Florid 2nd DCA Holds 559.715 Assignment of Debt Notices NOT Applicable to Foreclosure

Plain English Summary:

Florida law contains a statute, 559.715, which states that anytime one of your creditors sells the debt you owe to another creditor/company, they are supposed to send you written notice by mail telling you about the assignment of the debt.  If they did not send it at the time the debt was assigned to the new creditor, then at least 30 days before the filing of any lawsuit to collect that debt.

This is not a new issue for appellate courts, as a previous decision (Brindise as cited below) already held that a mortgage lender foreclosing did not have to send such notice when assigning the loan to a new servicer or bank before filing foreclosure; and that the failure to do so was not a defense to foreclosure.

This decision simply completely removes the defense of lack of notice of assignment of the mortgage debt before filing suit that foreclosure defense lawyers were using previously; albeit rather unsuccessfully.

The 2nd District Court of Appeal (DCA) recently affirmed prior cases that found that Florida Statute § 559.715, part of the Florida Consumer Collection Practices Act (“FCCPA”), does not apply to the note holder in a mortgage foreclosure proceeding.  Deutsche Bank Nat. Trust Co. v. Hagstrom, 2D14-5254, 2016 WL 3926852, at *1 (Fla. 2d DCA 2016) opinion here.

The 2nd DCA in essence removed an affirmative defense that borrowers had that the lender did not send notice to the borrower 30 days before assigning the loan/debt to a new owner or servicer; which Fla. Stat. § 559.715 requires for debts that are “consumer debts.”

Section 559.715 states as follows:

[The FCCPA] does not prohibit the assignment, by a creditor, of the right to bill and collect a consumer debt. However, the assignee must give the debtor written notice of such assignment as soon as practical after the assignment is made, but at least 30 days before any action to collect the debt. The assignee is a real party in interest and may bring an action to collect a debt that has been assigned to the assignee and is in default.

In this case as the trial court level, the borrowers argued that Plaintiff, who was not the original lender, failed to provide written notice of the assignment of debt and therefore failed to comply with a condition precedent to foreclosure.  The trial court agreed and granted summary judgment for the borrowers.

The 2nd DCA examined the plaint text of the statute itself, and the plaintiff’s relationship to the debt.  The Court found that per the language, the statute applies to any assignees of the right to bill and collect a debt, but not to an assignee of the debt in and itself.  ““Section 559.715 requires no action by the creditor or the note holder.”

The Court reasoned that the note holder has the right to enforce the note regardless of any assignment to bill and collect the debt.  The Court also reasoned that in foreclosures that more than one party could be the real party in interest; the note owner/holder and the assignee of the right to bill and collect, usually a loan servicer.

Therefore, the Court concluded that because Plaintiff had proven that it was the holder of the note at the time the lawsuit was filed, § 559.715 was not applicable to foreclosure.  The court stated that § 559.715 “simply does not apply to holders of notes secured by mortgages on real property. Neither is it an affirmative defense to foreclosure actions; it does not establish a condition precedent and in no other way avoids the claims to foreclose a mortgage and enforce a note.”

This case, along with Brindise v. U.S. Bank Nat. Ass’n, 183 So. 3d 1215, 1216 (Fla. 2d DCA 2016), in which the Court held that compliance with § 559.715 is not a condition precedent to foreclosure, all but eliminate the  § 559.715 affirmative defense.

If you are battling with a foreclosure, please contact us today for a consultation at 754-900-1LAW (1529) or at info@HKLegalGroup.com

If Doing a Payoff/Reinstatement In Foreclosure CHECK YOUR LETTER ASAP FOR ILLEGAL CHARGES!

Plain English Summary:

When you are behind on your payments in foreclosure and you request a letter to pay the back amounts that you owe (reinstatement) or the full loan balance (payoff), the banks have to give you a total with a due date, as the amount changes each month as another payment becomes due or more interest or fees become due.  What the banks would do is add “estimated costs” to these letters, such as hearings that were scheduled for a few weeks out that the bank lawyers anticipated having to file court documents or attend court.

The US Appeals Court (which covers the southeast of the US and Florida) said no, that the bank could ONLY charge what costs it actually incurred as of the date the letter was generated/drafted.  So banks can no longer charge anticipated costs in their reinstatement or payoff letters as they once did; and it is actually illegal to do so now.

