April 2, 2015

The Florida Fourth District Court of Appeal, which has jurisdiction over appeals from cases in Broward, Palm Beach, and Martin Counties, has consistently defended homeowner’s rights and upheld the foreclosing party’s burden to prove it case more than any of Florida’s five appellate district courts. Two recent decisions from that Court have clarified the burden even further in cases involving securitizations.

In Murray v. HSBC Bank USA as Trustee, etc., No. 4D13-4316 (Fla. 4th DCA Jan. 21, 2015), the Court reversed a final judgment of foreclosure after trial, introducing the opinion with the the following: “In this foreclosure puzzle, one of the pieces is missing.” HSBC contended that it was a nonholder in possession with the rights of a holder pursuant to an assignment from Sand Canyon Corporation to HSBC. The PSA was introduced, and the borrowers argued that Option One California never transferred its rights to HSBC as HSBC failed to connect the dots between ACE Securities Corporation (the “Depositor” identified in the PSA) and the last identifiable holder of the Note.

The Court found that HSBC did not qualify as a nonholder in possession with the right to enforce, as it failed to produce any evidence to prove its claim and admitted that it was not a holder of the note as the Note was payable to Option One California and there was no blank endorsement. The Court found that although Option One Mortgage Corporation was a party to the PSA, it was only a servicer and nothing in the PSA established the servicer conveyed rights in mortgage loans to any party, as the servicer only “services” loans. The Court reversed the trial court with directions to enter judgment in favor of the homeowners.

One important point of this decision is that the Court found no error in analyzing the chain of alleged transfers using the PSA, and that it was the PSA which established that there was no evidence of any lawful transfer of the loan to HSBC.

On March 25, 2015, the 4th DCA followed with its decision in Jelic v. LaSalle Bank, N.A., No. 4D13-4040 (March 25, 2015) which also reversed a final judgment after trial. Once again, the court examined the case by looking at the PSA which was introduced into evidence through the representative of the servicer (Select Portfolio Servicing). The original note contained two undated special endorsements; one from the original lender to Greenpoint Mortgage Funding (via MERS), and one from Greenpoint to WaMu. The second assignment was executed more than 6 months after the Complaint was filed.

The Court held that the submission of the original Note at trial did not prove standing, as the special endorsements were undated and there was no testimony establishing that these endorsements were affixed to the Note prior to the initiation of the action, citing the Court’s McLean v. JPMorgan Chase Bank decision. “Bank” and “servicer” attorneys have consistently attempted to distinguish the use of McLean for trial purposes by arguing that McLean arose out of a summary judgment decision. The 4th DCA has now kebashed that argument as it applied the principles of McLean in reversing the final judgment which was entered after trial.

The Court also found that the partial PSA failed to establish standing. There was no evidence as to what WaMu’s role in the transaction was and thus there was no proof that WaMu had any authority to enforce the Note or what control LaSalle had, as trustee under the PSA, over WaMu.

Going even further, the Court found that there was no equitable transfer of the mortgage and Note, as there was no evidence that the unidentified party which (allegedly) transferred the Note and mortgage into the Trust under the PSA before the complaint was filed had the intent to transfer its interest to LaSalle. To quote the opinion: “Thus, it is impossible to determine whether the unidentified party transferring the mortgage and note into the PSA had any intent to transfer its interest because there is no indicating assignment from that unidentified party.”  Read that portion carefully, as it establishes a burden on the foreclosing party in a securitization case to prove its intent to transfer as well.

This case finally quashes the myth of the alleged effect of an undated blank endorsement espoused by “bank” and servicer attorneys, to wit: that they have the Note with a blank endorsement and thus they win. No longer, at least not in Florida, and the foreclosing party in a securitization case must also prove intent on the part of the party allegedly transferring the Note and mortgage to the trust to do so.

These two decision also signal the death of the Castillo mantra used on a daily basis by “Bank” and servicer attorneys that the homeowner has no standing to attack standing using the PSA. Numerous Courts have seen through this erroneous argument, including the very court (the U.S. Court of Appeals for the 6th Circuit) whose decision in the Livonia Properties case was the starting point for the erroneous argument that a homeowner has no standing to attack an assignment. As those of you who follow this website know, the 6th Circuit clarified their intent in Livonia Properties in the more recent Slorp decision, which affirmed that a homeowner has standing to attack a purported assignment as not transferring any interest.

Courts across the US who have consistently (and wrongfully) relied on an erroneous interpretation of Livonia Properties thus have to update their research and correct the mistake once and for all.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com