These days, perhaps, the most frequently alleged affirmative defense to a residential mortgage foreclosure action is the foreclosing plaintiff's lack of standing. That should not be surprising because mortgage loans are frequently bought and sold in the secondary mortgage market, (1) which requires the foreclosing plaintiff to demonstrate that it owned or held a legally sufficient interest in the mortgage loan at the time the foreclosure suit was filed. The instant article primarily explores the common law burden of proof associated with the plaintiff's standing in a mortgage foreclosure action, as well as the defendant's burden of proof along with the legal effect of the failure of such proof, including a potential game-changing analysis.
Before reaching the legal nuances of standing, it seems appropriate to initially recognize and repose the obvious; a plaintiff's standing is not an issue in a residential mortgage foreclosure action filed by the original mortgage lender. (2) Stated otherwise, if there has not been a transfer of the beneficial interest in the mortgage loan from the original lender to another entity since the time the lender originated the mortgage loan, and the mortgage foreclosure action is filed by the original lender, of course, the original lender has standing to foreclose the mortgage. (3) Modern-day repetitive mortgage loan sales and debt securitizations have rendered the original lender mortgage foreclosure action the rare exception to the norm. (4)
The 'Standing' Doctrine
The norm typically involves a mortgage foreclosure action that is not filed by the original lender, wherein the plaintiff faces an alleged affirmative defense against the foreclosure action within the mortgagor defendant's responsive pleading that the plaintiff lacks standing to file and prosecute the mortgage foreclosure action. (5) As such, it is prudent to first understand the legal concept or the "standing" requirement, when the defendant challenges the plaintiff's standing because an understanding of standing is a necessary predicate to defend against a plaintiff's alleged lack of standing. Generally, the plaintiff has standing if the plaintiff has a sufficient interest at stake in the controversy that will be affected by the outcome of the litigation. (6)
"In its broadest sense, standing is no more than having, or representing one who has, a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy." Kumar Corp. v. Nopal Lines, Ltd., 462 So. 2d 1178, 1182 (Fla. 3d DCA 1985) (quoting Sierra Club v. Morton, 405 U.S. 727, 731(1972)).
In the mortgage foreclosure context, "standing is broader than just actual ownership of the beneficial interest in the note." Mortgage Elec. Registration Sys., Inc. v. Azize, 965 So. 2d 151, 153 (Fla. 2d DCA 2007). "The Florida real party in interest rule, Fla. R. Civ. P. 1.210(a), (7) permits an action to be prosecuted in the name of someone other than, but acting for, the real party in interest." Id. (quoting Kumar, 462 So. 2d at 1183). "Thus, where a plaintiff is either the real party in interest or is maintaining the action on behalf of the real party in interest, its action cannot be terminated on the ground that it lacks standing." Kumar, 462 So. 2d at 1183. See also BAC Funding Consortium Inc. ISAOA/ATIMA v. JeanJacques, 28 So. 3d 936, 938 (Fla. 2d DCA 2010) ("The proper party with standing to foreclose a note and/or mortgage is the holder of the note and mortgage or the holder's representative."). (8)
Thus, the real party in interest with standing to foreclose may be either the owner or holder of the promissory note and mortgage, whereas some other entity, such as the mortgage loan servicer, may bring the mortgage foreclosure action on their behalf. (9) Given its significance in the mortgage foreclosure context, the Third District provided a most instructive decision concerning the real party in interest rule wherein the court held that a plaintiff may be either the real party interest or may maintain the action on behalf of the real party in interest in which latter case the action cannot be terminated on the ground that plaintiff lacks standing. (10)
Foreclosing Plaintiff Must Prove Its Standing to Foreclose
The first lesson in "Foreclosures 101" is that a lender must prove it had standing before the complaint is filed to foreclose on a mortgage. (11) Indeed, it has been repeatedly held that,
