Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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William A. Roper, Jr.
In a recent Florida appellate case, the Court of Appeals for the Fourth District set aside a summary judgment where the trial court erred in finding for a plaintiff which pleaded an unindorsed promissory note.  The case is:

Riggs v. Aurora Loan Servs., LLC, No. 4D08-4635, COURT OF APPEAL OF FLORIDA, FOURTH DISTRICT, 2010 Fla. App. LEXIS 5280; 35 Fla. L. Weekly D 879, April 21, 2010, Decided.


http://www.4dca.org/opinions/Apr%202010/04-21-10/4D08-4635.op.pdf


Litigants are reminded that negotiation of a promissory note under the Uniform Commercial code is by indorsement and delivery.  Unless the plaintiff is the named Lender shown on the face of the alleged instruments -- alleged promissory note and alleged mortgage, deed of trust or other mortgage scurity instrument -- only through indorsement and delivery can the plaintiff become the holder.

It is NOT at all unusual for careless foreclosure mills to plead an unindorsed copy of the promissory note.  And plaintiffs rarely plead and prove delivery.

Instead, the plaintiff usually relies upon a conclusory affidavit of merit using an unqualified witness to allege that the plaintiff is the owner and the holder (these are legal conclusions, NOT facts).

In Riggs, it seems that the plaintiff neglected or was unable to find an indorsed copy of the the alleged promissory note and neglected to even seek the admission of the usual conclusory affidavit.

We are left with a nice concise opinion which reaffirms that the plaintiff cannot be entitled to summary judgment on a promissory note made out in favor of another entity when the note is unindorsed:

"In the instant case, the endorsement in blank is unsigned and unauthenticated, creating a genuine issue of material fact as to whether Aurora is the lawful owner and holder of the note and/or mortgage. As in BAC Funding Consortium, there are no supporting  [*3]  affidavits or deposition testimony in the record to establish that Aurora validly owns and holds the note and mortgage, no evidence of an assignment to Aurora, no proof of purchase of the debt nor any other evidence of an effective transfer. Thus, we reverse the summary judgment and remand for further proceedings. We find no merit in any of the other arguments raised on appeal."

This should be a very nice case to cite in Florida when the plaintiff pleads another unindorsed instrument!

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Mr. Roper,

This was recently reversed.  Interestingly, the 4th DCA now has a signature on the indorsement in blank.  Would love to get your take on this.

http://www.4dca.org/opinions/June%202010/06-16-10/4D08-4635.rhg.pdf
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Well, now the note is indorsed.  This case was just reversed.  Would love to get your take on this little bit of magic by the bank.  Now you don't see it, and now you do.

http://www.4dca.org/opinions/June%202010/06-16-10/4D08-4635.rhg.pdf
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William A. Roper, Jr.
Alina:

Without seeing the specific briefs and underlying record in this case, it is difficult to know with certainty what happened.

But what I surmise has happened from the two opinions is one of two possibilities.  The first and more likely possiblity seems to be that in its original opinion the Court saw a printed name as indicative of noting a place where the signer would sign, but didn't.

The original opinion states that the promissory note was unindorsed, while noting that there was a form blank indorsement.

The opinion on rehearing states that the promissory note was indorsed with a hand printed signature of Humberto ALDAY.

Some people have signatures which are distinctive marks from which letters, printed or cursive can hardly be distinguished.  Others have very ordinary signatures in which each letter is clear and discernible.  There is certainly no requirement that a signature be in cursive writing rather than printed.

When reading the document, in the original opinion, the Court may have concluded that the printed name "Humberto ALDAY" was indicative of identifying the person who was expected to sign.  In rendering the decision on rehearing the Court may have instead concluded that this was, in fact, Mr. ALDAY's signature, or, at least, that in the absence of some contrary evidence that the lower court hadn't erred in reaching this conclusion.

Whether Mr. ALDAY actually prints his name when he signs is a fact issue.  This could have been explored through discovery or with reference to other public records, including other foreclosure documents.  For example, if Mr. ALDAY owns a real property subject to mortgage, the mortgage is probably recorded in the jurisdiction where teh property is located.  The defendant might have obtained a copy of Mr. ALDAY's signature, to show by evidence that the printed name was not actually a valid signature.

*

Another possibilty is that the plaintiff pled into the record an unindorsed copy of the note and later produced the original.

I am well familiar with the case of one foreclosure defendant in which the plaintiff did precisely that.  And I have seen numerous other instances where the plaintiff has attached an unindorsed promissory note to the complaint or motion for summary judgment.

