2d DCA Adds Insult to Injury on Statute of Limitations

Message to homeowners: Heads I win, tails you lose. Between Bartram and Desylvester the recurrent theme emerges as doctrine: If the homeowner wins a case the skids are greased for the bank to win the next round. The winner is treated as the party who SHOULD have lost and the loser is treated as the party who SHOULD have won. This fight is far from over.

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“Following the Florida Supreme Court’s recent decision in Bartram v. U.S. Bank, N.A., 41 Fla. L. Weekly S493, 2016 WL 6538647 (Fla. Nov. 3, 2016), courts were left to interpret how Bartram would affect lenders’ reliance on breach letters issued more than five years prior to a foreclosure proceeding initiated after the dismissal of a prior action. Florida’s Second District Court of Appeal answered this very question in its opinion in Desylvester v. Bank of New York Mellon, et al., which indicates that lenders need not send a new breach letter in subsequent foreclosure actions filed after the dismissal of a prior foreclosure if the borrower has failed to cure the initial default.
In Desylvester, the Second District Court of Appeal affirmed the entry of final judgment of foreclosure in favor where the bank initiated a successive mortgage foreclosure action premised on the same date of default alleged in a prior foreclosure action, including “all subsequent payments due thereafter.” Consistent with the Bartram decision, the Court’s opinion confirms that, following the dismissal of a prior foreclosure action, a mortgagee is not barred from filing a subsequent action premised on a “separate and distinct” date of default––including a borrower’s continuing state of default––under the same note and mortgage.”
An ounce of truth and a lot of craziness. I think Bartram stands for the proposition that the statute of limitations does bar actions for payments due before the beginning of the current statutory period. As I suspected we have the Florida Supreme Court thinking they fixed a problem by legislating from the bench — returning the parties back to their original positions except for payments barred by the statute of limitations.
The second DCA has muddied the waters further in Desylvester v Bank of New York Mellon. The courts are continuing to search and twist looking for a hook on which they can hang their preconceived notion of how the case should turn out — i.e., for the banks. Dozens of SCOTUS decisions say these courts (not just in Florida) are getting it wrong and overstepping constitutional boundaries resulting in unfair consequences. This fight is not over.
The 2d DCA here stretches the problematic view of the Florida Supreme Court in Bartram v US Bank. A default letter was sent for an alleged default that is now barred by the SOL. I suppose it might be logical to say that the creditor could still file a foreclosure action for the payments that are not barred by the SOL. But this court goes further and says that the original default letter can still be used as the basis of the new foreclosure action.
The court is skipping over obvious ramifications of the Bartram decision whether you think that decision was right or wrong. If the parties are returned to their original position except for the payments barred by SOL, then the homeowner still has a right to a default letter that spells out the real number, as amended by application of the SOL, that is required to reinstate, and the disclosure of how that number was computed. Removing that requirement is removing (1) a basic element of the alleged “contract” (i.e., the mortgage instrument, paragraph 22 in most such instruments) and (2) the application of statutory laws governing the conditions precedent to filing foreclosure.
The 2d DCA opinion is plainly wrong and wrongful. Again pushing aside the notions that foreclosure is an action in equity that should only be used as a last resort, the Court has essentially stripped the homeowner of basic protections provided by statute and provided by law. The Bartram decision was bad enough. The 2d DCA decision is basically reloading the gun for what is at best a questionable party to foreclose, placing the homeowner on his/her knees and cocking the gun for the bank or servicer — neither of whom have any right to even be in court.. Under Desylvester the losing party in the first foreclosure is treated as the winner and the winning party is treated as the loser.
All of which prompts the the larger essential question: With the courts undermining due process at every turn in ruling for the banks under a political theory that the fall of the big banks will bring down the world order, how is anyone left going to trust in our institutions? And assuming the current polls and trends continue, what will be left of our society that will be worth saving?

Deutsch Bank Trips and Falls: Default Notice Strictly Construed

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see http://www.dailybusinessreview.com/id=1202719610201/No-Default-Notice-Means-No-Foreclosure-4th-DCA-Rules?slreturn=20150206120242

Case dismissed. Deutsch sent the notice of default to a P.O. Box when they should have sent it to the property address. End of story?

Maybe not. This decision from the 4th DCA shows that at least this Court in Florida is starting to lean heavily away from the bank illusions and myths. You can’t produce self serving documentation and then say that it is presumptively correct because you say so. As it becomes more clear that the legal presumptions and factual assumptions are leading trial courts AWAY from the truth and into a fraudulent scheme created by the banks.

