harvey v. hsbc - april charney esq. appeal brief - psa

7/31/2019 HARVEY V. HSBC - April Charney Esq. Appeal Brief - PSA

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DISTRICT COURT OF APPEAL, OF FLORIDA,FIRST DISTRICT

First DCA Case No.: 1D11-4232

L.T. No.: 2006-CA-001265-XXXX-MA

MARILYN G. HARLEY, et al.

Appellant / Defendant,v.

HSBC BANK, USA, NATIONAL ASSOCIATION,As Trustee For Home Equity Loan Trust Series AE 2005-HE5

Appellee / Plaintiff._____________________________________/

APPEAL FROM THE FOURTH JUDICIAL CIRCUIT COURT IN AND FOR

JACKSONVILLE-DUVAL COUNTY, FLORIDA

AMENDED INITIAL BRIEF OF APPELLANT MARILYN G. HARLEY

APRIL CARRIE CHARNEY, ESQ.JACKSONVILLE AREA LEGAL AID, INC.

126 WEST ADAMS STREETJACKSONVILLE, FLORIDA 32202


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TABLE OF CONTENTS

PageTABLE OF CITATIONS ii

STATEMENT OF THE CASE 1

STATEMENT OF THE FACTS 5

QUESTIONS PRESENTED

1. Whether the trial court misapplied the law and committed reversible legalerror in granting judgment of foreclosure in favor of Appellee and on Appellant'scounterclaim?

2. Whether the Appellee trust had any legal right to foreclose the mortgage atthe commencement of this action?

3. Whether the federal Truth-in-Lending (TILA) disclosure statement thatAppellee delivered to Appellant constitutes a material mis-disclosure under TILAthat was unfair and deceptive and that violated the federal Truth-in-Lending Act by

disclosing a "comfort" fixed-rate annual percentage rate in the TILA disclosurestatement that overshadowed the adjustable interest rate information disclosed inthe HUD-1 disclosure statement that Appellee gave to Appellant for the adjustablerate mortgage loan involved in this foreclosure?

4. Whether Appellee violated the applicable material disclosure obligations ofthe federal Truth-in-Lending Act by failing to give Appellant a "CHARMS"

booklet at closing23

5. Whether the Appellee's December 19, 2005 notice of default and intent toaccelerate sent to Appellant failed to conform to the requirements of the mortgagecontract and Florida law?


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6. Whether the Appellee failed to comply with pre-foreclosure preventionnotice requirements imposed by the National Housing Act, 12 USC 1701x(c)5?

SUMMARY OF ARGUMENT 15

ARGUMENT 16

STANDARD OF REVIEW 16

CONCLUSION 37

CERTIFICATE OF SERVICE 38

SERVICE LIST 38

CERTIFICATE OF COMPLIANCE WITH FONT STANDARD33

TABLE OF CITATIONS

Cases

17In re Cummings, 184 N.Y.S. 404 (N.Y. App. Div. 1920)

BAC Funding Consortium , Inc. v. Jean-Jacques 1728 So. 3rd 936 (Fla. 2nd DCA 2010)

Bouskila v. M & I Bank 17

Case No. 1D10-2127 (Fla. 1st DCA 2011)

17In re Doble, No. 10-11296-MM13, 2011 WL 1465559 (Bankr. S.D. Cal. Apr. 14, 2011)

Calderon v. J.B. Nurseries, Inc. 17


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933 So. 2d 553 (Fla. 1st D.C.A. 2006)23,24

In re Celotex, 487 F.3d 1320 (11th Cir. 2007)

Carapezza v. Pate 17143 So.2d 346 (Fla. 3rd DCA 1962)

Crossland Sav. Bank FSB v. Constant 19489 U.S. at 113, 109 S.Ct. 948

DAngelo v. Fitzmaurice 16863 So. 2d 311, 314 (Fla. 2003)

F.A. Chastain Constr. v. Pratt, 146 So.2d 910 (Fla. 3d DCA 1962)

Firestone Tire & Rubber Co. v. Bruch 23489 U.S. 101, 112, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)

17

Gee v. U.S. Bank Natl Assn, No. 5D10-1687, 2011 WL 4645602 (Fla. 5th DCA Sept.30, 2011)

Gomez v. Am. Sav. & Loan Assn, 515 So.2d 301 (Fla. 4th DCA 1987)

Goncharuk v. HSBC Mortgage Serv., Inc., 62 So. 3d 680 (Fla. 2nd DCA 2011)

17

In re Dana, 465 N.Y.S.2d 102 (N.Y. Sup. Ct. 1982)

Jones v. First National Bank in Fort Lauderdale 17


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226 So.2d 834 (Fla. 4th DCA 1969)

Konsulian v. Busey Bank, N.A.

Case No. 2D10-2163 (Fla. 2nd DCA 2011)

Laing v. Gainey Builders, Inc., 17184 So.2d 897 (Fla. 1st DCA 1966)

LaSalle Natl Bank Assn v.Lamy 2012 Misc. 3d 1191A (2006)

Rashid v. Newberry Fed. Sav. & Loan Assn, 502 So.2d 1316 (Fla. 3d DCA 1987),

appeal after remand, 526 So.2d 772 (1988)

Rashid v. Newberry Federal Savings & Loan Assn, supra,

Maniscalco v. Hollywood Federal Savings &Loan Assn397 So.2d 453 (Fla. 4th DCA 1981)

17

In re Hayes, 393 B.R. 259 (Bankr. Mass. 2008)

Verizzo v. Bank of New York 1728 So. 3d 976 (Fla. 2nd DCA 2010)Your Constr. Ctr., Inc., v. Gross, 316 So.2d 596 (Fla. 4th DCA 1975)

In re Fidler, 210 B.R. 411 (D. Mass. 1997)

Statutes

Florida Statute 671.102 20

F.S. 671.102(3) 20,22


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Fla. Stat. Ann. 737.401 (1997)

12 USC 1701x

12 USC 1701x(c)(4)

12 USC 1701x(c)(5)

National Housing Act,12 USC 1701x(c)5

15 U.S.C.1601

15 U.S.C. 1635

15 U.S.C. 1640(a)

New York UCC 3-202(2) 20

Regulations

Reg. Z. 226.18(f); 52 Fed. Reg. 48665 (Dec. 24, 1987)

Rules and Other Citations

Restatement (Second) of Trusts 37 23

Restatement (Second) of Trusts 185 (1959)

Restatement (Second) of Trusts 186 (1959)

Restatement (Second) of Trusts 201 cmt. b (1959)

When Do Allonges Meet The 19Requirements of the New YorkNew York Law Journal, November 27, 2006


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http://www.abcny.org/pdf/report/LEGALDOCS-1.pdf

15

Trusts 201 cmt. b (1959NYA 1-102(3), now RA 1-302

http://www.abcny.org/pdf/report/LEGALDOCS-1.pdf 22

15 U.S.C. 1601, et. seq., Regulation Z, 12 C.F.R. Part 226.

note 48 of Section 226.23 of Regulation Z

National Housing Act 1612 USC 1701x(5)

Trusts 186 (1959)

Trusts 185 (1959)

Trusts 37
http://www.abcny.org/pdf/report/LEGALDOCS-1.pdfhttp://www.abcny.org/pdf/report/LEGALDOCS-1.pdfhttp://www.abcny.org/pdf/report/LEGALDOCS-1.pdfhttp://www.abcny.org/pdf/report/LEGALDOCS-1.pdfhttp://www.abcny.org/pdf/report/LEGALDOCS-1.pdf


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STATEMENT OF THE CASE

Appellant, Marilyn G. Harley, an original defendant in this residential

foreclosure action, appeals a July 13, 2011 "Final Judgment of Foreclosure"

entered by the Fourth Judicial Circuit Court in and for Duval County, Florida in

favor of the Appellee, HSBC Bank USA, National Association, As Trustee For

Home Equity Loan Trust Series AE 2005-HE5, the foreclosing Plaintiff in the Trial

Court, on July 13, 2011. (R. Vol. 5 Pg. 886-889).

