June 27, 2014


“The Court is concerned, as a result, that OneWest does not hold the Endorsed Note. But, perhaps more significantly, the Court is concerned that OneWest has determined that business expediency and cost containment are more important than complete candor with the courts.”[1]

 –  In Re Jessie M. Arizmendi (At the time of this California foreclosure decision in 2011, the homeowner/debtor, Ms. Arizmendi, was a frail 86-year-old with hearing loss and difficulty walking.)

This article discusses 42 cases with suddenly appearing (often called “ta-da”) endorsements.  In each case, a bank-trustee tried to foreclose on behalf of a mortgage-backed trust.  Most of these cases began with the filing of an unendorsed note that was described in the bank’s pleadings as a true and correct copy of the original note.  Several of the Florida cases began with a Lost Note claim, alleging that the bank at one point had the note in its custody and control, but somehow lost the note.  Later in the litigation, these lost notes were invariably and inexplicably found.

In a few cases, the judges expressed their disbelief and frustration with the documents presented by the banks and the claims made.  These cases are the exception, however, not the norm. Very few cases address the issue of whether the endorsements or found notes were illegally fabricated or forged.



Most homeowners borrow money to purchase their homes.  When these homeowners “close” on their home loan, they sign a promissory note and mortgage or deed of trust.  The note obliges the homeowners to pay back the loan under the specified terms.  The mortgage or deed of trust gives the lender the right to foreclose on the home if the homeowners default under the terms of the loan.  The note and the mortgage are two separate and distinct documents – or “instruments.”

Generally, almost all residential mortgage notes start as notes payable “to order,” that is, payable to the lender of the money.  Beginning in approximately 2004, the era of mortgage securitization, most mortgage notes (notes secured by a mortgage) were sold to third parties, usually called Depositors.  These Depositors bought loans from originators, pooled loans together, and sold the pools to form securitized trusts. The agreements governing almost every securitized trust required that the notes that were sold to the depositor, and made part of the trust loan pool, be both endorsed and delivered to the trustee or the document custodian for the trust. The governing trust documents specified both how the notes were to be endorsed, and how (when, where and to whom) they were to be delivered.

Five different major problems occur with notes that have been securitized:

1. Many notes presented in foreclosures are not endorsed;

2. The vast majority of endorsements are undated;

3. The endorsed notes are not filed at the time the complaint is filed, making it impossible for a court to determine whether the bank had the endorsed note at the time it commenced the foreclosure;

4. There are seldom any records presented in foreclosure cases recording when and where the delivery of the notes occurred; and

5. Different versions of the notes are presented to the Court in the same case, with the differences almost always involving the endorsements.



The Supreme Court of New Mexico became the third state highest court, joining Vermont and Oklahoma, to confront the issue of conflicting promissory note endorsements[2] in foreclosures, in a decision filed February 13, 2014, Bank of New York v. Romero.[3] The Romero case involves a fact pattern that arises frequently in foreclosure litigation: the copy of the note attached to the complaint when the action was first filed contained no endorsements, but by the time of the Summary Judgment hearing or trial, the bank-trustee has filed another copy of the note, this one with endorsements.

In the Romero case, the first newly appearing endorsement was a blank endorsement (no stated payee) from Equity One, Inc., the original lender. The second endorsement was a special endorsement (payee stated) made payable to JP Morgan Chase Bank.  There was no endorsement to Bank of New York Mellon (BONY), the plaintiff who filed the foreclosure action in its capacity as trustee for a mortgage-backed trust. Both copies were purported to be copies of the “original note.”

The New Mexico Supreme Court held that Bank of New York did not establish its lawful standing to file a foreclosure.[4] The New Mexico Supreme Court reversed the Court of Appeals and the District Court and remanded the case to the District Court with instructions to vacate its foreclosure judgment and to dismiss the Bank of New York’s foreclosure action for lack of standing.

Joseph and Mary Romero borrowed $227,240 on June 26, 2006, from Equity One, Inc. to refinance their home in Chimayo County, New Mexico. They signed a mortgage that identified Equity One, Inc. as the lender and Mortgage Electronic Registration Systems, Inc., as Nominee for Equity One, as the mortgagee.  The Romeros became delinquent in 2008.

Bank of New York, as Trustee for Popular Financial Services Mortgage Pass-Through Certificates Series #2006, filed a foreclosure action on April 1, 2008. The copy of the promissory note that was attached to the complaint when the Romero case was filed had no endorsements. The note itself identified only Equity One as the lender.

The Romeros argued at trial that the “original” note introduced by BONY at trial and purportedly authenticated was different from the copy of the original note attached to the Complaint that did not include any endorsements. A document custodian from Litton Loan Servicing, the servicer for the trust, testified that BONY had physical possession of both the note and mortgage at the time it filed the foreclosure complaint, but this testimony was largely disregarded because the document custodian claimed to rely on a Pooling and Servicing Agreement from the trust, but that agreement was not offered into evidence.

In Romero, the Supreme Court held that possession of the note, with a special endorsement to JP Morgan Chase, did not establish BONY as a Holder under the New Mexico UCC provision, UCC § 55-3-301, defining a person entitled to enforce a negotiable instrument such as a home loan.  The Court stated that:

Possession of an unendorsed note made payable to a third party does not establish the right of enforcement, just as finding a lost check made payable to a particular party does not allow the finder to cash it…[5]

Regarding the conflicting versions of the Note – one without endorsements, and one with two endorsements, the Supreme Court stated:

Without explanation, the note introduced at trial differed significantly from the original note attached to the foreclosure complaint, despite testimony at trial that the Bank of New York had physical possession of the Romeros’ note from the time the foreclosure complaint was filed on April 1, 2008. Neither the unendorsed note nor the twice-indorsed note establishes the Bank as a holder.[6]

The Court found that even the version of the note with endorsements was still insufficient to establish standing, noting:

The trial copy of the Romero’s note contained two undated indorsements: a blank indorsement by Equity One and a special indorsement by Equity One to JP Morgan Chase.  Although we agree with the Bank that if the Romero’s note contained only a blank indorsement from Equity One, the blank indorsement would have established the Bank as a Holder because the Bank would have been in possession of bearer paper, that is not the situation before us.  The Bank’s copy of the Romero’s note contained two indorsements, and the restrictive, special indorsement to JP Morgan Chase established JP Morgan Chase as the proper holder of the Romero’s note absent some evidence by JP Morgan Chase to the contrary. (citation omitted).[7]

The Bank also made an argument that the Court should ignore the special endorsement, but the Court rejected that argument, stating:

Rather than demonstrate timely ownership of the note and mortgage through JP Morgan Chase, the Bank of New York urges this Court to infer that the special indorsement was a mistake and that we should rely only on the blank indorsement. We are not persuaded. The Bank provides no authority and we know of none that exists to support its argument that the payment restrictions created by a special indorsement can be ignored contrary to our long-held rule on indorsements and the rights they create…[8]

The issue of whether such trust actually existed was never raised.  The Romeros did try to question the ownership of their note, as the Supreme Court opinion states:

According to the Romeros, Security and Exchange Commission filings showed that their loan certificate series was once owned by Popular ABS Mortgage and not Popular Financial Services Mortgage and the owner was JP Morgan Chase. [9]

If this issue had been properly raised, the court could have determined at the outset that the name of the plaintiff was incorrect, because such a trust did not exist and never existed. There is no such trust, Popular Financial Services Mortgage Pass-Through Certificates Series #2006, registered with the SEC, rated by any rating organization or listed by any servicer or trustee.  Such a trust is not the plaintiff in any other lawsuit filed in federal court or any reported state court case.

An examination of the Schedule of Loans from an entirely different trust indicates that the plaintiff was not only incorrectly identified and did not exist, but also that another trust, Popular ABS Mortgage Pass-Through Trust 2006-D, claimed in documents filed with the SEC and distributed to investors that it owned a loan for the same amount as the Romero loan, initiated in the same year, and from the same county in New Mexico, making it very likely that this trust actually owned the Romero’s note.

If the loan in the Romero case were actually held by Popular ABS, Inc. Mortgage Pass-Through Certificates Series 2006-D, the trial court may have addressed the issue of the endorsement by JP Morgan Chase with the additional knowledge the JP Morgan Chase was the original trustee, but withdrew from acting as trustee for hundreds of trusts, and was replaced by BONY. This may not have been a critical fact, but it does help explain the endorsement to JP Morgan Chase on the note presented by BONY at trial. It also helps explain why the Pooling and Servicing Agreement was not presented to the Court as evidence. The plaintiffs may have known they had named the wrong trust.



