What could be more embarrassing for the already floundering banks than the fact that their foreclosure, loan modification and short sale systems are a complete mess?

Well, a recent court decision in a mortgage foreclosure lawsuit in Pasco County, FL, revealed the banks, besides being disorganized, are apparently not above stooping to commit fraud in order to file foreclosure actions against homeowners.   You can view the Court’s order by clicking here.

Many homeowners probably don’t know the bank has to prove it has standing to bring a foreclosure action.  Standing is the constitutional right for a party to appear to bring a case in court.  Without standing, a party has no right to be in court. But in reality, the bank must prove that they in fact own and hold both the mortgage and promissory note, and thus have the right to foreclose.

This becomes a problem for banks because they are so disorganized that the documents are often lost or misplaced. An even bigger problem occurs when the original mortgage lenders sell the mortgages and notes and convert them into a securitized trust. When these mortgages are assigned to another bank or a securitized trust, the assignment of mortgage must be executed and notarized. Within these assignments, foreclosure defense attorneys are finding all kinds of problems that are leading to foreclosure cases being thrown out of court.

Fraud in the Court

A problem found in an assignment of mortgage that was recently thrown out by the court was especially astounding. The Plaintiff, U.S. Bank, filed a foreclosure action on December 6, 2007, based on an alleged assignment of mortgage dated as of December 5, 2007.

However, during the course of the litigation, the homeowner’s attorney noticed that the Notary’s commission was dated to expire on May 19, 2012. Pursuant to Florida law, notary stamps are only valid for 4 years. So, the notary that signed the assignment back on December 5, 2007 could not have had a notary stamp that expired in May of 2012.

This fact was confirmed by a sworn affidavit by the Notary Bonding Company’s representative, confirming that this Notary’s stamp was not issued until April 2008, five months after the purported date of assignment on the mortgage.

Based on this evidence, the judge found that the assignment was “fraudulently backdated in a purposeful, intentional effort to mislead the defendant and this court.”

On these grounds, the Judge found the defendant homeowner was the prevailing party because the Plaintiff lacked standing to file the lawsuit on December 6, 2007, and granted the Defendant’ attorney’s fees as well.

Defending is Better than Default

This news brings hope to many homeowners and shows defending the foreclosure action is better than doing nothing at all.  Additionally this teaches us we should never accept anything on its face and scrutinize every document produced by the banks to support their foreclosure complaint.

An argument can be made that Judges should be examining the authenticity of the documents produced by the Plaintiff before entering default and granting summary judgment against homeowners. However, in all likelihood, mistakes such as these are slipping through the cracks with the unprecedented number of foreclosure actions each judge has on their docket.

Thus, these kinds of problems truly exemplify why it is in every homeowner’s best interest to defend their foreclosure and not assume the court system will automatically protect their interests.