Appellant also appeals the July 25, 2011 final order captioned "Amended

Order on Plaintiff's Motion For Judgment As a Matter of Law On Defendant's

Third Affirmative Defense and Counterclaim" entered by the Circuit Court

granting the Appellee's motion for judgment on Appellant's counterclaim. (R. Vol.

5 Pg. 900).

Appellee filed an "Amended Complaint To Foreclose Mortgage And To

Enforce Lost Loan Documents" (hereinafter "Amended Complaint") against

Appellant on March 3, 2007 seeking to foreclose a recorded mortgage in favor of

Trimerica Mortgage Corporation. Attached to Appellee's amended complaint is an


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assignment of mortgage dated January 30, 2006. In its Amended Complaint,

Appellee claims that it "owns and holds the Note and Mortgage" but that Appellee

"is not presently in possession of the original note and mortgage." (R. Vol. 1 Pg.

43-69; Vol. 7 Pg. 1134-1155).

Appellant timely filed her "First Amended Answer To Amended Complaint,

Affirmative Defenses And Counterclaim" (hereinafter "Amended Answer")

denying that the recorded mortgage, a copy of which introduced into evidence, was

assigned to Appellee; denying that Appellee stated a cause of action for foreclosure

on account of the Appellee not being the true owner of the claim and not being the

real party in interest or shown to be authorized to bring the subject foreclosure

action at the time this action was filed. (R. Vol. 1 Pg. 96-100; Vol. 7 Pg.

1134-1155).

In her Amended Answer, Appellant denies that the subject promissory note is

a negotiable instrument and points out that the Appellee failed to attach a copy of

the underlying promissory note to its Amended Complaint. (R. Vol. 1 Pg. 96-100)

Appellant asserts affirmative defenses in her Amended Answer against the

Appellee's foreclosure action claiming that Appellee failed to provide Appellant

with a "Notice of Default and Intent to Accelerate" (R. Vol. 7 Pg. 1224-1225) that

conformed to the specific requirements of the mortgage and that such notice failure

resulted in a failure of the Appellee to meet the pre-foreclosure obligations


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imposed by the mortgage contract and by Florida law as condition precedent to

acceleration of the underlying debt and to foreclosure of the mortgage. (Id).

Appellant further and additionally asserts affirmative defenses in her

Amended Answer claiming that Appellee failed to comply with the federal

statutory pre-foreclosure prevention notice requirement imposed on Appellee in

equity and also imposed pursuant to a statutory scheme that embeds a federal

statutory notice as a condition precedent to foreclosure of the subject residential

mortgage.

Appellant claims that Appellee did not comply with this condition precedent

to acceleration and foreclosure by failing to send Appellant a notice that contained

information about foreclosure avoidance counseling that Appellee offered to

residential mortgage borrowers and that Appellee failed to send this notice within

45 days of Appellant's initial payment delinquency under the promissory note. (Id)

Finally, Appellant affirmatively defends against the foreclosure and asserts a

counterclaim against Appellee seeking federal Truth-in-Lending rescission of the

subject mortgage on the basis of the Appellees conduct, which amounted to unfair

and deceptive acts and materially violated the mandatory consumer disclosure

obligations set out in the Federal Truth In Lending Act (hereinafter "TILA").

Appellant claims that Appellees illegal conduct is evidenced by the fact that

Appellee gave Appellant a "Federal Truth-In-Lending Disclosure Statement"


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(hereinafter "TILA Statement") (R. Vol. 2 Pg. 209-212; T. 160:18 161:17) that

disclosed a comforting fixed annual percentage rate to Appellant that

overshadowed the HUD-1 disclosure form (Id) also given to Appellant at the

closing for the adjustable rate mortgage that is the subject of this action.

The Appellant also affirmatively defends this foreclosure and states a

counterclaim seeking TILA rescission and other consumer remedies for her

damages proximately caused by the fact that the Appellee also failed to comply

with TILA by failing to give Appellant a CHARMS BOOKLET, which is a

material consumer disclosure and that Appellee failed to give this booklet to

Appellant at the closing of the subject mortgage loan or at all. The CHARMS

BOOKLET is officially referred to as a "Consumer Handbook on Adjustable Rate

Mortgages". (Id).

Four years after this foreclosure action was commenced, Appellee attached an

original promissory note to a notice that Appellee filed in the circuit court. (R. Vol.

2 Pg. 350-380).

A nonjury trial before the circuit court was held on January 24 and March 24,

2011 which resulted in the entry of the July 13, 2011 Final Judgment of

Foreclosure. Appellee filed a motion to cancel/reset the foreclosure sale, which

was granted in part, by order of the circuit court canceling the sale, but NOT

resetting sale. (R. Vol. 5 Pg. 902-905, 923-924). The Final Judgment of


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Foreclosure is a final order; it remains in effect and is adverse to Appellant, as is

the Amended Final Judgment on Counterclaim.

STATEMENT OF FACTS

The Appellee is a trust established pursuant to a trust agreement titled

Pooling and Servicing Agreement Dated as of August 1, 2005 (hereinafter

PSA). The PSA for the Appellee trust provides, in Section 2.09, that Appellee

(represented in this action by HSBC as trustee) is an express trust governed by the

laws of the state of New York. (R. Vol. 6 Pg. 925-1127).

As a New York trust, Appellees legal existence and capacity is controlled by

the PSA pursuant to which HSBC Bank, as trustee, and Wells Fargo, as custodian

and servicer, derive all their respective trust related rights, powers, obligations and

duties in the forming the Appellee trust, in the conveyance and transfer of

qualified mortgage loans into the corpus of the Appellee trust, and in the

servicing of the qualified mortgage loans transferred into the trust.

The PSA is the binding trust contract that controls all of the actions of the


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trustee, the custodian and the servicer with respect to the Appellee trust. (Id).

On April 5, 2005, Appellant refinanced the debt on her home giving a

promissory note to Trimerica Mortgage Corporation secured by a mortgage

recorded in the official records of the Duval Circuit Clerk on April 19, 2005 at

book 12421 and page 1878. (R. Vol. 7 Pg. 1134-1135, 1229-1237).

The referenced PSA (R. Vol. 6 Pg. 925-1127) and a related and incorporated

Custodial Agreement (R. Vol. 7 Pg. 1156-1195) were introduced into evidence at

trial by the Appellee and these agreements contain the following pertinent

definitions:

Agreement is the Pooling and Servicing Agreement and all the exhibits and

schedules. (all definitions are PSA unless otherwise stated).

