Foreclosure Defense Litigation
Foreclosure Defense Litigation
You may be wondering what we mean by “foreclosure defense litigation.” Well, just like any other civil case, the Plaintiff (in this case, the foreclosing bank) must prove its case in order to be entitled to a Final Judgment of Foreclosure and to an auction date of your home. We raise defenses on your behalf to force the bank to prove its foreclosure case. Here are some of the defenses that we frequently raise:
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Lack of Standing
Another way the bank can have legal standing to foreclose is through assignments of the note and mortgage, although this is less commonly done. For example, let’s say Bank A is your original lender. Bank A sells the note and mortgage to Bank B and then due to economic hardship, you default. If Bank A had executed an assignment of mortgage that transfers both the note and the mortgage to Bank B, then Bank B would have standing to foreclose via the assignment of the note and mortgage. The critical part here is that the assignment must also transfer interest in the note, not just the mortgage. If the assignment only transfers the mortgage, this is not sufficient to convey standing to the foreclosing bank who purchased the loan.
If the bank cannot locate the original promissory note, the bank may try to foreclose by “re-establishing the lost note” pursuant to Florida Statute 673.3091 by proving up the requirements set forth in Fla. Stat. 673.3091.
What if the note is not a negotiable instrument?
In cases where the note is not a negotiable instrument, the bank will often try to prove standing by arguing that the bank is a non-holder of the note in possession with the rights of a holder. This will typically be supplemented by a purchase agreement demonstrating that the non-negotiable note was purchased by the new bank.
So what if your original note was modified?
If the bank fails to prove standing at trial, the foreclosure action should be dismissed. See, e.g., Winchel v. PennyMac Corp., 222 So. 3d 639 (Fla. 2d DCA 2017). Remember that absent a few exceptions, the bank will be able to re-accelerate the loan and try again to foreclose on the property. See Bartram v. U.S. Bank Nat. Ass’n, 211 So. 3d 1009 (Fla. 2016). The bank would need to file a new lawsuit and serve you again, but the bank would be able to sue you again for foreclosure. Like the first time, you would have the right to defend yourself, retain counsel, seek discovery, raise defenses, and so forth.
Condition Precedent: Default Letter
This defense has been narrowed in that now the default letter only has to substantially comply with the requirements of Paragraph 22 rather than strictly comply. See Green Tree Servicing, LLC v. Milam, 177 So. 3d 7 (Fla. 2d DCA 2015). Also, some of the Florida appellate courts have found that if the borrower cannot demonstrate that he or she was prejudiced by the failure of the lender to mail the default letter, then this would not be a viable defense against the foreclosure. See, e.g., Vasilevskiy v. Wachovia Bank, N.A., 171 So. 3d 192 (Fla. 5th DCA 2015).