to accelerate the total debt because of a default.”); Locke v. State Farm Fire & Cas. Co., 509 So. 2d 1375 (Fla. 1st DCA 1987) (“It has been held that the statute of limitations on a mortgage foreclosure action does not begin to run until the last payment is due unless the mortgage contains an acceleration clause. In the instant case, the mortgage, which provides for installment payments with the last payment due in May, 2008, contains an optional acceleration clause. In such a case no acceleration occurs until the holder of the mortgage exercises his right to accelerate.”); Monte v. Tipton, 612 So. 2d 714 (Fla. 2d DCA 1993) (“The statute of limitations on a mortgage foreclosure action does not begin to run until the last payment is due unless the mortgage contains an acceleration clause. Mrs. Tipton did not exercise her right to accelerate until she demanded the total principal balance and interest by letter dated March 12, 1991, less than two months prior to filing suit.”); Spencer v. EMC Mortg. Corp., 97 So. 3d 257 (Fla. 3d DCA 2012) (“The complaint alleges that the full unpaid principal amount was due by virtue of a default on July 1, 1997. [The bank’s] officer swore in his affidavit that default occurred on July 1, 1997, and ‘the then title holder to the Note accelerated payment of the entire amount due and owing on the Note and Mortgage.’ It appears on the face of the existing record, then, that acceleration likely occurred over five years before this lawsuit was filed in late November 2002.”).
As if those Florida cases were not clear enough, under the jurisprudence of virtually every state in America (or every state where I’ve found case law, anyway), where an installment contract has an acceleration clause, and that acceleration takes place, the statute of limitations begins to run at that point. (Yes, I realize this string-cite is obnoxiously long, but that’s the point.) See Smith v. FDIC, 61 F.3d 1552 (11th Cir. 1995) (“Under Florida law, when promissory note secured by mortgage contains an optional acceleration clause, foreclosure cause of action accrues, and statute of limitations begins to run, on date acceleration clause is invoked or on stated date of maturity, whichever is earlier.”); Wheel Estate Corp. v. Webb, 679 P.2d 529 (Ariz. 1983) (statute of limitations barred suit on installment contract); Navy Federal Credit Union v. Jones, 930 P.2d 1007 (Ariz. 1996) (exercise of optional acceleration clause barred claim under statute of limitations); In re. Bennett, 292 B.R. 476 (N.D. N.Y. 2003) (“Under New York law, statute of limitations on claim for breach of installment note which contained optional acceleration clause began to run when lender elected to exercise the acceleration clause, rather than upon the earlier, initial default on an installment payment.”); City of Lincoln v. Herschberger, 725 N.W. 2d 787 (Neb. 2007) (“We conclude that the statute of limitations began to run on the date the acceleration clause was exercised. Because the City’s petition was filed less than 5 years after the City exercised its right to acceleration, the City’s claim against the Hershbergers is not barred by the statute of limitations.”); Sparta State Bank v. Covell, 495 N.W. 2d 817 (Mich. 1993) (“when an installment contract does not contain an acceleration clause, claims based upon a breach of the installment contract accrue, and the statute of limitations begins to run, as each separate installment falls due. In the absence of an acceleration clause, claims on an installment contract do not accrue until the installment becomes due. However, a different result is reached when an installment contract contains an acceleration clause and the acceleration clause is exercised.”); Cadle Co. v. Prodoti, 716 A.2d 965 (Conn. 1998) (“It is undoubtedly true that the statute of limitations clock begins to run irreversibly when an optional acceleration clause is exercised by a demand of full payment before all installments become due.”); Clayton Nat’l, Inc. v. Guldi, 307 A.D. 2d 982 (N.Y. 2003) (statute of limitations barred foreclosure suit filed in 2000 where prior suit filed in 1992); Holy Cross Church of God in Christ v. Wolf, 44 S.W. 3d 562 (Tex. 2001) (“Promissory note holder’s agreement that predecessor had accelerated note and that the statute of limitations began to run on that date amounted to a judicial admission of the acceleration date in a response to a summary judgment motion and in a counter-motion for summary judgment.”); Loiacono v. Goldberg, 240 A.D. 2d 476 (N.Y. 1997) (“Once mortgage debt is accelerated, entire amount is due, and statute of limitations begins to run on entire mortgage debt.”); Ferrari v. Citation Securities, Inc., 2000 WL 329068 (Tex. 2000) (“If a lender accelerates a note, the statute of limitations begins to run from the date of an effective acceleration.”); Lavin v. Elmakiss, 302 A.D. 2d 638 (N.Y. 2003); Ryerson v. Hemar Ins. Corp. of America, 200 S.W. 3d 170 (Missouri 2006) (“Lender’s assignee’s cause of action for payment on an installment note accrued, and ten-year statute of limitations began to run, when borrower defaulted and lender accelerated payments due on the note, effectively causing the last installment payment due and owing.”); Oaklawn Bank v. Alford, 845 S.W. 2d 22 (Ark. 2000) (“After appellee defaulted and appellant accelerated the debt, appellant’s cause of action on the debt evidenced by the note did not depend upon any further contingency or condition precedent. … We, therefore, agree with the circuit judge in his finding that the statute of limitations began to run when appellant accelerated the debt and that it barred appellant’s complaint.”); Burney v. Citigroup Global Markets Realty Corp., 244 S.W. 3d 900 (Tex. 2008) (statute of limitations began to accrue upon acceleration, barred foreclosure); Hassler v. Account Brokers of Larrimer County, 274 P.3d 547 (Col. 2012) (“ if an obligation that is to be repaid in installments is accelerated either automatically by the terms of the agreement or by the election of the creditor pursuant to an optional acceleration clause—the entire remaining balance of the loan becomes due immediately and the statute of limitations is triggered for all installments that had not previously become due”); American Mut. Building & Loan Co. v. Kesler, 137 P.2d 960 (Idaho 1943) (“Where mortgagee availed itself of benefits of acceleration clause in mortgage, future installments were immediately matured for all purposes, and statute of limitations then