5 Tips For Beating A Bank Foreclosure
|Evan M. Rosen|
Since the Great Recession of 2008, foreclosures have been a major part of the American way of life. Many millions of foreclosures have been processed, resulting in millions of Americans being displaced from their homes. Unfortunately, many more will soon face a similar fate. But foreclosure, like all aspects of law, demands attention to a myriad of details — all of which can impact the outcome.
Most people think that if they get sued by the bank for lack of payment, they’d better start packing up the house immediately. This is not so. Born primarily out of the banks’ rush to lend and the resulting tidal wave of litigation, there is a new legal practice area for lawyers to help homeowners keep their homes. Combining many different areas of law, including the Uniform Commercial Code, trust formation, securitization, Sarbanes-Oxley, Dodd-Frank, CFPB Regulations, United States Bankruptcy Code, the evidence code and more, foreclosure defense is without a doubt its own new complicated specialty. Below are five of the most common issues that foreclosure defense lawyers have used to help homeowners:
1) Standing. In judicial foreclosure states, one of the very first elements a financial institution must prove is standing. In other words, is the entity filing suit the proper party to enforce the note and foreclose the mortgage?
The underlying premise of a foreclosure case is simple enough — a bank lends money and that money is not repaid as agreed. It’s really just a breach of contract case, with the property acting as collateral or security for the debt. In the old days, a bank lent money to a local resident, put the original note in a vault and then, if that bank had to take legal action, it would hire a local lawyer and file suit. At trial or summary judgment, that bank would put on evidence as to the contract, breach and its damages. It would then surrender the original note, to take it out of the “stream of commerce,” so no one else can try to enforce it and get a judgment. However, thanks to banks and their “complex methods of securitization” and “sloppy record keeping”, those days are long gone. Now, a court must put much more emphasis on whether the plaintiff bringing suit is really the “real party in interest” — the party who is entitled to enforce the note and foreclose the mortgage. There are a few ways a bank can meet this burden but there have been dozens of appellate cases in just the past few years which demonstrate a number of ways they have failed to do so.
In pursuing the defense of a foreclosure action, a certain level of forensic investigation is often required to determine who is the actual real party in interest. If an entity bringing suit fails to meet its burden of proof as to standing, the case must be dismissed.
2) Acceleration. A note is what’s known as an “installment contract.” One entity lends money and another makes periodic payments to pay the money back. If the party responsible for paying fails to live up to their end of the bargain, the lender can sue for the past due amounts — the late installment payments. If the lender wants to sue to get all of their money back and foreclose on its security interest in the collateral, as in the case of a foreclosure, the lender must first “accelerate” the debt. The case law definition of acceleration differs slightly — some cases suggest moving the date of maturity of the loan to now, while others hold simply that all payments are due now. Both definitions lead to the same end — the entire loan balance becomes due now.
Most mortgages contain clauses which address what a lender must do before being able to accelerate. The form Fannie Mae–Freddie Mac mortgage, used by all institutional lenders, contains an all bold paragraph which addresses the steps required before a lender can demand and sue for the entire debt.
Failure to meet any one of the requirements may mean that the lender has not properly accelerated and therefore, is not able to successfully maintain a lawsuit to foreclose on the mortgage.
3) Damages. As part of any civil lawsuit for money, including a breach of contract, the plaintiff in the case must prove damages. Case law demands that the evidence must be “sufficient to satisfy the mind of a prudent, impartial person as to the amount of awardable damages.”
This is especially true in a foreclosure case in which the borrower has a statutory right of redemption, as is the law in many states. This is the right of a defendant to “redeem” themselves, paying the full amount due under the judgment, up until a specific time in the process. This will stop the foreclosure dead in its tracks. While somewhat rare, this certainly does happen — all the more now that home prices have again risen. Ultimately, if a lender fails to prove its damages, judgment cannot be entered.
4) Evidence. This is an area of the law which has caused many cases to crumble. Lack of sufficient evidence can derail any issue, in any case. In the world of foreclosures, the bank must produce the right records and information to meet its burden. Banks almost always rely on a sole witness to authenticate documents and lay a business record foundation, to establish that the documents can be admitted into evidence as an exception to hearsay. These witnesses do not personally know anything about the case, nor do they need to. But, they must have personal knowledge — garnered by their own sight, hearing or touch — as to what they testify to, while on the stand, under oath. A witness cannot just repeat the “magic words” of these foundational issues.
