All items from Florida Banking Law Blog

Authored by Douglas L. Waldorf, Jr. of Rogers TowersThe legal right to enforce, by judicial proceeding, a promissory note and mortgage is referred to as “standing”.  This has been a hot topic in Florida foreclosure cases with courts holding that standing must exist when the suit is filed and, if it does not, the lack of standing is a defect that cannot be cured once the foreclosure suit has begun (though this question has recently been certified to the Florida Supreme Court).
So, is standing included as an element in a cause of action that a foreclosing plaintiff must prove or is it an affirmative defense that must be raised by the defendant? In a recent 5th DCA opinion, the district court found both to be correct.  In Beaumont v. Bank of New York Mellon, Inc., the Court reversed the trial court’s entry of summary judgment as the bank was unable to demonstrate that it had standing to bring the lawsuit. The defendant had apparently not raised standing as an affirmative defense in its pleadings, doing so for the first time at the summary judgment hearing. The bank argued that standing, as an affirmative defense, was waived as the defendant had not raised it in its pleadings.



Posted 2 days 8 hours ago

Authored by Adam B. Brandon of Rogers TowersFlorida’s Fifth District Court of Appeal recently emphasized the need for lenders to strictly comply with the notice requirements of a mortgage prior to foreclosure. In Samaroo v. Wells Fargo, the borrower appealed the circuit court’s entry of a summary final judgment of mortgage foreclosure. Finding that the bank failed to strictly comply with all of the notice requirements contained in the mortgage, the 5th DCA ruled against the bank and overturned the foreclosure judgment.
Before it initiated the litigation, the bank sent a demand letter to inform the borrower that the loan was in default and that the bank elected to accelerate the loan. The letter further informed the borrower that partial payments would not cure the default. However, the letter failed to explicitly mention that the borrower had the right to reinstate the loan after acceleration. This omission was a problem because the mortgage stipulated that any notice of default must inform the borrowers of the right to reinstate their loan after acceleration.
The bank suggested on appeal that its default letter “substantially” complied with the notice requirements of the mortgage. However, the 5th DCA rejected this argument because the bank’s own mortgage specified all of the important information to be provided to a borrower in default. In seeking to foreclose the mortgage, the bank itself could not provide any notice less than what the mortgage required.



Posted 1 week 2 days ago

Authored by Scott J. Kennellyand Adam B. Brandon of Rogers TowersAs described in a previous post, the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) requires that anyone with a claim against a failed bank must file a claim with the FDIC within 90 days of being notified (either by mail or by newspaper publication) of the FDIC’s administrative claims process. Claims that must go through the administrative process include claims for payment from the assets of failed banks, actions seeking a determination of rights with respect to the assets of failed banks, and claims relating to alleged acts or omissions of failed banks.



Posted 1 week 6 days ago

Authored by J. Ellsworth Summers, Jr.and Armando Nozzolillo of Rogers TowersOn March 27, 2014, the Eleventh Circuit (the “Court”) issued a ruling, which will have a major impact on how Chapter 7 and 13 debtors are able to treat claims of secured creditors. The issue in In re Brown, 13-13013, 2014 WL 1245266 (11th Cir. 2014) was whether §506(a)(2)’s valuation standard, which requires use of the “replacement value” method of valuating personal property, applies when a Chapter 13 debtor surrenders collateral to a secured creditor in full or partial satisfaction of the secured creditor’s claim. The Eleventh Circuit held that the replacement value, and not the foreclosure value, of collateral being surrendered as part of a Chapter 13 Plan is the required valuation method.
In Brown, the Debtor purchased a 37-foot recreational vehicle and entered into a loan agreement secured by the same. Subsequently, the Debtor filed a Chapter 13 bankruptcy petition in the U.S. Bankruptcy Court, Middle District of Georgia (the “Bankruptcy Court”).  Santander Consumer USA, Inc., the secured creditor (“Santander”), filed a secured proof of claim in the amount of $36,587.53, which represented the outstanding balance due on the loan. The Debtor’s Chapter 13 Plan (the “Plan”) proposed to surrender the recreational vehicle to Santander in full satisfaction of Santander’s claim.



Posted 3 weeks 12 hours ago

Authored by Scott J. Kennellyand Adam B. Brandon of Rogers TowersEnacted by Congress after the Savings and Loan Crisis of the 1980s, the Financial Institutions Reform, Recovery, and Enforcement Act (“FIRREA”) gives the FDIC sweeping authority to resolve the problems posed by a failed financial institution. This authority includes a mandatory administrative claims process to help the FDIC efficiently identify all claims against the receivership estate, promptly pay valid claims against a failed bank, and liquidate the remaining assets of the institution.
FIRREA details how the FDIC administers its claims process. Immediately after the FDIC’s appointment as receiver for a failed bank, it must notify the failed institution’s creditors of the bank’s failure and that they have 90 days to present their claims against the failed bank, together with proof, to the FDIC. Notices are typically mailed to known creditors and also published in area newspapers to put all creditors on notice. Once a claim is submitted, the FDIC has 180 days to allow or disallow the claim. If a creditor fails to timely file a claim with the FDIC, its claim will be disallowed completely.



