Foreclosure Defense Litigation

Remember that when you are served with a foreclosure lawsuit, you have been sued and you need a competent foreclosure defense attorney to defend you vigorously in Court. There are many Court documents that need to be filed, hearings that need to be attended. If you do not mount a vigorous defense in Court, the bank will get a foreclosure judgment against you and sell your home. Attorney Ryan Torrens is comfortable in the courtroom and has beat the bank in many foreclosure trials. Remember that even if you wish to explore one of the options below, you will still need an attorney to defend you in Court. At our firm we engage in foreclosure defense litigation to protect your interests and at the same time, try to achieve a resolution of the case that works for you. If you have a viable defense and wish to try your case, we will not hesitate to lead that battle for you and try your case on the merits.

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

The bank has to prove that it has legal standing to foreclose on the promissory note that you signed. The bank can do this by several different means, depending on the circumstances. If the bank is still in possession of the note and the note is a negotiable instrument, the bank can try to foreclose by surrendering the original promissory note to the Court. If the bank has sold your note to a different bank, the bank that currently holds the rights to the note would need to enforce the note and could do so if the note bears a specific endorsement in favor of the new bank or an endorsement in blank. The copy of the note attached to the lawsuit, with the endorsement, would need to be identical to the original note. The original note is usually surrendered at the final hearing or filed with the Court in advance of the final hearing.

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?

Under Florida law, for a note to be considered a negotiable instrument, the note must be a definite promise to pay a fixed amount. For example, a line of credit agreement would not be a negotiable instrument in many cases. A note can only be transferred to another bank by virtue of a specific endorsement or endorsement in blank if the note is 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?

How does that play into a standing defense? Sometimes we see scenarios like this: original note was signed with Bank A and then Bank A sells the note to Bank B. Client enters into loan modification with Bank B. Bank B then assigns the mortgage to Bank C but fails to complete any paperwork that the loan modification itself was transferred, this can create a defense of modification and lack of standing to enforce the loan modification. Florida case law provides that when a loan modification has been agreed to between the parties, the only way the bank can foreclose is by pleading and proving the modification. See, e.g., Nowlin v. Nationstar Mortg., LLC, 193 So. 3d 1043 (Fla. 2d DCA 2016). The defense of modification must be raised as an affirmative defense or it is deemed waived. See Bank of New York Mellon v. Bloedel, 236 So. 3d 1164 (Fla. 2d DCA 2018).

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

Although this defense has been narrowed down significantly due to certain appellate court rulings, this can still be a viable defense given the right circumstances. Most standard Fannie Mae/Freddie Mac mortgages in Florida have a Paragraph 22 which requires that the lender mail a notice of default to you at least 30 days prior to acceleration of the loan (usually this is when the foreclosure action is filed). This Florida appellate courts have held that as long as the mortgage requires it, mailing this default letter before the foreclosure action is filed is a mandatory condition precedent to foreclosure. The bank does not need to prove that you received the default letter. The bank only has to prove, through admissible evidence, that the default letter was mailed. See, e.g., Knight v. GTE Federal Credit Union, 2018 WL 844352 (Fla. 2d DCA 2018).

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).

Condition Precedent: FHA Face-to-Face Counseling Requirement

Home loans that are backed by the Federal Housing Administration (“FHA”) with federal HUD regulations. Before a lender may attempt to foreclose on an FHA-backed mortgage, the lender or mortgage servicer must invite the borrower to a face-to-face meeting (or make a reasonable effort to do so) to discuss options to resolve the loan default. The lender needs to make this invitation within 30 days after the default and at least 30 days prior to the loan default. If the lender fails to do this, the foreclosure case should be dismissed. See, e.g., Palma v. JPMorgan Chase Bank, 208 So. 3d 771 (Fla. 5th DCA 2016).

Foreclosure Defense Litigation