The importance of demonstrating legal standing as a condition precedent to filing a mortgage foreclosure lawsuit cannot be overstated. In simple terms, “standing” refers to one’s legal right to bring a lawsuit. If the plaintiff does not have standing at the time a foreclosure case is filed, there can be serious consequences including dismissal of the complaint. Even if the case proceeds to judgment, such judgment is deemed voidable under Florida law.
In a mortgage foreclosure case, Florida courts have generally held that possession of a note which is secured by a mortgage confers standing to foreclose. The important point for a lender considering foreclosure is to begin by locating the subject promissory note, preferably the original instrument. There is a method by which a copy of a note can serve as the basis for re-establishing a lost original but it is much easier and less costly to address this when the complaint is first drafted. So, for planning purposes, find the original note or make the determination that it is lost while you are preparing the file to be sent to counsel for foreclosure.
The lender will also want to include with the note any assignments or endorsements evidencing the transfer of the instrument from the original payee to the present holder. This is critical in today’s world of syndicated loans and assets being acquired from failed institutions. If the original payee has been succeeded by a new entity through merger or other legal means, the lender will want to gather evidence of this and transmit that to counsel along with the original documents. I have seen recently several cases where standing was challenged due to alleged lack of merger evidence.
With careful planning, a lender can minimize the possibility of a challenge to standing and, as a result, avoid costly delays in completing its foreclosure.