Johnny Lance Johnston is a disabled Vietnam veteran who represented himself at trial. His request to present the testimony of Lynn Szymoniak (the author of this article) regarding fraudulent documents used in his case was denied at trial.

Three months after the New Mexico Supreme Court’s decision in Romero, in Deutsche Bank National Trust Company v. Beneficial NM, Inc.,[10] a New Mexico appellate court reversed a foreclosure entered after a bench trial because the bank failed to establish that it had standing when it filed its complaint.  At the initial filing, the bank attached unendorsed copy of the note made payable to New Century Mortgage Corporation.  At trial, 20 months after the complaint was filed, Deutsche Bank introduced the original note, this time endorsed in blank, and argued that its possession of the note at trial with an undated blank endorsement was sufficient to establish its right to enforce the note, stating:

In this case, the blank indorsement on the note the Bank introduced at trial was not dated, making it impossible to tell when the indorsement was executed. Therefore, while the indorsed note was sufficient to show that the Bank was the holder of the note at the time of trial, it failed to show that the Bank was the holder at the time it filed its complaint for foreclosure. We conclude that neither the unindorsed copy of the note produced with the foreclosure complaint nor the indorsed note produced at trial were sufficient to show that the Bank held the note when it filed the complaint. The Bank offers no explanation as to why it produced an unindorsed copy of the note made payable to New Century instead of the indorsed note if it indeed had possession of the indorsed note when the complaint was filed. The bottom line is the Bank needed to show it possessed the proper supporting documentation when it filed the foreclosure complaint. Kabba, 2012 OK 2013, ¶ 11.[11]



Prior to the New Mexico Romero decision, two state Supreme Court decisions dealt with the issue of conflicting endorsements.  The first such case was U.S. Bank National Ass’n v. Kimball,[12] decided by the Vermont Supreme Court in 2011. In Kimball, U.S. Bank filed its complaint with a copy of a note attached.  An undated allonge was attached to the note, signed by a corporate officer of Accredited Home Lenders, Inc., the original lender, endorsing the note in blank. The homeowners filed an answer and the bank moved for summary judgment.

In its summary judgment motion, the bank asserted that it had the original note, and that it was endorsed from Accredited to RFC and then to U.S. Bank. No dates, however, were provided for these endorsements. In support, U.S. Bank attached an affidavit attesting to these facts, but the affidavit was devoid of any dates. The copy of the note attached had an allonge.  The trial court noted that the allonge submitted at summary judgment appeared to be the same allonge previously submitted as endorsed in blank, but this time with “RFC” stamped in the blank spot and containing a second endorsement from RFC to U.S. Bank. The court held that U.S. Bank lacked standing when the complaint was filed, and dismissed the complaint “with prejudice.”

On appeal, U.S. Bank asserted that it was entitled to enforce the note as a holder of the instrument.  The Supreme Court set forth the bank’s burden of proof:

A person becomes the holder of an instrument when it is issued or later negotiated to that person. 9A V.S.A. § 3-201(a). Negotiation always requires a transfer of possession of the instrument. Id. § 3-201 cmt. When the instrument is made payable to bearer, it can be negotiated by transfer alone. Id. §§ 3-201(b), 3-205(a). If it is payable to order—that is, to an identified person—then negotiation is completed by transfer and endorsement of the instrument. Id. § 3-201(b). An instrument payable to order can become a bearer instrument if endorsed in blank. Id. § 3-205(b). Therefore, in this case, because the note was not issued to U.S. Bank, to be a holder, U.S. Bank was required to show that at the time the complaint was filed it possessed the original note either made payable to bearer with a blank endorsement or made payable to order with an endorsement specifically to U.S. Bank.[13]

The Supreme Court concluded that U.S. Bank failed to satisfy either requirement. When U.S. Bank submitted its note with two undated specific endorsements, after submitting a note with a blank endorsement, the bank failed to explain when the additional endorsements were made, and why the complaint was originally submitted with a blank endorsement. The Supreme Court concluded that the trial court did not err in dismissing the complaint because of the “contradictory and uncertain” documentation.



The Oklahoma Supreme Court decided a similar case the following year, Deutsche Bank National Trust, as Trustee for Long Beach Mortgage Loan Trust 2002-1 v. Brumbaugh,[14] where the original petition for foreclosure, filed in January, 2009, included a copy of an unendorsed note payable to Long Beach Mortgage Company. On April 1, 2010, JP Morgan Chase Bank, as the servicing agent for the trust, filed a motion for summary judgment, again attaching a copy of the unendorsed note.  The respondent homeowners argued that the bank was not the real party in interest because there was no endorsement whatsoever. In reply to the homeowners’ response, and at the hearing, a copy of the note with a blank, undated indorsement signed by Long Beach Mortgage Company was attached and presented. The bank argued that this allonge was inadvertently omitted from the copy of the note attached with its motion for summary judgment.

The trial court reviewed the note presented at the hearing and agreed with Appellee that Appellee was the holder of the note because it had possession of the note and it was indorsed in blank. The court granted summary judgment in favor of Appellee on January 27, 2011.

The Oklahoma Supreme Court reversed, finding that there was a question of fact as to when the bank became a holder, and thus, a person entitled to enforce the note making summary judgment inappropriate. The Court noted that to commence a foreclosure action in Oklahoma, a plaintiff must demonstrate that it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing, stating:

It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit, showing the history of the note, so the defendant is duly apprised of the rights of the plaintiff… We reverse the granting of summary judgment by the trial court and remand back for further determinations as to when Appellee acquired its interest in the note.[15]



The New Mexico appellate court in the Johnston case (#2, above) also relied in part on a 2013 Oklahoma Supreme Court decision, Bank of America v. Kabba.[16] There, the Bank filed its foreclosure petition claiming to be the holder of the note, as successor in interest to LaSalle Bank, as Trustee for a trust, SAIL 2004-BNC2 in March, 2010. The Bank did not attach a copy of the note to its petition, but filed the note, with a blank endorsement, with a Motion for Summary Judgment, that was granted on June 13, 2011.  The Oklahoma Supreme Court reversed, finding that it was impossible to determine from the record when Bank of America acquired its interest in the underlying note.



Within three months of the the Kabba decision, the Oklahoma Supreme Court decided eight additional cases, reversing foreclosure judgments where the original, endorsed note was not filed at the time the foreclosure action was commenced.

In Deutsche Bank National Trust Co. v. Matthews,[17] Deutsche Bank filed a foreclosure petition as trustee of JPMorgan Acquisition Trust 2007-CH3 on January 14, 2009, claiming that it held the note and mortgage.  The note filed with the petition was unendorsed (despite an allegation saying it was endorsed), but eventually, six months later with a Motion for Summary Judgment, Deutsche Bank produced a note with two allonge endorsements, the second being an endorsement in blank. Both allonges were dated January 9, 2007, meaning Deutsche Bank was claiming to have acquired the note only five days before it filed for foreclosure, if the note was assumed to have been delivered the same day it was endorsed.

The first allonge was a special endorsement from the lender, Chase Bank USA, N.A. payable to Chase Home Finance, LLC. The second allonge was a blank endorsement from Chase Home Finance, LLC.

While the endorsement in blank pre-dating the filing of the petition would ordinarily have been enough to establish the bank’s right to foreclose, the unendorsed note attached at the original filing and the bank’s own allegations in the Summary Judgment motion made the court conclude otherwise.  In the motion for summary judgment, Deutsche Bank stated that it acquired Chase Bank USA, N.A.’s interest in the note and mortgage subsequent to the filing of the original action.  Because of this admission by Deutsche Bank, the Oklahoma Supreme Court reversed a summary judgment of foreclosure granted by the trial court with instructions to dismiss the case without prejudice because there was no evidence showing Deutsche Bank was a person entitled to enforce the note prior to the filing of the action.



In Deutsche Bank National Trust Co. v. Richardson,[18] Deutsche Bank again filed a foreclosure without attaching the note.  The initial pleading, filed October 15, 2010, alleged that Deutsche Bank was the present holder of the note and mortgage, but did not refer to any endorsement of the note. Deutsche Bank then filed for Summary Judgment on May 26, 2011, attaching for the first time a copy of the note, endorsed in blank, by WMC Mortgage Corporation, the original lender. Deutsche Bank.  Summary judgment was entered in favor of Deutsche Bank.

