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Counsel’s Corner: Lenders Are Simply Enforcing Contract Terms, Not ‘Fighting’ Borrowers

Roy Diaz w captionRoy Diaz is the shareholder of SHD Legal Group P.A. in Fort Lauderdale, Florida.  Roy has been a member of the Florida Bar since 1988. He has concentrated his practice in the areas of real estate, litigation, and bankruptcy.  He has represented lenders, servicers, private investors and real estate developers throughout his career with an emphasis on the mortgage servicing industry since 1994. Over the years, he has been a speaker regarding mortgage related law and procedure with The Florida Bar, ALFN, Five Star Institute, and National Business Institute. Roy recently spoke with DS News about an issue pending in the Florida Supreme Court, the statute of limitations on a mortgage loan.

What are some major issues you are currently facing in Florida as far as default servicing?

The compliance piece is still in play, and we continue to improve firm procedures to incorporate compliance policy. One of the major legal issues we're seeing are Florida statute of limitations claims. People are claiming lenders are not entitled to enforce mortgages based on the statute of limitations. There is a population of loans that were accelerated through prior firms which loans were dismissed for a variety of reasons. As a result, the second lawsuit, if you will, is being challenged for having passed the statute of limitations, which is currently five years.

There were two pinnacle appellate cases published in 2014. One followed well establish law which generally provides that mortgage loans are recurring debts, and therefore a new default date can be sued upon. The other case that came down, which is a little bit more technical, challenged that position. Both of those cases are now being evaluated by the Florida Supreme Court. We're hoping that sometime in 2015, probably the third quarter, the Florida Supreme Court will clarify the issue regarding statute of limitations. Historically on the appellate level, the law has supported a lender's ability to re-demand and proceed under a new default date, because mortgage loans are considered recurring debt. We're hoping the Supreme Court clarifies this issue in favor of permitting enforcement of the contractual obligations provided within the loan documents.

How would it affect the industry if the Supreme Court clarifies it in favor of the borrower?

It would certainly go against public policy.  A promissory note and mortgage are contractual obligations. The note is a recurring obligation that continues to occur on an interim basis, and therefore if a lender, due to a technicality, loses the right to enforce a portion of that debt, the recurrence of the default is something they should be entitled to enforce as a matter of public policy.

Public perception in this area of the law has become skewed. I would frame the issue as simply enforcing a contractual obligation. The defense bar has done a good job creating an atmosphere of “big lender vs. borrower.” This has skewed the real issue of a contractual breach. The lenders are not “fighting” the borrowers. The lenders are enforcing a contract that the borrower signed and agreed to. I don’t frame any discussion I have in court or with my clients as “lender vs. borrower.” I frame it as enforcing the mortgage vs. not being able to enforce the mortgage, which is a contract.

I firmly believe there is no such thing as a "big bad bank" as it relates to enforcing mortgages. It comes down to honoring a financial obligation that a person commits to. Unfortunately, some of the judges in Florida view the banks, servicers, and the firms that represent them in a negative way.

Do you see the way judges view banks, servicers, and those firms improving in the near future?

I think it's turning toward getting better. I think that a lot of the noise associated with the mortgage crisis is calming down and judges are less overwhelmed and therefore more inclined to focus on issues as opposed to being persuaded by what I call the "fight." I am optimistic that Florida Supreme Court will clarify the statute of limitations issue in favor of enforceability of mortgage contracts, which will provide the State Court judiciary with direction.



About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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