Assignment is an assignment of a mortgage in recordable form.

Closing Date is August 26, 2005.

Code is the Internal Revenue Code of 1986.

Custodial Agreement is the Custodial Agreement dated as of March 1, 2005

between HSBC as the Trustee, Wells Fargo, as the Custodian and Wells Fargo, as

the Servicer.

Custodian is Wells Fargo.

Custodial File is defined in the Custodial Agreement as any mortgage loan

documents which are delivered to the Custodian relating to each Mortgage


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Loan.

Cut-off Date is August 26, 2005 with respect to each Mortgage Loan.

Depositor is ACE Securities Corp.

Mortgage is the mortgage in a mortgaged property securing a mortgage

note.

Mortgage File is the mortgage loan documents that pertain to a mortgage

loan.

Mortgage Loan Documents are the documents that evidence or relate to the

delivery of the mortgage loan to Wells Fargo, as the Custodian under the Custodial

Agreement on behalf of HSBC, as the trustee.

Mortgage Loan Purchase Agreement (MLPA) is the mortgage loan purchase

agreement between the ACE Securities DB Structured Products, the Seller that is

dated August 26, 2005 and was introduced into evidence by Appellee. (R. Vol. 7

Pg. 1156-1195).

Mortgage Loan Schedule is the initial list of mortgage loans included in

REMIC I attached to the PSA as Schedule that ACE Securities (depositor) must

deliver to Wells Fargo (as servicer and custodian) and to HSBC Bank (trustee) on

August 26, 2005 (the closing date). The Mortgage Loan Schedule must list 37

specific items of information about each mortgage loan delivered by Wells Fargo

(as custodian) to HSBC Bank, as trustee, pursuant to the Custodial Agreement.


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The 37 data points that must be listed for each loan delivered by Wells Fargo

include the mortgagors first and last name and the street address of the mortgaged

property.

Mortgage Note is the original executed note evidencing the debt under a

mortgage loan.

Mortgaged Property is the underlying property securing the residential

mortgage loan.

Mortgagor is the obligor on a mortgage note.

REMIC or real estate mortgage investment conduit is an entity formed for

the purpose of holding a fixed pool of mortgages secured by interests in real

property within the meaning of Section 860 of the IRS Code.

http://www.irs.gov/publications/p550/ch01.html#en_US_2010_publink100010133

REMIC I is the pool of assetsconsisting ofsuch mortgage

loans...subject to the PSA.

Seller is DB Structured Products, Inc. in its capacity as seller under the

MLPA.

Servicer is Wells Fargo appointed under the PSA in connection with the

servicing and administration of the Mortgage Loans.

Startup Day is August 26, 2005 with respect to each Trust REMIC.

Trust is ACE Securities Corp., Home Equity Loan Trust, Serie 2005 -HE5,
http://www.irs.gov/publications/p550/ch01.html%20/%20en_US_2010_publink100010133http://www.irs.gov/publications/p550/ch01.html%20/%20en_US_2010_publink100010133


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the trust created under the PSA.

Trust Fund includes all of the assets of REMIC I.

Trust REMIC is REMIC I.

Trustee is HSBC Bank USA, National Association.

Under Section 2.01 of the PSA, ACE, as the Depositor, agreed to transfer to

HSBC Bank, as the Trustee, on behalf of the Appellee Trust, all right, title and

interest of ACE in and to the Mortgage Loans identified on the Mortgage Loan

Schedule concurrently with the execution and delivery of the PSA. This transfer

from the depositor to the trust includes the mortgages securing the mortgage loans.

(R. Vol. 6 Pg. 925-1127).

Under Section 2.02 of the PSA, HSBC Bank, as the Trustee of the Appellee

trust, acknowledges receipt of the Mortgage Loan Documents and all other assets

included within the definition of the REMIC 1, subject to Section 2.01 of the PSA

and Section 2 of the Custodial Agreement. HSBC Bank holds these mortgage

loan documents in trust in its capacity as trustee of the Appellee trust. (Id).

Section 2 of the Custodial Agreement specifies that ACE, as the Depositor,

had to deliver and release, by August 26, 2005, a set of documents to Custodian

Wells Fargo for each of the Mortgage Loans identified in the Mortgage Loan

Schedule that was supposed to be attached to the PSA. (R. Vol. 7 Pg. 1156-1195).

The documents that ACE was required to deliver to Wells Fargo by August


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26, 2005, the closing date of the Appellee trust, under Section 2 of the Custodial

Agreement in order for the subject mortgage loan to be included as part of the

corpus of the subject trust were:

a. the original Mortgage Note bearing all intervening endorsements

necessary to show a complete chain of endorsements from the original payee,

endorsed in blank, via original signature, and, if previously endorsed, signed in the

name of the last endorsee by a duly qualified officer of the last endorsee;

b. the original Assignment of Mortgage executed in blank;

c. the original Mortgage or a certified copy with evidence of recording;

and

d. the originals of any intervening assignment of mortgage or

certified copies with evidence of recording. (Id).

Under Section 2.02 of the PSA, HSBC Bank, as trustee, had authority to

acknowledge receipt of the Mortgage Loan Documents and all the other assets of

REMIC 1 that were delivered to it by ACE through the Custodian Wells Fargo by

August 26, 2005 and to declare that it holds all the Mortgage Loan Documents in

trust. (R. Vol. 6 Pg. 925-1127).

Section 2 of the Custodial Agreement required Wells Fargo as Custodian to

deliver to HSBC Bank the documents specifically identified above the original

Mortgage Note with all intervening endorsements, the original Assignment of


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Mortgage executed in blank and the original Mortgage or a certified copy with

evidence of recording within the limited REMIC time authorized by the PSA. (R.

Vol. 7 Pg. 1156-1195).

Section 3 of the Custodial Agreement, consistent with the PSA, also required

Wells Fargo to deliver an Initial Trust Receipt and Certification to HSBC as trustee

of the Appellee trust, stating that each and every mortgage loan described and

identified in the Mortgage Loan Schedule has a specific set of Mortgage Loan

Documents delivered to HSBC Bank by the August 26, 2005 cut-off date for the

Appellee REMIC trust. (Id).

At trial, there was no evidence presented by Appellee:

a. that the original Harley Mortgage Note, that is the subject of this action

bearing all intervening endorsements necessary to show a complete chain of

endorsements from Trimerica, endorsed in blank, via original signature, was

delivered by ACE to Wells Fargo by August 26, 2005;

b. that an original Assignment of the Harley Mortgage executed in blank

was delivered by ACE to Wells Fargo by August 26, 2005; or that

c. the original or recorded copies of any intervening assignments of the subject

mortgage was delivered by ACE to Wells Fargo by August 26, 2005;

d. that the Initial Trust Receipt and Certification, delivered by Wells Fargo to

HSBC, stated that all of the required Mortgage Loan Documents for the Mortgage


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Loan that is the subject of this foreclosure action was identified in the Mortgage

Loan Schedule or (other than those Mortgage Loans identified on an exception

report) were delivered to HSBC Bank by the cut-off date which was August 26,

2005. (R. Vol. 7 Pg. 1197-1200).

