The Wizard Behind the Curtain, Part Two
It’s a new ballgame, folks.
Remember my recent posts, including here and here, where I argued at length that a servicer could not prosecute a lawsuit without the trustee/agent ratifying the servicer’s actions? In my view, it’s not enough that the servicer says it has the authority to proceed on behalf of a trust – the servicer must prove it with evidence from the trust itself.
Unfortunately, this has not been happening in foreclosure cases in Florida. Instead of servicers proving their authority to act on behalf of a trustee, the servicers merely assert they have that authority, without any independent proof. This has prompted many consumer advocates, including myself, to wonder whether the plaintiffs named in foreclosure lawsuits even know these lawsuits are pending, a phenomenon many in the industry have called The Wizard Behind The Curtain.
Anyway, earlier today, Florida’s Fourth District issued an earth-shattering opinion, agreeing with everything I’ve been arguing in these regards:
In the mortgage foreclosure context, ‘standing is broader than just actual ownership of the beneficial interest in the note.’ … In securitization cases, a servicer may be considered a party in interest to commence legal action as long as the trustee joins or ratifies its action. … Here, the caption of the verified complaint states that the underlying action is brought by CW solely in its capacity as special servicer on behalf of U.S. Bank, N.A. … Although CW’s complaint is verified, it is verified by the SVP for CW – not by the real party in interest, the trust. CW relies on nothing more than its own allegations and affidavit to support its argument that it has standing to sue on behalf of the trust. This is insufficient evidence to prove that it is authorized to sue on the trust’s behalf.
Ellstno/Leetsdale, LLC v. CWCapital Asset Mgmt, LLC, Case No. 4D11-3151 (Fla. 4th DCA 2012) (boldface in original).
In light of this opinion, a servicer cannot prosecute a lawsuit on behalf of an alphabet soup securitized trust unless the servicer presents proof from the trust reflecting its authority to proceed.
Think about that for a moment. Let it simmer. How is the plaintiff going to prove that at trial? As I’ve been saying for a long time, I see two possibilities: (1) have the trustee so testify (in addition to the servicer, which means, yes, there must be two witnesses); or (2) produce a written, authenticated document showing the servicer’s authority to act on the trustee’s behalf with respect to that specific property.
This opinion should also dispel any notion that it is acceptable for a non-party servicer to verify a foreclosure complaint in lieu of the plaintiff doing so. The Elston opinion did not expressly so hold, but it clearly suggested as much. (“Although CW’s complaint is verified, it is verified by the “SVP” for CW – not by the real party in interest, the trust.”).
Personally, I love that the Wizard Behind the Curtain is finally being exposed. In my view, banks AND THEIR LAWYERS better think twice about prosecuting foreclosure cases based solely on the representations of a servicer. Clearly, the servicer must be able to prove its authority to prosecute that case with something besides its own affidavit.