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The devil is in the details. The article in the above link is by Brendan Sweeney. His point is that the existence of corporate entities may not be ignored. You would think that any large bank with a huge legal department would understand that, and you would be right. But they have a strategy that is working. Their strategy is to pick an entity that has no connection with the loan transaction, either in origination or in acquisition. This ensures that the records of that entity cannot be used to blow up the failed securitization scheme. And then by using a Robo witness from an entity that is referred to as a servicer, they can be sure that the witness knows nothing about the origination or acquisition of the paperwork and certainly knows nothing about the money trail.
Over the last 10 years the courts have disregarded or overruled the objections and defenses of borrowers that rely on the application of existing law. One of those things has been that the names on the documents don’t match up with the names used in the foreclosure. Most judges, believing that this is an inconsequential error, and also believing that a bank like HSBC would not be attempting to foreclose unless they actually had the right to do so, thus rule against the homeowner who is gratuitously described as “The borrower.” Of course just referring to the homeowner as a borrower prejudges the entire case.
Now the courts are starting to take a closer look at these transactions which appear to be facially valid on paper, but nonetheless do not exist. Simple application of black letter law is all that is needed for a borrower to win in foreclosure, if the judge is willing to apply the law in a proper fashion. In this case the party chosen to be the foreclosing party was HSBC Bank. But the paperwork whole pointed to a subsidiary of HSBC Bank.
The homeowner argued that the subsidiary was not the same as the parent and that therefore the action should be dismissed for lack of jurisdictional standing. HSBC argued that they owned all of the subsidiary and that it was the same thing, knowing full well that there was no legal support for their position. If you form a corporation it creates what is known as a corporate veil. In fact had HSBC Bank been successful in this case it would have provided the groundwork for Discovery and claims against parent companies and affiliated companies — something that none of the securitization players would allow or want.
Court in this case simply decided that simple law should be directly applied. So it wasn’t up to HSBC Bank to initiate a foreclosure action, Based upon the paperwork in the court record, then it should’ve been done in the name of the party to whom the paperwork was assigned or endorsed — and not in the name of any other entity, even if the other entity was the parent company.
The Court stated that Florida law is clear in that “[a] parent corporation and its wholly-owned subsidiary are separate and distinct legal entities. . . . As a separate legal entity, a parent corporation . . . cannot exercise the rights of its subsidiary.” Wright v. JP Morgan Chase Bank, N.A., 169 So. 3d 251 (Fla. 4th DCA 2015) (quoting Am. Int’l Group, Inc. v. Cornerstone Bus., Inc., 872 So. 2d 333, 336 (Fla. 2d DCA 2004)). Despite this, HSBC Bank put forward two documents to establish standing: (1) an Assignment and Assumption Agreement from HSBC Mortgage to HSBC Bank; and (2) a Secretary’s Certificate (dated after the commencement of the action) from HSBC Mortgage indicating that HSBC Bank is the sole shareholder of HSBC Mortgage. The Court concluded that neither document could be utilized to demonstrate that HSBC Bank had standing.