The Oklahoma Supreme Court reversed, noting that summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions.  The court found that the timeliness of the transfer was a disputed fact issue because Deutsche Bank did not file the blank endorsement until it filed its motion for summary judgment, making it impossible to determine from the record when Deutsche Bank acquired its underlying interest in the note.



 In CPT Asset Backed Certificates Series 2004-EC1 v. Cin Kham,[19] the copy of the note attached to the original petition was unendorsed. No endorsed note was ever entered into the record, though the bank’s counsel claimed to have a copy of the endorsed note at a hearing on the homeowner’s motion to vacate a default judgment that was entered in the case. Because the only note found in the record contained no endorsements, the Oklahoma Supreme Court vacated the judgment.



In BAC Home Loan Servicing, LP v. Swanson,[20] the petition filed by BAC had an attached copy of a note with an allonge transferring the note to Countrywide Bank, N.A. signed by a warehouse manager of Magnus Financial Corporation. There was no evidence presented showing the note was endorsed to BAC until the summary judgment motion when a copy of the allonge was filed which also showed a blank endorsement. The Supreme Court found that there was a question of fact as to when BAC acquired the note making summary judgment inappropriate.



In NTEX Realty LP v. Tacker,[21] the original note was payable to Home Funds Direct, Inc. and the original non-endorsed note was attached to the petition for foreclosure. NTEX moved for summary judgment, again attaching the unendorsed note, alleging that it was a “full, true and correct copy of the note.” When the homeowners again raised the issue in opposition that NTEX lacked standing, NTEX filed a supplement to its motion that included an undated allonge which transferred the note to NTEX, and the trial court granted summary judgment to NTEX.  The Supreme Court reversed because a question of fact remained as to when NTEX acquired the note.



In U.S. Bank v. Alexander,[22] the original lender was MILA, Inc. DBA Mortgage Lending Associates, Inc. Wells Fargo originally brought the case, with only an unendorsed note and part of the original mortgage attached. U.S. Bank as trustee for Credit Suisse First Boston HEAT 2005-4 was substituted as plaintiff.  This new plaintiff filed an amended petition, but again, only the unendorsed note was attached. The bank filed for summary judgment, again relying on the unendorsed note.  At a second motion for summary judgment, the bank for the first time, attached a copy of the note with a blank allonge.  Again, summary judgment was reversed because the bank did not demonstrate that it was the holder of the note at the time it filed its first amended petition.



In Wells Fargo Bank v. Heath, [23] the original lender was Option One Mortgage Corporation.  The foreclosure petition was filed by Wells Fargo Bank as Trustee for Option One Mortgage Loan Trust 2005-4.  Wells Fargo attached a copy of an unendorsed note to the petition. A final summary judgment was entered in favor of Wells Fargo and the property was sold at sheriff’s sale. The original homeowners obtained new counsel who filed a petition to vacate the sale.  At the hearing on that petition, the bank presented the original note, but this time with an undated allonge attached.  The Supreme Court decided that because Wells Fargo never established standing at the time suit was commenced, summary judgment was wrongly entered, reversed the lower court decisions, and remanded.



The court in the Johnny Lance Johnston case (see #2 above) also relied on a Florida appellate court decision, Green v. JPMorgan Chase Bank, NA.[24]  In the Green case, the copy of the note attached to the bank’s original complaint did not contain an endorsement. The bank later filed a note with an undated endorsement and summary judgment was granted for the bank. The appellate court reversed, noting that although the filing of the original blank-indorsed note showed the Bank’s possession of the note, that filing occurred more than a year after the Bank filed suit.  This late filing failed to refute the homeowner’s affirmative defense of lack of standing.




In BAC Funding Consortium, Inc. v. Jean-Jacques,[25] a foreclosure was filed in December, 2007, that included a count for reestablishment of a lost note. Subsequently, U.S. Bank filed a motion for summary judgment and dismissed its count for reestablishment of the note, and filed an “original mortgage and note” with the court. Summary judgment was granted in favor of U.S. Bank.  Reversing, the appellate court concluded that summary judgment was improper because U.S. Bank never established its standing to foreclose, stating: 

Moreover, while U.S. Bank subsequently filed the original note, the note did not identify U.S. Bank as the lender or holder. U.S. Bank also did not attach an assignment or any other evidence to establish that it had purchased the note and mortgage. Further, it did not file any supporting affidavits or deposition testimony to establish that it owns and holds the note and mortgage. Accordingly, the documents before the trial court at the summary judgment hearing did not establish U.S. Bank’s standing to foreclose the note and mortgage, and thus, at this point, U.S. Bank was not entitled to summary judgment in its favor.[26]



In Verizzo v. Bank of New York,[27] the Florida Second District Court of Appeal reversed a Summary Judgment in a foreclosure case originally filed with a count to reestablish a lost note, but later produced what it alleged to be an original note, endorsed to JP Morgan Chase Bank, as Trustee.  The trial court entered summary judgment in favor of Bank of New York, but the appellate court reversed, noting that because the note was assigned to JPMorgan Chase, not to the Bank of New York, there was a genuine issue of material fact as to whether The Bank of New York has standing to foreclose the mortgage.



Circuit Judge J. Michael Traynor in St. Johns County, Florida, was one of the first judges to challenge the authenticity of a suddenly appearing allonge. In M & T Bank v. Lisa D. Smith,[28] Judge Traynor granted the homeowner’s Motion to Dismiss the Second Amended Complaint and scheduled a special evidentiary hearing to determine the authenticity of documents filed by M & T Bank, stating:

Additionally, the Court is concerned with the authenticity of the documents filed. Plaintiff is asking the Court to ignore the documents filed in the first two Complaints, and to rule solely on the most recent Complaint. However, all three of these documents appear to be inconsistent with one another and have changed as needed to benefit the Plaintiff.  For instance, the blank Allonge as filed on both February 10, 2009, and September 22, 2009, remarkably turned into a stamped Allonge on March 3, 2010, with Wells Fargo’s information in the previously blank area.  This transformation is most interesting, given that it was argued that the Office of the Comptroller of the Currency closed the First National Bank of Nevada on July 25, 2008, and the stamp did not appear in either of the February or September 2009 filings. Similarly, Assignments appeared and vanished as needed, and the Allonge changed to fit the Plaintiff’s particular purpose at that moment.  Accordingly, an evidentiary hearing will be held to determine the authenticity of the Allonge and the appearance of the Assignment.



Gee v. U.S. Bank, N.A.[29] began with a complaint to reestablish a lost note and mortgage. The original lender was Advent Mortgage, LLC, but U.S. Bank claimed that Advent assigned the mortgage to Option One Mortgage Company who in turn assigned the mortgage to U.S. Bank. Gee denied the bank’s allegations.  U.S. Bank subsequently filed a Motion for Summary Judgment. The motion was silent regarding the reestablishment claim, and asserted instead that the original promissory note would be filed “on or before the hearing.” At the hearing, however, the court considered a lost document affidavit and granted summary judgment on the reestablishment claim and foreclosed the reestablished mortgage. The appellate court reversed, finding genuine issues of material fact.



In Feltus v. U.S. Bank,[30]the bank filed a Lost Note count, but attached a copy of the note to the complaint.  The copy showed the lender to be Countrywide Bank, N.A. There were no endorsements. After the homeowner filed a Motion To Dismiss for lack of standing, U.S. Bank filed another copy of the note as a supplemental exhibit to its complaint. This copy included two endorsements, a special endorsement by Countrywide Bank, N.A. to Countrywide Home Loans, Inc., and a blank endorsement by Countrywide Home Loans, Inc. Approximately six months later, however, U.S. Bank filed a motion for summary judgment, again alleging that the note had been lost.  Approximately 10 days later, U.S. Bank filed a reply to Feltus’s affirmative defenses in which it asserted that it was now in possession of the original note and attached a copy of the note with the two endorsements. The trial court entered judgment for the bank.  Reversing, the appellate court found that the endorsed note that U.S. Bank claimed to have in its possession was not properly before the court at the summary judgment hearing because U.S. Bank never properly amended its complaint.  The documents properly before the court did not establish conclusively that U.S. Bank was entitled to foreclose the Feltus mortgage as a matter of law.



 McLean v. JPMorgan Chase Bank[31] also began with a Lost Note count. The copy of the mortgage attached to the complaint identified the lender as American Brokers Conduit. After McLean filed an Answer and Affirmative Defenses and two Motions to Dismiss, Chase filed the alleged original note and mortgage. The note included an undated special endorsement, “Pay To The Order of JPMorgan Chase Bank, N.A. as Trustee Without Recourse By: American Brokers Conduit.” Chase filed a Motion for Summary Judgment that was granted by the trial court. The appellate court vacated the summary judgment because Chase failed to submit any record evidence proving that it had the right to enforce the note on the date the complaint was filed.



