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52 COURT CLARIFIES MORTGAGE REFORMATION & ATTORNEY'S FEES By Van Ness Attorneys Whether to seek reformation of a mortgage may be a question of strategy. If reformation is not required and may be diff icult to prove, servicers may be wary of seeking relief because of the potential for attorney's fees in the event that the servicer fails to prove the reformation issue. The Fourth District Court of Appeal appears to have made the decision simpler. Servicers may seek reformation without fear that a judgment of foreclosure without reformation will have a negative impact in terms of attorney's fees. In Deutsche Bank Nat' l Trust Co. v. Quintela, No. 4D17-873 (Fla. 4th DCA Mar. 27, 2019), the court held that a count to reform a mortgage does not carry the weight of potential attorney's fees. The court elucidated two primary reasons for this holding. First, the court held that reformation was outside of the permissible parameters of attorney's fees under section 57.105(7), Florida statutes because reformation is not a contractual remedy. The fees' provision in the mortgage clearly states that plaintiffs are entitled to collect all expenses incurred "in pursuing the remedies provided in this Section 22." Because reformation of the mortgage is not a remedy contemplated within section 22 of the mortgage, defense of reformation is not a ground for recovery of bilateral attorney's fees. Secondly, the court determined that reformation of the mortgage is not a signif icant issue in the litigation. The trial court entered judgment in favor of plaintiff on the foreclosure count despite the fact that the equitable relief of reformation was not provided. Inasmuch as the wont of reformation was not an impediment to foreclosure, it was not a "signif icant issue" for purposes of determining fees. The opinion in Quintela may aid servicers in deciding whether to pursue a reformation that may be diff icult to prove. Because reformation is not a contemplated remedy in the standard form mortgage and because reformation is not a signif icant issue in a case in which a foreclosure judgment is ultimately entered, the possibility of an adverse fees award should not deter a servicer from seeking reformation. Also, it is noteworthy that the court examined the scope of section 22 of the mortgage because that may limit other avenues of fees for borrowers and their counsel in the future. Van Ness Attorneys, aka Van Ness Law Firm, is a South Florida law f irm located in Deerf ield Beach and Miami with its roots in representing the loan servicing industry handling foreclosures, creditor-side bankruptcy, eviction, and litigation. Anthony Van Ness Van Ness sits on the Legal League 100 Advisory Board, and the law f irm is also a certif ied minority-owned business. A CALL FOR MORTGAGE REFORM In the annual letter to shareholders, JPMorgan Chase CEO Jamie Dimon stated that the U.S. is in desperate need of mortgage reform. Dimon stated that reform would add to America's economic growth. "Reducing onerous and unnecessary origination and servicing requirements (there are 3,000 federal and state requirements today) and opening up the securitization markets for safe loans would dramatically improve the cost and availability of mortgages to consumers—particularly the young, the self-employed and those with prior defaults," Dimon said. "And these would not be subprime mortgages but mortgages that we should be making," Dimon continued. "By taking this step, our economists believe that homeownership and economic growth would increase by up to 0.2 percent a year." According to Dimon, it was mortgage laws that led to the Great Recession in 2008, and today, bad mortgage laws are hindering economic growth. "Because there are so many regulators involved in crafting the new rules, coupled with political intervention that isn't always helpful, it is hard to achieve the much- needed mortgage reform," Dimon said. "is has become a critical issue and one reason why banks have been moving away from significant parts of the mortgage business. at business, in particular, highlights one of the flaws of our complicated capital allocation regime." Dimon stressed the importance of mortgage reform. According to Dimon and JPMorgan Chase's analysis, over "$1 trillion in additional mortgage loans might have been made over a five-year period had we reformed our mortgage system." Additionally, in his letter, Dimon notes the impact student loans have had on mortgages and household formation. "Irrational student lending, soaring college costs and the burden of student loans have become a significant issue," Dimon said. "e impact of student debt is now affecting mortgage credit and household formation—a $1,000 increase in student debt reduces subsequent homeownership rates by 1.8 percent. Recent research shows that the burdens of student debt are now starting to affect the economy.

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