Banks Must Send Notice of Default
Before Filing Foreclosure
In Florida, residential mortgages usually contain a provision requiring the bank to provide borrowers, who have fallen behind on payments, notice of the loan default and an opportunity to cure the mortgage (pay the past due amount) prior to foreclosure. The provision also sets out several specific requirements for the notice, which must be substantially followed by the bank.
This paragraph is also referred to as the “right to cure” notice or the “default” notice and in the standard form mortgage routinely used in Florida over the last several years, it is found at paragraph 22 of the mortgage:
“Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument …. The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration or the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale or the Property. The notice shall further inform Borrower or the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full or all sums secured by this Security Instrument without further demand and may foreclose this Security Instrument by judicial proceeding.”
In a Florida residential foreclosures, evidence of the bank’s failure to send the notice of default, or if it was sent, evidence of some defect within the notice, are grounds that support significantly strong defenses for the defendant homeowner. This article discusses several Florida appellate decisions where courts examined these issues and found in favor of homeowners.
Mortgages are Contracts
Mortgages are contracts. Sending the borrower the notice of default, as required by the specific terms and conditions of the mortgage, is a condition precedent to the bank’s right of foreclosure. If the bank failed to send the notice, it cannot proceed in foreclosure since a condition precedent to maintaining a foreclosure action has not been met.
“Where there are conditions precedent to filing the foreclosure suit, a bank must prove that it has substantially complied with them.” Torres v. Deutsche Bank Nat’l Trust Co., 256 So. 3d 903, 905 (Fla. 4th DCA 2018). “Along with the note, mortgage, and evidence regarding the outstanding debt on the loan, the default or acceleration letter must be introduced to demonstrate entitlement to foreclosure.” Id. “In addition to introducing the letter, the bank must also present competent, substantial evidence that the letter was actually mailed.” Id.
Torres v. Deutsche Bank Nat’l Trust Co.,
256 So. 3d 903 (Fla. 4th DCA 2018)
In Torres, the Court the reversed summary judgment in the bank’s favor because the bank “failed to prove compliance with the condition precedent of mailing Borrowers a default notice as required by paragraph 22 of the mortgage.” Torres, 256 So. 3d at 904. The Court noted that “[e]vidence that a document was drafted is insufficient, standing alone, to establish that it was in fact mailed.” Torres, 256 So. 3d at 905. “Rather, the ‘mailing must be proven by producing additional evidence such as proof of regular business practices, an affidavit swearing that the letter was mailed, or a return receipt.’” Id. (quotation omitted). “If the evidence comes by way of witness testimony, ‘the witness must have personal knowledge of the company’s general practice in mailing letters.’” Id. (quotation omitted). “Mere reliance on the boarding process to prove that the notice letter was mailed is insufficient.” Id.
“Without personal knowledge on the part of the witness, her testimony was insufficient to establish the letter was mailed.” Torres, 256 So. 3d at 905–06. In that case, “there was no return receipt and no affidavit swearing that the letter was mailed.” Id. Moreover, “[t]he loan analyst’s testimony was the Bank’s only evidence that the letter had been mailed to Borrowers.” Id. “The loan analyst testified that she did not have personal knowledge of Saxon’s regular business practices of mailing default letters, and merely opined that it did not make sense ‘to generate the letter and not mail it out.’” Id.
Alessio v. Ocwen Loan Servicing, LLC,
273 So. 3d 3 (Fla. 4th DCA 2019)
In Alessio v. Ocwen Loan Servicing, LLC, 273 So. 3d 3, 4 (Fla. 4th DCA 2019), the Court again reversed summary judgment in the bank’s favor, stating “[w]hile the trial court concluded that [the bank] had established its compliance with the provisions of the mortgage that required notice of default to have been mailed to the appellant borrowers prior to acceleration, we disagree that the proof was adequate.” There the Court noted, “Paragraph 22 of the mortgage requires that the lender give the borrower thirty days’ notice to cure a default prior to acceleration of the amount due.” Id. at 5. “Paragraph 15 provides that notices to the borrower ‘shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower’s notice address if sent by other means.’” Id. “Appellants contend that the evidence was insufficient to prove that the notice was mailed to them.” Id.