Under the Custodial Agreement in the present case, ACE agreed to purchase

Mortgage Loans from Seller DB Structured Loan Products pursuant to the

Mortgage Loan Purchase Agreement. (R. 1156-1195).

Mortgage Loan is defined in the Custodial Agreement consistent with the PSA

as being [e]ach mortgage loan identified on the Mortgage Loan Schedule that is

supposed to be attached to the Custodial Agreement. (Id).

There was no mortgage loan schedule, meeting the definition of a "mortgage

loan schedule" contained in the PSA, attached to the PSA or attached to any other

document introduced into the evidence in this action. There was supposed to be a

list of loans attached to the PSA, but there is not. (R. Vol. 6 Pg. 925-1127).

Additionally, the Mortgage Loan Schedule is defined in the Custodial

Agreement the same as it is in the PSA as The schedule of Mortgage Loans to be

delivered by the Depositor to the Custodian and the servicer (with a copy to the

Trustee) two Business Days prior to the Closing Date and to be annexed to the

Custodial Agreement asExhibit 8. This Mortgage Loan Schedule must contain

the same 37 data points described in the PSA. (Id). However, there was no


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evidence presented in this case that a Mortgage Loan Schedule was attached to the

PSA.

Under Section 5 of the Custodial Agreement, Wells Fargo was supposed to

review each Custodial File within 180 days after August 26, 2005 and deliver to

HSBC a Final Trust Receipt confirming that, as to each of the mortgage loans

listed on the Mortgage Loan Schedule, all of the above-described mortgage loan

documents were reviewed, that the mortgage loan documents reviewed for each

Mortgage Loan accurately reflected the information on the Mortgage Loan

Schedule; that each Mortgage Note was endorsed and that the Mortgage was

assigned to the Appellee trust in conformity with Section 2 of the Custodial

Agreement. (R. Vol. 7 Pg. 1156-1195).

There was no evidence presented in this case of the existence or delivery by

Wells Fargo to HSBC of a Final Trust Receipt, as defined and specified in the

Custodial Agreement, confirming that the Harley Mortgage Loan that is the subject

of this foreclosure action was listed on any Mortgage Loan Schedule as defined in

the PSA or by the Custodial Agreement. Nor is there any evidence that Wells

Fargo ever confirmed that all of the required documents relating to the Harley

mortgage loan were reviewed by it.

In the present case, there was no qualifying Mortgage Loan Schedule, there

was no evidence presented, nor could there be, that Wells Fargo reviewed any


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documents for the Harley mortgage loan for accuracy and no evidence showing

that Well Fargo confirmed that the Harley Mortgage Note was endorsed or that the

Harley Mortgage was ever assigned in conformity with Section 2 of the Custodial

Agreement.

Section 11.02 of the PSA specifically limits HSBC, as the trustee, and

prohibits the custodian from accepting any mortgage loans as contributions to the

Appellee Trust REMIC after August 26, 2005. (The Qualified Substitute Mortgage

Loan transfer provisions in Section 2.03 of the PSA do not apply to the Harley

loan. (R. Vol. 6 Pg. 925-1127).

At trial, Appellee trust introduced into evidence a copy of the Harley note and

an unauthenticated indorsement called "Allonge To Note" that was not physically

attached to the Harley note, but instead appears on a separate piece of paper, after a

Prepayment Addendum. (R. Vol. 7 Pg. 1229-1237).

SUMMARY OF ARGUMENT

The trial court misapplied the law and committed reversible legal error in

granting judgment of foreclosure in favor of Appellee because the Appellee trust

did not have any legal right to foreclose the mortgage at the commencement of this

action.

The federal Truth-in-Lending disclosure statement that Appellee delivered to


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Appellant constitutes a material misdisclosure under TILA that was unfair and

deceptive and that violated the federal Truth-in-Lending Act by disclosing a

"comfort" fixed rate annual percentage rate that overshadowed the adjustable

interest rate information contained in the HUD-1 disclosure for the adjustable rate

mortgage loan involved in this foreclosure.

Appellee violated the applicable material disclosure obligations of the federal

Truth-in-Lending Act by failing to give Appellant a "CHARMS" booklet at

closing.

The Appellee's December 19, 2005 notice of default and intent to accelerate

failed to conform to the requirements of the mortgage contract or Florida law. The

Appellee failed to accelerate the mortgage debt.

The Appellee failed to comply with preforeclosure prevention notice

requirements imposed by the National Housing Act,12 USC 1701x(c)5.


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ARGUMENT

THE TRIAL COURT MISAPPLIED THE LAW AND COMMITTED

REVERSIBLE LEGAL ERROR IN GRANTING JUDGMENT OF

FORECLOSURE IN FAVOR OF APPELLEE BECAUSE THE APPELLEE

TRUST DID NOT HAVE ANY LEGAL RIGHT TO FORECLOSE THE

MORTGAGE AT THE COMMENCEMENT OF THIS ACTION.

STANDARD OF REVIEW

THE TRIAL COURTS DECISIONS CHALLENGED IN THIS APPEAL ARE

CONTRARY TO LAW. THE STANDARD OF REVIEW ON ALL ISSUES

RAISED IN THIS APPEAL IS DE NOVO. DAngelo v. Fitzmaurice, 863 So. 2d

311, 314 (Fla. 2003);Armstrong v. Harris, 773 So.2d 7 (Fla. 2000) Calderon v. J.B.Nurseries, Inc., 933 So. 2d 553 (Fla. 1st D.C.A. 2006);Mgmt. Computer Controls,

Inc. v. Charles Perry Constr., Inc, 743 So.2d 627 (Fla. 1st D.C.A. 1999) (The

construction of a written contract is, moreover, a matter of law. Therefore, our

review standard over the lower tribunal's construction of the contract is de novo.

Jacobsen v. Ross Stores, 882 So.2d 431 (Fla. 1st D.C.A. 2004); Klonis v. Dep't of

Revenue, 766 So.2d 1186 (Fla. 1st D.C.A. 2000)( Review of this pure question of

law is de novo.)

MISAPPLICATION OF LAW AND REVERSIBLE ERROR

Appellee is a REMIC trust (Real Estate Mortgage Investment Conduit) and


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as such, Appellee is subject to and must comply with the strict IRS regulations

which, in turn, are imposed on Appellee by the strict terms of Article XI of the

PSA. (R. Vol. 6 Pg. 925-1127). It is basic trust law that, in addition to applicable

laws, a trusts founding document controls what rules and regulations must be

adhered to by the trustee on behalf of the trust. This is true in Florida and New

York. Jones v. First National Bank in Fort Lauderdale, 226 So.2d 834 (Fla. 4th

DCA 1969); See also, In re Dana, 465 N.Y.S.2d (N.Y. Sup. Ct. 1982) and In re

Cummings, 184 N.Y.S. 404 (N.Y.App. Div. 1920).