began to run against unmatured installments and continued to run against past due installments.”); Evans v. Kilgore, 21 So. 2d 842 (Ala. 1945) (“A mortgagee’s election to mature entire indebtedness, evidenced by notes secured by mortgage, as of date on which first of notes became due, matured all notes for all purposes on such date, so that action for balance due thereon was barred by statute of limitations six years thereafter.”); Uland v. Nat’l City Bank of Evansville, 447 N.E. 2d 1124 (Ind. 1983) (“Where note contained optional acceleration clause and bank, by virtue of letter sent to maker, who was in default in monthly note payments, exercised option to accelerate payments, but parties thereafter entered into agreements to reinstate note, initial exercise of option to accelerate was thereby revoked, and ten-year statute of limitations commenced to run only at time note was due, rather than on earlier date of exercise of option to accelerate.”); EMC Mortg. Corp. v. Patella, 279 A.D. 2d 604 (N.Y. 2001) (“Six-year limitations period applicable to foreclosure action brought by original mortgagee started to run when mortgagee notified mortgagors that their debt was being accelerated, and continued to run when that action was dismissed, so that subsequent foreclosure action brought by mortgage’s assignee was untimely, where original mortgagee did not revoke its election to accelerate.”); Driessen-Rieke v. Steckman, 409 N.W. 2d 50 (Minn. 1987) (“Creditors’ call on debentures, as provided under debenture agreement, advanced maturity date on underlying debts secured by debentures; thus, statute of limitations for foreclosure on mortgage that had been issued by debtor when call was made, in return for creditors’ forbearance for 45 days, began to run from date of mortgage plus 45-day grace period, and creditors’ subsequent foreclosure action was time barred”); Asset Acceptance, LLC v. Morgan, 2007 WL 949251 (Mich. 2007) (“If an acceleration clause is exercised, the entire unpaid balance under the contract becomes due, and the statute of limitations period no longer runs separately after each installment becomes due.”); Baseline Financial Services v. Madison, 278 P.3d 321 (Ariz. 2012) (“When an installment contract contains an optional acceleration clause, an action as to future installments does not accrue until the holder exercises the option to accelerate.”); Koeppel v. Carlandia Corp., 21 A.D. 3d 884 (N.Y. 2005) (“We agree with the Supreme Court that this action is barred by the six-year statute of limitations applicable to an action to foreclose a mortgage. The six-year statute of limitations began to run upon the acceleration of the mortgage debt.”); U.S. Leasing Corp. v. Everett, Creech, Hancock & Herzig, 363 S.E. 2d 665 (N.C. 1988) (“A cause of action for breach of contract accrues at time of breach which gives rise to right of action for purposes of applying limitations period, and, in case of obligation payable by installments, statute of limitation runs against each installment individually from time it becomes due, unless creditor exercises a contractual option to accelerate debt in which case statute begins to run from date acceleration clause is invoked.”).
Strung together in this manner, the weight of these cases is overwhelming. Florida. Arizona. New York. Texas. Connecticut. North Carolina. Michigan. Minnesota. Alabama. Idaho. Colorado. Everywhere I looked, courts were applying the statute of limitations in the same way I described above. Perhaps more powerful than sheer volume of these cases, though – and the number of different jurisdictions from which they emanate – was the absence of *any* case law to the contrary. No court in any state was allowing foreclosure in the face of the statute of limitations where a bank accelerated and five years passed (or however many years under that state’s statute) without the bank filing suit. None.
I found this argument so powerful, with the cases listed out in this format, that’s exactly how I presented the argument when the bank argued against the statute of limitations in a recent quiet title lawsuit I filed in federal court.
In the face of all of these authorities – numerous, long-standing cases from across the country – bank lawyers in Florida have begun arguing the statute of limitations does not apply in the manner I’ve described. They rely principally on a case called Singleton v. Greymar Assocs., 882 So. 2d 1004 (Fla. 2004). Though that case might appear persuasive at first blush since it comes from the Florida Supreme Court, the obvious problem is that the decision does not even mention the statute of limitations! Yes, bank lawyers throughout Florida have been trying to prevent the statute of limitations from operating in the way I’ve described above – in the face of all of these case authorities – by relying on a case that does not even mention the statute of limitations.
Singleton stands for the proposition that a bank can file suit for foreclosure even where a prior suit was dismissed with prejudice because the payment obligations under the Note/Mortgage are continuing obligations. That sounds contrary to our standard beliefs about dismissals “with prejudice” because it is. Typically, when a plaintiff’s lawsuit is dismissed “with prejudice,” that means the plaintiff can’t sue again. What’s different about foreclosure cases, though, is the nature of an installment contracts. Using my example above, if the homeowner stopped paying in February of 2008, the bank accelerated the balance due in May of 2008 and filed suit, if that suit is dismissed with prejudice that same month, then the bank is prevented from ever obtaining relief regarding the non-payments in February, March, April, and May of 2008. However, the monthly payment obligations continue through 2034, and, under Singleton, nothing stops the bank from filing another suit regarding those, future payments (if not made).
Confronted with the possibility of losing hundreds if not thousands of mortgages due to application of the statute of limitations, bank lawyers started arguing Singleton did not bar suit even when more than five years passed after the bank accelerated the balance due under the Note/Mortgage. In other words, the banksters wanted Florida courts to treat the statute of limitations as if it did not exist. Acceleration? Five years passed? Pfft. We can still sue under Singleton because the dismissal of the foreclosure suit operated to “nullify” the acceleration or “de-celerate” the balance due.
