The Florida Bar: Cracking the Mortgage Assignment Shell Game

MERS Shell Game

The Florida Bar: Cracking the Mortgage Assignment Shell Game

By David Peterson a creditors’ rights litigator.

Problem 5 — Who Has Standing to Foreclose the Mortgage?

The provisions of Article 3 speak in terms of who is entitled to “enforce” an instrument. Thus, the solution to problem four must also be the solution to problem five. Unlike problem four, however, there are a number of reported cases concerning standing in foreclosures that must be considered. It should come as no surprise that the holder of the promissory note has standing to maintain a foreclosure action.34 Further, an agent for the holder can sue to foreclose.35 The holder of a collateral assignment has sufficient standing to foreclose.36

Failure to file the original promissory note or offer evidence of standing might preclude summary judgment.37 Even when the plaintiff files the original, it might be necessary to offer additional evidence to show that the plaintiff is the holder or has rights as a nonholder. In BAC Funding Consortium, Inc. v. Jean-Jacques, 28 So. 3d 936 (Fla. 2d DCA 2010), for example, the court reversed a summary judgment of foreclosure, saying the plaintiff had not proven it held the note. The written assignment was incomplete and unsigned. The plaintiff filed the original note, which showed an indorsement to another person, but no indorsement to the plaintiff. The court found that was insufficient. Clearly, a party in possession of a note indorsed to another is not a “holder,” but recall that Johns v. Gillian holds that a written assignment is not needed to show standing when the transferee receives delivery of the note. The court’s ruling in BAC Funding Consortium was based on the heavy burden required for summary judgment. The court said the plaintiff did not offer an affidavit or deposition proving it held the note and suggested that “proof of purchase of the debt, or evidence of an effective transfer” might substitute for an assignment.38

In Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. 4th DCA 1990), the court held that an assignment executed after the filing of the foreclosure case was not sufficient to show the plaintiff had standing at the time the complaint was filed. In WM Specialty Mortgage, LLC v. Salomon, 874 So. 2d 680 (Fla. 4th DCA 2004), however, the court distinguished Jeff-Ray Corp., stating that the execution date of the written assignment was less significant when the plaintiff could show that it acquired the mortgage before filing the foreclosure without a written assignment, as permitted by Johns v. Gilliam.39

When the note is lost, a document trail showing ownership is important. The burden in BAC Funding Consortium might be discharged by an affidavit confirming that the note was sold to the plaintiff prior to foreclosure. Corroboratory evidence of sale documents or payment of consideration is icing on the cake, but probably not needed absent doubt over the plaintiff’s rights. If doubt remains, indemnity can be required if needed to protect the mortgagor.40

In the case of a defaulting mortgagor, someone presumably has a right to foreclose. Excessively strict standing requirements might result in a windfall to the mortgagor at the expense of the lender. At the same time, courts must ensure that the mortgagor is not subjected to double liability. A review of the cases shows that while there are a few cases in which mortgagors paid the wrong party and were later held liable to the true holder, there is a dearth of cases in Florida where a mortgagor was foreclosed by one putative mortgagee, and later found liable to another who was the true holder. The lack of such nightmare cases is a testament to the fine job courts have done in enforcing the standing requirements, but it also begs the question whether the risk of double liability may be overstated. Given the long foreclosure process in Florida, a defaulting borrower is unlikely to remain unaware of conflicting demands long enough to complete a foreclosure. It seems that in such an event, either the borrower must have ignored conflicting demands, or one of the putative mortgagees sat on its rights. While both are plausible scenarios, they each present clear equities that should assist a court in positioning the loss.

