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Florida Court Clarifies Notice of Default Requirements for Debtors, Holds ‘Substantial Compliance’ by Creditors Sufficient

Initiating the collections or repossession process against a borrower in default necessitates a careful reading of applicable state and federal statutes. As we will explain further, creditors may not simply appear on property to repossess a vehicle or jumpstart the foreclosure process without ensuring adequate due process is afforded the borrower.

More than just a formality, deficiencies within the collection or repossession process can result in a dismissal of the action in favor of the borrower, which requires the creditor to waste additional time and resources restarting the process the correct way. To avoid this hassle, and to ensure your collection practices are up-to-date in accordance with Florida laws, be sure to contact our Ft. Lauderdale creditors’ rights law firm today.

Court Considers Notice of Default

In nearly every creditors’ rights matter, proper notice of default is a necessary prerequisite to beginning the process. In the foreclosure context, notice of default is an inescapable procedural milestone and proper format and content must be precisely followed to avoid dismissal. But, just how precise must a notice of default be and is it sufficient if a creditor’s notice is “close enough” to the requirements for notice listed in the mortgage?

In the opinion of one Florida state court, close enough is good enough and the “substantial compliance” threshold was entered as the proper measure for determining whether proper notice was provided.

The case, known as Green Tree Servicing, LLC v. Erin C. Milam et al., involved a residential home foreclosure, including several objections by the borrowers as to the content contained in the notice of default. As is common in most mortgage agreements, the notice of default in this case was required to explain (i) the borrowers were in default; (ii) the required actions necessary to cure the default; (iii) the deadline to cure the default; (iv) a failure to cure the default by the deadline may result in foreclosure, and; (v) the borrowers’ had a right to reinstate the mortgage even after acceleration, and may assert any available defenses to acceleration.

In Green Tree Servicing, the borrowers specifically objected to the calculation of past due payments, asserting that the creditor included a payment that was not yet due at the time of notice. Moreover, the borrowers objected to the specific wording concerning their right to reinstate the mortgage, specifically objecting to use of the phrase “may reinstate.”

Finding Favors Creditors

After reviewing the arguments set forth by both sides, the court considered the case in light of centuries-old contract law principles. Specifically, parties to a contract are generally considered bound by the agreement following substantial – not perfect – compliance with its terms. Using the same analysis, the court similarly concluded that a creditor’s notice of default will not be defeated for failure to perfectly comply with the format and content requirements set forth in the mortgage agreement. In sum, substantial compliance is sufficient, and:

[W]hen the content of a lender’s notice letter is nearly equivalent to or varies in only immaterial respects from what the mortgage requires, the letter substantially complies, and a minor variation from the terms of [the mortgage] should not preclude a foreclosure action.

Contact a Creditors’ Rights Firm in Ft. Lauderdale Today!

If you would like to speak to a reputable creditors’ rights attorney, please do not hesitate to contact the Law Office of Michael L. Feinstein today at 954-767-9662.