As a REMIC Trust, Appellee had no right or claim to foreclose the

Appellant's mortgage or prevail in this foreclosure action and Appellee failed to

present any admissible evidence that Appellee held or owned the subject mortgage

note at the commencement of this foreclosure action. Absent such essential

evidence of ownership and holder status, Appellee failed to establish standing or

real party in interest status to prosecute this foreclosure action. Gee v. U.S. Bank,

N.A., as Trustee, Case No. 5D10-1687 (Fla. 5th DCA 2011); BAC Funding

Consortium, Inc. v. Jean-Jacques, 28 So. 3rd 936 (Fla. 2nd DCA 2010); and Your

Construction Center, Inc. v. Gross, 316 So.2d 596 (Fla. 4th DCA 1975). And see:

In re Doble, 2011 Bankr. LEXIS 1449 (April 14, 2011) and In re Hayes, 393 B.R,

259 (Bankr. Mass. 2008). Florida law requires that Appellee hold and own the

subject note at the commencement of this action. Ownership of the note and the


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mortgage are material facts at issue in this foreclosure that needed to be proved by

Appellee. Carapezza v. Pate, 143 So.2d346 (Fla. 3rd DCA 1962);Laing v. Gainey

Builders, Inc., 184 So.2d 897 (Fla. 1st DCA 1966) (holder of note and mortgage is

real party in interest in foreclosure action); Verizzo v. Bank of New York, 28 So. 3d

976 (Fla. 2nd DCA 2010) (requiring showing that foreclosing entity hold the note

and mortgage and that it owned same before commencement of the foreclosure),

accord, Bouskila v. M & I Bank, Case No. 1D10-2127 (Fla. 1stDCA 2011) (the

party seeking to foreclose must present evidence that it owns and holds the note

and mortgage to establish standing to proceed with a foreclosure).

The PSA is the only mechanism by which the Appellee trust is competent to

acquire, transfer, dispose of or sell any mortgage loan or other asset. As trustee of

the plaintiff trust, not only is HSBC bound by the strict terms and limitations of the

PSA, but HSBC has no capacity or competency to acquire, transfer, dispose of or

sell any mortgage loan or other asset on the trusts behalf outside the terms of the

PSA.

In this case, HSBC Bank, as trustee of the Appellee trust, had the initial

burden of presenting the Trial Court with evidence that the trust held the Appellant

Harley's note at the commencement of this action. Appellee completely failed to

meet this evidentiary burden and the "Allonge To Note" that Appellee did

introduce into evidence (R. Vol. 7 Pg. 1229-1237) does not meet the technical


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requirements of the New York Uniform Commercial Code (which uses the 1951

version of the UCC) to make the transferee of a promissory note its holder.

Because the PSA adopts for all purposes New York law, the New York version

of the UCC controls how and when the Appellee trust could gain the status and

capacity of a holder of the Appellant's note. New York UCC 3-202(2) states:

An indorsement must be written by or on behalf of the holder and on the

instrument or on a paper so firmly affixed thereto as to become a part thereof.

The detached and separate "Allonge To Note" introduced by Appellee as evidence

in this case is impaired and rendered ineffective under the New York UCC so that

the allonge is not a valid indorsement of the Appellant's promissory note and does

not satisfy the strict terms of the PSA.

This failure of a proper indorsesment and the fact that, by its terms, the

promissory note at issue is not negotiable, are fatal to the Appellee's right to

enforce the Appellant's promissory note as a negotiable instrument and deprive

Appellee of any legal right to foreclose the Appellant's mortgage. The Appellee

failed to establish it held the Harley note under the PSA on August 26, 2005 (or

ever).

The Appellee trust, by the clear terms of the PSA, is governed by New York

law which clearly prohibits the use of any additional piece of paper for an

indorsement, as long as enough space remains to write the indorsement somewhere


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on the negotiable instrument itself. Even if this Court finds the Appellant's

promissory note negotiable, there is space on the note and the No-Space Test

does not allow the use of a separate allonge.

Even when another law allows a separate indorsement, the New York UCC

literally requires an allonge to be firmly affixed to the instrument..." (3 sets of

quotation marks here are we missing one somewhere?) See: Getting Attached -

When do Allonges meet the requirements of the New York UCC?, New York Law

Journal, November 27, 2006, by Lawrence Safran and Joshua Stein. In Crossland

Sav. Bank FSB v. Constant, the indorsements were rejected because they were not

stapled to the negotiable instruments themselves, but instead to the back of another

document in a group of documents that included the notes. Similarly, in LaSalle

Natl Bank Assn v. Lamy, 12 Misc. 3d 1191A (2006), the assignee took an

assignment of the note without at the same time receiving an indorsement from the

proper party. The assignee later did receive an allonge from the proper party, but

did not attach it to the note. The court, holding that this allonge was not an

indorsement under New York UCC 3-202(2), decided that regardless of the

fact that the assignor still owned the note, the assignee could not enforce the note

or obtain a default judgment on the note.

Even if this Court were to accord to the Appellee trust in the present action the

status of a transferee of an instrument by operation of law under the UCC, pursuant


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to its own PSA, the Appellee trust is not and cannot be a holder of the promissory

note, as it is not part of a "qualified mortgage loan" under the PSA. As a result,

Appellee has no legal or contractual right to enforce the Appellant's promissory

note under the UCC and Appellee has no legal ability or capacity to foreclose the

Appellant's mortgage under Florida law.

All the provisions of Florida and New Yorks versions of the UCC are subject

to be varied by private agreement (subject to limitations not applicable to the

instant case). Florida Statute 671.102 titled: Purposes; rules of construction;

variation by agreement states that [t]he effect of provisions of this code may be

varied by agreement. F.S. 671.102(3).

This broad grant of power to private parties to contract away from the UCC

by private agreement is only limited by prohibitions contained in other provisions

of the UCC not applicable here and the parties are prohibited by the UCC from

deviating or contracting away their respective UCC obligations of good faith,

diligence, reasonableness and care.

The UCC clearly respects the right of the Appellee in the present action to

enter into a private agreement - the PSA - which self-limits the Appellee's capacity

and ability to hold the Appellant's promissory note. The PSA, as authorized by the

UCC, is a private agreement which changes the standards by which the Appellee

trust can access holder status and gain UCC rights to enforcement. The UCC


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bestowed the Appellee with the right to set up different standards to become a

holder and these differing standards control as long as the deviations are not

manifestly unreasonable.

The effect of F.S. 671.102(3) is to grant the Appellee the right and power to

execute the PSA and to expressly deny the power of HSBC, as the trustee, to claim

transferee or other non-holder status on behalf of the Appellee in this case

because the Appellant's promissory note and other requisite mortgage loan

documentation was not transferred to the Appellee by August 26, 2005 as required

by the strict terms of the PSA.

New Yorks version of the UCC has the identical provision to the variation

by agreement provision found in F.S. 671.102(3). (formerly NYA 1-102(3), now

RA 1-302) see: the 2004 Report on Revised Article 1 of the Uniform Commercial

Code prepared by the Committee on Uniform State Laws of The Association of the

Bar of the City of New York at:

http://www.abcny.org/pdf/report/LEGALDOCS-1.pdf

The official comments to Article I of both the Florida and New York UCC

inform that the UCC must be liberally construed and applied to permit the

expansion of commercial practices through agreement of the parties. Appellee

was free to enter into the PSA and the other agreements and to change the legal

consequences that would otherwise flow from the application of the UCC.


