Livinglies's Weblog

One of the most effective strategies the banks have devised is to utilize a process of servicing musical chairs to keep the homeowner and judges from being able to decipher who the rotating parties involved in the loan are.  The name game becomes so convoluted through assignments, serving rights and through attempts to identify the true creditor that not even the servicers know who the creditor is.  LPS/DocX/Black Knight augments this confusion by fabricating documents to paper over the underlying fraud.

Foreclosure standing, the critical point that derailed hundreds of lender lawsuits, confused a Florida trial judge, who “throughout the trial … seemed confused” about the role of the loan servicer, according to a state appellate court.

Ownership questions, broken chains of title and document fraud resulted from the collapse of the real estate market when originators transferred loans in such a sloppy manner and in such large quantities that the paperwork trail went cold.  Borrowers, country recorders and even the banks themselves couldn’t rely on the document trail, let alone a trial court judge without extensive knowledge of how the fraudulent scheme played out.

Deutsche Bank National Trust Co.’s prevailed, when the Fourth District Court of Appeal reversed an involuntary dismissal and remanded the case over confusion about the financial players.

Deutsche Bank, acting as trustee for Harborview Mortgage Loan Trust’s mortgage-backed certificates, filed a foreclosure suit against two homeowners alleging it held their promissory note and mortgage. It relied on an employee of the prior loan servicer who had no personal knowledge of the loan and attorney-in-fact, GMAC Mortgage LLC, to verify the complaint—a move that would muddle the litigation when Deutsche presented a witness from yet another company, Ocwen Loan Servicing, to testify about the loan’s path.  Ocwen claims it had acquired GMAC and was the current loan servicer.  Another lender, Novastar Mortgage Inc., had also been involved, according to a blank indorsement from that financier, which Deutsche Bank used to shore up its ownership claim.  It is a shame the homeowner didn’t bother to contact an investigator to examine the trusts, documents and transfers to determine if the paper trail was valid.

Broward Circuit Judge William Haury wasn’t confused, he was cautious.  He knew something was afoul in the convoluted chain of title.  “Throughout the trial, the trial court seemed confused as to GMAC’s role in the subject case,” Fourth DCA Judge Burton Conner wrote in a unanimous decision with Judges Carole Taylor and Alan Forst. “Despite the fact that it was the bank that filed suit on its own behalf, the trial court seemed concerned that there was no document reflecting GMAC’s authority to file the suit. However, GMAC did not file the suit as the plaintiff, but instead, merely verified the complaint as the servicer and attorney-in-fact.”

Once the bank rested, the homeowners, Adrian M. Applewhite and Anika O. Johnson, moved for involuntary dismissal for lack of standing. Haury granted their motion and entered final judgment in their favor. He denied Deutsche’s motion for rehearing and a new trial, finding it failed to prove GMAC’s authority to act as attorney-in-fact at the time the bank filed the complaint.

But the appellate court disagreed.

“It is well established that standing of the plaintiff to foreclose on a mortgage must be established at the time the plaintiff files suit,” Conner wrote. “In this case, the bank filed its complaint alleging its status as the holder of the note, having acquired the loan prior to filing the complaint. Attached to the complaint was a copy of the note with a blank indorsement, making it payable to the bearer. … The bank correctly argued at trial there was sufficient evidence to show it had standing to bring the foreclosure suit where no evidence was presented to the contrary.”

Now you know why so many foreclosure cases have forged indorsements or an indorsement magically appears on the note during trial. A valid indorsement perfects a note so that it becomes bearer paper and provides the authority needed for a holder to foreclose.  However, a good percentage of indorsements are fabrications or endorsed by robosigners with no authority to indorse the note.  In fact, the easiest way for a servicer to foreclose is to fabricate the originating bank’s signature on the note and create “bearer” paper.  Homeowners should research the party who indorsed their note to determine if that party had authority to indorse, and look for tale-tale signs of fabrication or forgery.

The panel also rejected the homeowners’ assertion that the bank needed to enter into evidence a pooling and serving agreement to prove legal standing over the securitized mortgage loans.  Florida does not have the equivalent of the California Yvanova decision.

“The argument is without merit,” Conner wrote.

Greenberg Traurig attorneys Kimberly S. Mello, Jonathan S. Tannen and Patrick G. Broderick represented Deutsche Bank.

Mark H. Klein and David Jay Bernstein of the Law Office of David Jay Bernstein in Deerfield Beach represented Applewhite and Johnson.

Filed under: foreclosure |