Unsophisticated defendants, particularly those unrepresented by competent counsel, often fail to assure that the plaintiff properly authenticates the copy, certifying it as a true and accurate copy of the original.

Of course, the original instrument is always parole evidence -- it is the best evidence of what the note actually says.  And the court is going to typically rely on the original note in preference to the unindorsed copy

If the defendant objects to the copy for failure to authenticate OR, better yet, if the defendant uses discovery, including both an interrogatory and request for admission to prove up the unindorsed copy, later production of the indorsed original can probably at best be evidence of indorsement after the pleading of the copy (which will usually be after commencement of the suit).  This would often be a basis for dismissal due to lack of standing at inception.

When a defendant fails to object and to get the plaintiff to embrace and wrap its arms around the unindorsed copy, production of the original will tend to displace the prior pleaded copy and the lack of indorsement of the copy is seen as essentially irrelevant!

So another possiblity is that there was more than one copy of the promissory note in the record, possibly an unindorsed copy attached to the complaint and an indorsed copy attached to the motion for summary judgment or an affidavit in support of that motion.  Upon rehearing, the plaintiff-appelle may have put the court on the right page to see that the instrument was indorsed after all.

*

Without access to the record, we cannot ascertain whether these are reasonable outcomes.  But I am inclined to suspect that the appellate decision upon rehearing is probably sound and that defendants should take some instruction from this case: (a) as to the desirability of getting a plaintiff to authenticate copies pled into the record (including a binding judicial admission as to the correctness of the copy), (b) the desirability to investigate anything that might be construed as an indorsing signature on the instrument, (c) the necessity of getting something into the summary judgment record to dispute facts that might otherwise be undisputed.

If the defendant had obtained a certified copy of Mr. ALDAY's mortgage, including his authenticated signature and the signature markedly differed from what was printed on the instrument, this would have been not only been pretty good summary judgment evidence calling into question the indorsement, but might have been conclusive in showing that the note was unindorsed.  Similarly, a judicial admission that a prior pled copy was a true and exact copy could have been used to conclusively show that the undated indorsement must have taken place after commencement.

Either should have precluded summary judgment! 

*

On the other hand, I know that the defendant I described above expressly pointed out the lack of indorsement of the instrument and summary judgment was granted anyway.  This is now a subject of a promising appeal.
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Scroll down and click on the link Riggs+motion+for+rehearing, to see the brief that Aurora submitted using UCC to argue their case, and the 4DCA bought it and affirmed the lower court's decision.  This came fom matt weidner's blog on june 20th.

The Inside Story on the Riggs Reversal- Fighting Ghosts, “Evidence” That Changes, Slippery “Facts”

June 20th, 2010 · Foreclosure



This appeal is particularly relevant given the recent reversal of the Riggs v. Aurora case, which was also heard in the Fourth District.  The rehearing brief is attached below and offers the important details about this very confusing situation.

rehearing fl

Riggs+Motion+for+Rehearing

These cases all remind us of the absolute necessity to have court reporters in all hearings, and to properly document all legally operative facts.  As issues surrounding negotiable instruments become increasingly important, it is critical that attorneys obtain a certified copy of the original note when it is filed.

The cases also show the chaos that is occurring when plaintiffs are permitted to engage in totally improper practice of dropping these promissory notes into files without amending the complaints to make these documents part of the record….this procedure must be insisted upon because it’s the only way the legitimacy of these documents can be challenged…see also Florida Statutes, 673.3081.

 

If the above link does not work, then go directly to Mr Weidner's blog:

 

http://mattweidnerlaw.com/blog/

 

 

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William A. Roper, Jr.
Angela:

Nice find!  I hadn't seen the brief on re-hearing.

But in all candor, what I am discerning from this brief is that my speculation above is pretty much dead on.

There are clearly several critical issues which seem to be explored in this case.

These include:

  1. Whether a "shipper" has the actual authority to exceute an indorsement on behalf of First Magnus.  Frankly, I find that rather curious.  Usually, only officers of a corporation would have that sort of authority.  Some old cases hold that a cashier of a small bank, which has no other employees (e.g. the officers are not actually employees of the bank) have authority to execute indorsements.  I haven't researched the law or briefed this issue in respect of the law either of Ohio OR the PLACE OF INDORSEMENT AND/OR DELIVERY.  (Ohio law may not even apply!)
  2. Whether the indorsement shown is actually Humberto ALDAY's signature (printed as "H. Alday").  As indicated in my prior post, pretty much any mark actually ascribed by Mr. ALDAY intending to be bound would probably be valid, IF he has the authority.  By contrast, any writing of a person other than Mr. ALDAY (without his express consent and direction) would tend to be a forgery under the laws of most places.  This begs the question, did Mr. ALDAY actually sign the instrument.
  3. WHEN was the instrument indorsed and delivered?  Indorsements are typically undated and therefore are essentially never evidence of the date of a transaction (other than showing that the indorsement happened at some time prior to the date that the indorsed instrument is presented as evidence).  So the purportedly indorsed instrument is not actually conclusive evidence that the plaintiff was the owner and holder at the date of commencement of suit.  But the plaintiff seems to have overcome that with one or more other affidavits (which I haven't seen), which the court apparently found satisfactory.