On December 3, 2015, the United States Court of Appeals, 11th Circuit, decided the case of Kevin Prescott v. Seterus, Inc., 635 Fed. Appx. 640, 2015 U.S. App. LEXIS 20934 (11th Cir. Fla. 2015) and held that the inclusion of estimated/anticipated costs in a payoff or reinstatement letter is a violation of the FDCPA.

In this case, the borrower defaulted on hos lean and sometime after requested a reinstatement letter. He was provided with a letter “good through September 27, 2013,” which included an estimate of anticipated attorney’s fees that had not been incurred as of the date of the letter but were anticipated to be incurred prior to the “good through date” of September 27, 2013. This was fairly commonly added if there is an upcoming hearing or need for further court action to dismiss the case.

The borrower paid the full amount demanded on September 26, 2013, and one week later,filed a lawsuit claiming that the inclusion of estimated attorney’s fees in the letter was a violation of the Fair Debt Collection Practices Act (FDCPA).

The trial court found for the lender and granted summary judgment in its favor, but the 11th Circuit Court of Appeals reversed, holding that the borrower was not obligated to pay estimated fees since the mortgage did not require payment of any expenses other than those that were actually incurred; not those that were anticipated.

The ruling was not based on a failure to disclose the amounts, as the payoff letter listed specific anticipated amount. But rather that the lender had no right to anticipated payments in the payoff that it had not incurred on the date the payoff was made.

Notwithstanding the clause in the mortgage that provided for the lender to “take such action as lender may reasonably require to assure that lender’s interest in the property and rights under the Security Agreement and mortgagor’s obligation to pay the sum secured by the Security Agreement shall continue unchanged”, the court held that, since the least sophisticated consumer would not have understood this language, the fees were not authorized and that the lender demanding them as part of the reinstatemnet was a violation of the FDCPA.

Another similar case regarding payoff and reinstatement letters is Avila v. Riexinger Associates, LLC, 2016 U.S. App. LEXIS 5183, 2016 WL 1104797 (2d Cir. 2016), decided by the U.S. Court of Appeals, 2nd Circuit, on March 22, 2016. This case held that the least sophisticated consumer would not be aware of the fact that the amount due in the payoff letter might increase as a result of interest, legal fees, process servers, and things of similar nature. Avila requires specific “Safe Harbor” language to be included in the letter that provides a disclosure to the consumer that the amounts due may increase between the time the letter is drafted and when the borrower makes payment and the payoff or reinstatement is paid.

If you are in foreclosure and doing a payoff or reinstatement and have these charges on your letter, please contact us today! 754-900-1LAW (1529) or info@HKLegalGroup.com

4th DCA Reverses Sanctions Against Bank

Plain English Summary:

A bank filed foreclosure against a husband and wife.  Only the wife signed the note and mortgage, but there was a page of the mortgage that mentioned that there was an addendum to the mortgage for additional borrowers.  The husband was sued for foreclosure along with the wife and wanted sanctions from the bank for having to defend the case.

The appellate court said no as the bank reasonably relied on the mortgage itself which had a reference to an additional page for “additional borrowers,,” and assuming there may be other borrowers, in an abundance of caution added the husband as a defendant to the foreclosure case.  It was not intentional bad conduct by the bank to warrant giving the husband money sanctions from the bank.

The 4th DCA recently, in Trust Mortgage, LLC vs Ferlanti, 4D 15-1437, reversed and order of sanctions against a foreclosing lender holding that the trial court erred and that the lender had an objectively reasonable belief that a non-signing spouse was a properly named defendant in the case.  Opinion here.

The lender has filed a mortgage foreclosure against against husband and wife.  The note and mortgage were both only signed by the wife, however the 1st page of the mortgage has a box checked that referenced an addendum for additional borrowers; but no addendum was present.

The non-borrowing spouse moved for summary judgment arguing that he did not sign the note and mortgage, and moved for sanctions as the lender and its attorneys jointly as they  “knew of should have known that its claim ‘was not supported by the material facts necessary to establish the claim.”

The trial court granted the non-borrower spouse’s motion for summary judgment and granted sanctions against the lender but not its attorneys.  The lender appealed.