 Gonzales v. Deutsche Bank National Trust Company[32] was filed with a missing note count.  Approximately 10 weeks later, Deutsche Bank dismissed that count and filed a “Notice of Filing Original Note and Mortgage.”  The note had an undated blank endorsement.  Because the endorsement was not dated, and the original endorsed note was not filed at the time the case was filed, summary judgment was reversed.



Zervas v. Wells Fargo Bank, N.A.,[33] the mortgage and note attached to the complaint showed the lender to be Fremont Investment and Loan. On April 1, 2010, approximately six months after the complaint was filed, Wells Fargo filed a lost note affidavit, alleging that the note was lost by its attorney sometime after the attorney received it on November 2, 2009. Then on July 26, 2010, seven days before a hearing on the bank’s motion for summary judgment, Wells Fargo filed the note as a supplemental exhibit to its complaint and summary judgment was granted for the bank. In reversing, the appellate court noted that the bank was required to prove the endorsement in blank was effectuated before the lawsuit was filed.



Cutler v. U.S. Bank[34] was also filed with a Lost Note count.  The homeowners challenged U.S. Bank’s standing. Approximately five months later, U.S. Bank moved for summary judgment, attaching what was represented to be the original note, with an attached allonge, signed in blank and undated.  The trial court granted the bank’s summary judgment motion.  The appellate court reversed, finding that a genuine issue of material fact existed as to whether U.S. Bank was the proper holder of the note at the time it filed the foreclosure action.




In Bank of New York v. Teague,[35] summary judgment was granted for the homeowners and the case was dismissed without prejudice where the plaintiff did not have the original note when it filed the complaint and the note later produced by the bank had an endorsement to a different company.



Vidal v. Liquidation Properties[36] also involved a complaint filed with a Lost Note count. At summary judgment, Liquidation filed the original note and an undated allonge to the note endorsed in blank.  Liquidation did not file an affidavit demonstrating that the note was transferred prior to the filing of the complaint. Liquidation also filed an assignment of mortgage reflecting transfer of only the mortgage, not the note. Although the Assignment of Mortgage was sworn to on February 6, 2009, it included the statement:  “ASSIGNMENT EFFECTIVE AS OF 01/15/2009.”   The appellate court found that two inferences could be drawn from the effective date language. One could infer that ownership of the note and mortgage were equitably transferred to Liquidation on January 15, 2009, but one could also infer that the parties to the transfer were attempting to backdate an event to their benefit.Because the language yields two possible inferences, proof was needed as to the meaning of the language, and a disputed fact existed, making summary judgment inappropriate.  In a footnote, the appellate court added: “Allowing assignments to be retroactively effective would be inimical to the requirements of pre-suit ownership for standing in foreclosure cases.”  This is one of the few cases to address the fact that many of the mortgage assignments filed in foreclosure cases attempt to make the assignments effective prior to their creation.



 In Wells Fargo Bank v. Bohatka,[37] the trial court dismissed Wells Fargo’s complaint with prejudice.  On appeal, the dismissal with prejudice was reversed, with the appellate court stating that dismissal without prejudice was appropriate.  This was a case where the note and the mortgage identified Option One as the lender.  The note contained no endorsement. At a hearing on the Bohatka’s Motion to Dismiss, the bank produced a photocopy of an allonge to the note.  The Court examined the original note in the court file, made a finding that the allonge had never been affixed to the note, and dismissed with prejudice, and filed a formal complaint with the Attorney General.



In Focht v. Wells Fargo Bank,[38] Wells Fargo, as trustee, filed a foreclosure complaint with a Lost Note count in January, 2008.  Six months later, Wells Fargo produced and filed what was represented to be the original note, endorsed in blank, and a mortgage assignment dated September, 2008. The trial court granted Wells Fargo’s motion for summary judgment.  The appellate court found that Wells Fargo’s submission of a post filing assignment did not establish that it had standing when it filed the lawsuit and that nothing else in the record established that Wells Fargo possessed the note when it filed the lawsuit. 



In Zimmerman v. JPMorgan Chase Bank,[39] Chase attached a copy of a promissory note listing Washington Mutual Bank FA as the lender to its complaint.  That copy did not include any endorsements.  Later, again in support of summary judgment, Chase filed what was purported to be the original note, but this version included 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 complaint”, the lower court’s judgment in favor of the lender was reversed.



One of the most thorough examinations of a suddenly appearing allonge came in the bankruptcy decision, In Re Canellas,[40] where the court painstakingly explained the insufficiencies of the documents presented by U.S. Bank that resulted in a denial of the bank’s motion for relief from stay:

The Affidavit executed by Movant’s loan servicer makes no mention of the location of the original Note or who has possession of it. Movant proffered no business records or testimony tracing ownership of the Note and establishing Movant is the present holder of
 the Note.

The veracity of the Allonge and Assignment is questionable. The dates contained in the Allonge are chronologically impossible. The Allonge is dated August 1, 2006, but references a trust that came into existence on October 31, 2006. The signature of Jennifer Henninger is undated and not notarized. The Allonge was not referenced in or filed with Movant’s Motion in October 2009, but was presented three months later as an attachment to its post-hearing brief.

The Assignment was executed and recorded post-petition approximately two weeks prior to Movant’s filing of the Motion for Relief. It was prepared by Jennifer Henninger, who executed the Allonge, and was recorded by the law firm that is representing Movant in this proceeding. Jack Jacob’s execution of the Assignment was notarized by Jennifer Henninger and witnessed by Louis Zaffino, the affiant of Movant’s Affidavit. It appears the Allonge and the Assignment were created post-petition for the purpose of the relief from stay proceeding. Movant did not establish Jennifer Henninger and Jack Jacob had authority to execute the Allonge and Assignment.[41]



 In June, 2010, a New Jersey bankruptcy court decided In Re Kemp,[42] a case that received attention in the national press and revealed the scope of the mortgage loan documentation problems. In Kemp, the debtors sought to expunge the proof of claim filed on behalf of BONY by Countrywide Home Loans, Inc. as servicer. The debtor argued that the note was never properly endorsed to the transferee and was never placed in the transferee’s possession. Under the New Jersey Uniform Commercial Code, the note, as a negotiable instrument, would not have been enforceable under those circumstances.

The trust involved in the Kemp case was CWABS Series 2006-8.  The Court examined the PSA and focused on the endorsement provision PSA § 2.01(a) at 52 that expressly provided that in connection with the transfer of each loan, the depositor was to deliver “the original Mortgage Note, endorsed by manual or facsimile signature in blank in the following form: ‘Pay to the order of ____________ without recourse’ with all intervening endorsements that show a complete chain of endorsement from the originator to the person endorsing the Mortgage Note.” PSA § 2.01(g)(i) at 56.  The Court found that, “most significantly,” the note in question was never endorsed in blank or delivered to BONY as required by the PSA.

In Kemp, BONY originally filed a note with no endorsement and an unsigned allonge with its proof of claim. The unsigned allonge was specially endorsed in favor of “America’s Wholesale Lender”, directing that the debtor “Pay to the Order of Countrywide Home Loans, Inc., d/b/a America’s Wholesale Lender.”

At the Kemp trial, Countrywide produced a new undated allonge with an endorsement stating “Pay to the Order of Bank of New York, as Trustee for the Certificateholders CWABS, Inc., Asset-backed Certificates, Series 6006-8.”The new allonge was signed by a vice president of Countrywide Home Loans, Inc., in the Bankruptcy Risk Litigation Management Department. Linda DeMartini, a supervisor and operational team leader for the Litigation Management Department for BAC Home Loans Servicing testified that the new allonge was prepared in anticipation of the litigation, and that it was signed several weeks before the trial.

As to the location of the note, Ms. DeMartini testified that to her knowledge, the original note never left the possession of Countrywide, and that the original note appears to have been transferred to Countrywide’s foreclosure unit, as evidenced by internal FedEx tracking numbers. She also confirmed that the new allonge had not been attached or otherwise affixed to the note. She testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents. The testimony that the notes were never endorsed and delivered to the trusts was a bombshell disclosure because every trust required endorsement of the notes, and delivery to the trustee or custodian.  A process was described in the PSAs where the document custodian would accept the mortgage files containing these documents, review the files to make sure each was complete, and then notify the originators of any missing documents, so that the originators could provide the missing documents or substitute a qualified loan for any loan with the missing paperwork.  The DeMartini testimony supported a conclusion that none of these steps were followed, in violation of the representations and warranties in the PSAs.

