Four reversed payments, refused new ones - and the foreclosure still stood
A servicer reversed four mortgage payments without explanation, refused new ones - and the bank still got its foreclosure.
The Florida Second District Court of Appeal reversed a trial court judgment blocking Bank of New York Mellon from foreclosing on a couple’s Hillsborough County home. The November 4 decision landed 2-1, and the fact pattern reads like a servicing nightmare.
The couple took out a $160,000 mortgage in 2007 and entered a loan modification after a Chapter 13 bankruptcy in 2012. Payments were current - until August 21, 2015, when Bank of America, the servicer at the time, reversed four payments without explanation. No notes in the payment history. At trial, the bank’s witness could only speculate about why.
Here is where it gets interesting. Despite the reversals, the couple kept paying every month through April 2017, and Bank of America kept cashing those checks. Then in May 2017, the servicer returned that month’s payment, saying it fell short because it did not include the four reversed payments. The wife walked into a Bank of America branch twice to pay. The bank turned her away.
BNY Mellon filed to foreclose in January 2021. The trial court sided with the couple. On appeal, the majority flipped it.
Each missed monthly payment is a separate default under Florida law. Whatever happened with the 2015 reversals, no payments came in from June 2017 onward, and the couple admitted they could not bring the loan current when suit was filed. “A dispute over the proper accounting of payments with a bank or servicer does not, without more, excuse a borrower’s obligation to make timely payments,” the court wrote.
Unclean hands did not survive either. That defense requires conduct “akin to fraud” - something “sneaky, unscrupulous, or tricky.” The majority acknowledged the bank’s handling was far from ideal. “We in no way condone how Bank of America or the Bank prosecuted this action,” the court wrote. “But we conclude that not being ‘nice’ or doing what we consider to be unwise or imprudent is insufficient to prove that the Bank acted with unclean hands.”
On remand, the court directed removal of the four reversed payments, pre-June 2017 interest, and pre-July 2017 fees from the judgment.
For servicers and default teams, this one lands close to home. Poor payment application will not kill a foreclosure - but it hands borrowers’ counsel a sympathetic fact pattern and costs real money litigating the mess.
This is a slip opinion and may be revised before official publication.