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The PSA is now the primary source of rules, obligations and limitations that

clearly vary the effect of the UCC with respect to how and when the Appellee trust

can achieve holder status of a negotiable instrument. Assuming that the

Appellant's promissory note is a negotiable instrument, then Appellee failed to

establish holder status which is a statutory and common law precedent to the

Appellee asserting a legal right to enforce the Appellant's promissory note under

the UCC or to foreclose the Appellant's mortgage under Florida law.

Additionally pursuant to the PSA, Appellee has no legal capacity to be a

transferee or a non-holder in possession of the Appellant's promissory note.

It is also clear that under New York law, as the trustee of the Appellee, a New

York common law trust, HSBC cannot act or ratify acts not authorized or in

accordance with its own trust agreement (the PSA). In re Celotex, 487 F.3d 1320

(11th Cir 2007). InIn re Celotex, the Eleventh Circuit was faced with the same

fundamental issue of defining the relative powers of a New York express trust in

the process of resolving whether or not the trustees possessed certain discretionary

authority or whether the Trustees' actions were ultra vires under the Trust

agreement.

The Eleventh Circuit determined that in order to determine the power of the

trustee, the court had to independently interpret the terms of theTrust

Agreement Id., citing: Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,


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112, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989) ("As they do with contractual

provisions, courts construe terms in trust agreements without deferring to either

party's interpretation."). "The extent of [a trustee's] duties and powers is

determined by the trust instrument and the rules of law which are applicable, and

not by his own interpretation of the instrument or his own belief as to the rules of

law." Restatement (Second) of Trusts 201 cmt. b (1959).

"From the trust, the trustee derives the rule of his conduct, the extent and limit

of his authority, the measure of his obligation." Jones v. First Nat'l Bank in Fort

Lauderdale, 226 So.2d 834, 835 (Fla. 4th Dist.Ct.App.1969) "[T]he trustee can

properly exercise such powers and only such powers as (a) are conferred upon him

in specific words by the terms of the trust, or (b) are necessary or appropriate to

carry out the purposes of the trust and are not forbidden by the terms of the trust."

Restatement (Second) of Trusts 186 (1959); see also id. 164. Likewise, the

Eleventh Circuit determined in theIn re Celotexcase, that [t]he extent and limit of

the Administrator's powers are similarly determined by the terms of the Trust

Agreement referencing for authority The Restatement (Second) of Trusts 37

("[T]he settlor may grant powers tothe trustee, a beneficiary, or a third person

otherwise unconnected with the trust.").

The Eleventh Circuit found that the general rule is: "If under the terms of the

trust a person has power to control the action of the trustee in certain respects, the


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trustee is under a duty to act in accordance with the exercise of such power, unless

the attempted exercise of the power violates the terms of the trust or is a violation

of a fiduciary duty to which such person is subject in the exercise of the power."

citing The Restatement (Second) of Trusts 185 (1959) as "the black letter law of

trusts". Id.

In the present case, the PSA and the Custodial Agreement bind the trustee of

the Appellee trust to conform to the obligations under these controlling private

agreements to administer the trust in accordance with the agreements. And, "If

under the terms of the trust a person has power to control the action of the trustee

in certain respects, the trustee is [ordinarily] under a duty to act in accordance"

Id. Because the trustee is "a fiduciary to the extent he exercises any discretionary

authority or control," the In re Celotex court held that agents of trusts must

ordinarily comply with the trustees exercise of power as limited by the terms of

the trust agreement. Id, citing, Firestone, supra, 489 U.S. at 113, 109 S.Ct. 948.

As in In Re Celotex, the Trustee and the trust in the instant case are duty

bound to comply with and follow the procedural and substantive limitations on

their authority under the PSA. Neither the Appellee nor HSBC, as trustee, can

take acts that are inconsistent with the express terms of the PSA or that exceed the

power of control or authority granted therein.

Because Appellee failed to acquire the transfer of Appellant's promissory note


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as required by the strict terms of the PSA, Appellee is contractually prohibited and

without legal power to exercise any rights with respect to the Appellant's note or

mortgage.

THE FEDERAL TRUTH-IN-LENDING DISCLOSURE STATEMENT

THAT APPELLEE DELIVERED TO APPELLANT CONSTITUTES A

MATERIAL MISDISCLOSURE UNDER TILA THAT WAS UNFAIR AND

DECEPTIVE AND THAT VIOLATED THE FEDERAL

TRUTH-IN-LENDING ACT BY DISCLOSING A "COMFORT" FIXED

RATE ANNUAL PERCENTAGE RATE THAT OVERSHADOWED THE

ADJUSTABLE RATE INFORMATION CONTAINED IN THE HUD-1

DISCLOSURE FOR THE ADJUSTABLE RATE MORTAGE LOAN

INVOLVED IN THIS FORECLOSURE.

Appellee engaged in unfair and deceptive acts in violation of TILA by giving

Appellant a Federal Truth-In-Lending Disclosure Statement (TILA Statement)

that disclosed a fixed APR of 9.573%. 15 U.S.C. 1601, et. seq., Regulation Z, 12

C.F.R. Part 226. By disclosing a comforting fixed APR in the TILA Statement

that Appellee gave to Appellant, the Appellee put the Annual Percentage Rate

disclosure in the HUD-1 in the shadows. This form of overshadowing of a

material financing term in a consumer contract constitutes an unfair and deceptive

act under TILA because it effectively contradicted, distracted attention from and


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drowned out the HUD-1 APR disclosure that was given to Appellant at closing.

The replacement APR of 9.573 that is imputed to the HUD-1 as a result of the

overshadowing exceeds the .125% tolerance allowed by TILA for the APR

disclosure in this case for the Appellant's loan.

For TILA purposes, the overshadowing disclosure of the APR beyond the

allowable tolerance is a defective, inaccurate and erroneous disclosure of the APR,

the legal effect of which is to establish that the Appellee completely failed to give

Appellant the required material TILA APR disclosure on the HUD-1. 15 U.S.C.

1601.

APPELLEE VIOLATED THE APPLICABLE MATERIAL DISCLOSURE

OBLIGATIONS OF THE FEDERAL TRUTH-IN-LENDING ACT BY

FAILING TO GIVE APPELLANT A "CHARMS" BOOKLET AT CLOSING.

The evidence and the record in the present case establish that the Appellee

materially failed to comply with TILA by failing to give Appellant a Consumer

Handbook on Adjustable Rate Mortgages - a CHARMS handbook - at closing

explaining the features of her adjustable rate mortgage (ARM) as required by 15

U.S.C.1601, et. seq. The CHARMS booklet is a material disclosure which TILA

required the lender in this case, the Appellees predecessor in interest, to give to

Appellant at closing.

Under TILA, the Appellee is liable for the lenders failure to give Appellant

the CHARMS booklet at closing and such failure triggered Appellants right under


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TILA to rescind the loan. See: note 48 of Section 226.23 of Regulation Z.

Because the interest rate for Appellant's mortgage note is adjustable and is

secured by mortgage on her principal dwelling with a maturity longer than one

year, the lender was required to give the CHARMS information to Appellant at

closing.

