Foreclosure Defense Florida

Systemic Collapse of Regulation And The Failure of The Mortgage and Title Industries

Accredited Mortgage Trust, Ace Security Trust, Ameriquest Mortgage Trust, Asset Backed Trust 2005-HE, Carrington Mortgage Trust, CBASS Mortgage Series 2007 Cb. These are just a small representative sample of the Plaintiffs who filed suit to foreclose mortgages in Pinellas County in September 2009.   The exotic sounding names of the Plaintiffs identified belie a fundamental problem that exists within the current foreclosure crisis–yet another problem being ignored by the courts that are pursuing these foreclosure cases.

Utter Failure to Enforce Existing Laws

In Florida, a variety of state statutes and court rules prohibit entities who have not registered with the Secretary of State from maintaining actions in the state. The relevant text reads as follows:

A foreign limited partnership transacting business in this state may not maintain an action or proceeding in this state until the foreign limited partnership has a certificate of authority to transact business in this state. (Florida Statutes Chapter 620.1907)


A foreign corporation transacting business in this state without a certificate of authority may not maintain a proceeding in any court in this state until it obtains a certificate of authority. (Florida Statutes Chapter 607.1502)

The purpose of this statute is to ensure that citizens who are subject to   suit have the opportunity to know precisely who is suing them and to help ensure the state has some idea what companies are transacting business within its borders.   While lawsuits are routinely dismissed until the Plaintiff registers with the state when the issue is raised in other civil cases, dismissal is sometimes denied in the foreclosure context due to the claimed protection of a narrow exemption from the registration law for companies that are pursuing foreclosure actions.   The refusal to order dismissal is based upon the following text which provides that the following activities are not considered transacting business in the state:

  • Creating or acquiring indebtedness, mortgages, and security interests in real or personal property.
  • Securing or collecting debts or enforcing mortgages and security interests in property securing the debts.(Florida Statutes Chapter 607.1501)

The important distinction–and the reason why this exemption should not apply to many of the companies pursuing these suits–is that the companies engage in wide range of activities that exceed those narrow activies exempted by   statute and which therefore prevent them from claiming the protection of this exemption.

Mortgage Servicers/Lenders/Plaintiffs Acting as Trust Companies

Perhaps the most glaring example of activities these rouge companies routinely engage in which brings them outside the protection of the exemption cited can be found in the company’s own name.   Anytime the company name contains the word “Trust” in it, such as “Carrington Loan Trust” or “Trustee for the XIXS Loan Trust”, it’s a pretty good bet that the company is enagaging in the business of managing trusts, defined by Florida Statute as:

“Trust business” means the business of acting as a fiduciary when such business is conducted by a bank, state or federal association, or a trust company, and also when conducted by any other business organization as its sole or principal business.

“Trust company” means any business organization, other than a bank or state or federal association, which is authorized by lawful authority to engage in trust business. A bank or state or federal association conducting business pursuant to lawful authority, which also by lawful authority has authority to engage in trust business, is the functional equivalent of a trust company with respect to performance of fiduciary services, and may assume fiduciary duties under appointive instruments that establish fiduciary relationships. (Florida Statutes Chapter 658.12)

The purpose of the trust registration statutes cited above, and the regulatory framework set up to monitor trust related activities is, like the corporate registration statutes, to allow regulators to be aware of those companies that are engaging in trust related activities in the state.   Due to the fiduciary nature of any trust relationship (i.e. an agent has control and is managing the assets of a principal), there is the potential for abuse of this relationship.   For this reason, the trust and banking statutes places a variety of restrictions and requirements on all companies that wish to transact such business in the state. (see Florida Statutes, Chapter 658.21) The preceeding section is but one of many requirements, but the bottom line is state law requires trust companies to register, maintain notice of offices and officers, pay registration fees and make deposits of funds in proportion to the volume of trust business in the state.

Mortgage Trust Companies Are Grossly Out of Compliance With State Law

The sections of the banking and trust code and the corporation registration statutes cited above are intended to protect citizens and impose minimum requirements on entities that are creating millions of dollars of liabilities in this state. For unexplained reasons, these statutes are being utterly ignored by state regulators and the courts that could be requiring compliance with these statutes as a condition of maintaining foreclosure suits in this state.   Such massive non-compliance with statutes meant to protect citizens and the state is staggering particularly in light of the widespread knowledge that part of what got our nation, and the entire world, into near collapse was ignoring laws and regulations that could have prevented the widespread damage that occured.

The net result will be continued liability and catastrophy, as the unintended (but totally forseeable) consequences of systemic non-compliance are bourne out in the years to come.   Look for more bank and mortgage company failures, and add these issues to the list of reasons why I believe you will see title insurors going bankrupt and eventually a total failure of the title insurance industry in this country.

For more information on this or other issues relating to real estate, contact Matt Weidner at

Leave a Reply