Will the Florida Supreme Court Chip Away at the Defenses Available in Foreclosures?
By Michael Cotzen and Jennifer Murillo
Last month, the Second District Court of Appeals entered an opinion in the case of Focht v. Wells Fargo Bank, N.A., which stands to change the current defenses available to homeowners facing foreclosure.
It is well-established law that a bank, at the time it forecloses, must have standing to sue. Country Place Cmty. Ass’n v. J.P. Morgan Mortg. Acq. Corp., 51 So. 3d 1176, 1179 (Fla. 2d DCA 2010). Consider the following hypothetical: Borrower executes a note and mortgage in favor of Bank A in 2005. In 2010, Bank B files an action to enforce the note and foreclose on the mortgage. At the time of filing, Bank B must be entitled to enforce the note and at summary judgment or trial, Bank B must be able to prove it was entitled to do so before it filed the Complaint.
In Focht, in October 2002, Focht executed a note that was secured by a mortgage on her property in Nokomis, Florida. The original lender was BNC Mortgage, Inc., but the loan was later transferred into a trust for which Wells Fargo is the trustee. Wells Fargo filed a foreclosure complaint in January 2008. But it was not until September 2008 that Wells Fargo filed an assignment of the note and mortgage, several months after the complaint was filed. The Second District reversed a summary judgment in favor of the bank because the bank was not able to prove standing at the time the complaint was filed. But in its reversal, the Second DCA certified a question to the Florida Supreme Court, which could change the face of foreclosure actions:
CAN A PLAINTIFF IN A FORECLOSURE ACTION CURE THE INABILITY TO PROVE STANDING AT THE INCEPTION OF SUIT BY PROOF THAT THE PLAINTIFF HAS SINCE ACQUIRED STANDING?
To answer this question in the affirmative would, the Court suggests, streamline the foreclosure process, but it would also dramatically change the foreclosure laws of this State which have been amended as recently as July 1, 2013 to ensure that banks’ new complaints detail how they became entitled to foreclose. To answer this question in the affirmative would significantly limit this important defense, and could open the door to fraud and a violation of due process. Florida law has always placed a burden on the foreclosing party to show that it is entitled to enforce the note before it can foreclose. The changes contemplated by Focht would undermine the concept of standing and essentially strip the homeowner of his or her right to challenge the foreclosure process.