It’s all the rage. You’re in foreclosure. You find out the lender has lost the note. Or if it was lost initially, the lender suddenly finds the note or proves its terms. But either way, the lender still can’t prove when it took ownership or assignment of the note. You argue the lender can’t show it owned the note before filing the foreclosure action against you. The lender is denied foreclosure judgment or even better, the action is dismissed because you show they took ownership after filing. This means you own your house or business free and clear right? Not so fast…

1. What happens if the action is dismissed because the lender doesn’t have the note?

If the action is dismissed, it almost always will be “without prejudice.” That means the lender can get its act together and get the assignment of the note and mortgage recorded, get its proof that it owns the note, and refile the complaint. And as a practical matter, the mortgage is still recorded against the title of your home. Failure to prove ownership of the note is NOT alone grounds to remove the mortgage from the title to your home as a “cloud on title.”

2. How does a lender prove it owns the note?

Only a lender that owns the note has “standing” to sue in foreclosure. To establish standing, the plaintiff must submit the original note bearing a special endorsement in favor of the lender. Duke v. HSBC Mortg. Services, LLC, 79 So. 3d 778 (Fla. 4th DCA 2011). If it can’t do that it can file a copy of the recorded assignment from payee to the plaintiff, or provide an affidavit of ownership proving its status as holder of the note. Servedio v. U.S. Bank Nat’l Ass’n, 46 So.3d 1105 (Fla. 4th DCA 2010).

3. Is having the note, assignment, or affidavit enough to establish standing?

No. A bank can’t prove it is entitled to file foreclosure unless it shows it owned the note before filing. Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. 4th DCA 1990). A promissory note containing a special endorsement in favor of the lender that is not dated is not enough. An assignment of mortgage dated after filing is actually proof against the bank having standing at the time of filing. An affidavit or other testimony only showing the bank, at some point in time, took ownership of the note is not enough. Rigby v. Wells Fargo Bank, N.A., 84 So. 3d 1195 (Fla. 4th DCA 2012); McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So.3d 170, 173 (Fla. 4th DCA 2012).

4. If the lender can’t find the note, can I get away with sitting back and doing nothing to defend?

This is not recommended. If you do nothing you will probably suffer a default final summary judgment of foreclosure. If you start defending after the initial clerk’s default for failure to respond to the complaint, you are still at a disadvantage. At least one court that reversed summary judgment of foreclosure against the defendants because of standing dismissed the case only against the defendants who responded to the complaint. The others, who commenced their defense only after suffering a clerk’s default for failure to respond, were still stuck in the case. Venture Holdings & Acquisitions Grp., LLC v. A.I.M. Funding Grp., LLC, 75 So.3d 773 (Fla. 4th DCA 2011).

Please remember, even if a case is dismissed against you, the lender can still come back. Still, a vigorous defense is not without ultimate value. A strong foreclosure defense may put you in a better position to settle with the lender on terms you can live with.