Ultimately, if the witness cannot meet the criteria established by law, the evidence will not be admitted. And, if a critical record is not admitted, the bank cannot meet its burden.
5) Second Lawsuits. In every other area of the law, when parties come before the court to seek redress for their conflict, after a court rules and the time to appeal has passed, normally, that is the end of the case. The parties go their separate ways and forever hold their peace. This is known as res judicata — the matter has been judged. However, in a foreclosure case in Florida, so far the Supreme Court of the state has decided that banks can have as many chances as they like, so long as they claim a different date of default. What the Supreme Court of Florida has yet to decide, but will apparently be doing so soon, is whether or not banks will get special treatment under the relatively simple application of the statute of limitations.
In Florida, the statute of limitations to sue on a contract is five years. “Where the installment contract contains an optional acceleration clause, the statute of limitations may commence running earlier on payments not yet due if the holder exercises his right to accelerate the total debt because of a default. In other words, the entire debt does not become due on the mere default of payment; rather, it becomes due when the creditor takes affirmative action to alert the debtor that he has exercised his option to accelerate.”
There is a common saying in the law, “widows and orphans make bad law.” Apparently, we can add banks to that too. Res judicata, the business records exception to hearsay, dismissals with and without prejudice and the statute of limitations are all bedrock principles of law, which are being rechiseled in favor of banks. But, there are still a few issues within res judicata and the statute of limitations, which are being upheld and can be applied to successfully defend a foreclosure suit.
Attorneys on all sides of a case must understand the intricacies of the law and facts at hand. Foreclosing on a home is serious business — the concept of leaving someone homeless is not to be taken lightly. Add to this the fact that the entities foreclosing caused a global crisis. The executive and legislative branches have given the financial institutions special treatment, but it is specifically part of the courts’ role in our civilized society to simply apply the rule of law, equally, to all those who come before it. Financial status should not matter. And, under that principle of fair and equal treatment under the law, if a bank cannot meet its burden and prove its case, just as it is for the rest of us, their case must be dismissed.
—By Evan M. Rosen, Law Offices of Evan M. Rosen PA
Evan Rosen is founder of Fort Lauderdale, Florida, based foreclosure defense law firmLaw Offices of Evan M. Rosen PA.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
 “However, as Judge Altenbernd observed, “[i]n this case and numerous other cases, the financial institutions have brought these problems upon themselves by the complex methods of securitization and their own sloppy recordkeeping.” Id., at 313 (Altenbernd, J., concurring). We further note that many foreclosure actions languish due to the plaintiffs’ failure to prosecute cases in a timely manner and not from any wrongdoing by the borrower. Once a defendant contests the plaintiff’s standing as the proper party to enforce a note via foreclosure, the plaintiff’s right to bring suit on the note at the requisite time becomes a disputed issue the plaintiff must prove. Gee v. U.S. Bank, N.A., 72 So. 3d 211, 213 (Fla. 5th DCA 2011). It is not inequitable to require a plaintiff to prove its case, beginning with its standing to bring the action at the outset when that status is challenged.” Ham v. Nationstar, 164 So.3d 714 (Fla. 1st DCA 2015).
 Sea World of Florida v. Ace American Insurance, 28 So. 3d 158 (Fla 5th DCA 2010).
 “Testimony must be based on matters perceived by the senses of the witness.” C. Ehrhardt, Florida Evidence §604.1 (2015 Edition).
 “The ends of justice require that the doctrine of res judicata not be applied so strictly so as to prevent mortgagees from being able to challenge multiple defaults on a mortgage.” Singleton v. Greymar, 882 So. 2d 1004(Fla. 2004). “We conclude that the doctrine of res judicata does not necessarily bar successive foreclosure suits, regardless of whether or not the mortgagee sought to accelerate payments on the note in the first suit. In this case the subsequent and separate alleged default created a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action.” Id
 Greene v Bursey, 733 So. 2d 1111 (Fla. 4th DCA 1999).