Consumer Finance Litigation

In Russell v. Aurora Loan Services, LLC, 40 Fla. L. Weekly D967a (Fla. 2d DCA Apr. 24, 2015), Florida's Second District Court of Appeal added to the emerging line of case law regarding the proof required to establish standing in mortgage foreclosure actions. There, the Second DCA held that substituted party-plaintiff, Nationstar Mortgage, LLC, failed to establish at trial that either Nationstar or the original plaintiff, Aurora Loan Services, LLC, had standing as the servicer acting on behalf of the real party in interest to foreclose against borrower William Russell. As a result, the court reversed the final judgment of foreclosure in favor of Nationstar. Aurora alleged in its February 25, 2011 complaint that it was authorized to bring the lawsuit as the servicer of the loan. Attached to the complaint were a copy of the note, an allonge with three special endorsements, none of which were to Aurora, and an assignment of mortgage to Aurora dated November 23, 2010 that only purported to transfer the mortgage, not the note. Aurora's verified complaint did not include exhibits demonstrating that it was authorized to prosecute the action on behalf of the real party in interest, Deutsche Bank Trust Company Americas as Trustee ("Deutsche Bank"), which was the named payee of the last special endorsement added to the allonge. The complaint was verified by an Aurora employee, not a Deutsche Bank employee. Partway through the litigation, Aurora moved to have Nationstar substituted in as party-plaintiff, and attached an assignment of mortgage from Aurora to Nationstar as an exhibit to its motion. The trial court granted the motion. At trial, the original note and mortgage were entered into evidence, as was the assignment of mortgage. Nationstar also entered into evidence a limited power of attorney ("POA") signed by Deutsche Bank and dated August 6, 2012. The POA designated Nationstar as the successor servicer to Aurora. However, the POA did not identify when Nationstar became the successor servicer to Aurora or when Aurora took over from the servicer before it. The POA also referenced agreements that listed the mortgage loans that Nationstar serviced for Deutsche Bank in "series" numbers that did not correlate to any of the loan documents in evidence. Nationstar's witness was unable to state whether Russell's loan was included in any of the series numbers. The Second DCA further observed that nothing in the pleadings supported Nationstar's assertion that it, and Aurora before it, were authorized servicers of Russell's loan. Aurora had not attached to the complaint or filed with the court any evidence, affidavits, or other documents demonstrating its authority to foreclose on behalf of Deutsche Bank, nor had Deutsche Bank verified the complaint. The Second DCA held that Nationstar did not prove that it, and Aurora as its predecessor, were authorized by Deutsche Bank to service Russell's loan and thus had standing to foreclose. The POA was "dated some eighteen months after the complaint was filed, grant[ed] limited powers to Nationstar only, and [did] not indicate the dates which Aurora previously acted as servicer for Deutsche Bank." Also, and "perhaps more importantly" (to borrow the court's characterization), the POA and the agreements referenced therein did not facially list the loan at issue as one that was serviced by Nationstar or Aurora, nor could Nationstar's witness explain how the borrower's loan was purportedly included among one of the identified series numbers. The Second DCA therefore held that Nationstar did not present any evidence or testimony confirming that the loan at issue was actually serviced by Nationstar or had been previously serviced by Aurora or that Deutsche Bank had ratified the foreclosure action. Because the borrower had moved for an involuntary dismissal at trial, and the Second DCA agreed that he was entitled to a dismissal, the court reversed and remanded with instructions that the trial judge dismiss the action. In sum, Russell acts as a cautionary guidepost to servicers bringing complaints in their own name. A successor servicer of a loan that is subject to a foreclosure action in the prior servicer's name must be able to establish not only its own right to foreclose on behalf of the real party in interest, but also the standing of any prior servicer at the time that the foreclosure was filed. To read the Court's full opinion, click here.