Florida associations should be aware of marketability issues with “mortgage terminator” judgments
This month, The Fund Concept, by “the Fund” which is the Attorneys Title Fund Insurance Fund, Inc. published an article about the well publicized “mortgage terminators”.
In its article, the Fund stated, “a Fund member should not close and insure any transaction where the title search and examination depends on the outcome of a lawsuit seeking to extinguish an outstanding mortgage without obtaining approval from the Fund’s legal underwriting department.”
The Fund reviewed some of the “mortgage terminator” judgments and concluded “…a significant body of precedent that suggests that these terminator judgments would not operate as res judicata or law of the case in a subsequent proceeding filed by the mortgagee to enforce the mortgage.”
In other words, there is long established law that would allow a mortgagee to foreclose its mortgage, notwithstanding these “terminator judgments.” This law dates back to at least 1940, in a Florida Supreme Court Case Cone Bros Construction Co. v Moore. It is well settled law, and still cited as precedent, most recently by this Fund article.
Rest here…
What is a “mortgage terminator” lawsuit?
It is a marketing term used to describe a lawsuit filed by a condominium or homeowners’ association, after the association has taken title to a unit (typically through foreclosure of the association’s lien). After acquiring title to the property, the association files suit against the lender (the owner of the mortgage) to “terminate” the mortgage. When the lender fails to appear, a default judgment is entered granting the relief sought which includes cancellation of the mortgage of record.
Proponents of the “mortgage terminator” lawsuit have tried to convince associations that these lawsuits are a good idea. Some are actively encouraging associations to move forward with this type of action. We are seeing more and more evidence that these tactics ultimately put associations at risk. Associations may have sold such units to third-parties, claiming that the mortgage on the unit has been “wiped-out” by the mortgage terminator lawsuit. In reality, the lender may still have the right to enforce the mortgage. Therefore, an association could be sued by the person who bought the unit from the association and who thought that he or she had clear title to the unit. And instead of clear title to the unit, the new owners could be forced to move out of the unit when the bank took title or would have to pay rent to the bank on a unit that they thought they owned.
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And they wonder why people don’t want to buy homes, even that the prices are the lowest in 10 years
Where do successful TILA rescissions fit into this? CFPB says court ruling unnecessary to void mortgage and note if rescission is unopposed by lender during 20 day period after rescission letter sent. (http://www.cfslbulletin.com/2012/03/30/cfpb-says-rescission-complete-on-notice/#more).
Hi:
This is exactly my situation. My HOA took title to my property approx 1 yr. ago. I had been out of work for approx. 3 yrs. I have been trying to do a Loan Mod. with B of A. I was denied a loan modification. I am currently doing a short sale. The HOA hired the Agent.
This agent does not have my interests in mind at all. She is trying to force me to sign a form that a third party can do the negotiations on the sale.
This is a mess and I would like to know if someone would be willing to speak with me and at the least tell me what my rights, if any, are.