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Florida Court Finds Bank had Standing to Foreclose | Key Points

  1. In a 19-page opinion recently issued by the Third DCA, the Court reversed a final judgment entered in favor of two borrowers in a foreclosure action concluding securitization of their loan did not affect the negotiable nature of the note or the bank’s holder status. HSBC Bank USA, N.A. v. Buset, 2018 Fla. App. LEXIS 1660 (Fla. 3d Feb. 7, 2018). The Borrowers recently moved for an extension of time to file a motion for rehearing rendering the opinion “non-final” pending resolution of any timely filed rehearing motion.
  2. Based in great part on the testimony of the Borrowers’ expert, Kathleen Cully, an out-of-state attorney “specializing in securitization,” the trial court improperly concluded the Bank lacked standing to foreclose despite being the “holder” of the note both at the time it filed the complaint and at the time of trial. As a preliminary matter, the Third DCA found “the trial court committed reversible error by permitting Ms. Cully…to testify to legal issues,” noting that determination of questions of law “is exclusively within the province of the court.” The Court also explained the lower Court improperly shifted the focus of the case “from foreclosure to securitization” by focusing on Ms. Cully’s testimony and ignoring well-established precedent pertaining to the nature and enforceability of negotiable instruments.
  3. The Court explained that the Bank was not required to establish it owned the note when its standing was based on its status as the holder of the note. Additionally, the Court noted alleged violations of the PSA and alleged deficiencies in the Bank’s assignment of mortgage were irrelevant where the Bank held the endorsed note. The Court concluded the lower Court misapprehended “the nature of negotiable instruments” and failed to apply century old precedent from the Florida Supreme Court when it held the Bank lacked standing to foreclose.
  4. The Third DCA’s opinion in Buset provides significant guidance on several key issues which are frequently the dispositive issues in a foreclosure case, e.g., standing, admissibility of hearsay evidence, permissible scope of expert testimony, effects of securitization, and PSA violations. Regarding standing, the Court established clear limitations on the Bank’s evidentiary requirements and the arguments available to a borrower challenging foreclosure. Assuming the Buset opinion withstands a motion for rehearing, it will be of great precedential value to banks in the future as all Florida trial courts will be required to follow its holding.

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