The Kemp Court disallowed Countrywide’s claim, finding that it was unenforceable under New Jersey law on two grounds. First, under New Jersey’s UCC provisions, the fact that the purported owner of the note, BONY, never had possession of the note was fatal to its enforcement. Second, the fact that the note was not properly endorsed to the new owner also defeated its enforceability. The Court also commented on the conflicting versions of the note possession, noting:

In a bizarre twist…Countrywide produced a copy of a “Lost Note Certification,” dated February 1, 2007, which indicated that the original note had been delivered to the lender on the origination date and thereafter “misplaced, lost or destroyed, and after a thorough and diligent search, no one has been able to locate the original Note.” The defendant asserted for the first time that the “whereabouts of the Note could not be determined” at the time that the proof of claim was filed. Def. Suppl. Subm. at 6. As a result, Countrywide claimed that it was unable to affix the allonge to the note until after the original note had been rediscovered. At the next hearing on September 24, 2009, counsel was not able to explain the inconsistencies between the lost note certification, Ms. DeMartini’s testimony, and the “rediscovery” of the note, and asked that the lost note certification be disregarded. T13-15 to 16 (9/24/2009).[43]

The Kemp case, and the DeMartini testimony in particular, were the subject of articles in the New York Times,[44] Fortune,[45] Daily Finance,[46] Naked Capitalism,[47] American Banker[48]and Firedoglake.[49] In an article for Fortune, Abigail Field investigated whether, as DeMartini testified, the notes lacked the proper endorsements.  Field examined 130 foreclosures filed in two New York counties between 2006 and 2010 where the Bank of New York was foreclosing on behalf of a Countrywide mortgage-backed trust. In 104 of those cases, where the loan was originally made by Countrywide, none of the 104 Countrywide loans were endorsed by Countrywide. Two-thirds of the 26 loans made by other banks also lacked endorsements.

In a similar study conducted in June, 2014, The Housing Justice Foundation  reviewed filings by Bank of New York as Trustee for a mortgage-backed trust in bankruptcy cases ending in a standard discharge in three different jurisdictions, the Middle District of Florida, Massachusetts and South Carolina. In the cases where a note was submitted, the note was unendorsed in 78.899% of the cases filed in 2008 and 2009.

The issue of missing endorsements – and possibly of “litigation specialists” wrongfully adding missing endorsements was not just a Countrywide Mortgage problem – nor was it limited to Countrywide trusts – the CWABS, CWALT and CWMBS trusts that used Bank of New York as trustee.  Deutsche Bank, HSBC Bank and U.S. Bank also regularly filed unendorsed notes in bankruptcy cases.


On March 12, 2014, a story by Catherine Curan in the New York Post,[50] reported that allegations in a bankruptcy case in the Southern District of New York involved a 150-page Wells Fargo Foreclosure Attorney Procedures Manual created November 9, 2011 and updated February 24, 2012, which, according to the homeowner/debtor’s attorney, Linda Tirelli, was a detailed procedure to be followed when mortgage notes lacked endorsements.  The process involved the attorney notifying the Wells Fargo “Default Docs Team” of exactly “what entities the attorney needs the note endorsement to reflect.”  This process raises the question of why Wells Fargo employees were adding any endorsement other than a Wells Fargo endorsement to any note.  Even in cases where Wells Fargo should have been the endorser, in the case of mortgage-backed trusts, the endorsement would have been added six to sight years after the trust closing date.  The language, however, regarding “what entities” certainly indicates that Wells Fargo employees were adding endorsements from lenders other than Wells Fargo.



Unendorsed notes were presented three times to the bankruptcy court in In Re Doble,[51] a 2011 case from the Southern District of California, and finally replaced with an endorsed copy of the note.  Bankruptcy Judge Margaret M. Mann found this especially troubling, noting:

 The most disconcerting misrepresentation to the Court was Defendants’ submission of multiple “true and correct” copies of the Note under penalty of perjury without any endorsement from Plaza. Whether the Note was endorsed is central to the merits of this case. When Defendants finally submitted an endorsed copy of the Note on November 8, 2010, they attempted to pass off the first three unendorsed copies of the Note as “illegible.” The first three copies of the Note were fully readable, so the phantom endorsement page was not a problem with legibility. The timing of this tardily produced endorsement, produced after several requests, suggests it was added [*19] only in response to the litigation. To add to the Court’s incredulity, Defendants have never answered the Court’s specific questions as to when and under what circumstances this newly proffered endorsement was executed. For the purpose of its analysis on the merits, the Court finds that the endorsement was not made until it was presented to the Court on November 8, 2010.[52]



Bankruptcy Judge Laura S. Taylor does not hide her frustration with the evidence presented by OneWest in In Re Jessie M. Arizmendi,[53] this 2011 case from the Southern District of California:

 “…there are key assumptions that the Court must make in order for this set of facts to withstand scrutiny. And they are that OneWest, in fact, holds the Endorsed Note and held the Endorsed Note at all appropriate points in time. Frankly, the Court is not willing to make such assumptions at this time. OneWest attached the Unendorsed Note to both its Proof of Claim and the Declaration. The Declaration stated under penalty of perjury, that the Unendorsed Note was a true and accurate copy of the Note held by OneWest. The Proof of Claim implicitly stated the same and OneWest, of course, is obligated to provide only accurate information in connection with its Proof of Claim. The problem is that the Unendorsed Note does not bear the endorsement or attach the allonge found on the Endorsed Note, a document produced only after trial and the close of evidence. One West, thus, leaves the Court with the quandary of guessing which promissory note OneWest holds, whether and when One West held the Endorsed Note, and what the explanation is for the failure to provide the Endorsed Note prior to the close of evidence.

A further evidentiary anomaly arises on account of the Assignment; MERS executed this document as a nominee for the Original Lender. But the allonge to the Endorsed Note makes clear that the Original Lender assigned its interests in the Note more than three years prior to execution of the Assignment. And rights under the Trust Deed follow the Note. Polhemas v. Trainer, 30 Cal. 686, 688 (1866). Thus, MERS’ purported assignment of the Trust Deed and the related note as nominee for the Original Lender and without a reference to either IndyMac Bank, FSB or Freddie Mac appears designed to disguise rather than to illuminate the facts.

And finally, even if OneWest’s second post-trial discussion of standing and submission of evidence were accurate, one thing remains clear: OneWest failed to tell the true and complete story in the OneWest Declaration and in the Claim.

The Court is concerned, as a result, that OneWest does not hold the Endorsed Note. But, perhaps more significantly, the Court is concerned that OneWest has determined that business expediency and cost containment are more important than complete candor with the courts. On these points, Ms. Arizmendi has a right to be heard, and the Court has a right to explanation.

Further, this is not the first time that OneWest has provided less than complete information in the Southern District of California.[54]



Other bankruptcy decisions that have focused on whether movant banks have sufficiently established themselves as the holders of the notes include several cases involving suddenly appearing endorsements. In In Re Weisband,[55] an allonge with a special endorsement was presented at an evidentiary hearing, but the allonge had not been included when GMAC filed its proof of claim, as the Court noted:

 Under Arizona law, a holder is defined as “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” A.R.S. § 47-1201(B)(21)(a).[3] GMAC has failed to demonstrate that it is the holder of the Note because, while it was in possession of the Note at the evidentiary hearing, it failed to demonstrate that the Note is properly payable to GMAC. A special endorsement to GMAC was admitted into evidence with the Note. However, for the Endorsement to constitute part of the Note, it must be on “a paper affixed to the instrument.” A.R.S. § 47-3204; see also In re Nash, 49 B.R. 254, 261 (Bankr.D.Ariz.1985). Here, the evidence did not demonstrate that the Endorsement was affixed to the Note. The Endorsement is on a separate sheet of paper; there was no evidence that it was stapled or otherwise attached to the rest of the Note. Furthermore, when GMAC filed its proof of claim, the Endorsement was not included, which is a further indication that the allonge containing the Endorsement was not affixed to the Note.[56]



