Posted on February 27th, 2012 by Mark Stopa
I’m really irritated about a quote I just read from Warren Buffett and it’s time for me to rant/vent. You know Buffett – the multi-billionaire investor who owns more stock in banks like Bank of America and Wells Fargo than the combined sum of all persons reading this blog. Anyway, Buffett had the audacity today to make the following statement:
Large numbers of people who have ‘lost’ their house through foreclosure have actually realized a profit because they carried out refinancings earlier that gave them cash in excess of their cost. In these cases, the evicted homeowner was the winner and the victim was the lender.
Call me childish or immature, but I just want to get about 3 inches from this guy’s face and scream “SHUT UP!”
I mean, seriously. Warren Buffet has absolutely no idea what it’s like to face foreclosure, much less be foreclosed. No friggin’ idea. He’s certainly never experienced it himself, and I’d venture to say he has never ever spoken to anyone who has been foreclosed. As such, where does he get off saying a homeowner who was “evicted,” and hence “foreclosed,” was a “winner”?
I’ve spoken to lots of homeowners who have been foreclosed. I can think of a few adjectives to describe their state of mind. Desperate. Afraid. Depressed. Fearful. Ashamed. ”Winning” is not among them.
Where does Buffett get off talking like this? Insulting, offensive, repugnant, disgusting, ignorant … pick your adjective, Buffett’s comments were all of them.
I argued this issue with a banker friend of mine (banker friend – sounds like an oxymoron, I know), and his point was that Buffett was merely trying to say that some homeowners who refinanced and took out cash for their equity only to get foreclosed (and not pay the cash back) made out well.
Ok, but so what? For every person who fits into this description, there are easily 25 or more who don’t. 25 sincere, well-intentioned homeowners who intended to pay their debts but whose world collapsed around them as the global economy went into the crapper (to no fault of their own). And even for those few homeowners who did take out cash and refinance, most of them I know did so to pay other bills/obligations. How many people do you know who cashed out their equity and partied with the money, then got foreclosed? I can’t say I know any.
Of course, last time I checked, the banks got bailed out just fine, but we’re still waiting for the homeowner bailouts.
Warren Buffett, you have no idea what you’re talking about here. I know you’re bitter because your investments in BOA and Wells Fargo haven’t worked out like you’d hoped, but before you go talking about what it’s like for homeowners who have been foreclosed, stop and make sure you know what you’re talking about. Otherwise, you just come across as ignorant, insensitive, and another ka-jillionaire who has no concept of what life is like for the typical American.
Sorry, folks. Rant over.
Mark Stopa
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Posted on February 27th, 2012 by Mark Stopa
Foreclosure defense attorneys see this fact-pattern frequently. The Note attached to the original Complaint contains no endorsements, yet the Note attached to an Amended Complaint is specially endorsed to the Plaintiff or endorsed in blank. This prompts an obvious question – “When was the Note endorsed?”
Plaintiffs’ attorneys love to argue this doesn’t matter because they have the original Note, with an endorsement, so they’re the holder. However, as I’ve been arguing for many years, including here, here, and here, that’s not sufficient – foreclosure plaintiffs must show they had standing at the inception of the case. Specifically, foreclosure plaintiffs must show they had an endorsement (or an assignment, as the case may be) and possession of the original Note before filing the underlying lawsuit.
In recent months, Florida’s appellate courts have borne out this distinction, requiring plaintiffs to prove ”standing at inception” to prevail in a foreclosure case. See Feltus v. U.S. Bank, N.A., Case No. 2D10-3272 (Fla. 2d DCA 2012); McLean v. J.P. Morgan Chase Bank, N.A., Case No. 4D10-3429 (Fla. 4th DCA 2012); Venture Holdings & Acquisitions Group, LLC v. A.I.M. Funding Group, LLC, 75 So. 3d 773 (Fla. 4th DCA 2012). Notably, these cases make it clear that an outright dismissal (without leave to amend) is the only proper remedy for a foreclosure plaintiff which lacks standing when suit was filed.
Admittedly, it’s easy to cite a case and assert it stands for a proposition of law when that may or may not be the case. So don’t take my word for it. Read McLean:
While it is true that standing to foreclose can be demonstrated by the filing of the original note with a special indorsement in favor of the plaintiff, this does not alter the rule that a
party’s standing is determined at the time a lawsuit was filed. See Progressive Exp. Ins. Co. v. McGrath Cmty. Chiro., 913 So. 2d 1281 (Fla. 2d DCA 2005). Stated another way, “the plaintiff’s standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed.” …
To summarize, the plaintiff must prove it had standing to foreclose when the complaint was filed. …
Where the plaintiff contends that its standing to foreclose derives from an indorsement of the note, the plaintiff must show that the indorsement occurred
prior to the inception of the lawsuit. If the Note or allonge reflects on its face that the endorsement occurred before the filing of the complaint, this is sufficient to establish
standing. …
In the present case, as is common in recent foreclosure cases, Chase did not attach a copy of the original note to its complaint, but instead brought a count to re-establish a lost Note. Later, however, Chase filed with the circuit court the original promissory note, which bore a special indorsement in favor of Chase. Because Chase presented to the
trial court the original promissory note, which contained a special endorsement in its favor, it obtained standing to foreclose, at least at some point.