I think this argument is total hogwash and completely devoid of any merit whatsoever. Again, the only case the banksters rely upon for this position – Singleton – did not even mention the statute of limitations. Any lawyer knows there is an enormous difference between being able to sue again after a dismissal with prejudice (particularly when filing suit less than five years post-acceleration) and being able to sue after passage of the statute of limitations. In other words, the doctrine of res judicata (the legal concept when a case is dismissed with prejudice) is totally different than the statute of limitations. That’s why, again, banks could cite *NO CASE* supporting this position in the context of the statute of limitations – not just from Florida, but anywhere.
A few weeks ago, that all changed. In U.S. Bank v. Bartram, Florida’s Fifth DCA applied Singleton in the statute of limitations context, ruling the statute of limitations did not bar mortgage foreclosure even where the bank accelerated the balance due, then did not file suit in the ensuing, five-year period. Candidly, I find this analysis so distorted, and so contrary to established law (above) that it’s hard to know where to begin. But let’s start with a concept you’ve all heard me talk about many times – paragraph 22.
You know about paragraph 22 of the standard, Fannie Mae mortgage because I have blogged about the banks’ obligation to give this notice many times. But paragraph 22 does more than require this notice – that’s the paragraph of the mortgage which allows acceleration and foreclosure in the first place. You see, if an installment contract had no right to accelerate, the banks could not accelerate the balance due – they could only sue for the monthly payments not made. It’s only because paragraph 22 sets forth the right to accelerate and foreclose that the banks can accelerate the balance due, i.e. declare future payments immediately due and payable. So it’s obviously important that the parties’ contract spell out this right. Yet guess where the banks’ right to “de-celerate” the balance due (or to “nullify” the acceleration) is contained in the mortgage? Nowhere! The contract, i.e. the Note/Mortgage, say nothing about de-celeration because it doesn’t exist. It’s a made-up term, made up by the banksters and their lawyers to try to frivolously avoid losing a bunch of mortgages to the statute of limitations. There’s nothing in the Note/Mortgage about giving notice to the homeowner about “de-celeration,” either (or the right to resume making normal, monthly payments that would come with de-celeration) because, again, the concept does not exist.
Sadly, even though this entire concept does not exist – either in case law or the parties’ contract – the Bartram court let these banks get away with it. With respect to anyone who disagrees, I find it terribly wrong – just WRONG – for anyone to suggest a bank can make up a contractual term – literally, just make it up (and for a court to allow them to get away with it) – simply to create the result that it wants to create, i.e. being able to ignore the statute of limitations and foreclose. If that sounds harsh, re-read all of those cases. And show me something to the contrary – go ahead, I dare you. (In fairness, there is one scenario under the law where de-celeration can take place – where the homeowner resumes making monthly mortgage payments and the banks allow it. That’s how any contract works – if the parties agree to resume making monthly payments, then it’s their contract, so they can. Absent that, however, the acceleration remains in place.)
Ahh, yes, say the banksters … but when that first suit is de-celerated, it’s not the bank trying to de-celerate, it’s the court doing so (by dismissing the case). Again, that’s wrong. There no case law saying that a court dismissing a case operates to de-celerate the balance due and prevent the running of the statute of limitations. In fact, the cases hold precisely the opposite. Quite simply, where the balance due is accelerated by filing suit and that suit is then dismissed, the statute of limitations runs from when that suit was first filed. See Wood v. Fitz-Simmons, 2009 WL 580784 (Ariz. 2009) (“An affirmative act by the lender is necessary to revoke the acceleration of a debt once that option has been exercised. And, where a debt has been accelerated by the filing of a lawsuit, a trial court’s dismissal of the action is not by itself sufficient to revoke the acceleration and extend the limitations period.”); Federal Nat’l Mortg. Ass’n v. Mebane, 208 A.D. 2d 892 (N.Y. 1994) (“Contrary to Metmor’s contention, although a lender may revoke its election to accelerate all sums due under an optional acceleration clause in a mortgage provided that there is no change in the borrower’s position in reliance thereon, the record is barren of any affirmative act of revocation occurring within the six-year Statute of Limitations period subsequent to the service of the complaint in the prior foreclosure action, wherein the holder of the mortgage notified the borrowers of its election to accelerate. It cannot be said that a dismissal by the court constituted an affirmative act by the lender to revoke its election to accelerate.”); Clayton Nat’l, Inc. v. Guldi, 307 A.D. 2d 982 (N.Y. 2003) (“Contrary to the plaintiff’s contention, the dismissal of the 1992 action for lack of personal jurisdiction did not constitute an affirmative act by the lender to revoke its election to accelerate.”). Again, the banks have no case law to the contrary, as none exists. But that didn’t stop the Bartram court from ruling how it did … sigh.
The only good aspect of Bartram is that it certified the question to the Florida Supreme Court. At least that way we’ll get a decision, once and for all, from our highest court. For me, the Florida Supreme Court’s ruling in that case will be the ultimate litmus test for the integrity of our entire judicial system. Is the system irretrievably broken? Is it so influenced by politics that the Court won’t follow well-established law existing for dozens of years throughout numerous jurisdictions? Is the pressure/pull from the Fannie Mae cronies so great that a bank-oriented result is going to happen regardless of case precedent? I suppose only time will tell. Regardless of what happens, though, I know what the result should be, and so do the banksters. Again – here’s the memo.
So what do I say to all of the homeowners in Florida who want to know if the statute of limitations is a viable defense? Well, my confidence in how the statute applies is the same now as high as it was before Bartram, but my confidence in our courts to rule that way is obviously much less. I suppose we’ll just have to see what happens.
Thank you to the colleague who helped me put this research/memo together. (You know who you are.) Your fine work was appreciated.
Mark Stopa
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Posted on May 3rd, 2014 by Mark Stopa
This past Friday, I had several hearings in foreclosure cases before a judge in St. Petersburg before whom I appear regularly. There is mutual respect between this judge and I, and we each do our best to make our respective experiences as pleasurable and, dare I say, fun, as possible. Anyway, during the course of these hearings, the judge joked that I must drive a Porsche or a Maserati given all the foreclosure cases I’ve gotten dismissed over the years. While I know it was purely said in good fun, this disappointed me.