*

There seems to be a Humberto ALDAY in Tuscon, Pima County, Arizona.  He is the owner of record of real property and has executed several deeds of trust there. 

See:

http://www.recorder.pima.gov/public/docview.aspx?s=4/1/1987&e=6/22/2010&l=ALDAY&f=HUMBERTO


Unfortunately, Pima County doesn't make the images of these records available for FREE to any member of the public, as many counties now do.  Perhaps someone else would like to pay Pima County to obtain a copy of one or more of these records.

But even if the instruments showed that the signature was substantially different, this doesn't much help AFTER the matter was decided by the lower court on summary judgment.  I point these records out to show how easily that the defendant might have actually found and checked Mr. ALDAY's signature. 
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Anon
Mr. Roper

I was wondering if you could answer this question as you seem to knowledgeable on this subject. What do you think would be the case if instead First Magnus filed the action for foreclosure produced the indorsed note but then filed as assignment to Aurora post lis pendens.

Thanks


 what is the difference between indorse and endorse.



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William A. Roper, Jr.
Anon:

First, a few covenants.  I am NOT an attorney and also I do not pretend to be familiar with the law of any particular jurisdiction.  Also, I have not studied, read about nor researched the particular question you pose relating to lis pendens.  So my response is very much a "hip shoot" and you should use it as no more than an informed guess.

That said, generally a lis pendens is a means of informing others of the pendency of a claim or litigation.  But it is my impression that in some places, there might be a statutory or court rule which requires the filing of a lis pendens in advance or coinciding with litigation.

IF there is some requirement in a particular juridiction which required the filing of a lis pendens, PERHAPS the filing of a lis pendens by other than the owner of the promissory note might create some complictions.

But, generally, this would NOT cause a standing problem.

If you search this Forum on the topic of standing, you will find some informative posts by myself and others on this topic.  Generally, in order to have standing, a plaintiff must have a pecuniary interest in the subject matter of the cause of action.

And standing is measured at the inception of the suit.

In many places standing is a Constitutional imperative.  This is certainly true of Federal Standing, which is an Article III imperative.  And it is similarly a Constitutional imperative under the "open courts" provisions of many state Constitutions.

As long as the original plaintiff which filed the action has standing, then a suit can usually proceed.  If the original plaintiff subsequently assigned its interests, generally, in most places there should be not only a negotiation of the note (with indorsement and delivery), but also a written assignment of mortgage and a written assignment of the cause of action.  Then, there should also be a motion for the substitution of the new correct plaintiff in the case.  Substitution in a Federal suit in this instance is indicated by Rule 17, which discusses real party at interest.  Many states have rules similar to the Federal Rules and in some instances the state rules are also similarly numbered.

You would need to research the law of the particular jurisdiction, including cases, to be more certain how the situation you describe would be handled in that jurisdiction.

*

Ownership of a promissory note is transferred under the UCC of all states by negotiationNegotiation requires indorsement and delivery.

Indorsement and endorsement are simply two ways of spelling the same thing.  Indorse or indorsement is the older way and older statutes and cases often use indorsement.  Modern dictionaries and usage seems to prefer endorsement.

When searching for cases, be sure to search under both terms.

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anon
Thank you Mr. Roper.

I did not mean to confuse you by using the term lis pendens. In Florida that is the first step in a foreclosure. Most of the transfer of note cases ie Aurora seem to revolve around whether or not the loan was transfered to a third party. In  the case I am speaking of, the first mortgage company called First Magnus say for an example filed for foreclosure, then less than a month later made an assignment to a second company, use as an example Aurora. However all along the first company has acted like the assignment never took place: guess it is the elephant in the room : to the point of producing the note which is indorsed but the first company claims it holds the note. The socond company can't have possession of the note because the first company filed it with the courthouse.

To tell you the truth nobody knows, not the attorney's no one. I have been posting on this board for five years now. Five years ago people knew way less. I think I have some idea of the answer and it comes in the form of the question. Which company gets the payoff?
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