"Show Me The Note" Defense

There is one thing that the law requires in almost any real estate action, at least in those states or in bankruptcy court, where there is a judicial action concerning foreclosure.  That is the requirement to produce the actual real estate note, or at least a reasonable copy of it.

One would think that a lender, wishing to litigate on its note, or wishing to foreclose, would not have that much difficulty producing the darn thing.  But, that appears to be wrong.

According to an article in HuffPo, and other media outlets, a small homeowner rebellion called "show me the note" or "produce the note" is taking off with some degree of success.

The truth of the matter, in this  computer day and age, as these mortgages have been sliced up and transferred with great regularity, it just seems impossible for many creditors to produce the original mortgage note, as they must do if challenged.  This has provided an opportunity for lawyers to get foreclosures stopped and get modifications negotiated.

As quoted in the article, "You wouldn't imagine that the lenders would be that slovenly that they would not be able to produce adequate documentation of the debt," said House Financial Services Committee member Rep. Brad Miller (D-N.C.). "But apparently a lot of times they really have been unable to."

When involving North Carolina's legal assistance to homeowners facing foreclosure, roughly one of every three mortgages has been found to have some substantial legal discrepancy.

During the securitization boom, millions of mortgages were sold and packaged into bonds -- often many times over, metastasizing into esoteric financial instruments -- for sale to investors. Each time, the paperwork should have been changing hands and the homeowner should have been notified that someone new held the note. But just as deciphering the true holder of the mortgage has become more and more difficult for homeowners -- Is it the servicer? Investor? Trustee? Original lender? -- the paperwork has also become difficult to track.

This also comes on top of the trend with the legal aid attorney in Florida, requiring proof as to actually owned the debt.  Now they are filing quiet title actions attempting to get title to the client's home.

In dismissing 14 foreclosure cases in 2007 based on a lack of proper documentation, a federal judge in Ohio admonished the lenders, stating their argument that "'Judge, you just don't understand how things work'...reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process."

Comments

[Patches]

Judge Boyko right? Max O Gardner has some good stuff on this subject.

[Paul Slough]

'Judge, you just don't understand how things work' ...I love it, as if hundreds of years of mortgage law is supposed to be ignored just so they can save some ink.

[Linda J. Rougeux]

From the Desk of Linda J. Rougeux, President, Advocates for Justice, Consumer Compliance Auditors and Litigation Support Specialists.

Let the In-Fighting Begin… HUGE case for Florida Homeowners
By Lane Houk on Feb 12, 2010 in Court Cases, Featured, Foreclosure Defense Research, Homeowner Resources
Fresh off the press of the 2nd District Court of Appeals, today the Fla. 2nd DCA issued a stunning shot across the bow of US financial institutions by reversing a trial court’s decision to grant summary judgment in favor of US Bank, NA.

CLICK HERE for a copy of the Final Order issued today, February 12, 2010.

What is absolutely hilarious about this case is that the homeowners were NOT involved in the case. Rather, BAC Funding Consortium Inc., who was the 2nd mortgagee in the case, appealed the trial courts decision and alleged that US Bank, NA did not have standing to foreclose. Oh the irony… we knew this would happen but it is certainly fun to watch it start to happen. Banks suing Lenders; Lenders suing Trustees; Investors suing Servicers. Much more to come… that’s a promise.

The essence of BAC’s argument? Summary judgment for the plaintiff in mortgage foreclosure action was premature where plaintiff had failed to establish standing to foreclose — Plaintiff moving for summary judgment before an answer is filed must establish that defendant could not raise any genuine issues of material fact if defendant were permitted to answer complaint — Because exhibit to plaintiff’s complaint conflicts with allegations concerning standing and exhibit does not show that plaintiff has standing to foreclose mortgage, plaintiff did not establish entitlement to foreclose mortgage — Incomplete, unsigned, and unauthenticated assignment attached as exhibit to plaintiff’s response to defendant’s motion to dismiss did not constitute admissible evidence establishing standing to foreclose note and mortgage.

The appellate court agreed and said,
“Despite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage, the trial court granted summary judgment of foreclosure in favor of U.S. Bank. BAC now appeals, contending that the summary judgment was improper because U.S. Bank never established its standing to foreclose.

