- 24 Oct
Justice Writes on Issue of Multiple Defaults on Long-term Debt
In a five-page opinion recently released by a Florida Supreme Court justice, he wrote on the topic of timing in foreclosure litigation concerning multiple defaults and lawsuits. In this opinion, Justice C. Alan Lawson mentioned what he called “the latest symptom of a more serious problem” which involves a misunderstanding of the law. The main issue is concerning whether the date of each of the missed payments carries a legal significance when you are trying to determine the deadline to bring a lawsuit against the borrower.
The answer is that a missed payment does not begin the clock on the given five-year deadline to bring a suit. However, new rulings show that the lender can have a new opportunity to bring a lawsuit for later missed payments.
The opinion came from after recent Florida Supreme Court decision to first accept, then decline a case involving a lender’s second foreclosure of the same loan.
Lower District courts conflicted on whether the statute of limitations prohibited suing for foreclosure outside of the five-year window, or whether a new and separate default essentially reset the clock and allowed a lender to sue. The Florida Supreme Court held that a lender could bring multiple lawsuits outside of the five-year span, if the borrower defaulted multiple times on the same loan. District Courts of Appeal found similar decisions, and the lower courts resolved their initial conflicts.
The original case was resolved, but the Justice’s opinion hinted at a misunderstanding of how the five year statute of limitations works on long-term mortgages. Lenders, when dealing with default, can sue to try and collect the total balance of the debt, but not the missed payments. However, the total amount of the debt isn’t due until the loan matures, generally far in the future. In order to collect the entire balance, the lender must declare the entire balance due immediately because of the original default. The Justice’s opinion points out that just because the lender does not accelerate the loan after one default, it does not get rid of their right to do so after a later, second default, despite the original statute of limitations.
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