You see, I don’t drive a fancy car. I drive a Toyota Prius with 130,000 miles. More than that, though, the judge’s comment disappointed me because if that’s the perception I’ve left with the judge – that I’m in it for the fees, money, and fancy cars, then I’m doing it wrong. I know the judge was just kidding around, but still … the hint of that perception must change. And it will change, starting now.
You see, I don’t do what I do for the fees. Sure, I have to run a business and pay staff, and of course, I like/need to make money for myself and my family. For me, though, foreclosure defense is about fighting for justice. About ensuring the integrity of the judicial system even as the powers that be try to push foreclosures through the system at lightning speed. About helping people. About creating law in ways that will help consumers. About keeping people in their homes and preventing homelessness.
To help prove that point, and leave no doubt about my intentions (among judges whom I appear or anyone else), I have a new plan. Starting this month (on a random date of my choosing), I’m going to take $2,000 cash – all hundreds – and hand it out to randomly-selected homeless people, in my sole discretion, in Williams Park in St. Petersburg (a known hangout for homeless in St. Pete, just blocks from where the judge made his comments). And I’m going to do the same thing in other, randomly-chosen places throughout Florida once per month for the rest of the year. That’s $2,000, once per month, cash, in hundreds, handed out to homeless people as I see fit – for the rest of 2014.
I’m going to help people. I’m going to help the homeless. I’m going to make sure everyone knows that’s why I’m in this. And, yes, I’m going to keep driving my Prius (until it will drive no more).
Mark Stopa
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Posted on March 28th, 2014 by Mark Stopa
For much of the last two-plus years, paragraph 22 has been my baby. I’ve argued it in Florida courtrooms many hundreds – perhaps thousands – of times. I’ve blogged about it (here, here, and here), trying to help everyone understand the argument. I’d like to think this has changed foreclosure defense in Florida. I feel like it has for my clients, as I’ve had hundreds of foreclosure cases dismissed (by 32 different circuit court judges in 10 different counties) on this basis.
Like anything in law or in life, paragraph 22 doesn’t always work. Many judges don’t like it. Many don’t agree with it. The biggest problem, though, has been the relative absence of published case law from Florida’s appellate courts. As a result thereof, any two, randomly chosen, circuit court judges could pick up the same paragraph 22 letter and reach vastly different conclusions. Some may think the information in the letter is sufficient; others may not. Some may think the letter must “comply,” others may believe “substantial compliance” is okay.
By and large, that’s what has been happening for much of the last two years. Some judges will dismiss a case based on certain language in the paragraph 22 letter, while other judges won’t. Having argued this many hundreds of times, the randomness of the results I obtain is sometimes difficult to accept. Particularly in counties where the judges who preside over foreclosure hearings randomly rotate, the difference between winning and losing a case can hinge not on what the paragraph 22 letter says, but on what judge happens to be sitting on the bench that day. Since the American justice system strives to give predictable, consistent rulings, that’s obviously not ideal.
Within the last week, though, the landscape has changed. After going many months without any published decisions on paragraph 22 from the appellate courts, we got two such decisions within the past week. Interestingly, the homeowner prevailed in one such appeal but lost in the other. So where are we? What’s the current state of the law on paragraph 22?
U.S. Bank v. Busquets and Samaroo v. Wells Fargo Bank may seem vastly different, particularly given the result in each case. However, I see these decisions as remarkably similar, helping frame the issues for judges and counsel in foreclosure cases.
First, prejudice is irrelevant. Banks love to argue prejudice in the paragraph 22 context by saying, in layman’s terms: ”sure, the letter may not contain the information required by paragraph 22 of the mortgage, but the homeowner wasn’t paying the mortgage anyway, so any defects in the language of the letter are irrelevant.” Now that we have three cases – Busquets, Samaroo, and Judy v. MSMC Venture, LLC, 100 So. 3d 1287 (Fla. 2d DCA 2012) – which have engaged in a paragraph 22 analysis without discussing prejudice, I think it’s fair to say the concept of “prejudice” in the paragraph 22 context is dead. It doesn’t matter whether the homeowner is harmed by defects in the paragraph 22 letter – the letter still must contain the required information.
Score one for homeowners here.
Similarly, “substantial compliance” is dead. Busquets, Samaroo, and Judy do not engage in a “substantial compliance” analysis. Re-read Judy and Busquets and you won’t find “substantial compliance” mentioned anywhere. It’s completely missing. As I see it, if ”substantial compliance” were how courts were supposed to evaluate paragraph 22 letters, these decisions would have at least mentioned the term. Meanwhile, the Fifth District in Samaroo explicitly rejects the concept, saying substantial compliance is ”an argument we cannot credit.”
This is a huge win for Florida homeowners. Huge. Some may disagree, but what I see is three published decisions, none of which adopt a “substantial compliance” analysis, all of which make it clear that ”close enough” is not good enough. Hooray! “Substantial compliance” is dead.
One defect is one too many. The paragraph 22 letters in Judy and Samaroo had just one defect, yet both courts did not allow foreclosure based on that one defect. As such, I think it’s clear a bank cannot foreclose in Florida if the paragraph 22 letter is missing just one piece of information. (Notably, even if “substantial compliance” were the standard, the Florida Supreme Court has adopted this same approach – one defect is one too many – in that context. See Olivier v. City of St. Petersburg, 65 So. 2d 71 (Fla. 1953)).
Read the letter – nothing more. Perhaps the best part of these three cases, though, is the most subtle. Do you notice, in all three decisions, how the courts do nothing except look at the letter and decide whether it says what it’s supposed to say? Under no circumstance do the courts resort to extrinsic evidence. At no point do they cite the need for testimony (from homeowners, banks, or any witnesses). Clearly, no testimony is necessary to evaluate the sufficiency of the letter. Instead, judges review each letter and determine, as a matter of law, whether the letter says what it is supposed to say.