In In Re Tarantola,[57] Deutsche Bank National Trust Company, as successor trustee, filed a motion for relief from stay, to which the debtor objected, claiming that Deutsche did not have standing. When filed, Deutsche Bank attached a copy of the note to the motion. The note contained no endorsements and showed no allonges attached. At trial, the servicer for Deutsche appeared and presented the original note, containing two endorsements, on an allonge. The testimony showed that the allonge was not attached to the original note (it was attached to a copy), and it was determined that the allonge was created subsequent to the filing of the motion, executed by a person whose limited power of attorney did not extend to execution of an allonge. As a result of the post-filing creation of the allonge to support the motion, the court denied Deutsche Bank’s motion, stating:

Yet again, the court is called upon to decide whether the purported holder of a note allegedly transferred into a securitized mortgage pool has standing to obtain relief from the automatic stay. Yet again, the movant has failed to demonstrate that it has standing. To make matters worse, the movant filed its motion without evidentiary support of its claim, attempted to create such evidentiary support after the fact, and only disclosed its “real” evidence on the day of the final evidentiary hearing.  The relief will be denied.[58]



Also in 2014, an Ohio appellate court also dealt with the issue of conflicting endorsements in Deutsche Bank National Trust Company v. Holden,[59] where the Court noted:

Thus, Deutsche Bank has filed two different copies of the same note – one with and one without an endorsement. Both copies purport to be true and accurate copies of the original note. Ms. Theodoro’s affidavit fails to explain why the copy of the note attached to her affidavit differs from the one attached to her complaint when, from her averments, the note, while in Chase’s possession, had always contained a blank indorsement from Novastar to Deutsche Bank…Due to the inconsistencies between the copies of the note and the lack of an explanation based on personal knowledge as to how Deutsche Bank came to offer two different copies of the note into the record, this Court concludes that there is a genuine issue of material fact as to whether Deutsche Bank was the holder of the note at the time the complaint was filed. Accordingly, the trial court erred in granting Deutsche Bank’s motion for summary judgment on its foreclosure complaint.[60]

The Court in Holden noted two similar cases where Summary Judgments were also reversed: U.S. Bank, N.A. v.  McGinn,[61] and Fannie Mae v. Trahey.[62]



The McGinn case involved a note changing from two endorsements at filing to a note with three endorsements at Summary Judgment.  In this case, the third endorsement was to U.S. Bank, the bank-trustee that had filed the foreclosure action. The original filing had two endorsements: an endorsement from Intervale Mortgage Corporation, the original lender, to Decision One Mortgage Company and a blank endorsement from Decision One Mortgage.  By Summary Judgment, the blank endorsement had been signed over to Residual Funding Corporation, who then executed the third endorsement to U.S. Bank.  In addition to the third endorsement, US. Bank attached an Assignment of Mortgage executed on June 12, 2008, twelve days after the complaint was filed.  U.S. Bank also attached an affidavit from Peter Knapp who was identified as a senior litigation analyst for GMAC Mortgage, LLC to explain the inconsistency of the notes.  Knapp’s affidavit stated, in pertinent part:

 Based on the circumstances of this case and my personal knowledge of how foreclosure counsel obtains copies of notes, earlier versions of the notes, not identical to the actual Note held in the custodial vault, are in GMACM’s computer system and are sometime[s] printed out and inadvertently attached to foreclosure complaints.  I believe that is what happened with the copy of the Note which was attached to the Complaint in this case, and is the reason the Note attached to the Complaint was not a copy of the actual original Note.[63]

The Appellate Court rejected this explanation, stating:

 U.S. Bank argues that Knapp’s second affidavit resolves any issue concerning the difference in the original note and the copy that was attached to the complaint. However, the language of that affidavit is indecisive. Rather than providing a definitive explanation for the additional endorsements on the original note, Knapp states that he believes that the wrong copy of the complaint was inadvertently attached to the foreclosure complaint. However, Civ.R. 56(E) requires personal knowledge. Indeed, believing something to be true is different that knowing something is true.

While it may be true that U.S. Bank met its initial burden of demonstrating that no genuine issue of material fact existed, appellants responded by showing that a genuine issue of material fact did exist by pointing to the inconsistency in the two notes. The difference in the two notes calls into question whether U.S. Bank actually possessed the original note prior to filing the complaint. If U.S. Bank did not, it was not a holder and, thus, lacked standing to bring the foreclosure action in the first place. Construing the evidence in a light most favorable to appellants, we conclude that the trial court erred when it granted U.S. Bank’s motion for summary judgment. Accordingly, appellants’ assignment of error is well-taken.[64]



The Trahey case involved a note executed in favor of Sirva Mortgage, Inc. There was a MERS Assignment to Fannie Mae in May, 2011.  In June, 2011, Fannie Maw filed a foreclosure action against the Traheys.  Fannie Mae attached a note with an undated endorsed in blank by Sirva Mortgage.

In September 2011, Fannie Mae filed an amended complaint “to attach the fully negotiated note with all [i]ndorsements.” The promissory note attached showed Sirva had indorsed the note to CitiMortgage, Inc. and that CitiMortgage, Inc. had indorsed the note in blank. Unlike the note attached to the original complaint, this copy of the note did not include an endorsement from Sirva in blank. The new endorsements were also undated.

Fannie Mae filed a Motion for Summary Judgment that which was granted by the trial court.  The appellate court reversed, noting the problem with the endorsements:

 Here, Fannie Mae filed two copies of the promissory note, each containing different indorsements. The first note, attached to the original complaint, was indorsed by Sirva to blank. Therefore, Fannie Mae could have established that it was the real party in interest by proving that it had possession of the note. See R.C. 1303.25(B). However, a second copy of the promissory note, attached to the amended complaint, reflects that Sirva indorsed the note to CitiMortgage, and CitiMortgage indorsed the note to blank. Neither copy indicates when the various indorsements were made.

The inconsistencies between the indorsements contained in the two copies of the promissory notes raises a genuine issue of material fact. In reviewing the record, we cannot determine what the status of the note was at the time the complaint was filed. Because there is a genuine issue of material fact as to whether Fannie Mae was a holder of the promissory note at the time the complaint was filed, the court erred in granting Fannie Mae’s motion for summary judgment. Accordingly, Trahey’s first assignment of error is sustained.[65]



In Deutsche Bank National Trust Company v. Heller,[66] Deutsche Bank submitted a copy of a note with an undated endorsement to Deutsche Bank to support its motion for Summary Judgment, but the copy of the note annexed to the plaintiff’s original complaint contained no such endorsement.  The appellate court found that Summary judgment was inappropriate because it was not clear from the undated endorsement whether the endorsement was effectuated prior to the commencement of the action.



In Deutsche Bank National Trust Company v. Hossain,[67] summary judgment for Deutsche Bank was denied where Deutsche Bank originally filed an unendorsed note, then filed a note with an allonge endorsing the note in blank in support of Summary Judgment, with an explanation by the bank’s lawyer that the endorsement page had been inadvertently omitted.  The court found this explanation to be insufficient.



An undated allonge similarly appeared mid-litigation in U.S. Bank Natl. Assn. v. De Los Rios,[68] where the Court denied Summary Judgment, noting, in part, “Furthermore, the plaintiff has not provided an explanation as to why a different version of the note without the without the allonge was produced by it.”



Deutsche Bank Natl. Trust Co. v. McRae,[69] also involved an unendorsed note that was later replaced with a note with an endorsement in blank.  The court found this suspect and insufficient, stating:

By way of the September 8, 2009 Order, this court previously determined that Plaintiff lacked standing, because it failed “to submit evidence of proper assignment/delivery of mortgage and note.” Thereafter, Plaintiff submitted a second copy of the Note, which for the first time contained an endorsement by First Franklin, a Division of National City Bank of Indiana, to First Franklin Financial Corporation, and an endorsement in blank by First Franklin Financial Corporation. The endorsement in blank, however, is undated. In stark contrast, the copy of the Note attached to the complaint bears no such endorsements. Obviously, the endorsements were made in response to the September 8, 2009 Order, which post-date the commencement of this case (in January 2009), and are ineffective.



The endorsements in Deutsche Bank National Trust Company v. Barnett,[70] were also found to be insufficient to confer standing, and the inconsistencies raised an issue of fact as to the plaintiff’s standing to commence the action where the plaintiff submitted copies of two different versions of an undated allonge.



An allonge also appeared mid-litigation in a Kentucky case, Morgan v. HSBC Bank USA,[71] where initially, HSBC produced a note between Ownit and Morgan, and subsequently, at the summary judgment stage, produced another note with an allonge purporting to assign the note to HSBC. In its order granting summary judgment, the trial court held that the endorsement in the note allonge by Richard Williams, as president of Litton Loan Servicing LP and attorney-in- act for Ownit, was sufficient proof that HSBC was a holder of the note.  The appellate court reversed and stated that it found it “troubling” that when HSBC initially filed suit, a copy of this note was not attached and that later, this undated note allonge purporting to indorse the note to HSBC appeared in the record.



