Presentation on theme: "1. 2 William M. LeRoy - Moderator President & CEO American Legal & Financial Network “ALFN” Cynthia A. Nierer, Esq. - Panelist Partner Rosicki, Rosicki."— Presentation transcript:
2 William M. LeRoy - Moderator President & CEO American Legal & Financial Network “ALFN” Cynthia A. Nierer, Esq. - Panelist Partner Rosicki, Rosicki & Associates, P.C. Michelle Garcia Gilbert, Esq. - Panelist Partner Gilbert McGrotty Group, P.A.
WHERE WE WERE Over the past two years the mortgage industry has been subjected to increased judicial scrutiny. Court and Judge specific requirements have and continue to be established across the country. Judicial scrutiny is common even in matters where the mortgagor has not appeared. Assignments of mortgage dated prior to the commencement of the foreclosure has become customary (not just effective prior). Some jurisdictions/judges require assignments to be recorded. 3
WHERE WE ARE NOW Judicial scrutiny has not declined. Has moved past the date/recordation of assignments of mortgage. Courts/Judges are looking more intently at all documents submitted (affidavits, assignments, powers of attorney). Signing authority is being questioned. Proof of signing authority being required. Courts/Judges are raising the concern that there may be a conflict of interest inherent in individuals signing via power of attorney. 4
HSBC Bank USA v. Vasquez, NY Supreme Court, Kings County (24 Misc.3d 1239(A)). 9/1/2006 Vasquez borrowed $381,500.00 from HSBC. Mortgage read “MERS as nominee for HSBC Mortgage”. MERS as nominee assigned the mortgage to HSBC. The assignment was executed by the bank’s foreclosure attorney via a corporate resolution. Plaintiff brought a motion for summary judgment. The Court denied the motion. 5
HSBC v. Vasquez continued… The Court denied the motion for several reasons: The assignment was deemed invalid as it failed to include a corporate resolution or power of attorney— same is needed to show how the agent is vested with the authority to assign the mortgage. The individual that signed the assignment was employed by the foreclosure firm. The Court noted its concern that same constituted a conflict of interest under the Disciplinary Rules of the Code of Professional Responsibility. As per the Court, the borrower failed to make the 5/1/07 payment…yet the assignment to HSBC was dated 10/9/07. The Court required an explanation from an officer of HSBC as to why HSBC purchased a non- performing loan from MERS after default. 6
IndyMac Bank F.S.B. v. Garcia, (NY Supreme Court, Suffolk County) In August 2006, borrower gave a mortgage to Sterling National Mortgage Company. Foreclosure action was commenced January 2008. Borrower failed to appear in the action and at two court scheduled settlement conferences. Plaintiff submitted a motion for an Order of Reference. Court denied same for “…failure to submit proper evidentiary proof, including an affidavit from one with personal knowledge, of a valid indorsement of the note or assignment of the mortgage, sufficient to establish the plaintiff’s ownership of the note and mortgage at the time the action was commenced.” 7
IndyMac Bank v. Garcia continued… Per the plaintiff, Sterling indorsed the note to plaintiff prior to the foreclosure commencement. The Court found the indorsement was not proven to be valid: Plaintiff’s Affidavit stated “…the original note with proper indorsement is [now] in the plaintiff’s possession…”. Does not state prior to foreclosure commencement. Indorsement was payable to order BUT there was NO evidence of delivery PRIOR to the commencement of the foreclosure. Indorsement was on a separate page, did not reference the subject note and was undated. 8
HSBC Bank USA N.A. v. Yeasmin, NY Supreme Court, County of Kings. Defendant borrowed $624,800.00 in May 2006. Mortgagee was MERS as nominee for Cambridge. Borrower defaulted May 2007. On September 10, 2007 the underlying mortgage was assigned to HSBC and the foreclosure was commenced that date. Borrower did not appear in the foreclosure action. Plaintiff’s attorney submitted a motion for an order of reference. 9
HSBC Bank USA N.A. v. Yeasmin continued… That motion was denied with leave to renew within 45 days from the date of the Court’s order with plaintiff providing the following in the new motion: Valid assignment into plaintiff (was signed by employee of plaintiff’s attorney but original lacked power of attorney and/or corporate resolution) Affirmation from plaintiff’s attorney that the assignor of the mortgage and the plaintiff consented to simultaneous representation (conflict of interest) 10
HSBC Bank USA N.A. v. Yeasmin continued… Submission of an affidavit of fact executed by one with authority to sign, and if same is signed by a loan servicer, a copy of a valid power of attorney and the servicing agreement authorizing the affiant to act in the instant foreclosure action. An affidavit from an officer of the plaintiff explaining why plaintiff purchased a non-performing loan from MERS as nominee for Cambridge. 11
