In today’s Sun Sentinel, reporter Diane C. Lade exposes yet another paperwork problem for Florida lenders: in an article entitled, “Lawyers say they’re forced to cancel mediations when lenders hold back disclosures, ” Lade points out that many of the loan modifications are failing because banks are not providing the proper paperwork.
Lenders are bring faulty filings to the table, or just not bringing everything they are suppose to provide.
It’s understood at this point that the idea of encouraging loan modifications in order to avoid home foreclosures has failed in Florida and elsewhere in the country. That’s a given.
However, what is becoming very clear now is that it’s not the homeowners that are the big problem here: it may well be that the lenders aren’t able to bring the necessary legal paperwork to that negotation table. No lawyer worth their salt, sitting there representing the home owner behind in their mortgage, is going to look the other way when the bank can’t provide basic stuff. Like proof of ownership of the promissory note. Like their possession of the original mortgage. Things like that.
Result? Lawyers are starting to go into the courtroom, asking judges for help in dealing with the banks.
The Two Basic Documents That Are At Issue: the Mortgage and the Promissory Note
In 2009, the Florida Supreme Court ordered (read the full 80 page Order here) that there must be a mediation in foreclosure cases involving residential homesteads, and among other things, lenders (at the request of the borrower) must disclose proof that they own and hold the mortgage note.
This means that the lender has to fork over as part of the mandatory mediation two things: (1) the promissory note that the homeowner signed, which is a contract where the individual, by their signature, agrees to pay the lender a certain sum of money over a set number of monthly payments and (2) the mortgage, where the individual, by their signature, agrees that the lender holds an interest in the property (a “security interest”) which the bank holds as collateral in the event that the homeowner stops paying on the promissory note.
Here’s one of the big shocks of ForeclosureGate: the lenders that want to foreclose are all too often unable to provide legally valid, original mortgages and promissory notes to prove that they have the legal right (or standing) to institute foreclosure proceedings or to negotiate a modification of the home loan. This is particularly true where there has been an assignment of the original mortgage note to another entity (e.g., the pending Pino case at the Florida Supreme Court, where the first foreclosure lawsuit was summarily dropped by the Law Offices of David J. Stern after the lender couldn’t provide the proper paperwork.)
Lesson for homeowners: know what the lender is required to provide when a loan modification is being negotiated, and make sure that the financial institution can do – and does – what is required by the Florida Supreme Court.