A Broward County Circuit Court Judge held that Fannie Mae is not entitled to the statutory limitation on the amount of unpaid assessments which must be paid by first mortgagees taking title to foreclosed properties. Under Section 718.116, Florida Statutes, a first mortgagee, or its successors or assigns, who acquires title by foreclosure or deed in lieu is responsible to the condominium association for unpaid assessments equal to the lesser of (a) the unpaid common expenses and assessments for the 12 month period prior to acquiring title, or (b) one percent of the mortgage debt. In contrast, a new unit owner is held to be jointly and severally liable with the prior owner for all unpaid assessments that came due before the unit owner acquired title.
In Federal National Mortgage Association v. Park Place at Pompano Condominium, the court found that, although Fannie Mae bought the loan and had been the assignee of the first mortgagee's right to bid at the foreclosure sale, Fannie Mae did not receive an assignment of the mortgage. Notwithstanding the lack of an assignment of the mortgage, the court in the foreclosure action did issue a certificate of title in favor of Fannie Mae finding Fannie Mae was the "legal and equitable owner and holder of the loan." In the end, the court presiding over the action between Fannie Mae and the Association seemed to agree with the Association that an actual "assignment of mortgage" had to be executed in order for Fannie Mae to be considered an assignee of the first mortgagee and to claim the protections of Section 718.116, F.S.
The holding is consistent with the provisions of Section 701.02, F.S. which provides, in part, that an assignment of a mortgage is ineffective in law or equity against creditors and subsequent purchasers "unless the assignment is contained in a document, that in its title, indicates an assignment of mortgage and is recorded according to law".
By claiming to be the equitable assignee of the first mortgagee, Fannie Mae had been able to cap its exposure for unpaid assessments in South Florida. Under the precedent set by the instant case, Fannie Mae would be treated like any other new owner acquiring title and held jointly and severally liable with the prior owner for all unpaid common expenses and assessments--a possibility which could seriously curb Fannie Mae's appetite to acquire loans in Florida.
Whether other courts will follow the holding in this case or continue to find that Fannie Mae is the equitable assignee of the first mortgagee remains to be seen. However, this case may finally prompt Fannie Mae to go through the formalities of assigning the loan.