I don’t want to bog you down with legalese, but this makes a huge difference. If testimony were needed to adjudicate the sufficiency of a paragraph 22 letter, getting a case dismissed on this basis would be much harder, much more complicated, and much more expensive. But it’s not. It’s easy. Get the bank to produce the letter, admit in a deposition, interrogatory answer, or affidavit that is the letter it sent, and set a motion for summary judgment for hearing. Following Judy, Busquets, and Samaroo, the judge can look at the letter and decide, as a matter of law, whether the letter says what it needs to say. If it doesn’t, your case should be dismissed.
For two-plus years, I’ve been doing precisely this. I’ve been moving for summary judgment, presenting the paragraph 22 letters to judges, and arguing they are defective. I’ve been arguing prejudice and substantial compliance are not part of the analysis, that testimony regarding the content of the letter is unnecessary, and the judges can rule on the content of the letter as a matter of law. Now, the appellate courts have accepted this approach. It won’t always work (see Busquets), and not every letter is defective. But paragraph 22 is not only live and well in Florida, it’s never been better.
Mark Stopa
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Posted on March 16th, 2014 by Mark Stopa
“Change the world.” I know what you’re thinking – “Stopa is swinging at windmills again.” Look … I know it’s a cliché, and yes, ”changing the world” sounds impossibly optimistic. But if you never read another blog from me again, please … read this one.
This is a hard week for consumer advocates. We’re all struggling to keep our composure as we read this 150-page manual from Wells Fargo, illustrating in painstaking detail the extent of the fraud that exists in foreclosure-world. I could go on and on with examples, pulling excerpts from the manual and showing just how crooked these banks are and how corrupt the process has become. Instead, I’ll give just one.
Page 17 of Wells Fargo’s own manual shows that when Wells Fargo wants to foreclose, and doesn’t have an endorsement on the original Note, it doesn’t send the Note to a prior owner/holder to get endorsed, but has its own employees (the “WFHM Default Docs Team”) execute that endorsement. Please stop and think about that for a minute.
In Florida, the law has morphed in recent years to clarify that all a bank needs to foreclose is possession of an original, endorsed Note. That endorsement, of course, is supposed to be signed by the *prior* owner/holder of the Note – the entity that transferred/sold the Note to Wells Fargo. In a fraud-free world, that’s how endorsements would be done – the prior owner/holder of the Note signs an endorsement when it transfers/sells the Note to Wells Fargo. But here we have Wells Fargo’s own manual showing that when it doesn’t have an endorsement from the prior owner/holder, all it does is have its own employees effectuate that endorsement.
If you’ve ever wondered why, when you review endorsements on Notes in foreclosure cases, you see the same few signatures over and over again (Joan Mills, in Wells Fargo’s case, or Michelle Sjolander, for Bank of America), this is why. When the endorsements are effectuated, they aren’t signed with an original, wet-ink signature, as would happen in the ordinary course of business if one bank were legitimately transferring possession of the original Note to another bank. Instead, the bank that wants to foreclose puts a stamp of an endorsement on the Note (not a signature but, literally, a stamp of a signature) and tries to use that endorsement as proof of standing.
Is this really what foreclosure “proof” has become? The bank that has the Note lacks the requisite endorsement, so it just stamps an endorsement on the Note itself? “Here you go, Court. Here’s the original Note with an endorsement. Never mind that we put the endorsement on the Note ourself; here’s the endorsed Note.”
An increasing number of people in this country are disgusted with how the big banks get away with stuff like this, particularly when they’re the ones that crashed the global economy not so long ago. In fact, just today, the New York Times published this story, explaining how “our” government has completely dropped the ball in prosecuting these criminal banksters. If you’re rich and powerful in the banking industry, you don’t get punished no matter how bad your misconduct – it’s really that simple. And that’s not my spin – that’s straight from the New York Times.
At times like this, I want our courts to exhibit the utmost integrity. I want our courts to show the public that they don’t tolerate this type of misconduct. Unfortunately, these big banks are powerful. Throughout the country, and including here in Florida, the banks and their related business interests put immense pressure on the legislature to “clear the backlog” of foreclosure cases. The legislature, in turn, strong-arms our courts to push through the cases. As a result, right now in Florida, there are, literally, quotas in place. The legislature is telling our courts, right now: “Clear this number of foreclosure cases or you won’t get additional funding.” The deadline is June 30, 2014.
How powerful are the interests creating the pressure to “clear the backlog”? Remember my blog posts from months ago (another topic which nobody will talk about, hence the corruption of it all) – it takes 10 million dollars in demonstrable net worth to be invited to a foreclosure auction held by Fannie Mae, the auctions at which foreclosed properties are sold in bulk for pennies on the dollar to rich and power investors like Bill Clinton.
Think about that for a minute. Here we have court systems throughout Florida killing themselves to prosecute cases faster … so properties can be sold in bulk in secret sales to uber-wealthy investors like Bill Clinton? All so the courts can get a pittance of funding from the legislature which is controlled by the lobbyists hired by the rich and powerful?
I’m confident many judges dislike this dynamic. After all, as we all learned in grammar school, the judicial branch of government is supposed to operate independent of the legislature; the latter is not supposed to be able to tell the former what to do. Unfortunately, though, these judges aren’t allowed to speak out.
I’ve tried speaking out (both via this blog and in courts throughout Florida on a daily basis). I’ve tried supporting our good judges in Florida (of which, despite the foreclosure morass, there are many). I’ve tried screaming from the rooftops about the inequity of it all. But I’m just one person, and I can’t do it alone. The foreclosure process is a runaway train, too big and too fast for me to stop it myself. That’s why I need your help.