  In every foreclosure, the two key threshold questions are:

1. Was the note endorsed in blank or by special endorsement to the party seeking to foreclose?

2.  Was the note endorsed and delivered before the foreclosure complaint  was filed?

The issue of note endorsements is critical in foreclosures because most foreclosures involve notes and mortgages that have been transferred several times.  Many courts have found that without any endorsements, only the original lender identified on the note has standing to foreclose.[72] Courts in almost every jurisdiction were slow in recognizing that unendorsed notes do not establish a third-party’s right to foreclose, but by 2014, most courts ask the key question of whether the note was properly endorsed.  As the Court explained in Servedio v. US. Bank,[73]

 A plaintiff must tender the original promissory note to the trial court or seek to reestablish the lost note under section 673.3091, Florida Statutes… Moreover, if the note does not name the plaintiff as the payee, the note must bear a special indorsement in favor of the plaintiff or a blank indorsement. Alternatively, the plaintiff may submit evidence of an assignment from the payee to the plaintiff or an affidavit of ownership to prove its status as the holder of the note.[74]

An unendorsed note is insufficient by itself to establish standing to foreclose in most jurisdictions in 2014. Because the end-result when a bank files a note missing an endorsement, or with a special endorsement to another party, as in the Romero case (number one above), is often dismissal of the bank’s case, there is considerable incentive to add an endorsement, particularly because it is very difficult to challenge an endorsed original note filed at the inception of the case.  Where the endorsement suddenly appears, as in the cases discussed above, the defending homeowner is often successful in challenging the bank’s standing to foreclose. Where the loan documents look correct, however, the bank most often prevails – even if the notes and/or endorsements were created the week before trial by a bank “litigation specialist team” as described in Kemp.



 Many of the cases involving notes, endorsements and foreclosures have arisen because of a common practice of banks to begin foreclosure proceedings, in both judicial and non-judicial states, before the actual, original note has been delivered to the law firm representing the bank. The banks either allege that the original note has been lost, or they attach a copy of the note as it appeared at closing, or both.

The Pooling and Servicing Agreements (“PSA”) for almost every trust specifically address the documents that the trustees and servicers are supposed to use in foreclosures.  According to the trust documents, when there is a foreclosure, the servicer is supposed to send a Request for Release of Mortgage Documents form to the document custodian.  Within three business days, the custodian us supposed to send the original mortgage file, including the properly endorsed note, by overnight mail, to the servicer to be used in the foreclosure proceeding. These requirements are usually set forth in a provision of the PSA titled “Trustee to Cooperate; Release of Mortgage Files.”  In Soundview Home Loan Trust 2006-OPT2, for example, this provision is found in section 3.17(b) which states, in pertinent part:

From time to time and as appropriate for the servicing or foreclosure of any Mortgage Loan… the Custodian, pursuant to the Custodial Agreement, shall, upon any request made by or on behalf of the Servicer and delivery to the Custodian of two executed copies of a written Request for Release… release the related Mortgage File to the Servicer or its designee within three Business Days, which, shall be sent by overnight mail, at the expense of the Servicer or the related Mortgagor, and the Trustee (or the Custodian on behalf of the Trustee) shall, at the written direction of the Servicer, execute such documents provided to it by the Servicer as shall be necessary to the prosecution of any such proceedings.

The term “Mortgage File” is defined in the definitions section of the PSA as “The mortgage documents listed in Section 2.01 pertaining to a particular Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to this Agreement.”

Section 2.01 lists six documents that are to be contained in each mortgage file for each loan in the pool: 1) the original Mortgage Note endorsed either (A) in blank or (B) in the following form: “Pay to the Order of Deutsche Bank National Trust Company, without recourse;” 2) the original mortgage with evidence of recording thereon; 3) unless the mortgage is a MERS loan, an original Assignment, in form and substance acceptable for recording, assigned either (A) in blank or (B) to “Deutsche Bank National Trust Company, as trustee, without recourse;” 4) an original of any intervening assignment of Mortgage, showing a complete chain of assignments or to MERS if the mortgage loan is a MERS loan; 5) the original or a certified copy of the lender’s title insurance policy; and 6) the original or copies of each assumption, modification, written assurance or substitution agreement, if any.

In many cases, when the original note was eventually filed, the note differed from the note that was filed at the commencement of the foreclosure action. This failure to use the original endorsed note is a breach of the PSA provisions set forth above.  This short-cut used in a rush to foreclose has resulted in significant increased expense for the foreclosing banks and for the homeowner litigants. Nevertheless, perhaps because law firms received the bulk of their fees when the complaint was commenced, the common practice was a “shoot first – ask questions later” approach in foreclosure litigation.



The Florida Bankers Association confirmed the routine destruction of promissory notes in Comments submitted by the Association to the Florida Supreme Court when the Court was considering an amendment to the Florida Rules of Civil Procedure to require verification of residential mortgage foreclosure complaints, stating:

 It is a reality of commerce that virtually all paper documents related to a note and mortgage are converted to electronic files almost immediately after the loan is closed. Individual loans, as electronic data, are compiled into portfolios which are transferred to the secondary market, frequently as mortgage-backed securities. The records of ownership and payment are maintained by a servicing agent in an electronic database.

The reason “many firms file lost note counts as a standard alternative pleading in the complaint” is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file. See State Street Bank and Trust Company v. Lord, 851 So. 2d 790 (Fla. 4th DCA 2003). Electronic storage is almost universally acknowledged as safer, more efficient and less expensive than maintaining the originals in hard copy, which bears the concomitant costs of physical indexing, archiving and maintaining security. It is a standard in the industry and becoming the benchmark of modern efficiency across the spectrum of commerce—including the court system.

There is also some evidence that original loan documents could be sitting in warehouses after the lenders filed for bankruptcy and closed their offices.  In the bankruptcy case of Mortgage Lenders Network USA, the U.S. Attorney in Delaware formally objected to a trustee’s request to destroy 18,000 boxes of records to eliminate the storage costs.  Similarly, in the American Home Mortgage bankruptcy case, thousands of boxes of documents were stored or destroyed. The New Century Mortgage Liquidating Trust Trustee in February, 2013 also sought permission to destroy thousands of boxes of loan documents.



Lawsuits regarding the missing loan documents and quality of loans were filed by investor groups, including Massachusetts Mutual Life Insurance Company,[75] Dexia SA/NV, Dexia Holdings, Dexia Asset Management and Dexia Credit Local, SA,[76] the Oklahoma Police Pension and Retirement System,[77] MASTR Asset-Backed Securities Trust 2006-HE3,[78] HSH Nordbank AG,[79] Phoenix Light SF Limited, [80] John Hancock Life Insurance Company,[81] Blackrock Allocation Target Shares: Series S Portfolio,[82] Blackrock Balanced Capital Portfolio (FI),[83] BlackRock Allocation Target Shares: Series S Portfolio,[84] BlackRock Allocation Target Shares: Series S Portfolio,[85] BlackRock Balanced Capital Portfolio (FI),[86] and BlackRock Core Active Libor Fund B.[87]

These lawsuits generally claim that representations and omissions regarding the transfer of good title to the mortgage loans were false and misleading.  The discovery in these cases will certainly involve testimony by the employees who were responsible for receiving and safeguarding the loan documents for the trusts, the employees who found the tens of thousands of lost notes and the litigation “specialists” who added the missing endorsements.

Before investors can regain the confidence to again make significant investments in residential mortgage-backed securities, issues regarding missing notes, endorsements, and possible fabrication of loan documents need to be resolved, including:

 • Were defective loan documents, including unendorsed notes and mortgage assignments in unrecordable form delivered to thousands of trusts?

 • Were the actual promissory notes never delivered, or delivered and destroyed, or delivered, but in non-negotiable, unendorsed form?

 • Did the trustees fail to examine the loan documents and reject any loan with defective documentation?

 • How often did “litigation specialists” recreate the missing notes and/or add the missing endorsements?

 • How do we compensate past investors and protect future investors from these crimes and failures?


[1] In Re Jessie M. Arizmendi, 09-19263-PB13, United States Bankruptcy Court, S.D. of California.

[2] Many courts and authors prefer the spelling “indorsements.”

