Second Bite At Fla. Foreclosures May Not Be So Sweet

Financial services companies pursuing judicial foreclosures in Florida already face a host of unique and challenging hurdles. The varying and often court- or judge-specific procedural, substantive and evidentiary requirements and expectations can create pitfalls for lenders seeking to foreclose on a mortgage. Two recent cases, from separate Florida District Courts of Appeal, raise the specter of yet another unfortunate outcome for lenders: dismissal of their entire action on statute of limitations (SOL) grounds. While the inconsistencies in the opinions may offer the silver lining of ultimate resolution by the Florida Supreme Court, lenders should discuss the possible implications of the SOL to strategic litigation and business decisions with counsel. The dramatic rise in home loan mortgage default rates from 2007 to 2009 triggered a corresponding increase in foreclosure actions across the country. In Florida, many of these judicial foreclosure actions were placed on hold or delayed because of backlogs in the courts, changes in the legal landscape, or delay tactics employed by borrowers or their counsel, not to mention the lenders' own desire to undertake internal evaluations of the strengths, weaknesses and merits of those cases. For a time, thousands of foreclosure cases, with complaints filed four, five or even six years ago, remained pending in the Florida courts. Often, rather than pursuing these aging cases, servicers dismiss and restart the foreclosures by filing a new complaint — a common practice in jurisdictions throughout the United States. However, depending upon when the initial complaint was filed, this strategy may now expose servicers pursuing Florida judicial foreclosures to motions to dismiss. Beauvais The uncertainty over the SOL issue in Florida was highlighted by the recent Third District Court of Appeals opinion in Deutsche Bank v. Beauvais, No. 3D14-575, Case No. 12-49315 (Fla. 3d DCA Dec. 17, 2014). The critical issue in Beauvais — and the question underlying the SOL debate in Florida — is the application of the SOL to successive foreclosure actions. Specifically: does acceleration of payments due in a dismissed foreclosure action start the "SOL clock" and bar subsequent foreclosure actions even when those actions are based on entirely new payment defaults. In Beauvais, a mortgage loan servicer filed a 2007 foreclosure action, based on a September 2006 payment default. In the foreclosure complaint, the servicer...