Nonetheless, the record evidence is insufficient to demonstrate that Chase had standing to foreclose at the time the lawsuit was filed. The mortgage was assigned to Chase three days after Chase filed the instant foreclosure complaint. While the original note contained an undated special endorsement in Chase’s favor, the affidavit filed in support of
summary judgment did not state when the endorsement was made to Chase. Furthermore, the affidavit, which was dated after the lawsuit was filed, did not specifically state when Chase became the owner of the note, nor did the affidavit indicate that Chase was the owner of the note before suit was filed. Therefore, Chase failed to submit any record evidence proving that it had the right to enforce the note on the date the complaint was filed.
We therefore reverse the summary judgment and corresponding final judgment of foreclosure. On remand, in order for Chase to be entitled to summary judgment, it must show,
without genuine issue of material fact, that it was the holder of the note on the date the complaint was filed (i.e., that the note was endorsed to Chase on or before the date the lawsuit was filed). By contrast, if the evidence shows that the note was endorsed 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. See Jeff-Ray Corp., 566 So. 2d at 886. An evidentiary hearing may also be required if there is disputed
evidence on an issue, such as to the date the note was endorsed to Chase.
I’m pleased to say the judges before whom I appear are really starting to understand this principle of law and apply it in foreclosure cases. However, one issue I’ve begun encountering (in response to motions to dismiss) is when plaintiffs’ attorneys to say ”yeah, but those are summary judgment cases.” In a motion to dimiss, they argue, the Court is confined to the four corners of the Amended Complaint, and the absence of an endorsement on the original Complaint (when the plaintiff has filed an Amended Complaint) is outside the court’s purview at the motion to dismiss stage of a lawsuit.
I’ve thought about this fact-pattern a lot, and I think the solution is clear. In cases where they’re traveling under an Amended Complaint that has an endorsement on the Note that was not on the Note attached to the original Complaint, foreclosure plaintiffs need to plead the date in which the endorsement was entered. Let’s say that again:
Foreclosure plaintiffs need to plead the date in which an endorsement was entered.
Think about it. Is this really that unreasonable? If an endorsement shows up on a Note attached to an Amended Complaint, when the endorsement wasn’t on versions of the Note filed previously, and the plaintiff’s standing is predicated entirely on that endorsement, is it really that unreasonable to force plaintiffs to plead when the endorsement was created in their Amended Complaints? Florida requires ultimate facts. Isn’t an allegation as to when the endorsement was entered the bare minimum required to get over the “standing at inception” hurdle?
For anyone who thinks this would only serve to further burden our courts, look at it this way … which is the better use of judicial resources, forcing plaintiffs to plead the date these endorsements were created, or allowing cases to proceed to an Answer, a summary judgment hearing, and potentially a trial, without any allegation on this issue? Remember, if the plaintiff can’t show the endorsement was created before the lawsuit was filed, then the case is dismissed – case over. And if the plaintiff can so allege, then this helps the parties frame the issue as they proceed forward on the merits.
Isn’t it more efficient to require the date of the endorsement any time there’s an Amended Complaint? To prevail in a foreclosure case, the plaintiff must prove the “endorsement occurred prior to the inception of the lawsuit,” see McLean; shouldn’t they have to plead that as well?
With this backdrop in place, I’m very pleased to see this Order, which Judge Lee Haworth in Sarasota drafted himself, dismissing an Amended Complaint with instructions that the plaintiff, upon amendment, include allegations showing when the endorsement was put on the Note. The judge cited all of the appropriate cases regarding standing at inception and basically said “I’m not going to let this case proceed further if plaintiff can’t show when the endorsement upon which it relies for standing was entered.”
This should be happening across the board, in all Florida courts. There are far too many junk pleadings where endorsements magically show up after-the-fact. These garbage pleadings should stop. When foreclosure plaintiffs rely on an endorsement that wasn’t on the Note attached to the original Complaint, they should be made to plead the date that endorsement occurred in an Amended Complaint, failing which their cases should be dismissed and they should be ordered to re-file a new lawsuit. See cases, supra.
Mark Stopa
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