HSBC v. Yeasmin continued… Plaintiff renewed its motion. The Court denied the motion and dismissed the foreclosure action: Motion was untimely—was made 204 days after the 45 day time limit expired. (Due to a forebearance agreement had been entered into with the borrower.) Assignment still not valid. Plaintiff’s attorney argued that the signator was not an agent of MERS but an officer—therefore a power of attorney was unnecessary. However, the assignment did not state the signor’s title and the corporate resolution was not attached for the Court’s review. 12
HSBC v. Yeasmin continued… Plaintiff’s attorney did not confirm for the Court (in the Court’s opinion) that they did not represent both Plaintiff and MERS, or that both Plaintiff and MERS were aware of the dual representation, the possible conflict of interest and possible repercussions of same. Court found the affidavit of merit unconvincing. Signed by an officer of Wells Fargo as attorney in fact for HSBC. 13
HSBC v. Yeasmin continued… A photocopy of the power of attorney was annexed which appointed Wells Fargo to execute documents if same were permitted under the servicing agreement in connection to certain mortgages held by HSBC. Per the Court, it was unable to determine if the subject mortgage falls in this category. Per the Court, it has not been presented with the FULL servicing agreement as certain pages were redacted (plaintiff explained in an affidavit same contained proprietary information). 14
The Bank of New York, as trustee v. Alderazi, et als., NY Supreme Court, County of Kings Borrower did not appear in the foreclosure action. Plaintiff submitted an ex parte application for the appointment of a referee. Application was denied for lack of standing. Recorded mortgage listed MERS as nominee for America’s Wholesale Lender. Mortgage was subsequently assigned to Bank of New York. Assignment was signed by an assistant vice president of MERS as “authorized agent pursuant to Board of Resolutions and/or appointment”. 15
Bank of New York v. Alderazi continued… The Court cited HSBC v. Yeasmin and noted that it was held that for an assignment that was signed by an agent to be valid “…a power of attorney is necessary to demonstrate how the agent is vested with the authority to assign the mortgage”. No proof that America’s Wholesale Lender ever authorized MERS to make an assignment. MERS, as nominee, is an agent and only has those powers granted it by its principal. 16
Bank of New York v. Alderazi continued… MERS claimed that language in the mortgage itself granted it the right to assign. Court found that the language was under the “BORROWER’S TRANSFER TO LENDER OF RIGHTS IN THE PROPERTY” section. The borrower may have granted MERS the right to assign—but it is the lender who must grant the right. Moreover, the Court found that there was no language in the mortgage that specifically confered the right to assign. 17
U.S. BANK, N.A. AS TRUSTEE v. Emmanuel, NY Supreme Court, Kings County Plaintiff brought an ex parte motion for service by publication. Motion was denied and action dismissed. The assignment of mortgage was dated/recorded properly. However, neither it nor the underlying complaint state if the note was assigned. As such, the Court held the assignment is a nullity, the debt was not transferred and the plaintiff lacked standing. The Court further noted the possible conflict of interest due to the plaintiff’s attorney executing the assignment of mortgage on behalf of MERS as nominee. 18
In re Kerman J. Minbatiwalla, United States Bankruptcy Court, Southern District New York, (424 B.R. 104). Chapter 13 debtor filed an objection to the creditors proof of claim as the filer was not the original mortgage lender. Court held that the servicer of the mortgage has standing to file a proof of claim as its duties as servicer. 19
In re Kerman J. Minbatiwalla continued… Court further held that the assignee of a note and mortgage also has standing to file a proof of claim: Must provide a valid assignment or Provide proof of delivery/possession of the note and mortgage. The Court found that the bank did not provide either proof of the assignment of the mortgage and note or proof of delivery/possession of the mortgage and note. As such the claim objection by debtor was sustained. 20
BEST PRACTICES: Assignments should be dated/notarized prior to the commencement of the foreclosure action. Lenders/servicers should be ready to provide proof of possession of the mortgage and note. Lenders/servicers should be ready to provide the endorsement and/or allonge to the Court— in proper form (annexed to the note, dated, correct parties named). Powers of attorney should accompany assignments of mortgage—if not at recording then when provided to counsel. 21
