August 26, 2019
The Foreclosure Savings Clause
Nearly every sort of document that affects the viability or that validates a loan is likely to have what we refer to as a “savings clause.” These clauses are inserted into contracts to assert that, even if some portion of the contract is invalidated or determined to be unenforceable by a court, the contract will remain as intact and enforceable as the law will allow. These clauses can refer to the entire contract, or to specific provisions within a given contract. They are intended, in other words, to be a source of relative certainty even in a situation whose uncertainty may be at issue. Often these clauses are also referred to as “severability clauses,” because they express intent by the parties that they hope a court will “sever” (cut away or render inert) whatever portion of the contract the law must deem invalid while maintaining the rest of the agreement—and even indicate particular portions of the contract that they would consider the best to sever. This is helpful in some ways, but there will always be scenarios in which such a clause will not quite solve all of the issues one might want it to.
One reason for this is that sometimes courts find even portions of such savings clauses to be invalid or ineffective (an example germane to loan documents occurred in the precedential Florida case Gessa v. Manor Care of Fla., Inc., in which the court decided that a limitations of remedies provision could not be severed, even though the contract stipulated that it could be in its severability clause—limitations of remedies provisions must remain).
Yet these clauses can function as evidence of intent in cases. If a savings clause declares that a lender does not want the interest and calculations payments to accrue at an unlawful rate, then it makes it easier for a court to sever any provision within the contract that would have the effect of charging a consumer an unlawful rate, while the contract in its other respects would remain intact. This is beneficial to both loan borrowers and lenders, because it imposes a level of certainty, even if the law—such as code that determines what may be an unlawful rate—shifts beneath the sands on which the contract was built. Thus foreclosures can more easily be avoided, as can the abandonment of mortgages.
At Topouzis & Associates, P.C., we offer the services that ensure title to your new home gets conveyed clear of defects—and we also supply purchasers with Owner’s Policies of title insurance, just in case. Contact us if you want your property transfer in Cranston, Rhode Island; Springfield, Massachusetts; or Miami, Florida to go through without a hitch—both before and after closing.