Defending Foreclosure on Steroids – Max Gardner Orlando seminar
Negotiable or Non-negotiable? In residential foreclosures the lenders routinely claim that all they need is a blank endorsement on the mortgage note. They say it doesn’t matter who the original lender was, or how they got the Note…as long as someone, anyone, (a thief perhaps?!) stamped a blank endorsement on the last page (or on a separate piece of paper attached to the Note, known as an ‘allonge’), then, they say, they can foreclose. There is a developing push back saying that YES, it DOES indeed matter and powerful legal defenses are gaining traction in Florida and the nation. I recently returned from an intense seminar in Orlando put on by Max Gardner, a nationally known premier bankruptcy attorney. The seminar was attended by serious foreclosure defense lawyers and experts (fraud detection, mortgage securities research, etc) from around the country. I’ve attended so many foreclosure defense seminars, this was superior. The primary theme was that FNMA/Freddie Mac mortgage notes (in other words, most residential mortgage notes today) are NOT easily transferable IF the correct law is applied.
Here we dive into the thicket of the Uniform Commercial Code (”UCC”), a set of laws adopted by most states, including Florida. The defense revolves around which portions of that law, Article Three governing NEGOTIABLE INSTRUMENTS OR Article Nine governing SECURED TRANSACTIONS control. If Article Nine applies, foreclosiing lenders have A MUCH HEAVIER BURDEN to meet in court, one that many, perhaps, cannot meet IF their feet are held to the fire. Max Gardner laid out powerful support for this legal argument. Further, Max made a compelling argument that it need not be Either/Or, both sections of the law may be applicable, and in that case, the foreclosing banks (and those suing on credit card debt, in many cases) STILL have to meet the heavier burden of Article Nine. ( Much of the credit card debt was also securitized).
Just as a small illustration, Article Three of the UCC defines a negotiable instrument as an unconditional promise to pay a fixed sum, which can be read and understood without reference to another writing. However, an analysis of the typical ‘FNMA form’ Note reveals that you can not figure out the amount of $$$ owed without reading the mortgage together with the note. Even FNMA and FHLMC (Freddie Mac) have acknowledged in writing that the two must be read together and constitute ‘an integrated contract.’ This was recognized by a Florida appellate court, specifically acknowledging guidance received from FNMA, in 2010, Sims v New Falls FL Choice of Law and Integration of Mtg & Note.doc. Not a brand new case, but with insights for foreclosure defense that have not been fully appreciated by all.
This is not intended as legal advice for your particular situation.