On appeal the 4th DCA opined that “[t]o award fees under the statue, ‘the trial court must find that the action was ‘frivolous or so devoid of merit both on the facts and the law as to be completely untenable.'” … Moreover, that finding ‘must be based upon substantial competent evidence presented to the court at the hearing on attorney’s fees or otherwise before the court and in the trial court record.'”

The court stated that while the husband was named as a defendant in the complaint, there was no allegation that he signed the note or mortgage, because the lender showed “there was at least some triable set of facts under which [he] could be liable under the mortgage agreement” given the reference to an additional missing signature page, “its absence does not indicate that a theory based on its existence, with [the husband’s] signature on it, was ‘frivolous or so devoid of merit both on the facts and the law as to be completely untenable.'”

Ultimately the 4th DC found that  “lack of concrete proof of [the fact that the husband signed the mortgage] does not mean its complaint was frivolous. A party does not need to have conclusive evidence to prove its case at the time of filing in order to avoid sanctions. Instead, like here, where the party reasonably believes the factual basis for its claim exists, it is entitled to proceed with its claims and seek to prove those facts. If attempt to prove those facts are fruitless, that is still not cause for sanctions where the party’s initial belief was well-founded. It is only in circumstances  … where the party knew or should have known at the time of filing that the material facts were nonexistent that a claim is truly frivolous and worthy of sanctions.”

4th DCA Reverses Dismissal of Foreclosure For Unclean Hands by Borrower

Plain English Summary:

A woman took out a mortgage, and when the bank filed foreclosure, she raised the defense that the loan application contained false information- mainly the total of her assets and monthly income.  The trial court judge said the bank could not foreclose as they knew about the fraud and dismissed the case.

The appellate court reviewing the case found that the woman testified that she didn’t bother to read the mortgage application before signing,  failing her duty to read what she was signing (a long-standing Florida principle of law), and thus “not feel bad for her” in that she could not now use the incorrect loan application as a defense to foreclosure or to claim that she was not responsible for the loan money unpaid.

The 4th DCA recently, in Wells Fargo Bank, N.A. v. Hilary A. Williamson, Case No. 4D15-285, 2016 WL 3745477 (Fla. 4th DCA 2016), reversed a trial court’s dismissal of a foreclosure action in favor of the borrower.  Opinion here.

The Court affirmed its prior holding in Vidal v. Liquidation Properties, Inc., 104 So. 3d 1274 (4th DCA 2013) that a borrower is in the best position to know their own financial information.   If a borrower fills out a loan application containing false information, that borrower is precluded from raising fraud as an affirmative defense to foreclosure against them. See Shahar v. Green Tree Servicing, 125 So. 3d 251 (Fla. 4th DCA 2013).

The borrower here raised fraud as an affirmative defense to foreclosure alleging that “”the original lender’s loan consultant falsified the loan application by overstating the borrower’s liquid assets, her monthly income, and ownership of real estate.”  She also raised the defense of unclean hands.  At trial, “[t]he borrower testified that the income and asset information were false and the loan consultant inserted the information without her knowledge.”  She also testified that she did not read the application, although she was not prevented from doing so, and that she knew that the loan had an adjustable-rate although she requested a fixed-rate mortgage.  She further knew the amount she was borrowing.

The trial court found that Wells Fargo either knew about or failed to conduct due diligence and therefore went along with the fraudulent conduct, and was thus barred from foreclosing and dismissed the foreclosure case.  On appeal, the 4th DCA reversed the trial court.

The 4th DCA found Wells Fargo did not have unclean hands and that Shahar was applied incorrectly by the trial court.  It states that the original lender’s actions did not rise to the level of unclean hands because the borrower (1) had time to review the loan documents, (2) had the opportunity to review the falsified information, (3) specifically noticed the change from a fixed rate to an adjustable rate, (4) was not coerced into signing the application, (5) subsequently obtained a second loan in the form of a line of credit from the same lender, and (6) admitted that she failed to read the loan documents.

The 4th DCA found that the borrower here failed to introduce any evidence at all that she relied on the alleged lender misconduct or the the result was misconduct.  The Court further stated that that it is well-settled in Florida that unless a party can show that he was prevented from reading a contract, he cannot defend against an action on the contract solely because he signed without reading it.

Thus, the 4th DCA reversed the dismissal and sent the case back to the trial court for Wells Fargo to continue with its foreclosure action.