Assignee stands in the shoes of the assignor: It must prove the loan

Holder vs. Holder in Due Course: What Florida Homeowners Need to Know

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(This article, like all content on this blog, is not a substitute for legal advice. Always consult with a licensed attorney in the jurisdiction of your property or transaction.)

The Crucial Distinction: Pleading vs. Proof

There is a big difference between alleging you are the “holder” of a note with the right to enforce it and actually proving it.

• When a bank, trustee, or servicer alleges the right to enforce, courts will usually let them survive a motion to dismiss.

• But once the borrower denies that allegation, the burden shifts back to the party making the claim.

The mistake made by many judges and attorneys is failing to distinguish between pleading and proof. This often leads to rulings that prevent borrowers from conducting proper discovery and allow foreclosure mills to slide by on the assumption that the “holder” automatically has enforceable rights.

Why Banks Rarely Claim “Holder in Due Course”

For more than a decade, I’ve noted that foreclosing parties almost never claim to be a “holder in due course” (HDC). In fact, opposing counsel often explicitly denies it.

That’s telling. For example:

• Citimortgage often admits it’s a servicer but refuses to identify the true creditor.

• When the Plaintiff is a trust, the Pooling and Servicing Agreement (PSA) would need to show purchase in good faith, for value, without knowledge of defenses.

If they could establish that, most foreclosure cases would end quickly. The borrower would still be liable to the HDC, with only damage claims against intermediaries. Yet, no one makes the HDC claim. Why? Because they can’t.

The Default Problem

Under the Uniform Commercial Code (UCC), for a note to qualify as a negotiable instrument, it must not already be in default at the time of transfer.

• If a loan was transferred after it was declared in default, it cannot be considered a negotiable instrument.

• Without negotiability, terms like “holder” or “holder in due course” don’t apply.

• That leaves the foreclosing party with only one option: prove ownership of the debt—not just possession of paper.

The Core Problem: The Origination

Tracing ownership eventually brings us back to the origination of the loan. Every contract requires offer, acceptance, and consideration.

• If the originator didn’t fund the loan, there was no consideration.

• Without consideration, there is no enforceable contract.

• Under Regulation Z, that makes the transaction predatory per se, leaving the foreclosing party with unclean hands.

Assignments Are Not Enough

An assignment alone doesn’t prove ownership. It may be admitted into evidence, but if:

• There are defects in the instrument, or

• No witness can testify to an actual transaction of purchase,

then the assignment lacks foundation. Courts err when they allow foreclosure to proceed on unsubstantiated documents.

As one legal commentator put it:

“As an assignee typically stands in the shoes of his assignor, without the holder in due course doctrine these allegations may defeat the purchaser’s action or make it much more difficult and costly to pursue.”

Florida’s Holder in Due Course Rule

Florida has codified the HDC doctrine into statute. To qualify, a purchaser of a negotiable instrument must show:

1. Authenticity – The instrument shows no evidence of forgery, alteration, or irregularities.

2. Value – The purchaser actually paid value for the instrument.

3. Good Faith – The purchase was made without knowledge of defenses, claims, or default.

If these conditions are met, the HDC takes the note free of nearly all personal defenses the borrower could raise against the original lender.

But again—banks and servicers almost never allege HDC status. The reason is simple: they cannot prove they paid value, in good faith, without knowledge of defenses.

Bottom Line

• A “holder” is not the same as a “holder in due course.”

• Most foreclosing parties are, at best, holders—not HDCs.

• Without HDC status, their claims are open to borrower defenses and discovery.

• If the originator never funded the loan, the contract itself may be void.

Borrowers and their attorneys should focus on demanding proof—not just allegations—of ownership, consideration, and compliance with UCC requirements.

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Tags: Florida UCC, HOLDER, holder in due course, Pleading, PROOF
Posted in foreclosure defenses, Uncategorized |