In our last post, our blog spent some time examining acceleration clauses in the context of home mortgages. To recap, if a mortgage contains an acceleration clause, it means that in the event of default by the borrower, the lender can seek immediate payment of the full balance of the loan and, failing that, initiate foreclosure proceedings.
Furthermore, for home mortgages with an acceleration clause, the statute of limitations here in Florida is five years. This means that a lender has five years from the date on which it invokes the acceleration clause to bring a foreclosure action.
Interestingly enough, the Florida Supreme Court handed down what could prove to be a landmark decision in a case addressing whether this five-year statute of limitations is effectively reset when a foreclosure is involuntarily dismissed.
Specifically, in Bartram v. U.S. Bank, which consolidated three similar cases for review, the court ruled that when an underlying foreclosure action stemming from a default on a standard residential mortgage is involuntarily dismissed by a trial court, the result is that both parties — the borrower and the lender — revert to their respective pre-foreclosure status.
For borrowers, this means the acceleration is revoked and their right to resume regular payments is reinstated. For lenders, this means the right “to seek acceleration and foreclosure based on the [borrower’s] subsequent defaults” is reinstated.
In other words, the clock on the five-year state of limitations is effectively reset, such that if the borrower once again defaults, the lender can once again accelerate the debt and, if payment is not remitted, initiate foreclosure proceedings.
The decision was understandably not universally embraced by members of the legal community, with many viewing it as giving lenders a second bite at the apple.
“I think this decision will cause a new wave of foreclosure cases to be filed in the next 12-24 months,” said one attorney. “Basically, banks are getting a do-over.”
It remains to be seen what the fallout from the Bartram decision will be …
If you are facing serious financial difficulties and are on the verge of losing your home, consider speaking with a skilled legal professional who can help you learn more about your options for stopping foreclosure.
