Lenders - Don't Forget Your Endorsements!

No, not the endorsementson LinkedIn, although those are important too. I'm talking about endorsements to promissory notes. Since the onset of the Great Recession, far too many of Florida's judicial decisions have come down against lenders because they did not timely or properly obtain endorsements to promissory notes when they purchased loans on the secondary market. While this may seem like a technicality, it is a critical issue as a proper endorsement (either in favor of the current lender or in blank) is required for the non-originating lender to have "standing" - the legal right to bring the lawsuit. If the lender does not have standing when the lawsuit is filed, the lawsuit may ultimately be dismissed, and as many loan documents contain prevailing party attorney fee provisions, the lender may be liable for its borrower's fees.

Despite the bevy of cases on this very issue over the past few years, the significance of endorsements still appears to be an important lesson to remember as the decisions keep coming - so far one in each of the first four months of 2014 alone, each involving a different lender.

Leading off the year, in Viola v. U.S. Bank, the current lender, who was two assignments removed from the originating lender, did not attach a copy of the promissory note to the complaint, but only later, in support of a motion for summary judgment, filed a copy with all proper endorsements. Although the court reversed the judgment based upon procedural grounds, the opinion clearly indicates the court would have reversed on the basis of standing as well, as there was no proof of "the bank's ownership of the note and mortgage prior to the filing of the complaint."

Similarly, in Zimmerman v. JPMorgan Chase Bank, the current lender attached a copy of the promissory note to its complaint, but that copy did not include any endorsements. Only later, again in support of summary judgment, was the original note filed, this time with an undated endorsement in blank. As it "failed to file any evidence establishing that Chase obtained possession of the endorsed note prior to filing the...

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