Previous FC Action What About the Attorneys Fees and Costs?

by Anne Cordell Echevarria & Associates, P.A. USFN Member (FL)

Whether or not a lender may collect the attorneys fees and costs from a previous foreclosure action is a common question from many servicers in the mortgage servicing industry, and is very much a gray area of the law. While clearly attorneys fees are authorized under all loan documents for enforcement of the note upon default, the problem arises when a lender does not collect all outstanding charges due on a loan when it is "reinstated." The problem with attempting to collect these fees in a second or even third foreclosure action arises most often in front of a judge or opposing counsel, who will question why a lender dismissed an old case and called a loan reinstated if, in fact, not everything due on the loan as a result of the default was collected. Nonetheless, there are many times when general "non-waiver" language is contained in form mortgages. For example, Fannie Mae Form 3010 1/01 states, "[l]ender may accept any payment or partial payment insufficient to bring the loan current, without waiver of any rights hereunder ". Therefore, an argument can be made that this language in the contract allows the lender to partially reinstate a loan without giving up the right to collect certain amounts at a later time. It may be said, too, that by allowing partial reinstatement, a lender is actually helping a mortgagor to save his home. Yet the reality still remains that if pressed on prior fees and costs, a lender is best advised to remove these charges from a loan. Although there is no specific case law on point, courts, at least in Florida, will swiftly deny requests for these prior fees and costs and opposing attorneys will threaten to bring the issue before a scrutinizing judge. Finally, one caveat if the prior attorneys fees and costs are from a defective foreclosure, clearly, in all cases, they may not be charged to the borrower.

Copyright 2003 USFN