Mortgage Servicing Fraud: Lender Document Experts Are Clueless About The Loans They Are Testifying About

Judges in Florida are beginning to take a hard look at mortgage servicing fraud. Judges have the time to spend on a case now that foreclosures have subsided in Florida. This became evident in a case playing out in Miami where two foreclosure mill attorneys now face criminal charges.

The issues revolve around the question of how much first-hand knowledge a lender document expert actually has. In many cases, these “experts” claim they viewed the document on a computer screen. The computer is connected to a camera placed in the vault. They also like to claim that “everybody uses the same system” even when they don’t have first-hand knowledge.

Judges used to allow these claims during the Rocket Docket days. However, the days of a judge turning a blind eye to mortgage servicing fraud are over. They no longer need to worry about clearing their docket of foreclosure cases. They now have the time to digest the merits of basic foreclosure defense.

Mortgage Servicing Fraud: 5th DCA Slaps Down A Ditech Document Expert

Brevard County Judge Turns A Blind Eye To Mortgage Servicing Fraud

The Green case in Brevard County is another perfect example of the Florida courts now calling mortgage servicers onto the mat for the testimony of their document witnesses.

Charles Green executed and delivered a note and mortgage in favor of Countrywide Home Loans, Inc. Five years later, Green defaulted and BAC Home Loan Servicing initiated a foreclosure. BAC alleged it was the loan servicer and holder of the note. BAC attached an unendorsed copy of the note as an exhibit. Green answered the complaint asserting BAC lacked standing as an affirmative defense.

BAC’s filed a motion to substitute Bank of America, N.A. as its successor by merger, as the plaintiff in 2012.

Then, in April 2014, the trial court granted Bank of America’s motion to substitute Green Tree as plaintiff, by virtue of a mortgage assignment.

In October 2014, Green Tree filed an amended complaint. In the amended complaint, Green Tree alleged its status as holder of the note and attached a copy of the note. However, this time it contained an undated blank endorsement from Countrywide Home Loans. In his answer, Borrower again raised BAC’s lack of standing.

Green Tree (now Ditech) called Ditech foreclosure specialist Christopher Lee as their expert witness.

Ditech admitted a copy of the note into evidence at trial that bore the same blank endorsement as the copy attached to the amended complaint.

Lee testified that he had no knowledge of when Countrywide endorsed the note and provided no business records to indicate the date.

Lee further testified that “Countrywide Home Loan Servicing was renamed BAC Home Loan Servicing” in April 2009 before the filing of the original complaint. Green Tree presented no other evidence or testimony about any servicing agreements. The court entered a final judgment of foreclosure for Green Tree.

Green Appeals To The 5th DCA

Charles Green appealed to the 5th Florida District Court of Appeals. He argued the judge ruled incorrectly and ignored key pieces of evidence. Green’s argument was simple:

A crucial element in any mortgage foreclosure proceeding is that the party seeking foreclosure must demonstrate that it has the standing to foreclose. McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012).

The 5th DCA agreed:

Green Tree asserts that the merger between BAC and CHL Servicing, LP, established BAC’s standing at the time of filing the original complaint. “[I]n order to prove standing to foreclose based upon a merger, the surviving entity must prove that it `acquired all of [the absorbed entity’s] assets, including [the] note and mortgage, by virtue of the merger.’” Vogel v. Wells Fargo Bank, N.A., 192 So. 3d 714, 716 (Fla. 4th DCA 2016) (quoting Fiorito v. JP Morgan Chase Bank, Nat’l Ass’n, 174 So. 3d 519, 521 (Fla. 4th DCA 2015)).

Here, like the witness in Vogel, Green Tree’s witness offered no explanation “as to why the copy of the note attached to the complaint . . . did not reflect the [e]ndorsements” and testified that he did not know when the blank endorsement was placed on the note. Additionally, the witness testified primarily about Ditech’s receipt of Green Tree’s and BAC’s business records but failed to address the transfer of the note to BAC pursuant to the merger. Thus, Green Tree failed to demonstrate that BAC acquired standing based on the merger.

Furthermore, the 5th DCA concluded:

Because none of Green Tree’s purported predecessors had the standing to foreclose at the inception of the case, the trial court erred by finding that Green Tree acquired standing to foreclose. See Corrigan v. Bank of Am., N.A., 189 So. 3d 187, 190 (Fla. 2d DCA 2016). Accordingly, we reverse and remand for entry of an involuntary dismissal. See Walsh, 219 So. 3d at 930.