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In an opinion affirming in part and reversing in part, Florida's Second District Court of Appeal found that a Trial Judge’s Order went too far when it forbade the borrower in a foreclosure case, who had surrendered the real property at issue in an earlier bankruptcy, to contest the foreclosure “in any manner” due to that bankruptcy surrender. In reversing in part, the Court of Appeal held that there are circumstances where a borrower may be allowed to challenge some aspects of a foreclosure case; for example, in the amounts due and owing, or other limited circumstances that may have arisen post-bankruptcy. Importantly, however, in affirming, the Second District Court of Appeal also ruled that surrender in a bankruptcy case means that in a subsequent foreclosure case a borrower is not entitled to challenge the lender’s own entitlement to foreclose. “Because the debtor’s interest has been surrendered, the debtor is no longer entitled to challenge the entitlement to foreclose the debtor’s former legal interest.” Note that this opinion is not final yet.
On March 31, 2022, the Indiana Court of Appeals issued its second decision relating to the collection of mortgage interest during the pandemic. At the beginning of the initial surge of COVID-19, the Indiana Supreme Court had granted Marion County Courts’ request to toll the time in which a litigant must meet deadlines and comply with rules of procedure. The emergency order granted relief beginning March 16, 2020, and stated that “no interest shall be due or charged during the tolled period”. By further orders, this tolling period was extended through August 14, 2020. Based upon those emergency orders, a trial court issued a judgment and decree of foreclosure that excluded interest due under the terms of the note and mortgage for the period of March 16, 2020, through August 14, 2020.
In PNC Bank v. Page, the mortgage lender asked the Court to overrule the trial court’s decision to remove that portion of interest, arguing that the emergency order’s tolling of interest could not apply to foreclosure cases. The lender pointed to Governor Holcomb’s Executive Order 20-06, which temporarily suspended the prosecution of foreclosure and eviction actions in Indiana, and explicitly stated that the suspension does not relieve a borrower’s obligations under a mortgage. Previously, the Indiana Court of Appeals had found that post-judgment interest could not be tolled by Indiana courts because it is awarded to the judgment holder by statute and falls under the legislative powers of the state. Denman v. St. Vincent Med. Grp., Inc., Ind. Ct. App. 2021. By the same reasoning, the Court agreed with the lender and held that the tolling period does not apply to pre-judgment interest in a mortgage foreclosure.
Impact on Servicers and Lenders in Indiana
This pair of rulings is great news for mortgage lenders in Indiana. The somewhat contradictory orders issued by Indiana’s legislative and judicial branches have led to inconsistent rulings in mortgage foreclosures over the past 18 months. Now that the apparent contradiction has been resolved, lenders can rest easy that their standard interest calculations are enforceable in Indiana. Questions? This post was prepared by Caryn Beougher, Esq, an attorney in PLG's Indianapolis, Indiana office. Contact us here.
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