Plaintiff as Servicer? I Think Not.

I observed a foreclosure trial today, and one aspect of it in particular really bothered me. The plaintiff prosecuting the case was not the owner of the Note, but merely the servicer. Many judges and, of course, plaintiffs’ attorneys, seem to think this is fine, arguing the servicer can foreclose because it’s the “holder” of the Note, even though, by its own admission, it’s not the owner. In other words, the plaintiff/servicer concedes it does not “own” the Note, i.e. it’s not the plaintiff’s Note, but because it has the Note in its possession, and the Note is indorsed in blank, it can foreclose.

I’ve thought about this argument a lot, read a lot of case law, and see some fatal problems. Frankly, I’m frustrated these problems are largely being ignored and hope that everyone starts arguing and adjudicating this issue appropriately.

First off, taking the plaintiff’s argument to its logical extreme, anyone can steal a Note with a blank indorsement – literally, be a thief – but because he possesses the Note, and the Note is indorsed in blank, he could foreclose simply because he’s the holder. That sounds insane, but once you accept the argument that the plaintiff need only be the “holder,” and that ownership is irrelevant, that’s what you’re allowing – a thief can foreclose. Anyone can foreclose. Come to court with a Note with a blank indorsement, and how you obtained that Note is irrelevant – you can foreclose.

Respectfully, that’s just not the law. It can’t be the law. There’s no way the law can allow or would allow a thief to foreclose. Undoubtedly, this is why Rule 1.944 requires the plaintiff be the “owner and holder.”

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