Standing–A Common Defense to Mortgage Foreclosure

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Standing–A Common Defense to Mortgage Foreclosure

December 15, 2015

By: Justin C. Carlin

There is, unfortunately, a lot of misinformation among the public regarding mortgage foreclosure cases.  As an attorney who has both prosecuted and defended mortgage foreclosure cases, I believe that those holding misconceptions about foreclosures can usually be placed into two groups—those who believe that there are virtually no defenses to a mortgage foreclosure case, and those who (for whatever strange reason) believe that they are unlikely to lose a foreclosure case (despite having not paid their mortgage for months) and, therefore, underestimate a lender’s ability to foreclose.  In reality, banks and lenders rightfully win the overwhelming majority of mortgage foreclosure cases, but there are occasionally times when the borrower should (and does) win a foreclosure action.

By far, the most common defense to a foreclosure action is a lender’s purported lack of standing—i.e., the claim that the lender is not the party entitled to bring the foreclosure lawsuit.  (An example of standing in the non-foreclosure context: A (but only A) is injured in a car accident caused by B‘s negligence.  A would be legally permitted to bring a lawsuit against B, but C could not, because he has not suffered any injury as a result of B‘s negligence.  An exception might exist if there was an assignment, by which A, for value or for some other reason, transferred his claim against B to C.)  Standing is a legal defense that is often frivolously asserted in a mortgage foreclosure case, but it is occasionally (more often than some would expect) validly asserted.  The legal principle not only prevents a borrower from potentially being sued twice on the same debt obligation, but it also prevents an entity that is not owed funds from a homeowner from forcing the sale of the homeowner’s property in satisfaction of a debt owed to someone else.
 Bidding on a house

A classic example of a successful attack on a lender’s standing recently occurred in Florida’s Second District Court of Appeal.  On the day of trial, the lender failed to provide the court with any evidence regarding when the lender obtained possession of the promissory note secured by the mortgage.  The promissory note contained a blank endorsement (thereby conferring ownership of the note on the person who happens to be “holding” it), but the purported owner/holder of the note did not prove that it was the owner/holder of the note at the time the foreclosure complaint was filed.  It is now well-established in the State of Florida that the owner/holder of such a note must prove by “substantial, competent evidence” that the note endorsed in blank was transferred to the holder of the note prior to the commencement of the foreclosure action.  Absent such a showing, the borrower is entitled to the entry of a final judgment in its favor.

The foreclosure crisis has passed, but there are a number of borrowers who still find themselves on the receiving end of a foreclosure action brought by a lender without standing.  If you are such a person, you should check whether the last endorsement on the note (or on an “allonge,” which is merely an attachment to a note that contains, in chronological order, endorsements transferring the note) is endorsed in blank.  If so, you may have a basis to challenge the plaintiff’s standing to bring the action against you.

If you need representation in a Florida mortgage foreclosure case, then schedule a consultation with a Broward County foreclosure lawyer by calling 954-440-0901 or by completing the contact form listed on this page.

 

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