This Post-Foreclosure Note Endorsement Ruling Could Lead To Bigger Problems For Bank Of America

The Florida Appellate Court shot down another post-foreclosure note endorsement. Last week, Florida’s 2nd DCA issued an opinion smacking down the post-foreclosure note endorsement in the appellate case of THE EAGLES MASTER ASSOCIATION, INC.; and ST. ANDREWS AT THE EAGLES, INC., v. Bank of America, N.A.

The court ruled Bank of America lacked the proper standing to foreclose on a mortgage. BAC Home Loan Servicing filed the foreclosure action before the mortgage was assigned to them. BAC was also not in possession of the note at the time the foreclosure was initiated.

BofA Has Problems Establishing Ownership Of The Note With No Note Endorsement

BAC Home Loans Servicing, LP filed a foreclosure complaint on October 12, 2009. The first count was to foreclose on a mortgage given by Marie Black; the second count was to reestablish a lost note and mortgage.

Countrywide Bank FSB was identified as the lender in the original complaint. There was neither a note endorsement nor an allonge attached to the note.

BAC also named the HOA (Saint Andrews) in the complaint. Saint Andrews answered the complaint and pleaded an affirmative defense asserting that BAC lacked standing to foreclose. In response to Saint Andrews’ request to produce, BAC filed an assignment of the mortgage from MERS to BAC. The assignment stated that it was signed November 5, 2009.

However, the mortgage assignment claimed to have an effective date as of’ October 5, 2009. This is about a week before the complaint was filed. A stamp indicated that it was recorded in the Hillsborough County public records on December 16, 2009.

The Note Endorsement Issue Appears To Be The Fault Of David Stern’s Office

The assignment and original complaint were prepared by David Stern’s law firm.

In February 2012, BAC retained new lawyers. The new firm BAC hired moved for leave to file an amended complaint. The motion recited BAC’s hiring of new counsel. It also reported BAC’s merger with Bank of America, N.A.

The new attorney averred that his firm and BofA was in possession of the original note and mortgage. The amended complaint contained a single count for foreclosure and alleged that Bank of America “owns and holds” the note and mortgage.

BofA relied on the same mortgage assignment that had been prepared by Stern. Additionally, the Bank relied on a blank endorsement on the note, which did not appear on the copy that BAC filed with the original complaint.

St. Andrews filed an answer to the amended complaint. They alleged lack of standing as an affirmative defense. At trial, the BofA presented the testimony of BofA AVP Philip Houghtby. He recounted that he reviewed the Bank’s records concerning this loan.  Houghtby testified BofA was actually in possession of the note when the original complaint was filed. Yet, he did not know and was unable to say when the note was endorsed.

The note was payable to Countrywide Bank. Countrywide was not a party to the foreclosure action. BofA was required to show physical possession of the original note and an endorsement or allonge either in blank or in favor of the plaintiff.

BofA failed to show when the endorsement was added.

2nd DCA Finds Note Endorsement Inadequate

The 2nd DCA ruled that had the note with the blank endorsement should have been filed with the original complaint. Consequently, that would have sufficed to show standing. Yet in this case, the original complaint included a count to re-establish a lost note with a copy of the note attached to the complaint minus an endorsement. Thus, a later filed copy of the note with the endorsement did not suffice to show standing at the time the complaint was filed.

On the surface, this doesn’t seem like a big deal other than its another lost foreclosure case. However, the Florida 4th DCA made a similar ruling back in May. This case is different because it involves an HOA and it was an HOA who challenged the foreclosure. This is why BofA could be writing a huge check to Eagles Master and St. Andrews At The Eagles.

This ruling means Bank of America is now responsible for nearly 6+ years of assessments and unpaid association maintenance fees.