TALLAHASSEE – A Florida Supreme Court ruling allowing
mortgage lenders to resume suspended foreclosure proceedings at any time likely will mean an increase in foreclosure filings, according to three mortgage
experts, who also agree the ruling provides much-needed clarity and
consistency to lenders.
Before the ruling made in the case of Bartram v. U.S. Bank, Florida law required mortgage lenders to wait
five years after a default before they could begin new a new foreclosure.
However, the state’s high court ruled that the default status resets each month
that an outstanding balance remains.
U.S. Bank’s foreclosure process on Lewis Bartram’s $650,000
home in Ponte Vedra Beach stalled because the bank’s law firm closed. As a
result, the foreclosure case was dismissed in 2011, five years after the
proceedings began, because the previous statute of limitations had expired.
However, Florida’s Fifth District Court of Appeal overturned
the dismissal. Bartram then appealed the matter to the Florida Supreme Court.
“The Florida Supreme Court’s decision finally brings some
clarity to the issue and will allow judges who have been reluctant to rule on
foreclosure cases to move forward with ones that have been pending for years,” Michele
Stocker, co-chair of the Greenberg Traurig Consumer Financial Services
Litigation Practice, told the Florida
Record. “Now everyone knows what is and isn’t permissible.”
Stocker said a decline in foreclosure filings resulted from
of a number of different factors, including a better economy and more loss
mitigation efforts by banks to help homeowners avoid foreclosure. However, she
said the Bartram decision will likely
prompt an increase in filings.
“I do not think the increase will be that significant since
the banks will continue to offer loss mitigation options to their customers,”
Stocker said. “The bank’s efforts, coupled with the improving economy, will
continue to limit the number of new filings.”
Renee Marie Smith, a Florida real estate attorney and distressed housing industry
specialist, agreed that the number of residential mortgage
foreclosures will likely increase in the near future, as lenders will rely on
the Bartram decision to restart
foreclosures on old mortgage delinquencies that were on hold because of the conflict
of ruling in the Florida court system.
Smith also agreed with the court’s ruling.
“It is vital to eliminate inconsistency in the courts so
that we can clear out the backlog of delinquent mortgages and have a stable
lending environment in Florida,” Smith told the Florida Record.
In addition, she said the ruling puts all parties “back to
square one” upon dismissal without prejudice to either the borrower or the
“Borrowers, in my opinion, retain the same defenses and
rights as before,” Smith said. “[They] just don’t have a free pass to
Smith said the ruling helps lenders because it eliminates
uncertainty regarding how to collect on delinquencies, which will decrease
Greenspoon Marder, PA shareholder Dariel Abrahamy said he
agrees with the ruling because mortgage lenders should not be prohibited from
filing a new foreclosure action simply because the prior foreclosure was
“In my opinion it would be inequitable for someone who does
not pay their mortgage for years to get a house for free simply because a
foreclosure action was previously dismissed,” Abrahamy told the Florida Record. “Borrowers who thought
they would be able to avoid their mortgage payments indefinitely without any
repercussions should be prepared to have the banks start new foreclosure
actions against them.”
Abrahamy said the opinion from the Florida Supreme Court
provides confirmation that mortgage lenders are able to file new foreclosure
actions against borrowers who are in default.
“We can expect an increase in the amount of foreclosure
filing in the short term as lenders have been waiting for this decision to
provide clarity on the statute of limitations issue,” he said.
Also, Abrahamy said, lenders should carefully review their
loan documents before they file a new foreclosure on a previously accelerated
loan. He said the court determined that in order to permit reinstatement after
acceleration, the mortgage documents must include language permitting
reinstatement, and not every mortgage includes that language.