The Alabama Supreme Court recently released an opinion interpreting the pre-foreclosure notice requirements contained in paragraph 22 of the standard mortgage form. In short, strict compliance is required. The Court in Ex Parte Turner, concluded that lenders must specifically advise borrowers of their right to bring a court action to contest the default as required by the mortgage—anything less is insufficient. The notice sent to the borrowers in that case stated: “[y]ou . . . have the right to assert in foreclosure, the non-existence of a default or any other defense to acceleration and foreclosure.” The notice did not, however, inform the borrowers “. . . of the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale” as required by paragraph 22 of the standard mortgage form.
The Alabama Court of Civil Appeals found that the lender’s notice substantially complied with the language of the mortgage. The Alabama Supreme Court reversed this decision however on the basis that precedent requires strict compliance, not substantial compliance. This, according to the court, means near verbatim language in pre-foreclosure notices tracking the language in paragraph 22 of the mortgage form. In reaching this conclusion, the court observed that in a non-judicial foreclosure state such as Alabama, language informing borrowers of the right to bring a legal action is important to prevent lulling borrowers into believing that they can wait to advance their defense to foreclosure as a response to a lawsuit that, as a practical matter, may never come.
The decision will have lasting impact on pending and future foreclosures in Alabama. Lenders should work with their vendors to ensure that their current notices of default and notices of acceleration conform in all respects with the language contained in paragraph 22 of the standard mortgage form.