Consumer Finance Litigation

In Bermuda Dunes Private Residents, etc. v. Bank of America, 5D12-4218, 2014 WL 885720 (Fla. Dist. Ct. App. Mar. 7, 2014) Florida's Fifth District Court of Appeal issued an important opinion concerning the so-called "safe-harbor" for past due condominium assessments created by Fla. Stat. § 718.116(b) for those who acquire title to condominiums from the foreclosure of a first mortgage. The facts of the case were as follows: Bank of America held a first mortgage on a condominium, and assigned the mortgage to Federal Home Loan Mortgage Corporation ("Freddie Mac"). Freddie Mac then initiated a foreclosure action against the condominium on the mortgage. At the foreclosure sale Bank of America -- not Freddie Mac -- purchased the property. Bank of America took the position that it was entitled to the safe-harbor from past due condominium association assessments created by Fla. Stat. § 718.116(b) for first mortgagees, and their successors and assigns, because Freddie Mac had foreclosed in its capacity as "servicer" for Bank of America. Bank of America argued that the assignment of mortgage evidenced this servicing relationship. Even though the assignment was from Bank of America to Freddie Mac, the trial judge granted Bank of America's motion for summary judgment. The condominium association appealed. The Fifth District Court of Appeal held that the trial court erred in granting Bank of America's motion for summary judgment. The Appellate Court held that under Fla. Stat. § 718.116(b) "the key is who had rights and obligations under the mortgage at the time of the foreclosure." Id. at 7. The Court went on to hold that the assignment of mortgage evidenced that because Bank of America "assigned away its rights as first mortgagee, it is no longer the first mortgagee and is not entitled to the benefit of the statute." Id. The Court held that the factual findings by the trial court that Bank of America was an assignee of the mortgage were unsupported by the record, which only contained an assignment away from Bank of America to Freddie Mac. It is not uncommon for a foreclosing party to want a different party to take title to the property to simplify matters in managing the property post-foreclosure. However, efforts to expedite this process should not undermine the ability to make good use of the protections of Fla. Stat. 718.116(b). The Fifth District Court of Appeal has made it clear that merely purchasing the property at foreclosure sale, without the assignment of any interest in the mortgage, is insufficient. Therefore, to ensure a purchaser at foreclosure sale is protected by the safe-harbor for past due assessments the purchaser should seek to receive both an assignment of bid and an assignment of mortgage from the foreclosure plaintiff to ensure that the purchaser qualifies for protection under Fla. Stat. 718.116(b) as both a "first mortgagee, its successor or assigns" and one who "acquire[s] title to a unit by foreclosure." For more information on consumer finance litigation topics, please contact one of the Burr & Forman team members for assistance. We are happy to answer any questions or concerns you may have.