Foreclosure turned over Paragraph 22 of the Mortgage

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A dispute over paragraph 22 of the mortgage may force banks to make stronger arguments to prove notices of defaults entered.

In this Third District Court of Appeals case, the bank tried to foreclose the homeowner’s mortgage at summary judgment, which entails that there be no questions of material fact and the bank be permitted to a foreclosure judgment as a matter of law – a stage before trial.  The homeowner also filed for summary judgment, in dispute that paragraph 22 of the mortgage was not fulfilled by the bank, which involves the bank notify the homeowner of the default and certain rights and defenses the proprietor may have.  The bank filed two separate affidavits proving that the paragraph 22 notice of default was mailed and significantly complied with the requirements of paragraph 22 of the mortgage.

The trial court judge ruled that the bank’s notice of default failed to comply with paragraph 22 of the mortgage, decided that the bank’s affidavits attesting to the mailing of paragraph 22 notice of default was hearsay, and denied the bank’s motion for summary judgment, approved the homeowner’s motion for summary judgment, entered a final money judgment for the bank, not a foreclosure judgment, for the amount claimed due on the mortgage (which the bank had not sought for or requested) and canceled the promissory note.   The bank appealed.

The appellate court overturned all rulings above, specifically holding that the bank’s notice of default did significantly comply with paragraph 22 of the mortgage and cited multiple new cases in support of that finding.

Notably, the appellate court determined that the bank’s notice of default was not hearsay because it was being presented as a verbal act going to show that the notice of default was known and complied with paragraph 22 of the mortgage, not to prove the truth of what was declared in the notice of default.  This is a seemingly stronger argument banks may make to have notices of default entered in future cases, as most banks depend on on the business records exception to hearsay (meaning the notice of default is technically hearsay, but there is a reason that it should be allowed), while the verbal act argument deems the notice of default not even hearsay.

If you have questions about Foreclosure, Loan Modification, Bankruptcy, Short Sale, or other alternatives, please feel free to call my office at 888-886-0020, send an e-mail to emil@fleysherlaw.com, or complete the contact form below.

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