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Court Unlikely to Favor Homeowner in Florida Foreclosure Case: Moody’s

If a lender produces a fraudulent document when attempting to foreclose on a borrower, should lenders be able to voluntarily dismiss the foreclosure then re-file the case after fixing the error?

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The answer to this question is currently being decided by the Florida Supreme Court, which heard arguments May 10 for a case titled ""Roman Pino v. Bank of New York Mellon"":http://www.4dca.org/opinions/Feb%202011/02-02-11/4D10-378.op.pdf.

If the court does rule in favor of Pino, this would mean servicers could no longer fix documents and later refile foreclosures, which would stall or lead to the dismissal of foreclosures and make it even more difficult for the judicial state to proceed with foreclosures.

While a decision has not been made, Moody's Analytics said in a report that the ruling is not likely to fall in favor of the defendant Pino, who is the homeowner the bank tried to foreclose on using a fraudulent assignment of mortgage, or a document serving as proof the mortgage has been transferred from the original owner to a third party.

In its analysis, Moody's pointed out that two previous rulings and the Justices' remarks at oral argument already express the unlikelihood of favor towards the homeowner.

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The trial court and the entire body of the appellate court voted 9-2 against the defendant, and the Justices stated Florida law already has sufficient remedies and sanctions to deal with fraud.

Moody's said, ""[t]hese include the ability of a homeowner to challenge a completed foreclosure obtained through fraud, the availability of sanctions against those who knowingly make false statements to the court, and the recent amendments to the Florida rules requiring verification of the ownership and right to enforce the mortgage note and giving greater authority to sanction plaintiffs who make false allegations.""

Expressing concerns over the effects of a ruling in favor of the homeowner, the Justices also addressed the potential impact of a ruling in favor of Pino on non-mortgage civil litigation, Moody's stated.

However, if the court was to rule in favor of the homeowner, Moody's explained the consequences would be limited because the ruling would only be applicable in cases involving fraudulent documents, not document flaws born out of careless mistakes.

Even though proving fraud would mean showing a false statement or action with the intent to deceive, Moody's said a flawed document without fraud would still slow down the foreclosure process due to having to go through a hearing to try and prove fraud.

This would create an even greater backlog of foreclosures in a state known for having a high percentage of foreclosures. Recent data from ""CoreLogic"":http://dsnews.comarticles/number-of-completed-foreclosures-and-inventory-down-from-year-ago-corelogic-2012-05-30 revealed the state has the highest percentage of mortgages in foreclosure inventory out of all states. Also, the ""Florida Realtors"":http://www.floridarealtors.org/ reported the state holds nearly a third of all shadow inventory nationwide, with shadow inventory counted as the number of distressed properties not listed on the market.

About Author: Esther Cho

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