I’m optimistic I can get the ear/attention of the powers that be. Maybe I’m crazy/naïve, but I think I can. If so, I don’t want to be unarmed. You see, it’s one thing for me to explain the perversities of the process myself; it’s another for me to have proof. You, ladies and gentlemen, can give me that proof.
If you’ve had a bad experience in foreclosure court in Florida, share it with me. I’m not talking about how you lost your case/home when you think you should have won. And I’m not asking for tear-jerking stories of personal strife (e.g. I had cancer and the judge foreclosed on me anyway). I want testimonials from Florida homeowners which reflect a lack of integrity with the system as a whole. I’m talking about things like:
– The judge would not let me speak, at all.
– I was denied a continuance after the bank got three continuances.
– My motion was set for hearing at the same time as 30 other motions in other cases and I was limited to 60 seconds of argument
– At trial, the bank’s lawyer did not even have to ask any questions, as the judge asked all the questions and prosecuted the case
– The court said it “did not care” that the appellate court ruled on an issue (or anything to that effect), ruling the opposite of how the appellate court ruled. (This is a slippery slope. Reasonable people can disagree about the law or how it applies in a particular case. So I’m not asking for long explanations of how you think the judge got it wrong. Instead, I’m asking for any stories where the judge said he/she “did not care” how the appellate court ruled, “did not agree” with the appellate court’s ruling, or anything of that ilk.)
– The court declined to accept a settlement agreement of entry of a foreclosure judgment with an extended sale date, even though it was agreed upon by both parties. “You agree to entry of judgment with 120-day sale date? That’s too far away. 30 day sale date.”
– The court declined to reschedule a foreclosure sale where both parties agreed it should be rescheduled based on a settlement or settlement discussion (because the court wanted the sale to take place sooner).
– The court induced a pro se homeowner to consent to judgment when he/she wanted to go to trial (e.g. “if you consent to judgment, I will set a 120-day sale date, but if you oppose the trial, you will get a 30-day sale date”).
Please do not misunderstand the intent here. I don’t want or need any judges’ names. If you give me judges’ names, those names will be deleted. This is NOT a forum to criticize a judge or to complain that Judge X ruled against you. Many homeowners have been foreclosed, and many of them were appropriate rulings. My point here is to obtain testimonials reflecting the fairness of the judicial process in Florida and how that made you feel about the court system as a whole. It doesn’t even have to be your case – just something you saw/observed that reflects the fairness/integrity of the system. Particularly if this was your only experience in a Florida court, I want to know how your experience/observations make you feel about the judicial system.
Please limit your letters to 200 words or less and send the letters to: Stopa Law Firm, Attn: Testimonials, 2202 N. West Shore Blvd, Suite 200, Tampa, FL 33607.
If you send such a letter, you agree there is no attorney-client privilege regarding the contents of that letter and consent to my use of the letter, in my discretion, as I see fit.
I make no promises here, folks. Like I said, this a huge, runaway train with no brakes, and I’m just one man. That said, I’m hopeful, if I can compile some testimonials like I’m envisioning, that we can effectuate some real change in how the system operates. After all, maybe it’s the optimist in me, but I can’t help but believe that the powers that be would shudder if they realized just what’s happening in our courts on a regular basis.
Mark Stopa
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Posted on March 1st, 2014 by Mark Stopa
If you’ve ever sat through a mass-motion calendar in foreclosure court, you’ve seen it happen. An elderly or disabled homeowner appears pro se and makes a heart-wrenching, emotional argument why he/she shouldn’t be foreclosed. Cancer. Job loss. Nowhere else to live. Invariably, the judge will respond with something like “I’m sorry, but that’s not a legal defense to foreclosure.” Often, in fact, Florida’s judges are so used to hearing these stories from homeowners that they begin each hearing by asking “do you have any legal defense to foreclosure?” (emphasizing the term “legal defense”).
As much as we may not like it, equity does not trump law. If my client is 85, cancer-stricken, and has just six months to live, that is not a reason for a judge to deny foreclosure. We might think it should be, but it’s not.
I often find myself lamenting this concept, but, fortunately, it works both ways. You see, just as a judge cannot ignore the law when foreclosure might seem terribly unfair to the elderly/disabled woman, the judge cannot ignore viable legal defenses just because that judge might find it inequitable for the homeowner to live in the house for free.
Unfortunately, I see this concept more and more nowadays. Judges have been litigating foreclosure cases for five years. Some are tired of dealing with it. All are under immense pressure from higher-ups to “clear the backlog” of foreclosure cases. This has caused some judges to view certain foreclosure defenses as inequitable. ”They’re living in their house without paying, so why should I dismiss the foreclosure suit against them based on some technical defense?”
To be fair, most judges won’t come right out and say it like that. But if you litigate for homeowners enough, you can see this thought process from some judges. ”Foreclosure is an equitable proceeding. I can rule in a way that I find equitable.” Sometimes, that means disregarding defenses for the sake of a more expeditious foreclosure.
Respectfully, I believe that’s the wrong approach.
Let’s give some examples.
Florida Statute 57.011 requires any plaintiff who is not a resident of Florida to post a $100 non-resident cost bond upon filing suit. Under the terms of the statute, if the plaintiff doesn’t post the bond, the defendant gives written notice of the failure to do so. Then, if the Plaintiff still doesn’t post the bond, the defendant moves for dismissal and the court “shall” dismiss the lawsuit without prejudice.
I can totally see how enforcement of this statute, as drafted, seems terribly inequitable. What is the point of a $100 cost bond, anyway? To ensure a defendant can recoup $100 if the case is dismissed? Are we really going to dismiss a case over $100? Perhaps unsurprisingly, many judges don’t like dismissing a foreclosure case when a plaintiff fails to post the non-resident cost bond. Some have outright told me they “do not dismiss cases” on this basis. That sounds reasonable, perhaps, but I respectfully submit it is wrong.