When I represented banks I would send the default letter Certified return receipt requested to show delivery or attempted delivery refused. In nearly all cases the banks are showing a copy of a letter they say was sent but they have no proof it was ever sent. In this case with Deutsch, even if they sent it, it clearly went to the wrong address.

Not long ago such an error would have been considered as immaterial. This time it was dispositive ending the case in favor of the homeowner. What happens next? We don’t know. But for now the homeowner is safely in their home and not subject to forfeiture. Does he owe money? Maybe. But not to Deutsch and not to anyone identified by Deutsch in their so-called chain of ownership.

Insurers Pay Pretender Lenders and Then Pursue Homeowner for the “Loss”

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see http://features.necir.org/pmi Insurers pay “losses” on mortgages and then pursue borrowers for recovery of payment

A big area of confusion in the foreclosure cases is the impact of insurance claims and payments with respect to insured mortgages and insured mortgage bonds. So let’s start with the fact that there are many types of insurance contracts that affect the balance to be proven in a foreclosure case. The simplest rule to follow which has been stated in a number of cases, is that if the party seeking foreclosure has already received payments ON THAT LOAN then the balance should be correspondingly reduced. But that reduction is between the pretender lender and the borrower. That doesn’t mean that whoever paid the money to the pretender lender can’t pursue the homeowner for the amount paid. But it does affect the foreclosure because the insurance or third party payment (FDIC loss sharing, for example or Fannie or Freddie buyout or guarantee) affects the claimed liability of the borrower.

If you ask the banks about these payments you get stonewalled. And depending upon the timing of the payment it might invalidate the claim of a default, a notice of default and notice of sale. It could also negate the right to foreclose — again depending upon the timing of the payment.

There have been only 2,000 cases in which the insurers have paid the pretender lender and then fled a lawsuit against the homeowner/borrower. They are claiming they paid for a loss incurred by the pretender lender and that the borrower was essentially unjustly enriched and also claiming subrogation (whatever rights the pretender lender had against the borrower goes to the party making the payment to the pretender lender). The problem here of course is that while only 2,000 cases have been field against borrowers by insurers, there are hundreds of thousands of payments received by the pretender lenders.

And the fact that the insurer paid does NOT mean (but will often be presumed anyway) that the loss was actually incurred by the pretender lender. It is one thing to mistakenly apply presumptions under the UCC in which the pretender lender gets to foreclose. It is quite another when the insurer is making a claim that it paid a loss on your mortgage. They must prove the loss. And that means they not only must prove that they paid the claim, but that the claim was real.

For that reason, I am suggesting to foreclosure defense lawyers that they include, in discovery, the insurers and other third parties who appear to have some connection to the subject loan. This might present an opportunity to determine whether any real loss was present and could open the door to argue the reality: that the foreclosing parties neither owned nor had any risk of loss on the subject loans and that they did not represent any owner or other party entitled to enforce.

The take away here is that in a huge number of cases there are or were third party payments that reduced the alleged loss of the creditor or alleged creditor AND depending upon when those payments were made if might have the effect of rendering a notice of default void or even a foreclosure judgment where the redemption rights of the homeowner were affected by an incorrect statement of the loss. In actions for deficiency, the insurers are essentially cherry picking cases in which they think the borrower can pay the alleged loss. It also might represent an overpayment. For example if the third party payment was on a GSE guaranteed loan, did the pretender lender submit claims for both the insurance payment AND the guarantee payment? Under the terms of the note, the borrower might well be entitled to disgorgement of the overpayment, especially if it totals more than the claimed balance due on the alleged loan.

Insurance on the mortgage bonds is the same but more complicated and harder to present in court. The mortgage bond derives its value from the loan. That is why it is called a derivative. In nearly all cases the payment received by the banks (supposedly on behalf of the investors) is received long before a default on any specific loans and there is NO SUBROGATION. The insurers cannot step into the shoes of the pretender lender under those contracts. The “loss” is a claimed reduction in value called a “credit event” that is declared by the Master Servicer in sole discretion. The payment might be all or less than all of the par value of the mortgage bond.

Whatever the amount, it reduces the alleged loss as between the homeowner and any party making a claim for foreclosure based upon an alleged loss incurred from their default. This is true because the balance due to the investors under the mortgage bond has been covered already by the “credit event” which includes many things other than default on any specific loans, so the payment might include a claimed loss from default on a specific group of loans and other factors. In any event, the investors’ books if they were available would show a lower balance due than what any servicer would show. And that would mean that the default notice might be incorrect especially in terms of the reinstatement amount in the paragraph 22 letter.

