COURT RULING PROVIDES COSTLY LESSON ON BEST PRACTICES | Key Points
- Last month the United States Court of Appeals for the Eleventh Circuit issued a sixty-page opinion which addressed claims brought by borrowers, Johnnie and Adrian Marchisio (“the Borrowers” or “Borrowers”), against Servicer Mortgage Services, LLC (“Servicer”) for various statutory and contractual violations committed by Servicer while servicing the Marchisio’s first and second mortgages. Marchisio v. Servicer Mortgage Services, LLC, 17-10584, 2019 WL 1320522, at *1 (11th Cir. Mar. 25, 2019).
- Servicer filed a foreclosure action against the Borrowers seeking to foreclose two mortgages which lawsuit was later resolved through a deed-in-lieu of foreclosure entered in December 2009. Pursuant to the parties’ agreement, the Borrowers surrendered the property and Servicer “agreed to report to the credit reporting agencies…that the mortgage was discharged with a zero balance owed.” However, as the Circuit Court explained “….by the end of January 2014, more than four years after settlement of the foreclosure action and prompted only by two subsequent [federal] lawsuits, [Servicer] finally managed to update its databases, correct its previous errors, and accurately report the status of Plaintiffs’ second loan.”
- The Circuit Court found the four-year delay in Servicer’s compliance with the parties’ settlement agreement supported the Borrowers’ breach of contract claim and their claims for violations of the Fair Credit Reporting Act (“FCRA”) and the Florida Collections Act (“FCA”). The Court affirmed summary judgment on the FCRA claim in favor of the Borrowers and the award of statutory damages, but also found a basis for actual and punitive damages. The Court reversed summary judgment for Servicer on both the breach of contract and FCA claims remanding with directions that those claims be tried by a jury.
- This detailed holding provides helpful insights into best practices for servicing a loan in default which default is resolved through settlement. Click this link for a list of suggested best practices extrapolated from this holding.