Toxic Titles | Florida HOA’s Should Be Aware of Marketability Issues with “Mortgage Terminator” Judgments | Foreclosure Fraud - Fighting Foreclosure Fraud by Sharing the Knowledge

Toxic Titles | Florida HOA’s Should Be Aware of Marketability Issues with “Mortgage Terminator” Judgments | Foreclosure Fraud - Fighting Foreclosure Fraud by Sharing the Knowledge:

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FLORIDA ASSOCIATIONS SHOULD BE AWARE OF MARKETABILITY ISSUES WITH “MORTGAGE TERMINATOR” JUDGMENTS

This month, The Fund Concept, by “the Fund” which is the Attorneys Title Fund Insurance Fund, Inc. published an article about the well publicized “mortgage terminators”.

In its article, the Fund stated, “a Fund member should not close and insure any transaction where the title search and examination depends on the outcome of a lawsuit seeking to extinguish an outstanding mortgage without obtaining approval from the Fund’s legal underwriting department.”

The Fund reviewed some of the “mortgage terminator” judgments and concluded “…a significant body of precedent that suggests that these terminator judgments would not operate as res judicata or law of the case in a subsequent proceeding filed by the mortgagee to enforce the mortgage.”

In other words, there is long established law that would allow a mortgagee to foreclose its mortgage, notwithstanding these “terminator judgments.” This law dates back to at least 1940, in a Florida Supreme Court Case Cone Bros Construction Co. v Moore. It is well settled law, and still cited as precedent, most recently by this Fund article.

Rest here…

What is a “mortgage terminator” lawsuit?

It is a marketing term used to describe a lawsuit filed by a condominium or homeowners’ association, after the association has taken title to a unit (typically through foreclosure of the association’s lien). After acquiring title to the property, the association files suit against the lender (the owner of the mortgage) to “terminate” the mortgage. When the lender fails to appear, a default judgment is entered granting the relief sought which includes cancellation of the mortgage of record.

Proponents of the “mortgage terminator” lawsuit have tried to convince associations that these lawsuits are a good idea. Some are actively encouraging associations to move forward with this type of action. We are seeing more and more evidence that these tactics ultimately put associations at risk. Associations may have sold such units to third-parties, claiming that the mortgage on the unit has been “wiped-out” by the mortgage terminator lawsuit. In reality, the lender may still have the right to enforce the mortgage. Therefore, an association could be sued by the person who bought the unit from the association and who thought that he or she had clear title to the unit. And instead of clear title to the unit, the new owners could be forced to move out of the unit when the bank took title or would have to pay rent to the bank on a unit that they thought they owned.