In November 2016, a Court of Appeals in Florida tackled an issue regarding foreclosing a home after issuing a letter of acceleration and accepting partial payments. The Court of Appeals reversed the lower court and allowed the lender to move forward with the foreclosure.
The Facts and Conclusions of the Lower Court
The borrowers already defaulted on their mortgage, and the lender sent their standard acceleration letter. The letter included a date by which the homeowners could cure the default before the note would accelerate. The homeowners made several partial payments after the bank issued the letter. The bank followed these payments by issuing three separate letters that had different amounts necessary to cure the default. Nonetheless, they all referred to the same acceleration date.
The homeowners did not dispute that their payments were less than the total amount due to avoid the acceleration by the specified date, and the bank began a foreclosure action. The lower court determined that the bank did not comply with the mortgage by accepting partial payments after the acceleration letter. Specifically, it determined that the several letters, when taken as a whole, were confusing.
The Court of Appeals Reversal
The Court of Appeals pointed out that the lower court was under the assumption that the bank had to issue a new acceleration letter every time that it accepted a partial payment. This, however, was not the case. Paragraph 22 of the mortgage specifically stated that the lender could accelerate without further demand and foreclose on the property after issuing the first acceleration letter.
The Court of Appeals found that the purpose of the notice was to let the borrower know how they can cure the default and that the notice only has to comply with a mortgage’s condition precedent substantially. Therefore, there was no requirement to send a second notice of default, even after accepting partial payments. In this case, it was important that the homeowners did not pay the full amount to cure and that the dates in each letter were all the same. The Court of Appeals reversed the lower court and allowed the foreclosure to move forward.