Garret Bender and his wife Gina started a court battle more than a year ago against SunTrust Mortgage, which wanted to foreclose on their Delray Beach house to recoup a $4 million mortgage.
The Benders asked the 4th District Court of Appeal to intervene last week after they came across what many foreclosure defense attorneys call growing and serious problems in South Florida courts — plaintiff substitutions and the increasing use of confidentiality in foreclosures against a backdrop of the muddled world of securitized mortgages.
Lender-plaintiffs have often lacked the documentation to prove they are the actual owner of the mortgage in question. Many loans in foreclosure have been sold in securitized packages numerous times and tracking ownership can be complicated. Critics say judges, overwhelmed by the volume of pending foreclosures cases, have overlooked the critical issue to move cases more quickly, taking away the homeowners’ right of due process.
The Benders filed a petition to quash an order by Palm Beach Circuit Judge Meenu Sasser granting a motion by SunTrust to keep confidential the documents related to the transfer and sale of the Benders’ mortgage. In the petition, the couple also criticized the order that allowed SunTrust to name a new plaintiff to replace itself in the foreclosure action. The order granting confidentiality was decided without a hearing and failed to identify the grounds for making the court records confidential, Fort Lauderdale appellate attorney Laura Watson claims in the petition she filed on behalf of the Benders. Watson did not return a call seeking comment by deadline.
Sasser ordered the documents related to the purchase and servicing of the mortgage be made available to attorneys representing the Benders but otherwise remain confidential. SunTrust claimed in its motion for confidentiality that the documents contained “proprietary commercial information.”
Florida International University law professor Howard Wasserman said the ruling seems unusual since no hearing was held on the confidentiality motion and the justification for granting confidentiality isn’t detailed in the order.
“Ideally, there would be an opportunity for the defense to respond, and you have to have good reason why the records should be confidential,” he said.
SunTrust attorney Lori Heyer-Bednar, partner in charge of the Fort Lauderdale office of Roetzel & Andress, did not return a call seeking comment by deadline.
The issue of court secrecy was addressed by the Florida Supreme Court in 2007 after the discovery of widespread abuses by judges in sealing court cases and filings.
In an effort to protect the public’s constitutional right of access to court records, the Florida Supreme Court prohibited secret dockets in civil cases, barring judges from sealing civil court cases from the public. Earlier this year, the decision banning the secrecy of court records were extended to criminal cases.
In the petition to the 4th DCA, Watson noted SunTrust was allowed to drop out and name a substitute plaintiff more than a year after filing the foreclosure suit. SunTrust said it needed to make the change because the mortgage had been assigned to SunTrust Bank, which is the new plaintiff on the case.
Boca Raton attorney Robert Sweetapple, who is representing the Benders in circuit court, filed a motion for summary judgment Tuesday to dismiss the suit claiming SunTrust Mortgage had no right to file the foreclosure suit in 2009 because it did not own the note.
The Benders, who did not return calls by deadline, have been claiming since last year that SunTrust Mortgage was not the actual owner of the mortgage, according to the appellate petition.
Attorneys say the issue is critical to homeowners who face foreclosure because if the wrong entity is allowed to foreclose, the borrowers could still be left owing money to the actual lender.
In the Benders’ case, if Suntrust Mortgage had been allowed to foreclose on the Benders house, based on a mortgage it did not own, the Benders would still be liable for the payment of the loan if the actual owner of the note, Suntrust Bank, later filed a new foreclosure suit against them. By then, Suntrust Mortgage could have already sold the property. Foreclosure defense attorneys say if the courts continue to overlook the issue of note ownership, South Florida will be flooded with additional foreclosure litigation.
Attorneys for lender SunTrust Mortgage “feigned outrage” for several months at the assertion and refused to document the “true owner of the mortgage,” according to the Benders’ petition.
On the evening before a SunTrust corporate representative was scheduled for a deposition in the case, SunTrust filed a motion to substitute the plaintiff based on an assignment of the mortgage. However, court records show the mortgage was sold or assigned to SunTrust Bank months before the initial foreclosure suit was filed.
There have been widespread problems with foreclosure in Florida. The Florida attorney general has launched investigations into Florida’s three largest foreclosure firms over allegations that lenders have been filing fraudulent mortgage assignments and affidavits related to the ownership of the mortgage note in foreclosure cases.
On Tuesday, GMAC Mortgage announced it is halting foreclosure evictions in 23 states including Florida until it can correct a “defect” with affidavits in its foreclosure cases. The company said employees submitted affidavits containing information they didn’t personally know was true and sometimes signed without a notary present.
But the issue of plaintiff substitution is relatively new to foreclosure cases, particularly in instances where the change does not involve a company that later bought the underlying loan in the foreclosure case.
Wasserman said a motion to substitute a plaintiff generally is allowed as long as a judge concludes after a hearing that defendants are not prejudiced by the substitution.
But when it comes to foreclosure lawsuits, the issue can be more complex. Lawsuits often are filed by lenders or servicers that are foreclosing based on a mortgage note that may have been sold and changed hands numerous times, clouding the identity of the lienholder.
Plaintiff substitution creates great potential for fraud, some attorneys say.
“This is a huge issue,” said Aventura foreclosure defense attorney Richard Burton. “There are people being sued by two or three different parties claiming the same mortgage.”
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