The lender's failure to disclose the variable rate of this transaction as required

by the TILA ARM disclosure rule is imputed to Appellee and entitles Appellant to

recover from the Appellee her consumer statutory damages and also entitles

Appellant to pursue her rescission right against the Appellee under TILA. In re

Fidler, 210 B.R. 411 (D. Mass. 1997) and see: Reg. Z. 226.18(f); 52 Fed. Reg.

48665 (Dec. 24, 1987).

As a result of the Appellee's unfair and deceptive acts in overshadowing the

ARM disclosure in the HUD-1 and by failing to give Appellant a CHARMS

booklet at closing, TILA gives Appellant a continuing right to rescind the subject

mortgage which right the Appellant exercised by timely sending a rescission letter

to the Appellee pursuant to the Federal Truth-in-Lending Act, 15 U.S.C. 1635 and

Regulation Z, Section 226.23. (R. Vol. 1 Pg. 36-38).

In her rescission letter, Appellant timely notified the Appellee as required by

and in accordance with TILA that Appellant was rescinding the mortgage because

of the understating of the Annual Percentage Rate (APR) by more than the allowed


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.125% and also because of the Appellees failure to give her the CHARMS booklet

explaining the features of adjustable rate mortgages (ARM) at closing as required

by TILA.

Under TILA, Appellee had 20 days after receipt of Appellant's rescission

notice to take all action necessary to terminate the mortgage on her property.

Appellant has no other obligation to affect the legal rescission of her home loan

pursuant to TILA. Appellee failed to introduce any evidence at trial that Appellee

had terminated its security interest in Appellant's real property subject to the

mortgage.

As a result of the Appellee's failure to introduce any evidence that Appellee

canceled the Appellant's mortgage or terminated the security interest represented

by the mortgage, the Appellee violated TILA and is liable to Appellant for her

statutory damages pursuant to 15 U.S.C. 1640(a) for the statutory violation.

Another consequence of the Appellee's failure to terminate its security interest

upon the lawful rescission of the mortgage by Appellant, is that the Appellee came

to trail with unclean hands and without any lawful right to pursue the equitable

remedy of foreclosure.

THE APPELLEE'S DECEMBER 19, 2005 NOTICE OF DEFAULT AND

INTENT TO ACCELERATE FAILED TO CONFORM TO THE


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REQUIREMENTS OF THE MORTGAGE CONTRACT AND FLORIDA

LAW. THE APPELLEE FAILED TO ACCELERATE THE MORTGAGE

DEBT.

The December 19, 2005 notice of default failed to inform Appellant that she

had to cure the payment default on her loan within 30 days of the date of the

notice. Instead, the Appellee's December 19, 2005 notice demands that in order to

avoid acceleration of the mortgage debt, that Appellant pay an additional $455.58

to Appellee over and above the amount due as of the notice date to cure the

payment default. The $455.58 was included by the Appellee to cover a mortgage

payment for January, 2006 that was not yet due.

In this case, the Appellees right to payment is contractually dependent upon

compliance with the notice requirement for default and process by which the

Appellee is contractually authorized to accelerate the mortgage debt is carefully set

out in paragraph 22 of the Appellant's mortgage.

Until the condition of the notice required by paragraph 22 is met, acceleration

of the debt has not occurred and foreclosure must be denied. F.A. Chastain

Construction v. Pratt, 146 So.2d 910 (Fla. 3d DCA 1962) affd with directions, 157

So.2d 101 (1963); See also Gomez v. American Sav. & Loan Assn; 515 So.2d 301

(Fla 4th DCA 1987),Rashid v. Newberry Federal Savings & Loan Association, 526

So.2d 772 (Fla. 3d DCA 1988) and Konsulian v. Busey Bank, N.A., Case No.

2D10-2163 (Fla. 2nd DCA 2011).


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Compliance with the contractual pre-foreclosure notice requirements is

critical to the Appellees entitlement to accelerate the subject debt which, in turn, is

a contractual condition precedent to foreclosure. Rashid v. Newberry Federal

Savings & Loan Assn, supra, Maniscalco v. Hollywood Federal Savings & Loan

Assn, 397 So.2d 453 (Fla. 4th DCA 1981) (Notice required upon subsequent

default after prior default cured). These decisions are consistent with the very

recent ruling by the Florida Second District Court of Appeals in Goncharunk v.

HSBC Mortgage Services, Case No. 2D10-2629 (Fla. 2nd DCA 5/20/11), in which

the court reversed a summary judgment involving a similar notice failure.

Appellee's December 19, 2005 notice of default also failed to substantially

comply with the notice requirements of paragraph 22 of the mortgage because the

notice fails to inform Appellant that she has the right to assert the non-existence of

a default in a foreclosure proceeding. As a result, the Appellant's mortgage debt

was not legally accelerated and a clear condition precedent to foreclosure of the

Appellant's mortgage was not met.

THE APPELLEE FAILED TO COMPLY WITH PRE-FORECLOSURE

PREVENTION NOTICE REQUIREMENTS IMPOSED BY THE

NATIONAL HOUSING ACT, 12 USC 1701x(C)5.

12 USC 1701x(c)(5) imposes a specific statutory obligation on all creditors


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in the United States, including the Appellee in the present case, who service

conventional loans, (non federally-insured home loans) to send a specific notice

about access and availability of homeownership counseling to defaulting

homeowners within 45 days of an initial home loan payment default. The creditor

is obliged to advise the homeowner of any homeownership counseling offered by

the servicer of the loan and/or information about how to access HUD

homeownership counseling.

12 USC 1701x(c)(5) was enacted 21 years ago as part of the Housing and

Community Development Act of 1987 and provides in pertinent part:

12 USC 1701x. Assistance with respect to housing for low-and moderate incomefamilies

(c)(5): Notification of availability of homeownership counseling.(A) Notification of availability of homeownership counseling.

(i) Requirement. Except as provided in subparagraph C, the creditor ofa loanshall provide notice under clause (ii) to (I) any eligiblehomeowner who fails to pay any amount by the date the amount is dueunder a home loan,

(ii) Content. Notification under this subparagraph shall(I) notify the homeownerof the availability of any homeownership

counseling offered by the creditor;(III) notify the homeownerof the availability of

homeownershipcounseling provided by nonprofit organizations approved

bythe Secretary and experienced in the provision ofhomeownership counseling, or provide the toll-freetelephone number described in subparagraph (D)(i);

(B) Deadline for notification. The notification required in subparagraph (A)shall

be made(i) in a manner approved by the Secretary; and(ii) before the expiration of the 45-day period beginning on the date on

Which the failure referred to in such subparagraph occurs.(6) Definitions. For purposes of this subsection:


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(A) The term creditor means a person or entity that is servicing a homeloan on behalf of itself or another person or entity.

(B) The term eligible homeowner means a homeowner eligible forcounseling under paragraph 4.

(C) The term home loan means a loan secured by a mortgage or lienon residential property.

(D) The term homeowner means a person who is obligated under ahome loan.

(E) The term residential property means a 1-family residence,(7) Regulations. The Secretary shall issue any regulations that are necessary tocarry out this subsection.