“Problems” 1,2,3,4 and 6 here…


8 Responses to “The Florida Bar: Cracking the Mortgage Assignment Shell Game”
  1. D.Lennon says:

    Confused by……10-10-14, 2nd court appearance re. my deceased brother’s property. The first had been cancelled/continued by bank attorney. I assumed this would be as well, because the court mandated 72 hour prior to court meeting of the parties had again not happened. Despite arriving before the appointed time – I was ushered out by the bank attorney who explained that this had been her last foreclosure of the day so she had finished up early, I wouldn’t be financially responsible for anything as my name was not on the mortgage. Also, I should be able to get the property at auction in Dec. WTH?!? My brother’s sudden death in 2010 had led to my making an inquiry for another family member re. paying off the loan – the bank repeatedly ignored this, but added my name to the foreclosure. The property is adjacent to mine, so for 4 years I’ve endured physical, financial, emotional injury, as well as defamation of character – while subject to the looting and destruction of this home by those who claimed to represent the bank as well as would be squatters. All could have been avoided. Now I see in court records that I am listed as the lone defendant (Defaulting party???) Can anyone explain this?????

    • Jonathan says:

      Technically you had no standing in your brother’s case in multiple ways. First, you did not sign the note or mortgage so had no legal defenses to the note and mortgage claims (all) in the complaint. You were not in privity of contract with the bank suing (not a party to that contract- only your brother, possibly his wife if married, and the bank)

      Second, if you were defaulted (as you state) or dropped as a party then you had no right to speak at the final judgment hearing or allege ANY defenses (even if you could and had standing to do so in point 1 above).

      This is simply the rules of civil procedure for all civil cases unfortunately.

      • BOBBI SWANN says:

        Jonathan – the mere fact that the lender added D.L. Lennon’s name to the foreclosure and listed as the lone defendant is a violation of civil procedure. He may or may not have standing as you say b/c he may be entitled as an ‘heir’ to the property through a last will and testament. If there was a will, it should have been probated and the property would have been an asset of that probate. The Courts obviously recognized some sort of standing on the part of D.L. Lennon. Now, due to the violation of adding him as a defendant he should turn around and file for a Motion to Vacate the judgement and then sue the lender for punitive damages. It was successful in the YUBA case.

  2. BOBBI SWANN says:

    It would be different if the courts would rule in unison, but that is clearly not the case in Florida. What might be a good case for one is not necessarily the same for another defendant. Our laws are so radically misinterpreted or should I say varying interpretations that there is really no set standard of foreclosure. We all know how the judges can be swayed in most cases towards the plaintiff no matter what the law states. What we are experiencing is a total collapse of the legal system in Florida, flawed with corruption and dishonesty to even include those on the bench. I doubt if there is a handful of people (voters) out there who would resonate with such adoration for the court systems here. For me, the only joy is the upcoming election wherein all the incumbents will be thwarted out!

  3. Ruth Vorse says:

    Does remod paperwork (new interest rate and terms plus new balance) super cede existing loan paperwork – Ocwen trying to foreclose on original note from 2005 – remod done in 2010 does not show up in property search – Watson P.A. files assignment in 2010 with back dated paperwork dated 2009 with robo signer Patricias Arango – Ocwen states this is securitized investment.
    Seems like lack of standing – will not provide proof of original note.

    • neidermeyer says:

      Consult a lawyer in your state… it is vital that you make them state the “investor” ,, most loan mods DO NOT NAME the financial institution that is agreeing to the mod because it’s really just the underwriters syndicate (the investment bank that supposedly wrote your mortgage and “sold” it to a securitized trust) adjusting their passthrough to the real investor(s). FIGHT FIGHT FIGHT FIGHT FIGHT. The actual “investors” in the certificates have no actual loss as the syndicate advances payments no matter what ,, and calls it “servicer advances” ..

    • Ruth Vorse says:

      I found investor info through SEC filings – but I guess I am confused how you can do a remod on a security since it is no longer a mortgage – remod done by same bank as original mortgage – I didn’t know if I needed to be looking for another set of securities because was treated like new loan. I will be contacting an attorney – just trying to get
      some research done (tracking certificates/ chain of title/ etc.) to take with me –
      Thank you for your response!

  4. Dominick Sammarone says:

    The Florida bar is cracking down? That’s a laugh… The Florida bar couldn’t find the crack of their ass! The Florida bar is comprised of attorneys who couldn’t make it in private practice so they took a handout job also known as a hand job. I highly doubt anyone has the skills or qualifications of untangling the mers the Debacle. Florida bar is riddled with boobs that have a better chance of making money as a topless bar.

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