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Last Update: 10/10/20

In Florida, when a lender files a foreclosure lawsuit, the lender must prove that a homeowner has breached his or her obligations under the note and/or mortgage. In turn, a homeowner has the right to raise defenses that defeat or otherwise mitigate the claims made by the lender.

One such foreclosure defense is payment.


The Foreclosure Defense of Payment

Under Florida law, if you have satisfied your monthly obligation to your lender of making your monthly payment, then it is highly unlikely that you will lose a foreclosure lawsuit based upon non-payment.

Even though this outcome sounds obvious, it is not safe to assume that a bank won’t file a non-payment foreclose lawsuit where the homeowner has made all of his or her payments, because they do. Here’s an example of such a scenario.

The Case of the Bank Alleging Lack of Payment Even Though Mortgage Payments Were Made

A good example of a foreclosure lawsuit based upon non-payment is the case of Gulliver v. Texas Commerce Bank, 787 So. 2d 256 (Fla. Dist. Ct. App. 2001). In that case, the bank sued for foreclosure based on a mortgage it held after it was assigned from the original lender.

At the time that the foreclosing bank took over the mortgage pursuant to the assignment, it was notified that the mortgage was one month behind in payments.

The foreclosing bank sent a formal notice to the borrower, introducing itself as the new mortgage holder of the home loan. It also notified the borrower that the mortgage payment was late, and the note was considered to be in default.

The borrowers made the mortgage payment. They also paid future mortgage payments to the new mortgage holder.

Unfortunately, the new bank didn’t tell the homeowners that they weren’t applying their payments to their mortgage balance. The new bank was holding these payments in a “suspense” account and not applying them to reduce their debt.

Several months went by and the new bank filed a foreclosure lawsuit. In the complaint, the bank swore to the court that no payments had been made on the mortgage for the past 7 months.

The borrowers hired a lawyer and filed an answer to the complaint that included the affirmative defense of payment. They filed an affidavit (which is sworn testimony) with supporting documents showing payments had been made. This evidence was shown through cashed checks. Despite this evidence, the court ruled in the bank’s favor.

Upon review, the appellate court held that the homeowners presented a valid defense. The court stated that making all of the monthly payments is a meritorious defense that should not be overlooked.

It didn’t matter that the lender put the payments in a “suspense account.” The bank didn’t win at summary judgment because there were facts in dispute that needed to be resolved.

Proving Payment

When asserting the foreclosure defense of payment, the borrower has to show that payment was made. This can be accomplished through documentation.

However, not all payments are the same. In fact, some payments aren’t really even payments. This scenario is described below.

The Case of the Bouncing Checks

In the case of Scarfo v. Peever, 405 So. 2d 1064 (Fla. Dist. Ct. App. 1981), the bank sued to foreclose on the homeowner’s property. The borrowers asserted the foreclosure defense of payment. Moreover, the borrowers not only asserted payment, they also stated that they stood “ready, willing, and able” to pay off the mortgage in full and were ready to do so before the bank filed the foreclosure lawsuit.

The mortgage in this case had a due date of the ninth (9th) of every month, with a 30 day grace period. The borrowers never paid on or before the due date. They always paid before the end of the grace period. Sometimes, they made partial payments during the course of the month.

One month, the borrowers sent out their mortgage payment on the last day before the expiration of the grace period. The lender, Mr. Scarfo, did not immediately deposit it and present it for payment. According to the facts of the case, he was sick with the flu.

When he presented the check for payment, it bounced not once, but twice.

Mr. Scarfo notified the borrowers that the check had bounced and that he was accelerating the note, thus filing suit to foreclose on the property. The borrowers brought him cash to cover the bounced check as well as the next month’s payment. They did this the day after the foreclosure lawsuit was filed. However, the lender still moved forward to foreclose.

The court ruled that when the borrower made his monthly payment by check, it was his responsibility to make sure there were sufficient funds in the account to cover its payment when the lender presented it.

