Lyons: Documents Insufficient in Foreclosure Case

Lyons: Documents Insufficient in Foreclosure Case
By Tom Lyons


Published: Sunday, March 7, 2010 at 1:00 a.m.
Last Modified: Saturday, March 6, 2010 at 11:40 p.m.


When a ruling is reversed by an appellate court, the judge faulted sometimes grumbles.

So I didn’t know what to expect when I asked Circuit Court Judge Robert Bennett about an appellate court ruling that overturned a house foreclosure he had granted.

The three-judge panel said a bank that was not the original lender had not proven it had the right to foreclose, because the documents filed did not show how, or if, mortgage ownership had ever been transferred to the bank.

Bennett’s reaction?

The higher court was totally right, he said.

“I’m willing to fall on my sword on this one,” Bennett said. “It wasn’t a very good piece of judge work.”

To be fair, many judges have done much the same thing in similar cases, partly because most foreclosures had long been so routine. If contested at all, it was rare that anyone claimed a major financial institution had not proven any link to the mortgage.

Now, just a couple of years since Bennett’s ruling on a foreclosure case he cannot even recall, that sort of claim has become commonplace. Of the dozen or so lawyers I’ve heard from who fight foreclosures — a common specialty these days — all mentioned that issue.

This issue of standing, it’s common throughout the state,” said circuit Chief Judge Lee Haworth.

Many mortgages from the past decade were sold, packaged together, and resold as securities. Showing ownership of just one became complicated, especially because transfer paperwork was often not done for each mortgage.

Law firms that some call “foreclosure mills” handle loan default cases by the thousands for financial institutions that were not the original lenders. Some have filed odd documents in their court cases.

Many claim loan documents are lost, but that ownership of the note was transferred, perhaps multiple times, and that the foreclosing bank is now the owner or trustee.

Problem is, they rarely show a clear chain of transfers back to the original lender. Often, the documents are not only vague but also of fresh vintage. Some are only created, signed and notarized after the foreclosure is filed.

And signatures authorizing the transfers make fun reading. Some people listed as vice presidents and the like often are not, and were never even employees of the companies named. They work for companies that are hired to create the documents.

When accused of using sham documents, the response has sometimes been that the signers were somehow authorized to sign, a claim some judges have rejected.

But in many local cases, there has been no response at all from the alleged mortgage holder, and many cases have gone into limbo. And so, some homeowners have kept a roof over their heads while making no payments, but they have no idea when or how the legal battle might resume.

Bennett’s ruling happened before all this became as ordinary in Southwest Florida as sunshine. Few judges then thought to doubt that a bank had standing to foreclose.

Bennett and Haworth both say the impact of the appellate court ruling won’t be a big thing for other cases, simply because, even without it, many judges have become well aware of the issue of questionable foreclosure documents.

That doesn’t mean they are all being spotted.

In uncontested cases, most still slip by, and Haworth says judges have too many cases to do the checking that a defense lawyer would do. But there is bigger news that should help, Haworth says.

Last month, Florida’s Supreme Court decided that attorneys filing foreclosure cases will no longer be presumed blameless when they claim a right to foreclose based on faulty documents.

The foreclosure mills normally rely on an army of assistants and clerical workers, and lawyers claiming that an assistant’s error led to a faulty filing have rarely been called to task. That’s about to change, Haworth says.

Some may still gamble in cases where they expect no opposition lawyer will be checking the documents. But if they take the time and effort, most should be able to do things right and establish their claims, Haworth said.

If not, he said, they’ll have a problem.

“I’m looking forward to see how they do comply,” Haworth said. “Their license could be on the line.”

Tom Lyons can be contacted at


One Response to “Lyons: Documents Insufficient in Foreclosure Case”
  1. Dear Mr. Lyons:
    Kudos for a cogent, incisive column about the widespread problem of the use of defective, deficient and spurious documentation in foreclosure proceedings. Now that you have so well summarized the problem, I suggest you share with your readers the likely consequences.
    The use of defective documentation, especially documents which are recorded in the land records such as bogus assignments, are ticking times bombs. Such documents break the chain of title of the mortgage from the originating lender to the present alleged holder. This creates a cloud on title. Such a cloud will prevent the property from being resold with merchantable title. This means it will neither qualify for title insurance of financing. The banks, using unscrupulous foreclosure mills, have created have created a caldera of blighted title properties which will plague the nation for decades.
    These documents also provide evidence of mortgage fraud. Such evidence will serve as the fuel that fires future lawsuits subsequent to foreclosure for wrongful foreclosure seeking a reconveyance to the borrower as well as damages. These false documents will be used in massive class actions suits for damages for wrongful foreclosure, fraud and deceit, racketeering and violation of fair debt collection practices authorities.
    I suggest you speak with counsel for such major title companies as First American and Fidelity to confirm what I am saying. Both companies recently stopped offering rider coverage to insure against claims from parties with an interest in a foreclosed property that had not been made a party to the foreclosure. Because so many claims were being filed because of incomplete judgments of foreclosure, the title companies discontinued the coverage.
    I also suggest you interview Chief Judge Hays who has been acutely aware of the future title problems being created by foreclosure mills and has desperately sought to sweep this problem under a judicial rug by ignoring its resolution. More than a year ago, my colleagues and I petitioned Chief Judge Hays to use the Court Clerk to verify documentation including the chain of mortgage title and to require each plaintiff to submit a title report to make sure all parties with an interest in a property were properly served, notified and therefore dealt with in a foreclosure judgment. He declined the recommendation and went on to make sure the judicial, practice of rendering incomplete or defective foreclosure judgments continued. Please ask Chief Judge Hays who is going to wind up paying for the mess that he and other jurists like him have created.
    Richard F. Kessler
    Documentary Clearing House and Associates, LLC.

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