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Challenging Standing Through Close Scrutiny of the Bank’s Trial Exhibits

Although it may initially appear that the borrower would be precluded from asserting a defense that the Plaintiff lender lacked standing where the mortgage foreclosure complaint alleges that the plaintiff bank is in possession of the original note, and attaches a copy of an endorsed note, a recent decision from Florida’s Fourth District Court of Appeal is a strong reminder to both homeowners and foreclosure defense practitioners that effective challenges to standing should always be plead because they may only become apparent after a scrutinizing review of the bank’s trial exhibits. An aggressive pursuit of documents actually showing that the original note was transferred to the possession of the plaintiff, in discovery and at trial, can prove to be surprisingly worthwhile and may provide a strong defense at trial or on appeal.

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In Friedle v. Bank of N.Y. Mellon, No.4D15-1750 (Fla. 4th DCA 2017), the appellate court discussed the “evidentiary inference” set forth in Ortiz v. PNC Bank, N.A., 188 So.3d 923 (Fla. 4th DCA 2016), that if the Bank later files with the court the original note in the same condition as the copy attached to the complaint, then that is sufficient evidence that the plaintiff had possession of the note at the time the action was filed, absent any testimony or evidence to the contrary. In Friedle, the note attached to the complaint had no loan numbers on it, yet the original note filed with the court did. Acknowledging that the missing numbers might seem “a minor difference”, the Friedle Court explained that the Ortiz inference could only arise where the copy attached to the Complaint and the original are “identical”, as the copy must have been made from the original note at the time that the complaint was filed. Where they do not match, however, “the copy could have been made at a significantly earlier time and does not carry the same inference of possession at the filing of the complaint.”

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Friedle also demonstrates that the exhibits typically used to show standing, such as a pooling and servicing agreement, must be closely examined to find all of the prerequisites for actual acceptance of the loan as part of the trust. The Friedle Court dismissed the bank’s argument that the PSA proved standing, insisting that the PSA’s own requirements for acceptance of the loan into the trust had not been proven. That PSA required that the Trustee issue an Interim Certification, certifying that the Trustee had reviewed the mortgage file to certify that the necessary documents, including the original note, were contained within the mortgage loan file, prior to admitting the loan within the pool. The plaintiff did not admit into evidence any certification that the Trustee had reviewed the mortgage file and that all loan documents were present, and thus could not show that the Trust had ever acquired physical possession of the note.

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Although the bank claimed that the Mortgage Loan Schedule (MLS) was a part of the bank’s business records and that the schedule, which listed the Friedle subject mortgage, showed that the loan and note had been acquired by the bank, the Friedle Court held that the schedule only showed that the loan was supposed to be one of the loans subject to the PSA. Moreover, the court said, the MLS did not purport to show that the actual loan was physically transferred.

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The Friedle Court also noted that the bank’s witness, at the trial, acknowledged that the PSA was not part of the bank’s business records but came directly from the SEC. While the witness testified that the MLS was part of the bank’s business records, the appellate court concluded that it was clear from the witness’ testimony that the witness had no knowledge of the workings of either the PSA or the MLS. Interestingly, the Friedle Court concluded that the unsigned PSA should not have been admitted as a business record of the banks, as it was hearsay. The Friedle Court ultimately reversed and vacated the final judgment of foreclosure for the bank and directed that an involuntary dismissal be entered.

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The Friedle case stands as an important reminder of the need to always plead a standing defense and to closely examine the documents relied on by the plaintiff to prove its standing, as viable hearsay and standing defenses may very well be readily available from a close comparison of the documents. Charlip Law Group, L.C.’s seasoned foreclosure defense attorneys know what documents to request in discovery, and how to inspect the bank’s trial exhibits in order to develop the strongest possible trial and appellate strategy.

If you own a home and are facing a foreclosure, you need to seek legal advice to understand your rights and options. For more information, contact our North Miami office at (305)257-9420. Time is of the essence, don’t wait and call us now.

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