Archive for December, 2011

Not Just Standing – Standing at Inception

On the heels of two similar decisions just a few weeks ago, Florida’s Fourth District Court of Appeal just issued another ruling which explains the need for a bank to have standing to foreclose, not just in general terms and not just when it moves for summary judgment, but at the inception of the lawsuit.  McLean v. J.P. Morgan Chase Bank, issued today out of the Fourth District, does the best job of any foreclosure case I’ve read so far, at least in Florida, of explaining the distinction. 

I strongly encourage everyone to read the opinion, but I’ll summarize.  

Generally, the issue of whether the bank had standing at the inception of a foreclosure case arises in one of two contexts.  The first is where the bank contends it has standing to foreclose based on an Assignment of Mortgage, yet that assignment post-dates the filing of the Complaint.  This was the fact pattern in McLean, and the Fourth District makes it clear that such an assignment is insufficient, particularly without proof that the actual transfer of the Note/Mortgage took place prior to the suit being filed.  In other words, it’s okay for an assignment to post-date the filing of the Complaint so long as the actual transfer of the Note/Mortgage took place before suit was filed, and the bank must present evidence of that transfer to prevail. 

The second and perhaps more common fact pattern is where the bank relies on an indorsement that was executed after the original Complaint was filed.  (The indorsements are always undated, so how can you tell if the indorsement post-dates the Complaint?  Easy – compare the Note attached to the Complaint, which often has no indorsement, to the ”original” Note filed thereafter, which usually does.)  As the McLean court explained, this fact pattern also requires dismissal: 

if the evidence shows the Note was indorsed to Chase after the lawsuit was filed, then Chase had no standing at the time the Complaint was filed, in which case the trial court should dismiss the instant lawsuit and Chase must file a new complaint. 

In either scenario, i.e. whether the bank’s standing is based on an Assignment of Mortgage or an indorsement, the bank must present evidence that it acquired the requisite standing before it filed suit, failing which a summary judgment of foreclosure would be improper.  In other words, even if the homeowner doesn’t know when the indorsement was executed, if the bank can’t/doesn’t prove when it was executed, then it cannot foreclose. 

Notice how the court calls for an evidentiary hearing?  In my view, the evidence from the homeowner would be simple.  I’d have my client testify that the copy of the Note attached to the Complaint that he/she was served with did not have an indorsement.  (This is easy – the Complaint is in the court file.)  This would put the onus on the bank to prove it obtained the indorsement before filing suit even though the copy of the Note attached to the Complaint did not have that indorsement.  In other words, a bank representative would have to testify when the indorsement was obtained, and trust me – that’s easier said than done.     

One fascinating part of the opinion is the court’s indication that this issue can be addressed via a motion to dismiss.  To illustrate, did you notice how the court kept saying the homeowner raised these arguments via motions to dismiss?  Then, perhaps most tellingly, the court held: 

where a mortgage foreclosure action is based on an assignment that was executed after the lawsuit was filed, the plaintiff has failed to state a cause of action.  In such cases, the proper course of action is for the plaintiff to file a new Complaint. 

The term ”failed to state a cause of action” is critical here.  This is, quite simply, the clearest indication yet from any Florida appellate court that a plaintiff’s lack of standing at the inception of the case can be brought via a motion to dismiss.  

It’s an exciting day for foreclosure defense, folks – and yet another reason to keep fighting your lawsuit.

(By the way, if you check my old blogs, here and here, for example, you’ll see I’ve been arguing “standing at inception” in foreclosure cases for years.  It’s terrific to see the arguments I’ve been making for so long are being adopted by Florida’s appellate courts.)

Mark Stopa

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I had a Case Management Conference in a foreclosure case today.  It was one of those hearings where dozens of hearings in other cases were scheduled at the same time, so I had the opportunity to observe other hearings and gain insight into the judge’s thought processes.  In doing so, I heard some interesting, even entertaining, quotes from the judge:

Your client brought the case, why can’t your client get the documents?

The indorsement is not dated.  Why aren’t these things dated?

I would not entertain a summary judgment motion unless the parties have had good-faith discussions for at least 60 days to try to resolve the case.  Wells Fargo cannot simply ignore the homeowners when they’re trying to get a loan modification.

These one-liners made the long wait entertaining, but even more than that, they helped give me insight into the judge’s thought processes and feelings about foreclosure defense and foreclosure cases in general. 

So if you find yourself at a mass-motion calendar, don’t just daydream waiting for your case to be called.  Listen closely to the hearings before you.  Often, you’ll learn something about the judge that may apply to your specific case.

Mark Stopa

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When the Punishment Doesn’t Fit the Crime

Suppose I put on a ski mask, brought my gun into a Wells Fargo, and robbed the bank of $100,000.  Then suppose, despite my best efforts to get away with it, I got caught.  Do you think the state attorney would decline criminal prosecution and resolve the dispute by letting me pay back $10,000 of the $100,000? 

That’s a pretty absurd question, I realize.  So why do crooked bankers keep getting punishments that don’t fit their crimes? 