The summary judgment standard is well-established. “A movant is entitled to summary judgment ‘if the pleadings, depositions, answers to interrogatories, admissions, affidavits, and other materials as would be admissible in evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Estate of Githens ex rel. Seaman v. Bon Secours-Maria Manor Nursing Care Ctr., Inc., 928 So. 2d 1272, 1274 (Fla. 2d DCA 2006) (quoting Fla. R. Civ. P. 1.510(c)). When a plaintiff moves for summary judgment before the defendant has filed an answer, “the burden is upon the plaintiff to make it appear to a certainty that no answer which the defendant might properly serve could present a genuine issue of fact.” Settecasi v. Bd. of Pub. Instruction of Pinellas County, 156 So. 2d 652, 654 (Fla. 2d DCA 1963); see also W. Fla. Cmty. Builders, Inc. v. Mitchell, 528 So. 2d 979, 980 (Fla. 2d DCA 1988) (holding that when plaintiffs move for summary judgment before the defendant files an answer, “it [is] incumbent upon them to establish that no answer that [the defendant] could properly serve or affirmative defense it might raise” could present an issue of material fact); E.J. Assocs., Inc. v. John E. & Aliese Price Found., Inc., 515 So. 2d 763, 764 (Fla. 2d DCA 1987) (holding that when a plaintiff moves for summary judgment before the defendant files an answer, “the plaintiff must conclusively show that the defendant cannot plead a genuine issue of material fact”). As these cases show, a plaintiff moving for summary judgment before an answer is filed must not only establish that no genuine issue of material fact is present in the record as it stands, but also that the defendant could not raise any genuine issues of material fact if the defendant were permitted to answer the complaint.

In this case, U.S. Bank failed to meet this burden because the record before the trial court reflected a genuine issue of material fact as to U.S. Bank’s standing to foreclose the mortgage at issue. The proper party with standing to foreclose a note and/or mortgage is the holder of the note and mortgage or the holder’s representative. See Mortgage Elec. Registration Sys., Inc. v. Azize, 965 So. 2d 151, 153 (Fla. 2d DCA 2007); Troupe v. Redner, 652 So. 2d 394, 395-96 (Fla. 2d DCA 1995); see also Philogene v. ABN Amro Mortgage Group, Inc., 948 So. 2d 45, 46 (Fla. 4th DCA 2006) (“[W]e conclude that ABN had standing to bring and maintain a mortgage foreclosure action since it demonstrated that it held the note and mortgage in question.”). While U.S. Bank alleged in its unverified complaint that it was the holder of the note and mortgage, the copy of the mortgage attached to the complaint lists “Fremont Investment & Loan” as the “lender” and “MERS” as the “mortgagee.” When exhibits are attached to a complaint, the contents of the exhibits control over the allegations of the complaint. See, e.g., Hunt Ridge at Tall Pines, Inc. v. Hall, 766 So. 2d 399, 401 (Fla. 2d DCA 2000) (“Where complaint allegations are contradicted by exhibits attached to the complaint, the plain meaning of the exhibits control[s] and may be the basis for a motion to dismiss.”); Blue Supply Corp. v. Novos Electro Mech., Inc., 990 So. 2d 1157, 1159 (Fla. 3d DCA 2008); Harry Pepper & Assocs., Inc. v. Lasseter, 247 So. 2d 736, 736-37 (Fla. 3d DCA 1971) (holding that when there is an inconsistency between the allegations of material fact in a complaint and attachments to the complaint, the differing allegations “have the effect of neutralizing each allegation as against the other, thus rendering the pleading objectionable”). Because the exhibit to U.S. Bank’s complaint conflicts with its allegations concerning standing and the exhibit does not show that U.S. Bank has standing to foreclose the mortgage, U.S. Bank did not establish its entitlement to foreclose the mortgage as a matter of law.

Moreover, while U.S. Bank subsequently filed the original note, the note did not identify U.S. Bank as the lender or holder. U.S. Bank also did not attach an assignment or any other evidence to establish that it had purchased the note and mortgage. Further, it did not file any supporting affidavits or deposition testimony to establish that it owns and holds the note and mortgage. Accordingly, the documents before the trial court at the summary judgment hearing did not establish U.S. Bank’s standing to foreclose the note and mortgage, and thus, at this point, U.S. Bank was not entitled to summary judgment in its favor.”
[END]

The part that I underlined is especially important to note… US Bank actually filed the original note in the record but the Note apparently lacked any endorsement in favor of US Bank, and, presumably did not have a blank endorsement either. The appellate court also did NOT accept the bogus assignment that US Bank filed – and we have certainly seen ALOT of bogus assignments flying off the desks of document fabrication factories like Nationwide Title Clearing and FIS Foreclosure Solutions.

This is a fantastic case for attorneys and homeowners in Florida. There is a tremendous amount of legal ammunition in this case if you read the decision carefully and parse it out paragraph by paragraph.