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Having exhausted all possible explanations for the fraudulent behavior of the banks, the 4th DCA has now come to the conclusion that the reason for robo-signing, fabrication, backdating, forgery etc. is that there was no transaction underlying the paperwork that the banks rely upon — at least in this case. In this case in particular, after all the cynics, critics and ridicule I confess my base instincts when I say “I told you so.” Of course the case is remanded, but there is no way HSBC is going to be able to prove anything required by this decision.
For legal practitioners the take away from this case and others being decided in Florida and around the country, is that you should not accept proclamations from either opposing counsel or the bench that the facial validity of a document is enough. In most cases there is no underlying transaction in which a purchase and sale of the loan was completed. So now, at least in the 4th DCA in Florida, foreclosing parties are being returned to the days when they had to prove the actual loan and prove that actual purchase of the loan through proof of payment for the transaction by the party seeking to enforce the loan. And when they don’t or can’t they should be subjected to sanctions against both the conspirators and their attorneys, plus punitive damages.
CAVEAT: THIS CASE DOES NOT APPLY TO ALL CASES. Check with an attorney licensed in the jurisdiction in which your property is located before you make any decisions or start celebrating. But if you check around you will see an increasing number of Florida and other state and Federal decisions, including bankruptcy court, where they found the original note and mortgage void or the transfers to have eviscerated the right to enforce the mortgage through foreclosure. In short, the tide has turned.
A nonholder in possession, however, cannot rely on possession of the instrument alone as a basis to enforce it. . . . The transferee does not enjoy the statutorily provided assumption of the right to enforce the instrument that accompanies a negotiated instrument, and so the transferee “must account for possession of the unindorsed instrument by proving the transaction through which the transferee acquired it.” Com. Law § 3–203 cmt. 2. If there are multiple prior transfers, the transferee must prove each prior transfer. Once the transferee establishes a successful transfer from a holder, he or she acquires the enforcement rights of that holder. See Com. Law § 3–203 cmt. 2. A transferee’s rights, however, can be no greater than his or her transferor’s because those rights are “purely derivative.”
Id. (emphasis added) (internal citations omitted).
HSBC had to prove the chain of transfers starting with Option One California as the first holder of the note. The only document admitted that purported to transfer the note was the PSA. Although the note was included in the PSA, the parties to the PSA were ACE, Option One Mortgage Corporation, Wells Fargo, and HSBC; not Option One California. The loan analyst testified that Option One California was acquired by AHMS, which rebranded to Homeward Residential, which was ultimately acquired by Ocwen. HSBC argues that since “Option One” is defined under the PSA as “Option One Mortgage Corporation or any successor thereto,” and Option One transferred its interest to HSBC through the PSA, HSBC had the rights of a holder. We disagree.