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03/08/2010 - by Tom Lyons
Foreclosure Documents
Not All There
When a ruling is reversed by an appellate court, the judge faulted sometimes grumbles. So I didn't know what to
expect when I asked Circuit Court Judge Robert Bennett about an appellate court ruling that overturned a house
foreclosure he had granted. The three-judge panel said a bank that was not the original lender had not proven it
had the right to foreclose, because the documents filed did not show how, or if, mortgage ownership had ever been
transferred to the bank.
Bennett's reaction? The higher court was totally right, he said. "I'm willing to fall on my sword on this one,"
Bennett said. "It wasn't a very good piece of judge work." To be fair, many judges have done much the same thing in
similar cases, partly because most foreclosures had long been so routine. If contested at all, it was rare that
anyone claimed a major financial institution had not proven any link to the mortgage.
Now, just a couple of years since Bennett's ruling on a foreclosure case he cannot even recall, that sort of claim
has become commonplace. Of the dozen or so lawyers I've heard from who fight foreclosures -- a common specialty
these days -- all mentioned that issue. "This issue of standing, it's common throughout the state," said circuit
Chief Judge Lee Haworth. Many mortgages from the past decade were sold, packaged together, and resold as
securities. Showing ownership of just one became complicated, especially because transfer paperwork was often not
done for each mortgage.
Law firms that some call "foreclosure mills" handle loan default cases by the thousands for financial institutions
that were not the original lenders. Some have filed odd documents in their court cases. Many claim loan documents
are lost, but that ownership of the note was transferred, perhaps multiple times, and that the foreclosing bank is
now the owner or trustee. Problem is, they rarely show a clear chain of transfers back to the original lender.
Often, the documents are not only vague but also of fresh vintage. Some are only created, signed and notarized
after the foreclosure is filed. And signatures authorizing the transfers make fun reading. Some people listed as
vice presidents and the like often are not, and were never even employees of the companies named. They work for
companies that are hired to create the documents. When accused of using sham documents, the response has sometimes
been that the signers were somehow authorized to sign, a claim some judges have rejected.
But in many local cases, there has been no response at all from the alleged mortgage holder, and many cases have
gone into limbo. And so, some homeowners have kept a roof over their heads while making no payments, but they have
no idea when or how the legal battle might resume. Bennett's ruling happened before all this became as ordinary in
Southwest Florida as sunshine. Few judges then thought to doubt that a bank had standing to foreclose. Bennett and
Haworth both say the impact of the appellate court ruling won't be a big thing for other cases, simply because,
even without it, many judges have become well aware of the issue of questionable foreclosure documents.
That doesn't mean they are all being spotted. In uncontested cases, most still slip by, and Haworth says judges
have too many cases to do the checking that a defense lawyer would do. But there is bigger news that should help,
Haworth says. Last month, Florida's Supreme Court decided that attorneys filing foreclosure cases will no longer be
presumed blameless when they claim a right to foreclose based on faulty documents. The foreclosure mills normally
rely on an army of assistants and clerical workers, and lawyers claiming that an assistant's error led to a faulty
filing have rarely been called to task.
That's about to change, Haworth says. Some may still gamble in cases where they expect no opposition lawyer will be
checking the documents. But if they take the time and effort, most should be able to do things right and establish
their claims, Haworth said. If not, he said, they'll have a problem. "I'm looking forward to see how they do
comply," Haworth said. "Their license could be on the line."
Tom Lyons can be contacted at tom.lyons@heraldtribune.com.
Source: http://heraldtribune.com
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