And because these insurance contracts provide for no subrogation (no claims can be brought by insurer against the homeowner) the reduction in the balance is a reduction of the balance due from the borrower; and THAT is because if the borrower paid the full amount due on the claims of the pretender lender there would be a windfall or “free ride” to the pretender lender (adding insult to injury).

Comments Welcome

2 Florida Cases Decided in Favor of Borrower

The Wadsworth case clearly shows that the appellate courts are requiring the trial court to scrutinize the claims and filings of would-be forecloser and that things like notice of acceleration and the right to cure are important enough to reverse summary judgment. This is directly contrary to the rulings of many judges who say that the lack of notice is NOT a basis for granting a motion to dismiss. It can be argued that if it is enough to defeat a motion for summary judgment, it ought to be sufficient to dismiss the complaint that does not allege the existence of the loan, the financial injury and the compliance with paragraph 22, with a copy thereof.


The Beaumont decision is especially interesting because it deals with a rather obvious alteration of documents by Bank of America or its “successors” or lawyers. Or I would not be surprised to learn that LPS was involved in this one. They changed the due date and foreclosed. The trial court disregarded the defense that the note was altered and said it wasn’t enough that they alleged these facts on information and belief.  The appellate court that might be true, but the documents of records clearly raise the issue themselves.


Danielle Kelley, Esq. Swings Back at Separation of Note and Mortgage

If the banks lose the application of the UCC, which they should, they are dead in the water because they have no way to prove the transactions upon which they rely in collection and foreclosure.

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Danielle Kelley, Esq. whom I admired before she became my law partner has again broke some old/new ground in compelling fashion. This is not legal advice and nobody should use it without consulting an attorney who is properly licensed in good standing in the jurisdiction in which the property is located and who is competent on the subject of bills and notes.

The bottom line: if the note and mortgage were intended by the law to be considered one instrument, they would be one instrument. But they are not because all the conditions in the mortgage would render the note non-negotiable under the UCC and that would be true even if the loan was actually sold, for real, with payment and an assignment. The conditions expressed in the mortgage or deed of trust render the mortgage non-negotiable. Hence an alleged transfer of the note separates the note from the mortgage because the mortgage is by definition non-negotiable. If the banks lose the application of the UCC, which they should, they are dead in the water because they have no way to prove the transactions upon which they rely in collection and foreclosure.

All of this leads us back to the “sale” of the loan because the presumption arising out of being a holder or holder in due course does not exist where the paper is non-negotiable. The Banks must allege and prove the origination and sale the old fashioned way — by alleging that on the ___ day of ___, in the year ___ XYZ loaned the homeowner $____________. Pursuant to that transaction the defendant executed a note and mortgage (or deed of trust), attached hereto and incorporated by reference. On the ___ day of ________ in the year ________, Plaintiff acquired said loan by payment of valuable consideration and received an assignment that was recorded in the public records at page ___, Book ____ of the public records of ____ County. Defendant failed or refused to make payment commencing the ___ day of ____ in the year ____. Plaintiff gave notice of the delinquency and default, provided the Defendant with an opportunity to reinstate as required by the mortgage and applicable law (copy of said notices attached). Defendant will suffer financial loss without collection of the debt for which it owns the account receivable. Pursuant to the terms of the mortgage which is attached hereto, Defendant agreed that the subject property was pledged as collateral for the faithful performance of the duties under the note, to wit: payment.

Of course the Banks refuse to do that because it opens the door to discovery to exactly what money was paid, to whom and why. AND it would show that there were no actual transactions — just shuffling of paper.

Affirmative defense

Non-negotiability of Subject Note Prohibits Plaintiff from Enforcing it Pursuant to Fla. Stat. §673, et seq and Failure to Attach Documents Pursuant to Florida Rule of Civil Procedure 1.130

With regard to all counts of the Complaint, the Plaintiff’s claims are barred in whole or in part because the subject note that the Plaintiff may produce is not a negotiable instrument and therefore the Plaintiff cannot claim enforcement of the note pursuant to Fla. Stat. §673, et seq.  In order for an instrument to be negotiable it must not, amongst other things, “state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money.”  §673.1041(1)(c).  While there is no appellate case law in Florida (and precious little in the entire country) which has ever interpreted this portion of the statute to mortgage promissory notes, the Second District has interpreted this section with respect to retail installment sales contracts in GMAC v. Honest Air Conditioning & Heating, Inc., et al., 933 So. 2d 34 (Fla. 2d DCA 2006).  There, the Second District held that clauses in the RISC such as the requirement for late fees and NSF charges rendered the contract non-negotiable.  This Court should be mindful that the GMAC case was recently applied to a mortgage foreclosure in the Sixth Judicial Circuit.  See Wells Fargo Bank, N.A. v. Christopher J. Chesney, Case No. 51-2009-CA-6509-WS/G (6th Judicial Circuit/Hon. Stanley R. Mills February 22, 2010).