[3] Bank of New York as Trustee for Popular Financial Services Mortgage Pass-Through Certificate Series #2006 v. Joseph A. Romero, et al., 2014 N.M. Lexis 81.

[4] The Court also held that a borrower’s ability to repay a home mortgage is one of the “borrower’s circumstances” that lenders and courts must consider in determining compliance with the New Mexico Home Loan Protection Act (“HLPA”) and that the HLPA is not preempted by federal law.

[5] Romero, op. cit., ¶ 23.

[6] Id. ¶ 22.

[7] Id. ¶ 26.

[8] Id. ¶ 27.

[9] Id. ¶ 6.

[10] New Mexico Court of Appeals, 31,503 (N.M. Ct. App. 2014).

[11] Id. at ¶ 13.

[12] 2011 VT 81, 190 Vt. 210; 27 A.3d 1087.

[13] Id. at ¶14.

[14] 2012 OK 3, 270 P.3d 151.

[15] Id. at ¶11.

[16] 2012 OK 23, 276 P.3d 176 (2012).

[17] 2012 OK 14, 273 P. 3d 43 (2012).

[18]  2012 OK 15, 273 P. 3d 50 (2012).

[19]  2012 OK 22, 278 P. 3d 586 (2012).

[20]  2012 OK 25, 275 P. 3d 144 (2012).

[21]  2012 OK 26, 275 P. 3d 147 (2012).

[22]  2012 OK 43, 280 P. 3d 936 (2012).

[23]  2012 OK 54, 280 P. 3d 328 (2012).

[24] 109 So. 3d 1285 (Fla 5th DCA 2013).

[25] 28 So. 3d 936 (Fla. 2d DCA 2010).

[26] Id.

[27] 28 So. 3d 976 (Fla. 2nd  DCA 2010).

[28] Case No. CA0900418, St. Johns County, FL.

[29] 72 So. 3d 211 (Fla. 5th DCA 2011).

[30]  80 So. 3d 375 (Fla. 2d DCA 2012).

[31] 79 So. 3d 170 (Fla. 4th DCA 2012).

[32] 95 So. 3d 251 (Fla. 2d DCA 2012).

[33] 93 So. 3d 453 (Fla. 2d DCA 2012).

[34] 109 So. 3d 224 (Fla. 2d DCA 2012).

[35] Case No. 27-2009-CA-003121, Hernando County, FL, October 25, 2012.

[36] 104 So. 3d 1274 (Fla. 4th DCA 2013).

[37]  112 So. 3d 596 (Fla. 1st DCA 2013).

[38]  124 So. 3d 308 (Fla. 2d DCA 2013).

[39]  No. 4D12-2190 (Fla. 4th DCA 2012).

[40] Case No. 6:09-bk-12240-AB, (Bankr. M.D. Fla. 2009).

[41] Id. at 8-9.

[42] 440 B.R. 624 (Bankr. D.N.J. 010).

[43] Id, footnote 7.

[44] Gretchen Morgensen, “Flawed Paperwork Aggravates A Foreclosure Crisis,” New York Times, October 3, 2010.

[45] Abigail Field, “At Bank of America, more incomplete mortgage docs raise more questions,” Fortune, June 3, 2011.

[46] Abigail Field, “Who’s to Blame for the Mortgage Mess? Banks, Not Homeowners,” Daily Finance, January 30, 2011.

[47] Yves Smith, “Countrywide Admits To Not Conveying Notes to Mortgage Securitization Trusts,” Naked Capitalism, November 21, 2010.

[48] Kate Berry, “Foreclosure Mess Threatens To Hit Securitization Trustees,” American Banker, November 8, 2010.

[49] David Dayen, “Deposition: Countrywide Never Sent Mortgage Notes to Trust; Mortgage-Backed Securities in Question,” Firedoglake, November 21, 2010.

[50] Catherine Curan, “Wells Fargo Made Up on-demand foreclosure papers plan: court filing charges,” New York Post, March 12, 2014.

[51] 2011 WL 1465559 (Bankr. S.D.Cal. April 14, 2011).

[52]  Id. at 18-19.

[53] Supra.

[54] Arizmendi, Supra.

[55] 427 B.R. 13 (Bankr. D. Ariz. 2010).

[56] Id. at 18-19.

[57] 2010 WL 3022038, (D. AZ, July 9, 2010)(unreported decision).

[58]  Id. at ¶1.

[59] 2014-Ohio-1333.

[60] Id. at ¶10-11.

[61] 6th Dist. No. S-12-004, 2013-Ohio-8.

[62] 9th Dist. Lorain No. 12CA010209, 2013-Ohio-3071.

[63] McGinn, Supra at ¶23.

[64] Id. at ¶24-25.

[65] Trahey, Supra at ¶11-12.

[66]  100 AD 3d 68 – NY; Appellate Div. 2nd Dept. 2012.

[67]  2013 NY Slip Op 30096(U) – NY: Supreme Court 2013.

[68]  2014 NY Slip Op 30153 – NY: Supreme Court 2014.

[69]  2010 NY Slip Op 20020 – NY: Supreme Court, Alleghany, 2010.

[70] 88 AD3d 636, 931 NYS2d 630 [2d Dept. 2012].

[71]  2011 WL 3207776 (Court of Appeals of KY, 2011).

[72] See, e.g., Douglas J. Whaley, “Mortgage Foreclosures, Promissory Notes and the Uniform Commercial Code, 39 W. St. U. L. Rev. 313 (2012), describing “the Golden Rule of Mortgage Foreclosure” under the Uniform Commercial Code as prohibiting foreclosure unless the creditor “possess[es] the “properly-negotiated original promissory note.” See, also, Fed. Home Loan Mtge. Corp. v. Schwartzwald, 134 Ohio St.3d 1, 2012-Ohio-5017, 979 N.E.2d 1214, ¶28; Deutsche Bank National Trust Company v. Bodzianowski, Case No. 1:11-cv-01950 (N.D. ILL October 11, 2011) and Deutsche Bank v. Francis, 2011 NY Slip Op 50423(U), Index: 10441/09.

[73] 46 So. 3d 1105 (Fla. 4th DCA 2010).

[74] Id. at 2-3 (cites omitted).

[75] Massachusetts Mutual Life Insurance Company v. DB Structured Products, Inc., et al., Case No. 3:11-cv-30039, U.S. District Court, District of Massachusetts, filed February 16, 2011.

[76] Dexia SA/NV; Dexia Holdings, Inc.; Dexia Asset Management, LLC; Dexia Credit Local, SA v. Deutsche Bank AG, et al., Supreme Court of New York, County of New York, filed July 13, 2011.

[77] Oklahoma Police Pension & Retirement System v. U.S. Bank NA, Case No.  1:11-cv-08066, U.S. District Court, Southern District of New York, filed November 19, 2011.

[78] MASTR Asset-Backed Securities Trust 2006-HE3 by U.S. Bank, N.A. v. WMC Mortgage Corporation and Equifirst Corporation, Case 0:11-cv-02542-PAM-TNL, U.S. District Court, District of Minnesota, filed September 2, 2011.

[79] Index No. 652678/2011, Supreme Court of New York, County of New York, filed April 2, 2012.

[80] Lead Case No. 2-11-ml-02265-MRP-MAN, U.S. District Court, Central District of California.

[81] Case No. 1:2012cv03184, U.S. District Court, Southern District of New York, filed April 23, 2012.

[82] Blackrock Allocation Target Shares: Series S Portfolio v. U.S. Bank National Association, Index No. 651864/2014, Supreme Court of New York, County of New York, filed June 18, 2014.

[83] Blackrock Balanced Capital Portfolio (FI) v. Deutsche Bank National Trust Co. Index No. 651865/2014, Supreme Court of New York, County of New York, filed June 18, 2014.

[84] BlackRock Allocation Target Shares: Series S Portfolio v. Bank of New York Mellon, Index No. 651866/2014, Supreme Court of New York, County of New York, filed June 18, 2014.

[85] BlackRock Allocation Target Shares: Series S Portfolio v. Wells Fargo Bank N.A., Index No. 651867/2014, Supreme Court of New York, County of New York, filed June 18, 2014.

[86] BlackRock Balanced Capital Portfolio (FI) v. Citibank N.A., Index No. 651868/2014, Supreme Court of New York, County of New York, filed June 18, 2014.

[87] BlackRock Core Active Libor Fund B v. HSBC Bank USA, Index No. 651869/2014, Supreme Court of New York, County of New York, filed June 18, 2014.