In Alessio, “there was no proof of regular business practices or documents admitted to show that the document was actually mailed.” Alessio, 273 So. 3d at 6. “The court originally admitted the notice as a business record of Ocwen, but as noted in Torres, reliance on the boarding process to prove that the notice was mailed is insufficient.” Id. “The analyst testified that she had been taught by OneWest to determine whether a default letter was mailed, but she never described that process.” Id. “As she began working for OneWest in 2012, she did not testify that the process used by IndyMac Mortgage Services in 2009 (when the letter allegedly was sent) was the same process used by OneWest when she commenced work for them three years later.” Id. “In other words, she had no personal knowledge of the company’s general practice in mailing letters as it existed in 2009.” Id. “In fact, there was no evidence presented of any process of mailing letters of any of the entities involved.” Id.
Frost v. Regions Bank,
15 So. 3d 905 (Fla. 4th DCA 2009)
In Frost, the defendant to a foreclosure action asserted, as an affirmative defense, that the bank failed to provide notice and opportunity to cure the alleged default. Frost, 15 So. 3d at 906. On appeal, the Court revered summary judgment entered in the bank’s favor because “the bank did not factually refute the Frosts’ lack of notice and opportunity to cure defense.” Id. “Nothing in the bank’s complaint, motion for summary judgment, or affidavits indicate that the bank gave the Frosts the notice which the mortgage required.” Id.
The Court further noted, “[t]he bank also did not establish that the Frosts’ lack of notice and opportunity to cure defense was legally insufficient.” Frost, 15 So. 3d at 906. “Although the bank argues that the defense did not refer to any language from the mortgage, the bank cites no authority which requires the defense to contain such a reference.” Id. “Because the bank did not meet its burden to refute the Frosts’ lack of notice and opportunity to cure defense, the bank is not entitled to final summary judgment of foreclosure.” Id. at 906–07.
Kurian v. Wells Fargo Bank, N.A.,
114 So. 3d 1052 (Fla. 4th DCA 2013)
In Kurian v. Wells Fargo Bank, N.A., 114 So. 3d 1052, 1054–55 (Fla. 4th DCA 2013), the Court also reversed a final summary judgment of foreclosure where the bank failed to factually refute the defendants’ affirmative defense of lack of notice and opportunity to cure. The defendant in that case alleged that “the bank did not meet the requirements of … the mortgage by failing to provide sufficient notice of default and opportunity to cure.” Id. at 1054. At the summary judgment hearing, “the bank argued that the letter attached to the Complaint … satisfied the notice requirements set forth in … the mortgage.” Id. The Court reversed final summary judgment finding that “[t]he bank never refuted the homeowners’ affirmative defense … [because] [t]he letter attached to the Complaint did not satisfy [the] requirements [of the section of the mortgage dealing with notice of default].” Id. at 1054–55.
Edmonds v. U.S. Bank Nat’l Ass’n,
215 So. 3d 628 (Fla. 2d DCA 2017)
In Edmonds v. U.S. Bank Nat’l Ass’n, 215 So. 3d 628, 630 (Fla. 2d DCA 2017), the Court noted, “Paragraph 22 of the mortgage requires, among other things, that the lender give the borrowers notice of default and an opportunity to cure the default prior to acceleration of the debt.” “Paragraph 15 specifies that notices to the borrowers shall be deemed to have been given when they are mailed by first class mail or when actually delivered to the borrowers’ notice address.” Id. “In its complaint, JP Morgan alleged that it complied with all conditions precedent.” Id. “In their answer, the Edmonds denied that JP Morgan gave the required notice of the alleged default and an opportunity to cure.” Id.
On appeal, “[t]he Edmonds again argue, and we agree, that the Plaintiff failed to prove that it gave the required notice under the mortgage because it did not show that the default letters were mailed or actually delivered; thus, the Plaintiff failed to establish a condition precedent to suit.” Edmonds, 215 So. 3d at 630. “Although the letters were admitted into evidence, the fact that they were drafted is insufficient by itself to show that they were mailed.” Id. “Thus, the failure to prove that the default letters were mailed or actually delivered and that the notice under paragraph 22 was given requires that we reverse the final judgment and remand for the trial court to enter an order of involuntary dismissal.” Id. at 631.
Conclusion
As one Court succinctly put it:
In numerous foreclosure cases summary judgment has been reversed because the defendant has pleaded lack of notice and opportunity to cure as an affirmative defense and nothing in the bank’s complaint, motion for summary judgment, or affidavits established that the bank gave the homeowners the notice and opportunity to cure required by the mortgage.
Bryson v. Branch Banking and Trust Co., 75 So. 3d 783, 785–86 (Fla. 2d DCA 2011) (emphasis added) (holding that unauthenticated letters of default were insufficient to establish that the bank had complied with the notice and opportunity to cure requirements of the mortgage).