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The importance of this case, is that the 2d DCA is showing its discomfort with the musical chairs strategy employed by banks in foreclosure. Standing is required in order to file a lawsuit. You can’t acquire it after the lawsuit is filed and you can’t get around THAT by “substituting” a new party Plaintiff.
I would go further to state that the substitution of the new Party Plaintiff raises questions that MUST be answered in discovery and MUST be part of the prima facie case of the new Plaintiff or the Old Plaintiff. The door is opening on the ability of homeowners to be very aggressive in discovery and pre-trial motions.
And, as I said when I started the blog, these cases will vanish once homeowners start winning motions relating to discovery. The banks cannot comply because they don’t know the answers — ownership of the debt, note and mortgage, consummation, and balance after settlements paid to the alleged “creditor” who is suing to foreclose. Those payments are credits against the amount due to the creditor.
That must mean that as between the designated creditor and the alleged “borrower” the principal and interest have been paid down. The same goes for servicer advances. If the servicers want to argue subrogation then let them plead it — with the result that the debt, the note and mortgage become subject to split ownership.
It is simple contract and commercial instruments (Bills and Notes) law and practice. If a creditor has in fact received part payment or all the payments they were intending to receive, then the amount due from the borrower as to that creditor is correspondingly reduced.
The loan payable from borrower remains unaffected, but the loan receivable on the books of the creditor is reduced. Whoever paid off the creditor MIGHT have a claim to receive the proceeds of foreclosure BUT THAT CLAIM is NOT secured the way the creditor’s claim is secured — i.e., the mortgage.
By ignoring this simple black letter legal proposition, the courts are granting a security interest to a third party who was never in privity with the origination or acquisition of the loan.
Filed under: foreclosure