A legal strategy dubbed the "Mortgage Terminator" by the Miami Beach law firm which invented it has been confirmed by a Broward County, Fla., court as a viable method for protecting condominium and homeowner associations struggling to deal with the impact of foreclosures in their communities.
The tactic comes into play after an association forecloses on the owner of a unit to collect unpaid dues and/or assessments. Once the association takes title, the ploy requires the holder of the first mortgage to either initiate its own foreclosure proceeding against the dwelling or release its mortgage so the association can sell the unit to cover what it is owed.
In the first Mortgage Terminator case, which was filed earlier this year by the Association Law Group, Citibank agreed to release its mortgage on a Miami Beach property. And now, the law firm says, the strategy has worked again, this time in Broward County, where a final judgment has been entered against Wells Fargo Bank.
In the latest case, the Palm Aire Gardens Condominium Association had foreclosed on the property and taken title to it in late December. But even though its borrower had been dispossessed from ownership, Wells Fargo Bank, the first lien holder, was not foreclosing on the property. So ALG countered by suing the lender to force it to either initiate foreclosure proceedings or give up its ownership rights.
When Wells Fargo failed to act in defense of the suit, Judge Dale Ross entered a default final judgment in favor of Palm Aire. Among other things, the judgment provides that the lender "is declared to have abandoned its Mortgage and any claims it may have on the property" and that "it has no estate, right, title or interest in the Property."
Since this case, Palm Aire has filed another Mortgage Terminator case and been granted a second judgment stripping another mortgage from a second property it owns.
"We believe these Mortgage Terminator cases are the first time in the state of Florida, and perhaps the entire country, where condominium associations have successfully stripped mortgages from properties they own," said Ben Solomon, a partner and co-founder of the law firm. "While banks argue that such delays are sometimes related to working things out with their borrowers, in these cases their borrowers don't even have title to the properties any more."
In that lenders' refusal or failure to foreclose on their troubled assets is a "severe detriment" to the community association, Solomon said, associations need to "get aggressive against banks who are sitting on the sidelines waiting for the market to improve."
He called the Mortgage Terminator "a legal strategy that finally gives banks a legal ultimatum."
