Home > Foreclosure News > Homeowners Rights: Where is FDUTPA?

Homeowners Rights: Where is FDUTPA?

            As an attorney who used to practice in class action litigation under the Florida Deceptive and Unfair Trade Practice Act (FDUTPA), and that now works in foreclosure defense, I find myself in awe of the similarities between these areas of law.

            More surprisingly is the lack of education on the subject and what violations homeowners are being subjected to.  I remember studying the deceptive practices of corporations through advertising, trade practices, and the like.  How are the lenders any different?

            When the states settled with the major lenders a while back, one state I noticed pulled out of the settlement and filed suit on its own.  The Massachusetts Attorney General, in her Complaint, alleges many of these deceptive trade practices.

            One would think that the amount of false advertising sent to homeowners from lenders promising if they did this or that, then they could keep their home would subject them to liability under the act as other advertisements in other contexts have done in the past, but in actuality it goes much further.

            During a seminar at the Mayor’s Summit hosted by the City of Tallahassee, I asked a room full of people how many of them were told to stop paying on their mortgage in order to obtain a loan modification.  What that means is that they were current on their payments, but when they asked the lender for a modification the lender refused unless they were behind (sometimes as much as three months) on payments or in default of their mortgage.  Over half the room raised their hand.

            And now they are in foreclosure because they did what the lender told them to do?  Ultimately the lender did not modify anything, but by that point the homeowner was so behind in payments that they could not catch up, and if they sent a payment in for less than the full amount (usually tens of thousands of dollars) then the lender sent the payment back.

            A body of caselaw is at work though that may provide some relief.  According to the First District Court of Appeal in Florida, A waiver of the right to foreclose occurs when the lender misleads the homeowner or some other legitimate misunderstanding occurs which causes the homeowner to not perform according to the terms of the contract. Parker v. Dinsmore Co., 443 So.2d 356 (Fla. 1st DCA 1983).

            What the lender does in return is run into Court and screams that the Mortgage Contract states that any modifications to it must be in writing.  Sidenote to the information provided to homeowners:  when they are told to stop paying it is almost 99.9% of the time done over the phone and never in writing.  That way the lender can go into Court with a “their word against ours” theory, and cite what lawyers call the Parol Evidence Rule meaning it must be in writing.

            Finally, a recent opinion is pointing us in a different direction.  The homeowner may be able to raise that defense or counterclaim regardless of whether there is a writing or not, at least according to Roach v. Totalbank, 4D10-3641, 2012 WL 1414275 (Fla. 4th DCA 2012)(citing Pavolini v. Williams, 915 So.2d 251, 253-254 (Fla. 5th DCA 2005)(The lender argues the parol evidence rule and statute of frauds prohibit the guarantors from obtaining an extension of time by oral agreement. However, “[t]he parol evidence rule applies to verbal agreements between the parties to a written contract which are made before or at the time of execution of the contract. It does not apply to the admission of subsequent oral agreements that alter, modify, or change the former existing agreement between the parties.” Id. at 254 (emphasis added).”

            Future, oral agreements that modify the contract?  Such as being told to stop paying to obtain a modification?  Undoubtedly that is a deceptive and unfair trade practice that the lender should be held accountable for.  So homeowners who want to back down because it is their word against the lender should think again, and remember their words are just as powerful.  Actual damages will be needed, but with what the lenders have been putting the homeowners through they wouldn’t be as hard to prove as many might think.

  1. Dave Lentz
    May 25, 2012 at 6:58 am

    VERBAL AGREEMENTS IN MORTGAGES? Isn’t it true that Fla Stat 687.0304 (2011) will bar the use of “verbal agreements” in regards to these FDUPTA claims? If you use FDUPTA, there are severe attorney fee provisions here than can be costly for the homeowner . . . WHAT ABOUT THAT?

    • May 25, 2012 at 11:57 am

      Dave that is a great point. Not to mention that “banks” are excluded under FDUTPA as well. As for that exclusion and the credit agreements, that would have to come from the bank itself. In most of these cases we are dealing with the servicer, not the bank and we often move to dismiss on those grounds. For example, Bank of America may work with a homeowner to modify a loan only for the homeowner to find out that Freddie Mac actually owns the note, and not Bank of America. In that capacity they are a servicer. I have seen many cases dismissed under FDUTPA but never for the reason you cited, it was because the homeonwer did not prove a violation. FDUTPA defers to the Federal Trade Commission rulings so finding a violation there would be the best start. As for the attorney’s fee provision, I see what you are saying, but some of the clients are in such dire financial times trying to work with these lenders that they cannot afford an attorney at the time. And most foreclosure defense attorneys (if not all) charge a retainer. FDUTPA would possibly open the door to contingency fee suits where people could get representation without having to pay the retainer. Yes, it could be more costly, but the attorney will likely have incurred a great deal of costs dealing with a major lender who has set aside billions of dollars to hire firms to litigate these issues.

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