This is a good illustration of why so many people are so upset.  If I can’t rob a bank of $100,000 and call it “even” by returning $10,000, then why do the bankers get to “settle” via such terms?

Mark Stopa

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Admitted Perjury … How Pervasive is the Problem?

I’ve seen the banks admit to some really outlandish things, but this one might take the cake.  In a recent Petition for Writ of Certiorari in Florida’s Second District Court of Appeal, U.S. Bank argues:

Compliance with the trial court’s Order would require Petitioner to perjure itself.

That admission, by itself, is bad enough and, candidly, needs no further discussion.  Instead, let’s put the admission into perspective.  In the Petition, U.S. Bank argued it could not verify its foreclosure complaint under oath, as required by The Florida Supreme Court via Fla.R.Civ.P. 1.110, because doing so ”would require U.S. Bank to attest to information to which it has insufficient knowledge.” 

Think about that for a minute.  A huge bank in a foreclosure case is admitting it cannot verify its Complaint under oath, as required by Florida law, because it lacks sufficient knowledge to do so.  The bank is so confident in this inability it admits it would face perjury if it did so. 

Now answer me this – in how many cases have the banks verified foreclosure complaints, under oath, in this exact same situation, i.e. despite “insufficient knowledge” to do so?  Remember, the requirement to verify a complaint exists in every single residential foreclosure case in the state of Florida.  See Fla.R.Civ.P. 1.110.  As a matter of routine, banks verify foreclosure complaints in virtually every foreclosure lawsuit. 

So if banks verify Complaints in every single (residential foreclosure) case, yet lack “sufficient knowledge” to do so in these cases, are the banks guilty if perjury in each such case (thousands of cases throughout Florida)?  Instead of answering that question, I’ll defer to the words of the bank’s own lawyer, who opined:

Compliance with the trial court’s Order would require Petitioner to perjure itself.


Mark Stopa

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Releasing Original Notes After Settlement

I came across a motion and Order today that was all too familiar.  A foreclosure lawsuit had settled, and the bank’s lawyers asked the Court, ex parte and without hearing, to return the original Note/Mortgage to them.   

This type of request is all too common and sometimes, quite frankly, it makes sense.  For instance, when a foreclosure lawsuit settles via a loan modification, or when the bank voluntarily dismisses its lawsuit on its own (without a settlement), the Note/Mortgage should be returned to the Plaintiff or its counsel.  After all, the homeowner is, at least in theory, still indebted under those documents, so the bank may need them in the future.  

What troubles me, though, is when I see banks’ lawyers requesting that these documents be returned after a foreclosure lawsuit has been resolved via a short sale and deficiency waiver.  In this circumstance, I see no reason why the Note/Mortgage should be returned.  After all, the homeowner owes no more money under the Note/Mortgage, and the property has been sold to a third-party.  So why do these documents need to be returned? 

Frankly, returning the original Note/Mortgage after a short sale is a recipe for disaster, as it invites inappropriate claims that monies are still owed when the debts have all been extinguished.  Why enable a third party to take the position that monies are still owed when the debt has been settled/paid? 

Upon encountering this situation today, I drafted an Emergency Objection to the return of the original Note/Mortgage.  This objection doesn’t have any fancy legal arguments or case law, it simply notes that the bank should have to explain, at a duly-noticed hearing, why it should be entitled to the return of these documents.  If/when such a hearing takes place, I can make appropriate objections on behalf of my clients. 

The situation here is bigger than this one case.  Everyone should realize that it’s not a good thing for original promissory Notes to be floating around in the stream of commerce when the homeowner’s obligations thereunder have been extinguished.  This is not something that judges should allow, especially ex parte, and it’s not something that homeowners or their attorneys should accept without argument. 

Quite simply, it’s past time that we stop allowing these original Notes and Mortgages to be returned to banks and their lawyers ex parte.

Mark Stopa

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Mitt Romney – Another Clueless Politician

In the most recent example of how politicians are out of touch with the American people they’re supposed to be representing, Mitt Romney just challenged Rick Perry to a $10,000 bet during a GOP debate. 

First off, the fact that Romney challenged a competitor to a bet of any amount, on live TV, is troubling enough.  I can hardly think of anything less Presidential.  What’s he going to do next, arm-wrestle? 

The amount of the bet, though, is even more troubling.  Ten thousand dollars?  Most people I know, even if they were to make a bet about something, would bet, I don’t know, twenty bucks or so.  The fact that “ten thousand dollars” rolled off Romney’s tongue so easily, at a time when he should be most guarded with his words, shows he is completely out of touch with the American public. 

For many Americans, ten thousand dollars is about three months salary.  Think about that.  Romney is so out of touch with the voters he’s trying to win over that he’ll gamble three months of their salary like it’s nothing.  

Is it really any wonder why Americans are Occupying Wall Street?

Mark Stopa

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Holiday Discount for Foreclosure Defense

With the holidays approaching, many families are thinking about vacations, Christmas gifts, and relaxation.  The banks, though, are still thinking about foreclosures.  Hence, it’s important that homeowners facing foreclosure not bury their heads in the sand merely because the holidays are approaching.  If you’ve just been served, or have a hearing approaching, Santa won’t help you! 

