Understanding the Paragraph 22 Argument
I’ve spoken about it many times, but even now, I’m regularly asked “what is paragraph 22?” I suppose it’s time I give a real-life example and show what all the fuss is about.
Paragraph 22 of the standard Fannie Mae/MERS mortgage requires the lender give the borrower written notice of any default and an opportunity to cure that default before filing suit. That means, before filing a foreclosure lawsuit – and as a condition precedent to the filing of that lawsuit – the lender is required to send written notice of the alleged default and give the borrower a chance to cure that default. But it’s not enough that any letter be sent – the letter has to contain certain, specified information, as set forth in paragraph 22. Specifically, the letter has to: (a) specify the default; (b) specify the actions required to cure the default; (c) give the borrower 30 days to cure the default; (d) inform the borrower that failure to cure the default may result in: (i) acceleration; (ii) foreclosure by judicial proceeding; and (iii) sale of the property; (e) inform the borrower of the right to reinstate after acceleration; and (f) inform the borrower of the right to assert in the foreclosure proceeding the non-existence of any default or any other defense to foreclosure.
That sounds technical, and in some ways, it is. However, there is an excellent argument to be made that, under Florida law, if the foreclosure plaintiff failed to send this letter, and the letter failed to specify all of the required information, that the bank cannot prevail and the lawsuit must be dismissed.