The bounced check was not the lender’s problem. Moreover, it was insufficient to prove the foreclosure defense of payment.

The lender had the legal right to accelerate the mortgage because of the default. Trying to catch up on mortgage payments after a foreclosure lawsuit is filed is not enough to nullify a foreclosure action.

Does It Matter If The Borrower Has The Ability to Pay off the Mortgage Debt in Full?

When arguing the foreclosure defense of payment, how much does the borrower have to prove? If the borrower has the ability to pay off the mortgage, then what happens?

The Case of the Borrower “Ready, Willing, and Able” to Pay Off the Balance

In the case of Redding v. Powell, 452 So. 2d 132 (Fla. Dist. Ct. App. 1984), a parcel of land had been purchased with a mortgage. Everything went smoothly until the final payment was due. The lender filed a foreclosure action based upon the failure to pay the final payment on the note.

The borrowers denied that they had defaulted on the note, and they denied that the lenders were due any further sums.

They also asserted a foreclosure payment defense: they had been, and remained, “ … ready, willing and able to pay off the mortgage since they first learned that a balance was still owed.” The lenders refused to take their money – even before they took any steps to collect on the mortgage or to file for foreclosure.

Moreover, the lender’s lawyer had in his possession the borrower’s check which covered not only the principal balance and interest due on the mortgage, but a clearing fee as well. The lawyer did not have his client’s permission to cash it. There were funds to cover the check if presented.

The court ruled, when a borrower fails to make a final payment, the lender has no legal duty to demand payment before foreclosing on the property. It was the lender’s option to file the foreclosure lawsuit.

However, the borrower’s payment defense was legally valid. Here, the borrowers had asserted a defense of accord and satisfaction of the debt. Their checks and accompanying affidavits demonstrated their payment defense.

What about Prepayments?

There are instances when borrowers will make payments in advance on their mortgage, or “prepay” the note. Often, home owners will add $100 – $200 to their monthly mortgage payment. This is done to pay off the principal faster, and is considered a financially savvy thing to do by many financial advisers.

What happens when there is a foreclosure? Can these advance payments help in a foreclosure payment defense?

The Case of the Accepted Prepayments

In the case of Gulf Life Insurance Company v. Pringle, 216 So. 2d 468 (Fla. Dist. Ct. App. 1968), the borrowers successfully had the lender’s foreclosure case dismissed based upon their foreclosure defense of pre-payment.

Here, the lender filed a foreclosure lawsuit because the borrowers were not making their periodic mortgage payments by the due date. However, the borrowers were paying the lender and had even made payments in advance to the lender that exceeded the amount of the stated mortgage payment.

The mortgage in this case allowed for prepayments and there was no pre-payment penalty. Specifically, the note provided the option to make, without penalty, payments of $100.00 or multiples thereof, not to exceed 15% of the original sum of the note during the life of the mortgage.

When the foreclosure suit was filed, the total amount in periodic prepayments exceeded the mortgage payments due and owing at the time of the foreclosure lawsuit being filed.

The borrower proved that the mortgage payments were actually ahead of schedule and the lender had no right to accelerate the note.

What Should You Do?

When you are sued for foreclosure, all is not lost. Under Florida law, you may have a variety of defenses to assert against the bank. One such defense is the affirmative defense of payment.

The burden of proof here is upon the borrower to assert this defense and prove it through facts and evidence. Lenders often try to end these foreclosure lawsuits quickly with a “motion for summary judgment” stating that there are no disputed facts that have to be resolved by a trier of fact (judge or jury).

If you are facing foreclosure in Florida, a good piece of advice is to talk with an experienced Florida real estate lawyer to learn about your rights, including those related to the affirmative defense of payment and motions for summary judgment. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.



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Do you have questions or comments? If so, feel free to ask Larry about the issues that concern you the most by sending him an email or by calling him now at (954) 458-8655.

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