BEST PRACTICES continued… Those executing documents must clearly state their capacity/authority to sign and proof must be included—if not with recorded documents then when provided to counsel. IE: Copy of the requisite power of attorney When acting on behalf of more than one entity in a foreclosure proceeding, attorneys must be cognizant of a possible conflict of interest and obtain the necessary acknowledgments to provide to the Court. 22
Back to the future…MERS and old cases… February 11, 2010: Florida Supreme Court amended procedure rule - Rule 1.110(b) -requiring verification of foreclosure complaints involving residential property VOCs sent to client with complaints and title search for client review and signing of VOC Original VOC filed with original complaint
Florida Supreme Court’s stated objectives : To provide incentive for the plaintiff to verify ownership of note To conserve judicial resources being wasted on lost note counts and inconsistent allegations To prevent wasting of judicial resources and harm to defendants resulting from suits brought by plaintiffs not entitled to enforce the note To give trial courts greater authority to sanction plaintiffs who make false allegations
“Under penalty of perjury, I declare that I have read the foregoing, and the facts alleged therein are true and correct to the best of my knowledge and belief.” Some VOCS are notarized, some are signed by plaintiff’s attorneys
MERS nominee has standing to bring foreclosure actions. MERS V. Azize, 965 So. 2d 151 (Fla. 2d DCA 2007). Collection/litigation agent had standing in foreclosure even though it only held, not owned, note. MERS v.Revoredo, 955 So. 2d 33 (Fla. 3d DCA 2007)
Holder of a note has standing to seek enforcement of note Standing is broader than actual ownership of beneficial interest in note Florida real party in interest rule, Rule 1.210(a), permits an action to be prosecuted in name of someone other than, but acting for, the real party in interest Conflict with VOCs?
ASSIGNMENTS/ALLONGES: Assignments with “effective date” sometimes held insufficient to establish ownership interest at the time the action was commenced; best practice: execute prior to the commencement of the foreclosure action. Some judges review uncontested cases, determine assignment not of record: in court file or recorded in county records.
Even though assignment not formally executed until after action filed; equitable transfer from servicing agent occurred prior to complaint being filed. Glynn v. First Union National Bank, 912 So. 2d 357, (Fla.4 th DCA 2005)
Mortgagee's filing of originals, affidavits of mortgagee, assignments, evidence of mortgagee's name changes substantiated mortgagee's ownership of note and mortgage in foreclosure proceedings. Stanley v. Wells Fargo Bank, 937 So. 2d 708, (Fla. 5 th DCA 2006)
However, standing encompasses not only this "sufficient stake" definition, but the at least equally-important requirement that the claim be brought by or on behalf of one who is recognized in the law as a "real party in interest," that is, "the person in whom rests, by substantive law, the claim sought to be enforced," Author's Comment to Fla.R.Civ.P. 1.210, 30 Fla.Stat.Ann. 304, 306-07 (1967); see 3A J. Moore, Moore's Federal Practice, p 17.02 (2d ed.1984).
Some judges “sanction” parties by dismissing actions, requiring refiling fees, threatening future penalties. MERS issues resolved in several jurisdictions to allow bringing of action on behalf of another, but judges now using assignment “issues” to delay actions.
(I)ncomplete, unsigned, and unauthenticated assignment …did not constitute admissible evidence establishing…standing to foreclose the note and mortgage, …no other evidence to establish that it was the proper holder of the note and/or mortgage…BAC Funding Consortium, Inc. v. Jean-Jacques, 28 So. 3d 939 (Fla. 2d DCA 2010).
Nothing in the record reflects assignment or endorsement of the note... Thus, there is a genuine issue of material fact as to wh(o) owns and holds the note and has standing to foreclose the mortgage. Verizzo v. The Bank of New York, No. 2D08- 4647, (Fla. 2d DCA 2010)
…endorsement in blank is unsigned and unauthenticated, creating a genuine issue of material fact as to wh(o) is the lawful owner and holder of note/mortgage…there are no supporting affidavits or deposition testimony in the record…(about who) validly owns and holds note and mortgage, no evidence of an assignment…no proof of purchase of the debt nor any other evidence of an effective transfer. Riggs v. Aurora, No.4D08-4635 (Fla. 4 th DCA 2010)
Original documents confirmed, or lost note plead. Recorded, completely executed and recorded assignments Completely executed allonges Assignments and allonges executed by persons under correct authority Verification of complaint completed and filed with complaint in court only when all of above completed
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