The note attached to Plaintiff’s Complaint contains the following obligations other than the payment of money

1.      The obligation that the borrower pay a late charge if the lender has not received payment by the end of a certain period of days after the payment is due.  Defendants assert this defense although Section 7(a) of the Note attached states “See Attached Rider”.  The only riders attached to the Complaint are a “Prepayment Rider to Note” and an “Adjustable Rate Rider”, the latter of which deals with the interest change, not late fees.  Therefore there are documents potentially missing from the Complaint which runs afoul of Florida Rule of Civil Procedure 1.130 that such documents be attached as they are a document upon which a defense can be made.  Defendants are asserting the defense without the applicable rider; however, if Plaintiff is in possession of the original note, as they should be in order to foreclose, Plaintiff would have had said document to file.   

2.      The obligation that the borrower to tell the lender, in writing, if borrower opts to may prepay in clause 5 of the Note and the Prepayment Rider to the Note. 

3.      The obligation that the lender send any notices that must be given to the borrower pursuant to the terms of the subject note by either delivering it or mailing it by first class mail in clause 8; and

4.       The obligation of the borrower to waive the right of presentment and notice of dishonor in clause 9.

Because the subject note contains undertakings or instructions other than the payment of money, the subject note is not negotiable and therefore the Plaintiff cannot claim that it is entitled to enforce same pursuant to Fla. Stat. §673, et seq.

In addition to, or in alternative of, the following argument, even if the subject note is deemed negotiable, Fla. Stat. §673, et seq. (and therefore negotiation) cannot be utilized to transfer the non-negotiable mortgage, which is a separate transaction.  See in Sims v. New Falls Corporation, 37 So. 3d 358, 360 (Fla. 3d DCA 2010) (providing that a note and mortgage were two separate transactions).  The terms of the mortgage are expressly not incorporated into the terms of the note; rather, they are merely referenced by the note.  See clause 11 of the note.  Indeed, nowhere in the subject note is the right to foreclose the mortgage a remedy for default under the note.  It is clause 22 of the mortgage, on the other hand, which allows this.  Clause 22 of the mortgage, however, cannot be transferred to Plaintiff by negotiation as the mortgage is not negotiable.  


Paragraph 22: Not Exactly the Magic Bullet

Since we had our technical difficulties with the use of free conference last time I am going to answer certain questions that were sent in and never covered in the last members teleconference. Free conference assures me that the technical problems have been solved —  but the call-in number is going to be different.


Question regarding “paragraph 22”: I have enclosed a link below discussing the paragraph which is numbered 22 in the example used.

The first thing I want to say is that there are no magic bullets anywhere within the complexity and chaos of the false securitization scheme devised by Wall Street. Nothing will be a substitute for a thorough understanding of the scheme and no one element or theory is going to result in a “free house” for a homeowner except in those cases where the party pretending to be the lender as so angered the judge that the judge is looking for a way to punish them. Nonetheless the article below is written by an attorney who apparently has a fair understanding of several issues involving securitization of debt and is therefore worth reading.

The second thing I want to say is that the paragraph does not always bear the number  “22” since several different mortgage forms have been in use and evolving over the last 20 years. But the point raised by the article and by the question sent to me is entirely valid. In a case involving title to real property, and especially in a case where title is going to be forcibly taken from one party and given to another, the requirements of notice are usually going to be taken very seriously by a judge and applied very strictly. If not, and you have taken the trouble to properly prepare a good record, it is highly likely that exceed on appeal despite the fact that the odds on appeal generally favor the pretender lender by a wide margin.

The third thing I want to say is that notice is like a two edged sword.  It must come from a party that is empowered to give notice and that power should not be assumed based upon the self-serving proclamation by a pretender lender that arrogate unto itself the power to do anything with your loan. The other side is that once notice appears to be properly given, you must open your mail and react to it within the time limits prescribed by statute. Obviously if the pretender lender commences some sort of action against you before the notice period runs out you have an opportunity to reverse the procedure and force them to start all over again. On the other hand if the statute requires you to take some action once you have received notice and the notice period has run out, then it is likely that this will be held against you and in fact it may be fatal to your position.


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