If the lender cannot produce the note, is this a mortgage foreclosure defense?
There have been a lot of discussions and questions regarding the production of the original note in the foreclosure process. In researching this issue, I discovered some interesting answers provided by Florida lawyers. The following will attempt to answer this question citing some of their responses.
The simple answer is no! The lender can prove the promissory note through Florida Statute, section 673.3091. Enforcement of lost, destroyed, or stolen instrument: (1) A person not in possession of an instrument is entitled to enforce the instrument if:
(a) The person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;
(b) The loss of possession was not the result of a transfer by the person or a lawful seizure; and
(c) The person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.
(2) A person seeking enforcement of an instrument under subsection (1) must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, s. 673.3081 applies to the case as if the person seeking enforcement had produced the instrument. “The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.”1
“Often the foreclosure complaint asserts that the note is lost when it really isn’t. This is a device foreclosure firms use to get the suit started sooner, rather than later. Once they find the note, they withdraw the lost note count.”
Many valid defenses relate to either disputes of the debt (i.e. wrong amount), legal standing to sue (this is often an issue these days, where you are sued by an entity you have never heard of before), and other attacks on the indebtedness.2
Florida law does allow for foreclosure even if the original note cannot be produced. In the foreclosure complaint, the Plaintiff needs to include a count for Re-establishment of whatever documents are missing. This is the case in the majority of the foreclosures filed. An argument can be made that there may be a defect in the chain of title. The paper trail of the note from the original mortgagee never makes it to the Plaintiff, thereby creating a challenge. Thus, the question would then be why is the Plaintiff claiming it as the owner when the assignments show that someone else is the owner.
“The majority of these types of cases have trustees as the Plaintiffs on behalf of a securitized investment fund. For example, The Bank of New York as Trustee for the Certificate Holders C-Walt, Inc., Alternative Loan Trust 2006-OC, Mortgage Pass-Through Certificates, Series 2006-OC10.”
“To prove such defects, mastery of the Rules of Civil Procedure will be necessary, and therefore you should get an opinion from a lawyer experienced with foreclosure law. At the very least, you will be able to remain in the property a very long time without making payments while the Plaintiff seeks to prove proper chain of title, and that is if they ever can.”3
1 H. Dillon Graham, III, Attorney
2 Margery Ellen Golant, Attorney
3 Kenneth Edward Walton, II, Attorney
Mario D’Artagnan is a broker associate with The Jim Fischer Team at Gulf Coast Realty Network, Inc. He is a former Florida Real Estate Commission investigator, a former real estate instructor, and a published author. For more information, contact D’Artagnan at: mariodartagnan@yahoo.com, or call 239-565-4445.