Under the terms of the statute, an eligible homeowner is one who iseligible for counseling as follows:

12 USC 1701x(c)(4) Eligibility for counseling. A homeowner shall beeligible for homeownership counseling under this subsection if

(A) the home is secured by property that is the principal residenceof thehomeowner;(B) the home is not assisted under title V of the Housing Act of 1949; and(C) the homeowner is, or is expected to be, unable to make payments,

correct a home loan delinquency within a reasonable time, or resume

full home loan payments due to a reduction in the income of thehomeowner because of(i) an involuntary loss of, or reduction in, the employment of

the homeowner, the self-employment of the homeowner,or income from the pursuit of the occupation of thehomeowner; or

(ii) any similar loss or reduction experienced by any person whocontributes to the income of the homeowner.

The secretary of HUD, in a question and answer supplement published inorder to respond to creditor inquiries and to clarify creditor responsibilities under

the statute. 55 FR 2416 (01/24/1990) states: We note that if a creditors

complianceis challenged in court, the ultimate determination of the adequacy of

the creditors notification and the legal consequences of any noncompliance will be


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made by the court. (The question and answer supplement further advises creditors

that:

1. The notification requirement applies to all home loans except those assisted

by the Farmers Home AdministrationThus, both conventional mortgages and

loans, and those insured by HUD or guaranteed by the Department of Veterans

Affairs, are subject to section 169. (Section 169 is a reference to the section of the

Housing and Community Development Act that enacted 12 USC 1701x(c)(5))

2. [S]ince the purpose of the notice is to help the homeowner avert foreclosure,

it should be sent soon enough to enable the homeowner to benefit from the

counseling. HUD recommends that the notice be included in the creditors firstcommunication with the homeowner regarding the delinquency.

3. A notice must be sent to every homeowner every time the homeowner

becomes delinquent. If the homeowner brings the loan current and becomes

delinquent again, another notice must be sent.

4. The notice must contain information on any counseling provided by the

creditor and either the name, address and telephone number of the HUD-approved

counseling agencies near the homeowner or a cost-free telephone number at the

creditors office where the homeowner can obtain this information

5. HUD does not supply a form. It is HUDs view that sufficient information

has been provided on the section 169 notice requirement to enable creditors to

prepare the notice.

6. Creditors may prefer to send the notice to all delinquent homeowners, rather

than attempt to determine the cause of each delinquency.

7. The notice is not required (on) property sold under a land sales

contractuntil the contract is completed

8. The statute does not require any creditor to provide counseling.


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9. If a creditor does provide homeownership counseling, the creditor still has to

notify the delinquent homeowner of the availability of homeownership counseling

by HUD-approved counselors or by the Department of Veterans Affairs

HUD published an advisory on the notice requirement of the statute which states:

[T]he notice requirements apply virtually to all mortgagees and that

noncompliance with the laws requirements could be an actionable event that

could affect a mortgagees ability to carry out foreclosure in a timely

mannerHUD regards the obligations imposed on creditors by the new law as

self-executing: that is, the law speaks directly to creditors, imposing and obligation

upon any and all creditors to notify any eligible homeowner counseling, whenevera home loan is delinquent. 54 Fed. Reg. 20964-65 (May 15, 1989).

The evidence presented in this case established that:

a. the notification requirement of 12 USC 1701x(c)(5) applies to the Appellant's

loan because it is a home loan not assisted under title V of the Housing Act of 1949

that is secured by a mortgage;

b. the Appellee is a creditor within the definition contained in the statute as the

Appellee is a person or entity that is servicing a home loan on behalf of itself or

another person or entity; and

c. Appellant is a homeowner within the definition contained in the statute as a

person who is obligated under a home loan.

The statute required the Appellee in this case to send a notice of

preforeclosure counseling services to Appellant when she became delinquent in

her mortgage payment. The statute required the Appellee to send Appellant a

notice containing information about any foreclosure avoidance counseling that the

Appellee offered to its residential home mortgage borrowers within 45 days of the

delinquency in payment.


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The evidence presented at trial in the present case establishes that the

Appellee did not send a notice to Appellant that complied with the preforeclosure

prevention notice requirement imposed on the Appellee by the National Housing

Act, 12 U.S.C. 1701x(c)(5) before filing this foreclosure action. This failure is the

result of the Appellee's actions in not sending Appellant a notice containing

information on any foreclosure avoidance counseling that the Appellee offered to

its residential home mortgage borrowers at all or within 45 days of the Appellant's

delinquency in payment.

The evidence presented in this case supports a finding that Appellee is not

entitled to access the equitable remedy of foreclosure on account of the Appellees

failure to first comply with the federal statutory pre-foreclosure servicing notice

obligation set out in 12 USC 1701x(c)(5) before instituting this foreclosure action.


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CONCLUSION

The Appellee did not hold Appellant's promissory note at the commencement

of this action. Appellee had no legal right to foreclose the mortgage in this case.

Appellee violated TILA by overshadowing the material APR disclosure and by

failing to give Appellant a CHARMS booklet at closing triggering Appellant's

right to rescind the mortgage. Appellant timely rescinded the subject mortgage.

Appellees security interest in Appellants real property should be terminated by

this appellate court and the subject mortgage canceled.

The December 19, 2005 notice of default sent by the Appellee failed to

comply with the mortgage. The payment obligations under the promissory note

were never legally accelerated before the filing of this foreclosure action.

Appellee failed to comply with the preforeclosure notice requirement

imposed by 12 U.S.C. 1701x(c)(5) by failing to send Appellant a notice

containing information on foreclosure avoidance counseling within 45 days of the

payment delinquency thereby denying Appellee access to the equitable remedy of

foreclosure.

The trial court misapplied the law and committed reversible error. Appellee's

foreclosure complaint should be dismissed with prejudice and this matter should be

remanded for consideration of appellants claim for statutory damages and


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attorneys fees including attorney's fees for the prosecution of this appeal.

CERTIFICATE OF SERVICE

I certify that a copy hereof has been furnished to Maris Ajmo, Shapiro,Fishman & Cache, LLP, 2424 N. Federal Highway Ste. 360, Boca Raton FL.334317780, Attorney for Appellee, by U.S. Mail this 17th day of November, 2011.

SERVICE LIST

Marisa Ajmo, Esq.Shapiro, Fishman & Cache, LLP2424 N. Federal Highway Ste. 360Boca Raton FL. 334317780Attorney for Appellee

April Charney, ESQ.Jacksonville Area Legal Aid. Inc.126 West Adams StreetJacksonville, FL. 32202Attorney for Appellant

JACKSONVILLE AREA LEGAL AID, INC.,

_____________________________________April Carrie Charney, EsquireFla. Bar. No.: 310425126 W. Adams StreetJacksonville, Florida 33202Telephone: (904) 356-8371, ext. 373Facsimile: (904) [email protected] for Appellant

CERTIFICATE OF COMPLIANCE

THE UNDERSIGNED HEREBY CERTIFIES that the initial Brief ofAppellant, Marilyn G. Harley, complies with the font requirements set forth in the Rule9.210(a)(2), Fla. R. App.P.; to with Times New Roman 14-point font.
mailto:[email protected]:[email protected]


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______________________________April Charney, Esq.