Requirements For Foreclosing A Modified Loan In Florida


In 2016 the Fourth DCA reversed a mortgagee’s final judgment of foreclosure and dismissed the case due to the mortgagee’s failure to introduce the written loan modification into evidence at trial. Rattigan v. Central Mortgage Co., 199 So. 3d 966 (Fla. 4th DCA 2016). In Rattigan, the original note “capped the principal amount that could be owed at $747,500.” At trial the mortgagee failed to introduce the written modification agreement into evidence but sought to recover $760,000 in principal based exclusively on witness testimony that the loan had been modified either to raise or eliminate the original cap on the principal amount.

Notwithstanding the lack of documentary evidence, the trial court entered a judgment which included the increased principal amount and the mortgagors appealed. On appeal the Fourth DCA concluded that the “Bank was clearly proceeding under the modified note, i.e., a different note” and that the “Bank violated the best evidence rule”[i] by failing to introduce the modification at trial – “either the original or a duplicate with an explanation as to why the original note was unavailable.” The Fourth DCA reversed the judgment finding it was unsupported by sufficient record evidence.

Several trial courts interpreted Rattigan to mean that the original of the modification, not just a copy, was required to foreclose a modified loan. The Fourth and other district courts clarified that was not the case in a series of decisions that came out between March and July in 2018. Notably, in Liukkonen the Fourth DCA, referring to its holding in Rattigan, specifically stated that a loan modification was not a negotiable instrument and therefore a copy of the modification was sufficient to prove its terms. Liukkonen v. Bayview Loan Servicing, LLC, 243 So. 3d 981, 982 (Fla. 4th DCA 2018). The Court further clarified that “[n]o explanation as to why the original was unavailable is required.” The Court explained that the reasons for requiring production of an original promissory note did not apply to a modification because the modification was not the source of the obligation nor could a modification be enforced solely based on physical possession like a properly endorsed note. Therefore, the original modification did not have to be removed from the stream of commerce like a note.

The Fourth DCA reached the same conclusion in Wright, as did the Second and Third DCAs in McCampbell and Garcia. Wright v. Deutsche Bank Nat’l Tr. Co. on behalf of Holders of J.P. Morgan Mortgage Acquisition Tr. 2007-CH5 Asset Backed Pass-Through Certificates, Series 2007-CH5, 245 So. 3d 786, 787 (Fla. 4th DCA 2018) (affirming foreclosure judgment finding the filing of the original loan modification agreement was not “a condition precedent to foreclosure” because the loan modification “was not itself a negotiable instrument”); McCampbell v. Fed. Nat’l Mortgage Ass’n, 255 So. 3d 911 (Fla. 2d DCA 2018) (reversing an order of dismissal and remanding for a new foreclosure trial finding “a copy of a modification is admissible to the same degree as an original” because “it is not a negotiable instrument as defined in section 673.1041”); Bank of New York Mellon v. Garcia, 254 So. 3d 565, 566 (Fla. 3d DCA 2018), review denied, SC18-1764, 2019 WL 3219374 (Fla. July 17, 2018) (distinguishing Rattigan on the basis that the original nor a copy of the modification was entered into evidence in that case and reversing an order of dismissal and remanding for a new foreclosure trial explaining a copy of a modification is admissible to prove the terms of the agreement as long as there are no authenticity or fairness issues created by the presentation of the duplicate instead of the original).

Although this issue appears to be settled, the Fourth DCA recently pointed out an additional requirement for enforcing a loan modification in a decision rendered earlier this month in SchroederSchroeder v. MTGLQ Inv’rs, L.P., 4D18-3177, 2019 WL 4458739 (Fla. 4th DCA Sept. 18, 2019)[ii]. In Schroeder, the Fourth DCA reversed a foreclosure judgment “[b]ecause the required documentary stamp and intangible taxes were not paid on a portion of the loan enforced by the judgment…” Schroeder involved a modified loan with an increased principal balance like the loan in Rattigan. Although the mortgagee attached a copy of the loan modification to its complaint which supported the additional principal, it admitted it failed to pay taxes on that amount prior to the entry of judgment. Despite the fact the borrowers failed to raise this issue as a defense, the Fourth DCA agreed the failure to pay the required taxes rendered the note and mortgage unenforceable at the time the court entered judgment under sections 201.08(1)(b) and 199.282(4), Fla. Stats. The Court elaborated that the mortgagee’s failure in this regard did not constitute an affirmative defense that had to be pled to be preserved. The DCA remanded the matter with instructions to vacate the judgment, but also directed “that another final judgment may be entered…upon the submission of proof[iii] that the required documentary stamp and intangible taxes have been paid.” The takeaway from all these cases is that foreclosing a modified loan must be handled differently than a standard foreclosure to avoid costly delays and additional litigation expenses. The written modification should be sent to counsel for review prior to filing the complaint and to ensure compliance with statutory and common law requirements.

[i] This rule is codified at § 90.952, Fla. Stat.

[ii] This decision will not be final until October 4, 2019, provided the appellant does not file a motion for rehearing before that date.

[iii] The mortgagee paid the taxes and documentary stamps while the appeal was pending but that did not resolve the issue because the note was unenforceable when the court entered judgment.