In past years, I’ve seen that many homeowners try to put off their foreclosure woes until January.  Often, they’ve said they can afford Christmas gifts or foreclosure defense, but not both.  In my attempt to help homeowners have a normal Christmas and foreclosure defense, I created the Stopa Foreclosure Coupon.

Here are the details, as recently reported on Yahoo! News.

Mark Stopa

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A Presidential Vacation

I couldn’t imagine taking a 17-day vacation, and I’m just a foreclosure defense attorney.  Heck, I haven’t taken 17 days off all year.  I realize everyone deserves some time off, especially at Christmas, but, at best, I’ll take a few days off the week between Christmas and New Years’ Eve – not 17 days.   I doubt most of you reading this will take anything close to 17 days, either.    

With this in mind, why does President Obama, the leader of the free world, think a 17-day vacation is acceptable even as America is falling apart?  A few days?  Fine.  A Week?  Okay.  But 17 days?  Come on.  I’m sorry, but America deserves better.

This isn’t an issue of Democrat vs. Republican (I’m neither, if you’re wondering) – this is an issue of right versus wrong.

Mark Stopa

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The Four Fraud Patterns

This is a terrific and comprehensive article by Abigail Field explaining the four types of fraud which permeate mortgage foreclosure cases. 

One of my blogs is cited in the article as an example of “Endorsement Fraud,” which illustrates an important point – we have to all keep sharing our stories and experiences, as it’s the compilation of them which show the extent of problems in the foreclosure industry.

Mark Stopa

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Taylor Bean & Whitaker – Proof of a Legitimate Transfer?

Those of you who have followed my blog from the beginning will recall the Motions to Disqualify Counsel that I had been filing on a somewhat regular basis, where appropriate.  I blogged about one such motion here.  My argument, essentially, was that the bank’s lawyers had a conflict of interest where they had drafted an Assignment of Mortgage with the intent that their own client execute that AOM so as to convey standing. 

The bank’s argument in opposition was, essentially, two-fold.  First, they argued that the assignment of mortgage was irrelevant because the bank’s standing was predicated on an indorsement on the Note, not an AOM.  Second, they argued that the AOM was executed properly because MERS authorized that bank representative to sign it, even though that person was also an agent/employee of the bank which was receiving the Note/Mortgage. 

Personally, I’ve always disagreed with the bank’s arguments.  After all, how can self-dealing of this nature be blessed by our courts?  “I’m representing MERS for purposes of this AOM, even though I work for Citimortgage, the assignee of this AOM”  Seriously?  Unfortunately, various judges disagreed with me on this issue, so I largely stopped pushing these motions.  That said, where the facts really bothered me, I’ve kept pursuing them.  In one case, for instance, MERS purportedly assigned a mortgage as nominee for Taylor Bean & Whitaker purported assigned a mortgage to a securitized trust in March of 2010.  However, TBW had filed bankruptcy in August, 2009, so, absent some sort of explicit consent from a bankruptcy trustee, it seemed clear to me that, under federal law, TBW could not assign the mortgage to anyone because, once it filed bankruptcy, it did not even own the Note/Mortgage.  In other words, TBW may have executed an AOM, but the Note/Mortgage wasn’t its to assign!  As a result, and because the lawyers participated in this AOM, I filed this Motion to Disqualify Counsel

I had a hearing on this motion a few months ago in Tampa, and the judge agreed with my concern about how TBW could have assigned a mortgage when it was in bankruptcy.  The judge also seemed to agree with my belief that this issue was not mooted by any indorsement, particularly since the plaintiff had attached the AOM to its Complaint and was expressly relying upon it for standing.  As such, the judge ordered the opposing side to produce evidence showing the authority of TBW to convey this Note/Mortgage to the securitized trust as of the date in question. 

Despite many weeks to do so, the bank produced nothing.  As a result, the judge just issued an Order granting my Motion to Disqualify Counsel.  As such, the case is still pending, but the bank must hire a new lawyer. 

Whether that particular law firm or some other firm represents the bank may not seem like that big of a deal.  In my view, the issue is much bigger.  If the securitized trust or its attorneys were not able to produce evidence showing TBW was authorized to convey the Note/Mortgage, even when ordered to do so, then that’s a HUGE deal.  After all, in how many other cases might the plaintiff be unable to show that an assignor like TBW lacked the authority to convey a Note/Mortgage due to a pending bankruptcy? 

Remember, just because an Assignment of Mortgage shows up in a court file doesn’t mean the assignment was authorized.  After all, the bank executing the assignment may not have the authority to do so, as, e.g. with a bankruptcy, it may not even own what it’s trying to assign. 

Similarly, just because a Note has an indorsement doesn’t mean the indorsement was furnished by an entity with authority to indorse the Note.  If, for example, the entity was in bankruptcy, then it may not have the authority to indorse the Note even if it wanted to do so. 

Establishing that the prior owner/holder of a Note/Mortgage actually had the authority to assign or convey those documents is a significant, bona-fide defense in a fair number of foreclosure cases.  Make sure you’re not overlooking it!

Mark Stopa

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