It doesn’t matter if the judge thinks a statute is arcane and outdated, that dismissal is too harsh of a penalty, or that the defendant shouldn’t get to recoup attorneys’ fees for winning the case on a “technicality.” A judge’s role is to enforce statutes as they are written, not to inject his/her own, subjective views of equity in applying a statute. After all, that’s how our government is set up – judges enforce statutes and the legislature writes (and re-writes) them. Florida’s highest courts have explained this concept on many occasions – statutes must be enforced even if the judge finds it unfair to do so. See e.g. Thomas v. State, 65 So. 2d 866 (Fla. 1953) (“in deference to the Legislative Department of the Government, we have no authority to ignore the statute. Whether or not we believe in the statute is immaterial. If the statute is unwise, the remedy is to repeal by legislative enactment and not by judicial decree because we disagree with it.”).
Similarly, I’ve had a lot of success getting foreclosure cases dismissed when the paragraph 22 letter the bank sent before filing suit did not contain the information required by that paragraph of the mortgage. That’s not to say all cases turn on this, of course. After all, some of these letters are sufficient and some are not, and most judges will rule accordingly (dismissing the cases where the letter is the requisite information and not dismissing those that are sufficient). Some judges, though, don’t rule that way. Most won’t come right out and say so, but some judges have never found a paragraph 22 letter that did not “substantially comply.” Since there is not one appellate decision in Florida that says “substantial compliance” is the standard in the paragraph 22 context – not one – I don’t believe these judges are ruling this way based on law, but a mixture of law and what that judge perceives to be equitable.
On one level, I can understand that. Why should a foreclosure case be dismissed because a letter a bank sent a homeowner before filing suit did not say precisely what it was supposed to say? I get that argument, I do. But where the parties’ contract required that letter to contain certain information before filing suit – in a contract drafted by the bank and put in boldfaced font – how can anyone choose to ignore the parties’ own contract simply because they wouldn’t like the result of enforcing that contract as written?
As I see it, all of us in foreclosure-world must insist the law be enforced and subjective views of equity be cast aside. As much as we might want sympathy to guide a judge’s decision when dealing with that elderly/handicapped woman, equity can’t drive the train. Otherwise, our entire system of laws gets thrown by the wayside in favor of what each judge thinks is fair. ”Law” would cease to exist, being replaced by each judge’s subjective view of equity. We just can’t have that.
This might sound like I’m saying “judges aren’t fair.” That’s not what I’m saying. My point is that our system of laws can’t operate in a way that each judge rules based on what he/she thinks is fair because there is no way to enforce that. After all, if you take any two, random people, they will often disagree on what is fair or equitable. Realizing that Florida has many dozens of judges, with a myriad of different backgrounds and experiences, it’s easy to see how equity cannot drive the train – the opinions about what is “equitable” would be all over the map! One judge would think foreclosure was equitable in a given situation (the homeowner didn’t pay), while another would not (the homeowner was elderly/handicapped). There would be no way to know/predict how any particular judge felt, and no way to enforce these subjective views of fairness.
Don’t take my word for it. In 1986, the Florida Supreme Court was presented with an “equitable” argument in a mortgage foreclosure case. The Court ruled:
Petitioners argue that the foreclosure should be denied because an acceleration of the due date would be an inequitable or unjust result and the circumstances would render the acceleration unconscionable. … Although providing equitable relief in a proper case is discretionary with the trial judge, were that discretion not guided by fixed principles, the degree of uncertainty injected into contractual relations would be intolerable. Equity cannot therefore look solely to the result in determining whether to grant relief, but must apply rules which confer some degree of predictability on the decision-making process.
David v. Sun Fed. Savings & Loan Assn., 461 So. 2d 93 (Fla. 1984). That’s it, folks. Foreclosure cases are adjudicated based on a compilation of “rules which confer some degree of predictability on the decision-making process.” Id.; see also Smiley v. Manufactured Housing Assocs. III Ltd. P’ship, 679 So. 2d 1229 (Fla. 2d DCA 1996) (“in determining whether to grant equitable relief, the trial court cannot look solely to the result but must apply rules which confer some degree of predictability on the decision-making process”).
So the next time you have a judge disregard the cost-bond statute as arcane and outdated, or inject his/her views about how foreclosure defense is not “equitable,” remind the judge of these concepts. Point out how “equity” isn’t a defense for that elderly/handicapped homeowner, so “equity” can’t be a basis for ignoring statutes or laws that work in the homeowner’s favor, either.
Mark Stopa
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Posted on January 23rd, 2014 by Mark Stopa
Florida Rule of Civil Procedure 1.540 authorizes Florida courts to grant litigants relief from an Order if the Order resulted from the litigant’s “excusable neglect.” The classic example of this is when a party loses at a hearing because of an inadvertent calendaring error. That rule makes sense, and there are lots of cases which say so. After all, litigants should lose cases on the merits, not because the lawyer’s staff calendared a hearing incorrectly.
In foreclosure-world, where sloppy lawyering and careless bank practices are often the norm, the extent to which this Rule applies is a frequent source of contention.
An example we often see is when a bank’s lawyer fails to attend a court-ordered Case Management Conference. You see, judges in foreclosure cases routinely set such CMCs as a way to force dilatory plaintiffs to come to court to prosecute their cases. If the bank’s lawyer doesn’t attend this CMC, then boom – case dismissed. See Fla.R.Civ.P. 1.420(b) (authorizing dismissal for violation of a court order).
Often, plaintiffs’ attorneys seek relief from the Order of dismissal under Rule 1.540 by arguing “excusable neglect.” “Sorry, judge. We inadvertently failed to calendar the hearing, so we missed it. Don’t dismiss the case where we made a calendaring error.”