"A crucial element in any mortgage foreclosure proceeding is that the party seeking foreclosure must demonstrate that it has standing to foreclose." McLean, 79 So. 3d at 173. (12) "Whether a party is the proper party with standing to bring an action is a question of law to be reviewed de novo." Elston/ Leetsdale, LLC v. CWCapital Asset Mgmt. LLC, 87 So. 3d 14, 16 (Fla. 4th DCA 2012) (citation omitted). Standing to foreclose is determined at the time the lawsuit is filed and can be demonstrated by the filing of an assignment or the original note with a special endorsement in favor of the plaintiff or a blank endorsement. McLean, 79 So. 3d at 173. A "plaintiff's lack of standing at the inception of the case is not a defect that may be cured by the acquisition of standing after the case is filed" and cannot be established "retroactively by acquiring standing to file a lawsuit after the fact." Id. (citation omitted). (13)
Accordingly, if the plaintiff files its verified complaint for residential mortgage foreclosure (14) and attaches as an exhibit an assignment of the debt or a copy of the original note with a special endorsement in favor of the plaintiff or with a blank endorsement, (15) plaintiff would have established its standing to foreclose, if plaintiff also possessed the note. (16)
The party seeking foreclosure must present evidence that it owns and holds the note and mortgage in question in order to proceed with a foreclosure action. (17) Verizzo v. Bank of N.Y., 28 So. 3d 976, 978 (Fla. 2d DCA 2010); Philogene v. ABNAmro Mortgage Group Inc., 948 So. 2d 45, 46 (Fla. 4th DCA 2006). Where the defendant denies that the party seeking foreclosure has an ownership interest in the mortgage, (18) the issue of ownership becomes an issue the plaintiff must prove. (19) Carapezza v. Pate, 143 So. 2d 346, 347 (Fla. 3d DCA 1962).
In the present case, appellant possessed the original note, mortgage, and assignment executed by the personal representative of Haner's estate. The note was payable to the late John Haner, and the assignment granted Haner's rights under the note and mortgage to appellant. Thus, appellant "held" the note, which granted him standing to seek foreclosure of the mortgage. (20)
The proof presented in Lizio v. McCollum, 36 So. 3d 927 (Fla. 4th DCA 2010) was more than legally sufficient to demonstrate plaintiff's standing. (21)
"A crucial element in any mortgage foreclosure proceeding is that the party seeking foreclosure must demonstrate that it has standing to foreclose." (22) McLean v. JP Morgan Chase Bank Nat'l Ass'n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). To establish standing, the plaintiff must show it held or owned the note at the time the complaint was filed. Id. "A plaintiff may prove that it has standing to foreclose through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer." Stone v. BankUnited, 115 So. 3d 411, 413 (Fla. 2d DCA 2013) (quoting BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 939 (Fla. 2d DCA 2010)). (23)
According to the First District's decision in Hunter v. Aurora Loan Services, LLC, 137 So. 3d 570 (Fla. 1st DCA 2014), in addition to evidence of a valid assignment, plaintiff may also prove standing by proof of purchase of the debt or evidence of an effective transfer. (24) The proof necessary to prove the plaintiff had standing at the time of filing the mortgage foreclosure action should be attached to the plaintiff's initial pleading to avoid, if possible, defendant's affirmative defense of plaintiff's lack of standing. Such proof should ordinarily deter a foreclosure defense attorney from raising standing as an issue in the mortgage foreclosure action because affirmative defenses must be alleged in good faith. (25)
A plaintiff may also establish standing by any means identified in F.S. [section]673.3011, (2015). (26) The statute concerns a person entitled to enforce an instrument and expressly provides:
The term "person entitled to enforce" an instrument means:
(1) The holder of the instrument;
(2) A nonholder in possession of the instrument who has the rights of a holder; or
(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to s. 673.3091 or s. 673.4181(4).
A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument. (27)
"Because a promissory note is a negotiable instrument, and because a mortgage provides the security for the repayment of the note, this statute leads to the conclusion that the person having standing to foreclose a note secured by a mortgage may be either the holder of the note or a nonholder in possession (28) of the note who has the rights of a holder." (29) Furthermore, by implication, the foregoing statute would seem to suggest that a plaintiff may establish its standing through the sworn testimony of a trial witness, who testified that plaintiff held the promissory note on the date the mortgage foreclosure action was initially filed. (30)
Additionally, a transfer of the note after the mortgage foreclosure action has been filed will not necessarily jeopardize the proper plaintiff's standing.
Second, as to standing, appellee acquired the note and mortgage from the prior holder, Amtrust Bank, which was the original plaintiff in this foreclosure action. Amtrust moved to substitute appellee as the plaintiff pursuant to Florida Rule of...