Posted 4 weeks 9 hours ago

Authored by Samantha Alves Orenderand M. Scott Thomas of Rogers TowersIf the value of a foreclosed property is less than the loan amount, lenders may seek a deficiency judgment from borrowers and guarantors after the foreclosure sale. In most cases, the lender is the sole bidder at the sale and takes title to the collateral property, so the court must determine the fair market value of the property as of the date of the foreclosure sale. Parties may bring appraisals and expert testimony to the court’s attention, and the court may conduct an evidentiary hearing to determine the amount of the credit to be given against the loan amount.
But what happens when the lender is not the successful bidder at the foreclosure sale? If a third party submits the winning bid, does the court still need to determine the fair market value of the property?



Posted 4 weeks 2 days ago

Authored by E. Carson Langeand Gabriel Crafton of Rogers TowersPromissory notes are often renewed and extended without the express written consent of, or even notice to, the guarantors of the note.  A guarantor, faced with changing circumstances and wishing to cut off his liability under a promissory note that has been renewed and extended beyond its initial maturity date, may decide to revoke or terminate his guaranty by notice to the bank.  Under Florida law, however, where the terms of the guaranty contemplate renewals and extensions, a guarantor remains responsible for renewal notes entered even years after revocation.  Renewal notes do not create “new” obligations or otherwise cut off liability.



Posted 5 weeks 2 days ago

Authored by Edward L. Kelly of Rogers TowersRecent events have been highlighted in the press, regarding the redrawing of federal flood hazard maps and proposed increases in premium rates for flood insurance for property owners within special flood hazard zones, which may have a significant impact on the cost of home ownership in Florida and other states which are subject to coastal flooding as premiums for flood insurance increase and the areas located in special flood hazard zones increase.  The National Flood Insurance Act, 42, U.S.C. §§ 4001-4129 (the “Act”), was enacted in an effort to promote affordable flood insurance. The Act, and regulations promulgated by federal agencies regulating lenders to implement the Act mandate that the lender require its borrower to obtain flood insurance on improved properties located in special flood hazard areas. Specifically, for Federal Housing Administration guarantied residential mortgages, HUD requires a standard covenant in each such mortgage requiring that the borrower insure the improvements as required by the lender for all hazards including floods to the extent required by HUD.



Posted 5 weeks 6 days ago

Authored by J. Ellsworth Summers, Jr. and Armando Nozzolillo of Rogers TowersIt is well-settled that secured creditors are ordinarily entitled to credit bid their allowed secured claim in a sale pursuant to § 363 of the Bankruptcy Code (the “Code”). In Radlax Gateway Hotel, LLC v. Amalgamated Bank, 132 S.Ct. 205 (2012), the Supreme Court acknowledged that bankruptcy courts have the power to prohibit a secured creditor from credit bidding “for cause.” However, because “cause” is undefined in the Code, courts have substantial discretion when making this determination.
Recently, a case out of the District of Delaware, In re Fisker Auto. Holdings, Inc., 13-13087(KG), 2014 WL 210593 (Bankr. D. Del. 2014), produced a surprising opinion on the issue of what constitutes “cause.” In Fisker, Hybrid, a secured creditor, purchased from the Department of Energy $168.5 million in outstanding debt for $25 million. Prior to the Debtor filing bankruptcy, Hybrid and the Debtor negotiated an asset purchase agreement (the “Agreement”) in which Hybrid would purchase a majority of Debtor’s assets for a credit bid of $75 million. The Agreement provided for $500,000 to be distributed to Fisker’s unsecured creditors in a soon-to-be filed bankruptcy case.



Posted 6 weeks 2 days ago

Authored by Scott St. Amand of Rogers TowersUnder the Chapter 9 Plan of Adjustment filed on Friday of last week, Detroit Emergency Manager Kevyn Orr urged retirees to vote on a quick exit from bankruptcy by offering smaller-than-expected pension cuts. For non-uniformed city employees, Orr offered a 26 percent reduction in their pensions – so long as they agreed not to drag out litigation or pursue the sale of city-owned art. If they do pursue litigation, their pensions could be cut by upwards of 34 percent.  Police officers and firefighters were offered a similar deal – a four percent cut in pensions if they accepted the plan without a fight and ten percent if they did not. Ironically, the anti-litigation offer came on the same day that the Sixth Circuit Court of Appeals accepted a direct appeal of Detroit’s eligibility for bankruptcy from the city’s pension funds and largest labor union.



Posted 8 weeks 7 hours ago