As bad as that may sound, there are many cases supporting that argument. Again, courts prefer to adjudicate cases on the merits, not by foibles of human nature. The problem, of course, is the plaintiffs’ lawyers know this, so it’s easy for them to cite the buzzwords to argue to obtain relief under Rule 1.540. As a result, the Rule is easy to abuse. You’re a bank lawyer and you want a adverse ruling vacated? From an Order at a hearing you didn’t even attend? Just argue your staff inadvertently failed to calendar the hearing, so that’s why you didn’t attend. Have the legal assistant sign an affidavit to that effect and the Order will get vacated. Right?
Often, it’s not that simple – or it shouldn’t be, anyway. You see, Florida courts only authorize relief where the neglect was “excusable.” That merely begs the question – when is neglect “excusable” and when it is inexcusable?
By way of example, suppose a plaintiff’s counsel did not even have a system in place to calendar hearings, rather the lawyer simply tried to remember all of the hearings. Or suppose there was a calendaring system, but the lawyer knew his secretary wasn’t calendaring hearings correctly and didn’t do anything about it. In those examples, that type of neglect would not excusable. As the Fourth District said in a similar context, that’s not evidence of a “system gone awry,” but a ”defective system altogether.” Bequer v. Nat’l City Bank, 46 So. 3d 1199 (Fla. 4th DCA 2010) (reversing finding of “excusable neglect”). To use the words of the Second District, that wouldn’t be ”excusable neglect” justifying relief from an Order, but ”gross negligence.” See Hurley v. Govt. Employees Ins. Co., 619 So. 2d 477 (Fla. 2d DCA 1993) (reversing order finding “excusable neglect”).
Those might sound like extreme, even ridiculous examples, but let’s go back to my CMC example, sharing a real-life argument.
Recently, a Polk County judge dismissed a case I was defending where the plaintiff’s counsel did not attend a CMC. Order entered, case dismissed. Months later, the bank’s lawyer moved to vacate the Order, arguing his staff inadvertently failed to calendar the hearing. The lawyer even filed affidavits from his staff saying such.
I took a closer look at the file, then drafted this Timeline. It reflects how plaintiff’s current counsel had the file transferred to it by a different firm in June of 2013, yet new counsel did not actually file an appearance in the case until two months later. By that point, however, the Order setting the CMC had already been mailed (to prior counsel) and the CMC had already taken place. Hence, this wasn’t a calendaring error – the new firm wasn’t even counsel when the Order was mailed. The new firm had simply failed to appear in the case, even though the file had been transferred to them two months earlier. In other words, there wasn’t anything for the new firm to calendar; they hadn’t even received the Order due to their failure to appear in the case! Compounding the problem, the new firm waited two more months before seeking relief under Rule 1.540, arguing “excusable neglect.”
Here, take a look at the bank’s arguments. Now compare them to the facts in the Timeline. Not exactly an honest characterization of the facts, huh? And more significantly, it wasn’t ”excusable neglect,” either. The judge agreed, the bank’s motion was denied, and the Order dismissing the case remained in place.
What’s the moral of the story? Excusable neglect might seem like a low standard – a low bar to clear. In many ways, it is. But all neglect isn’t excusable, particularly not in foreclosure-world.
Mark Stopa
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Posted on January 22nd, 2014 by Mark Stopa
I had a hearing recently. As always, I had prepared beforehand, so I was ready and I was confident. As the hearing time arrived, though, I had to wait. This hearing was on a mass-motion calendar, such that several hearings in various cases were all scheduled at the same time.
Frankly, it often feels like a waste of time, having to wait and watch other cases while waiting for my turn. That said, it’s sometimes interesting to watch other lawyers argue.
Anyway, as I was watching these other cases, waiting for my turn, I realized that one lawyer’s argument was exactly the same as the argument I was about to make. Same facts, same argument, same judge. When that lawyer lost (“motion denied”), I was discouraged. My argument, after all, was the same. And that lawyer, frankly, hadn’t done a bad job.
About 30 minutes later, it was my turn. I argued the same issue, just in a little different way. “Motion granted.” Case dismissed.
Why would a judge rule differently on the same issue and the same facts in less than an hour? From where I was sitting, just one thing was different – the lawyer.
Maybe that judge knows I can (and will) go to the appellate court. Maybe that judge respects the work I’ve done and passion I exhibit representing homeowners. Maybe there’s something about the way I argued it that made the judge agree.
Whatever the reason, ask yourself this. If a judge can deny that first lawyer’s argument, when he did a pretty good job and presented the argument correctly, how do you think you’ll fare as a pro se homeowner trying to argue it yourself?
This is one aspect of this blog that has always troubled me. I want to help educate the public and spread information. But this information has to be used in the right way. If you think you can copy a form or something you’ve read here and use it to win, please take this story as a word of caution. Foreclosure defense isn’t just presenting the right argument – it’s making the right argument at the right time in the right way (and, often, from the right lawyer).
Mark Stopa
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Posted on January 13th, 2014 by Mark Stopa
I’m sad to report a heartbreaking story from Palm Beach, where a woman in foreclosure killed her two teenage children, then herself.
I didn’t know this homeowner, so I’m in no position to say whether her impending foreclosure was the impetus for this tragedy or if something else was the cause. Regardless, this seems like a good time to remind everyone about the human aspects of foreclosure.
To varying degrees, all of our courts are guilty of ignoring the human aspects of foreclosure. They are so consumed with adjudicating cases and reducing the number of pending suits that they forget … these are real people involved.
They’re a mom with two teenage sons struggling to keep a roof over their heads.
They’re an elderly couple living on a fixed income, hoping to stay in their home until they die.
They’re a middle-aged man who temporarily lost his job, unable to support his wife and children like he had.
With so much pressure on our courts from external forces, it can be easy to forget … these are the people we are serving. These are the people who live in the counties where the cases are pending. These are the people who elected the judges presiding over the cases.
So while some want to “grade” the success of the system based on how many cases have been adjudicated, I see a vastly different way to hand out grades. Compassion.
Mark Stopa
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