In residential foreclosures, a notice of default letter, commonly found in paragraph 22 of most mortgages is a condition precedent to acceleration of the amount owed under the note and mortgage. Those familiar with residential mortgage foreclosures know that the failure to comply with paragraph 22 is a staple in every borrower’s affirmative defenses. Sometimes borrowers allege the lender failed to comply with paragraph 22 because it did not send the default letter. Other times borrowers allege the letter failed to inform them of their rights under paragraph 22 or did not provide the borrower 30 days to cure the alleged default—the standard grace period found in paragraph 22.
For a number of years, borrowers successfully utilized this defense to avert summary judgment or sometimes even obtain dismissal of the foreclosure action. Over the past year and a half, Florida’s courts have issued two opinions that have essentially killed paragraph 22 as an affirmative defense. The first opinion, U.S. Bank Nat’l Ass’n v. Busquets, 135 So. 3d 488 (Fla. 2d DCA 2014), resolved the debate of whether a lender must strictly or substantially comply with the terms of the paragraph—or any other condition precedent to foreclosure—when it held a lender need only substantially comply with paragraph 22’s provisions. After Busquets, a default letter is sufficient so long as it adequately described the borrower’s rights under paragraph 22.
But the debate continued as to what should occur where a default letter failed to inform the borrower that he or she had 30 days to cure their default. Lenders argued they should be excused from complying because such compliance would be futile. Lenders reasoned that if a borrower could not pay the monthly installment the borrower certainly could not cure the entire default. Ramos v. Citimortgage, Inc., 146 So. 3d 126, 129 (Fla. 3d DCA 2014). However, appellate courts never addressed this issue. As such, paragraph 22 remained an affirmative defense borrowers hoped could be used to avert foreclosure.
Unfortunately for borrowers, all good things must come to an end. The Fifth District in Vasilevskiy v. Wachovia Bank, Nat’l Ass’n, 2015 WL 2414502 (Fla. 5th DCA 2015), affirmed a final summary judgment even though the lender’s notice of default letter only provided the borrower with 28 days to cure the alleged default. The court acknowledged the lender’s failure to provide the required full 30-day notice was a breach of the mortgage. However, the court did not end its analysis there. In Florida, a breach of a condition precedent will not preclude enforcement of the contract unless the breach is material. The court found the lender’s breach was not material because the borrower never attempted to cure the default during the four-year period that followed the default.
After Vasilevskiy, it appears the only way a borrower can successfully utilize paragraph 22 as an affirmative defense is if he or she proves the deficient letter precluded him or her from curing or attempting to cure the default—an unlikely occurrence consider the borrower could not make the required monthly payment. All good things must come to an end. For paragraph 22, that time came on May 22, 2015.