Assignment of Mortgage

Assignment of Mortgage

Are they legal?

Most homeowners who are dealing with foreclosure litigation will notice that the Plaintiff bank brining the foreclosure is not the original lender who gave them the mortgage on their property.  Homeowners may also notice that many banks bringing foreclosure actions claim to own the note and mortgage via an assignment from the original lender. Without going into the complexities of the pooling and servicing agreements which exist in every loan situation, these assignments of mortgage offer evidence into the types of fraud which are inherent in many foreclosure actions, as well as substantial affirmative defenses for homeowners.

The first problem with assignments is that that many were drafted and executed after the bank filed its foreclosure action. This presents a significant standing challenge. In layman’s terms, standing is a challenge to one party’s legal right to bring a lawsuit. In a foreclosure case, the bank bringing the lawsuit must be the owner of the note and mortgage. If the bank bringing the lawsuit is not the original lender they must establish how they came to own the note and mortgage and are therefore the party entitled to foreclose. Many banks attempt to prove this through an assignment of mortgage wherein the right to foreclose is assigned from the original lender to the Plaintiff bank. A properly executed assignment may be sufficient to show that the Plaintiff bank is the proper party to foreclose. However, if the assignment was not executed until after the Plaintiff bank filed its lawsuit, and the Plaintiff is basing its standing on the assignment, Plaintiff is basically admitting that it did not have standing at the time that it filed the action. Florida law is clear that a party cannot retroactively correct a standing problem. In other words, the fact that the Plaintiff bank did not have standing when they filed suit is a fatal defect and the case must be dismissed and re-filed.

Another problem common to many assignments is that oftentimes the party executing the assignment is an unknown individual as a representative of a party other than the original lender, most often MERS.  MERS is a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the US. MERS acts as a nominee for the actual lender. However, MERS has previously stated that in its nominee capacity it never owns the mortgage.  In MERS, Inc., v. Nebraska Department of Banking, MERS stated that as a trustee of a pool of mortgage backed securities “it does not acquire mortgage loans…because it only holds legal title to members’ mortgages in a nominee capacity…and that it does not own the promissory notes acquired by the mortgages and has no right to payments made on the notes.” Id. 704 N.W.2d 784, 787 (Neb. 2005). Accordingly there has been much legal debate as to whether MERS can actually assign an interest in the mortgage.

The final, and probably most significant issue deals with Florida Statute §559.715. That statute deals with the assignment of consumer debt. It states in pertinent part: the assignee must give the debtor written notice of such assignment [of consumer debt] within thirty (30) days of the assignment. Florida Courts have demanded strict compliance with the statute and have held that the required notice is a condition precedent to a debt collection action predicated upon an assignment. See LVNV Funding LLC. v. Harris, Fla. L. Weekly Supp. C23 (Fla. 11 Cir. Ct. June 24, 2009) (wherein the court found that Plaintiff failed to comply with the written notice provision of F.S §559.715 and therefore dismissed the action with prejudice).  Accordingly, if the Plaintiff has not provided the Defendant the mandatory 30 day notice of assignment, the case should be dismissed for failure to comply with a mandatory condition precedent.

The world of foreclosure litigation is complex and you should have an experienced attorney representing your interests.