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.
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.
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 email@example.com.