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Homeowners have been successful in enforcing mortgage modifications against foreclosing banks in Florida.

Mortgages are Contracts

Home mortgages, just like any other contract, can be changed (or modified) by the parties to the agreement.  Over the last several years, banks have provided countless homeowners the opportunity to save their homes by offering mortgage modifications that lowered the borrowers monthly payments.  Of course, homeowners trying to modify their mortgages and avoid foreclosure assumed that banks would act in good faith and honor the modifications they offered homeowners. However, a lot of times that doesn’t happen

Fannie Mae Flex Modification and HAMP

For instance, you have likely heard of the Home Affordable Modification Program (HAMP).  This was a federal program providing for mortgage modifications of certain kinds of home loans to avoid foreclosure. Many banks and mortgage holders offered HAMP modifications to struggling homeowners due, in part, to incentives offered by the U.S. Treasury to the banks to modify.  However, the program had many problems with execution and the uncertainty of the program led to many broken promises.

Fortunately, in December 2016, HAMP was replaced by the new Fannie Mae Flex Modification.  To see if you qualify for a Fannie Mae Flex Mortgage Modification, click here.

Are All Mortgage Modifications Legally Binding?

Unfortunately, all mortgage modifications are not legally binding.  Before a homeowner commences negotiations for a modification with their bank or mortgage servicer, they should protect themselves and learn the elements of an enforceable mortgage modifications in Florida.

For instance, a letter from a bank to a homeowner that contains information about a notice of interest rate increase on a modified mortgage, where no written mortgage modification had been previously offered, delivered or signed by the borrower, is likely not an enforceable mortgage modification. Generally speaking, bank mortgage modifications are not letters, they are written formal agreements requiring signatures from both the borrower and bank in order to be enforceable.


Florida Supreme Court 2017

Justice may mean taking your case to the appellate court for legal review.  Shown: the 2017 Florida Supreme Court, the highest appellate court in the State of Florida.


2 Cases of Lenders Failing to Honor a Mortgage Modification

Florida banks and mortgage lenders’ failure to honor formal mortgage modification agreements have become the basis for more and more defenses to foreclosure lawsuits.

Consider the following two cases:

1.  Nowlin v. Nationstar Mortg., LLC, 193 So. 3d 1043 (Fla. Dist. Ct. App. 2016).

In this mortgage modification case, the mortgage lender filed a foreclosure lawsuit against the borrowers even though they never missed a mortgage payment.

What happened was the borrowers got a home loan from BAC Home Loans Servicing in October 2002, which later transferred their loan to Nationstar.  BAC and the Nowlins entered into a formal mortgage modification of their home loan in July 2009.

The Nowlins weren’t behind on their payments when the mortgage modification was signed by both parties.

They received a letter from BAC informing them that their loan modification had been approved, and all they had to do was sign and return two enclosed documents before a notary and return them to BAC via Federal Express.  The FedEx receipt showed BAC received the documents on August 18, 2009.

Under their modification agreement, they were also required to send cashier’s checks for three consecutive mortgage payments. When the last cashier’s check payment was received by BAC, the mortgage modification would become a binding agreement.  The first payment was due on October 1, 2009.

The Nowlins sent cashiers’ checks, which were cashed by BAC on September 9th, November 1st, and December 1st.

Despite the Nowlin’s on time payments and receipts proving such, BAC sent them a letter in December 2009, notifying them that BAC was accelerating their mortgage loan because their August 2009 mortgage payment had not been received.  When they called BAC, they were told their modification had been cancelled.  They sent in paperwork for a second modification and BAC later claimed that paperwork wasn’t in their file.

In July 2014, BAC transferred the mortgage to Nationstar, who then went forward as plaintiff in the foreclosure proceedings.

The Nowlins lost at trial and appealed their case to the Florida Second District Court of Appeals and they won.  The foreclosure lawsuit was held improper and reversed.

The appellate court held that there was a valid modification agreement between BAC and the Nowlin’s and therefore the foreclosure was wrongful.

In its offer to the Nowlins, BAC specifically outlined what actions would constitute an acceptance of its offer to modify the mortgage contract. The Nowlins were required to (1) sign and return the documents provided by BAC, and (2) make three monthly payments beginning on October 1, 2009. The Nowlin’s provided evidence through FedEx receipts and bank documentation which showed they did both these things.

Under Florida contract law, the Nowlins’ acceptance of BAC’s offer to modify the original home loan was effective upon mailing of the payments and not upon receipt. (See: Morrison v. Thoelke, 155 So.2d 889, 905 (Fla. 2d DCA 1963).)

Basically, Nationstar’s argument was that it had no record of receiving the loan modification documents. The bank tried to rescind the offer of a mortgage modification before the Nowlin’s accepted the deal. Fortunately for the Nowlin’s the court ruled that acceptance occurred at the time of mailing, not at the time the bank received the paperwork and payments.

2.  Kuehlman v. Bank of America, NA, 177 So. 3d 1282 (Fla. Dist. Ct. App. 2015).

In this mortgage modification case, the borrower fell behind on his mortgage payments and entered into a loan modification.  Unfortunately, the borrower fell behind on his payments again, but the bank accepted the payments.  Thereafter, the bank filed foreclosure.

Result:  Bank of America filed a foreclosure lawsuit and won and the Borrower appealed.  The appellate court reversed the lower court’s foreclosure judgment finding that there was a legally binding modification of the mortgage.

Here’s what happened:  The home owner was behind on his mortgage payments and was offered a mortgage modification by the Bank, which had a deadline.

The borrower accepted the offer and returned all of the paperwork to the Bank.  He also included a payment for the new amount required under the agreement. Both were past the deadline stated in the offer.

He then continued making the revised payments under the modification agreement.  He made six more, which were all late.  However, all these late mortgage payments were accepted by the Bank and were cashed by the lender.

Many months later, the Bank got a notice from Fannie Mae (or Freddie Mac) instructing the Bank to reject the modification.

The Bank accepted two more payments from the Borrower after it received this notice.

Then it notified the borrower it was accelerating the mortgage, and gave the Borrower an opportunity to cure his default based on the original mortgage terms.  After that, it filed a foreclosure action.

The Bank argued that the Borrower failed to meet the deadline in the original modification offer, so the borrower failed to timely accept the offer.

According to the appellate court, when the Bank accepted the late paperwork as well as the late modified mortgage payments, there was a valid modification.  In contract terms, the Bank had accepted the Borrower’s counteroffer.

Are You Having a Problem with a Mortgage Modification?

A mortgage modification is a great opportunity for a homeowner to reorganize their finances. If the parties adhere to the terms of the agreement, the new mortgage terms should make living in the home more affordable for the homeowner, assuming, of course, that the bank actually honors the deal.

With that said, if you are offered a mortgage modification by your lender, then it is a good idea to follow the terms of the deal very closely. Document and make copies of any paperwork sent to the bank, and be sure to include a date on all paperwork. That way, you should be able to avoid any issues with the bank because as you can see they try to find all kinds of reasons to not honor the deal.

If you are having a problem with a mortgage modification in Florida, a good piece of advice is to talk with an experienced Florida real estate lawyer to learn about your rights.  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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