The issue of a Plaintiff’s standing to enforce a Promissory Note and Mortgage is one that is routinely raised as a defense in Florida Judicial foreclosure proceedings.  The trigger point of the issue is whether the Plaintiff had the right to file suit to enforce as of the date of filing of the foreclosure complaint.  A Plaintiff can demonstrate standing as of the filing date a number of ways.

Effective December 2014, Florida enacted rules related to the status of original Promissory Notes at the inception of filing foreclosure proceedings. The rationale of the changes was to “expedite the foreclosure process by ensuring initial disclosure of Plaintiffs status and the facts supporting the status, thereby ensuring the availability of documents necessary to prosecution of [foreclosure] cases.”[i]  As a result, Certification policies were enacted wherein Plaintiff’s include a certification of the status of the original Promissory Note at the time a foreclosure complaint is filed. This process demonstrates the Plaintiffs right to enforce the Note and Mortgage.

The pre-certification cases give rise to the defense of standing as of the time of filing. This article provides insight related to loans held by Securitized Trusts. In those cases, a plaintiff can utilize the Pooling and Servicing Agreement associated with the loan. The Florida Fourth District Court of Appeal recently provided guidance on this issue in the case of Meranda W. Bolous v. U.S. Bank, N.A, as Trustee, etc.[ii]

The facts in Bolous involve a 2009 lawsuit wherein U.S. Bank N.A., as Trustee for a mortgage backed securitization, files a foreclosure complaint.  The bank alleged that it owned and held the note and mortgage. The copy of the note attached to the complaint did not contain an endorsement. The bank later filed a verified amended complaint and included an undated Allonge endorsed in blank. Based on those facts the defendants challenged the bank’s standing as of the filing of the complaint.

At trial U.S. Bank presented testimony of the servicer together with evidentiary documents. Included in evidence presented was the Pooling and Servicing Agreement together with the corresponding mortgage loan schedule (“PSA”). The witness provided testimony establishing that the trust’s pooling and servicing agreement, entered into in 2005, houses the subject loan within the trust.  The PSA demonstrated the inclusion of the subject loan within the mortgage loan schedule. U.S. Bank also introduced evidence of a limited power of attorney from the bank as trustee (“POA”) allowing the servicer to act on its behalf.

The court carefully evaluated the language of the PSA. The Court highlighted language that it found to support U.S. Bank N.A.’s position regarding standing. The PSA stated “The parties hereto intend to effect an absolute sale and assignment of the Mortgage Loans to the Trustee for the benefit of the Certificateholders under the Agreement.”  This language is commonly used in PSA agreements that create the common goal of loan transfers.

The Court made particular reference to the section of the PSA entitled “Conveyance of Trust Fund” which provided the following language:

  • The Depositor hereby sells, transfers, assigns, delivers, sets over and otherwise conveys to the Trustee in trust for the benefit of the Certificateholders, without recourse, the Depositors right, title and interest in and to . . . the Mortgage Loans listed in the Mortgage Loan Schedule . . .
  • In connection with the transfer and assignment set forth in clause (a) above, the Depositor has delivered or caused to be delivered to the Custodian[iii] for the benefit of the Certificateholders, the documents and instruments with respect to each Mortgage Loan as assigned: . . . the original Mortgage Note bearing all intervening endorsements and including any riders to the Mortgage Note, endorsed “Pay to the order of ______, without recourse” and signed in the name of the last named endorsee by an authorized officer.

Based on the terms of the PSA, together with the corresponding mortgage loan schedule identifying the subject Mortgage Note, the Court concluded that U.S. Bank N.A. had standing to enforce the Mortgage Note as of the filing of the foreclosure lawsuit.

The Court noted other cases wherein the Plaintiff was unable to establish standing through the PSA. The distinction turned on the mortgage loan schedule.

The guideline for establishing standing has been clarified. Servicers should be prepared to present (i) a witness with personal knowledge of servicer business records, (ii) the subject Pooling and Servicing Agreement and (iii) the applicable mortgage loan schedule to establish the date Plaintiff took ownership of the Mortgage Note. The foregoing will establish standing and permit enforcement of the Mortgage Note.

[i] See: In Re: Amendments to the Florida Rules of Civil Procedure, SC13-2384

[ii] Bolous v. U.S. Bank, NA, — So.3rd —, 2016 WL 6476320 (Fla. 4th DCA 2016)

[iii] Identified in the PSA