About Abigail Pugliese

Abigail is a third year student at Brooklyn Law School and is anticipating to graduate in May 2013 with a Real Estate Law Certificate. Abigail received her B.S. from Villanova University, majoring in Accounting with minors in Real Estate and Business Law. She has interned with CBRE, Barton LLP, the New York State Office of the Attorney General in the Real Estate Finance Bureau, and the Housing Partnership Development Corporation. She is currently interning with Abrams Garfinkel Margolis Bergson LLP.

Eleventh Circuit Holds that Claim under TILA is Time-barred

In Johnson v. Mortgage Electronic Registration Systems, Inc., 252 Fed. Appx. 293 (11th Circ. 2007), the Eleventh Circuit dismissed borrower’s claims under the Truth in Lending Act (“TILA”), because they were time-barred.

On March 17, 2001 Johnson executed a loan from Homegold Financial Inc. The loan was transferred to Household Mortgage Services (“Household”) and MERS held the security deed as nominee for Household. Plaintiff filed a complaint alleging that Household and MERS “failed to make certain disclosures required by [TILA] and sought rescission of her loan and other remedies.” MERS moved to dismiss and the District Court granted summary judgment in favor of MERS. Plaintiff appealed.

Under TILA, the borrower is entitled to a right of rescission, which is “triggered” either (1) by notifying the creditor or (2) “in the face of a judicial or non-judicial foreclosure.” Both of these rights to rescission expire upon the three-year anniversary of the loan transaction. Since Johnson exercised her right to rescission three years and six months after executing the loan, her claim is barred. Since she did not show fraud, the district court properly granted summary judgment.

Georgia District Court Allows Homeowner Plaintiff to Amend Fraud Claim but Dismisses Wrongful Disclosure Claim

In LaCosta v. McCalla Raymer, Civil Action No. 1:10-CV-1171-RWS, 2011 WL 166902, Civil Action (N.D. Ga. January 18, 2011), the Court ruled that Homeowner Plaintiff could amend her fraud claim, but dismissed Plaintiff’s other claims stemming from an alleged modification on her loan and subsequent foreclosure.

Plaintiff executed a loan and note from Home America Mortgage, Inc. in 2008 and granted a security deed to MERS, which granted MERS power of sale and the power to foreclose on the property. Subsequently, MERS assigned the security deed to BAC Home Loans {“BAC”). Plaintiff attempted to arrange a mortgage modification with BAC and represents that BAC agreed to a monthly payment of $837.00 until the modification was finalized. Despite paying $837.00 per month, the loan was declared to be in default. BAC initiated foreclosure and Plaintiff filed claims objecting to the foreclosure. Plaintiff also moved for a temporary restraining order, while Defendant moved to dismiss for failure to sufficiently state a claim.

The District Court denied Plaintiff’s motion for a temporary restraining order since Plaintiff did not show “a substantial likelihood of success on the merits of her wrongful foreclosure claim.” The Court dismissed Plaintiff’s claim for wrongful disclosure, because “Plaintiff unequivocally granted MERS the power to sell the Property if she were not able to comply with the terms of the Note,” and for defective notice of foreclosure sale since Georgia law does not assert that “a secured creditor may not utilize an agent to serve notice on a debtor of the initiation of foreclosure proceedings.” Further, the Court dismissed Plaintiff’s claim for an invalid assignment because Plaintiff cited no relevant Georgia Statute or relevant case law that stated BAC needed to have an ownership interest in the Deed and the Note. Finally, the Court dismissed Plaintiff’s FDCPA Claim because notice of the foreclosure to Plaintiff was proper.

With regard to Plaintiff’s fraud claim “based upon representations supposedly made by Defendant BAC concerning a modification of [Plaintiff’s] mortgage,” the Court gave Plaintiff an opportunity to amend her Complaint since the Complaint currently fails to “provide the requisite level of detail needed to adequately allege fraud.”

Eleventh Circuit Court of Appeals Affirms Dismissal because Mortgagor Plaintiff Failed to State a Claim

In Milani v. One West Bank FSB, 491 Fed. App’x. 977 (11th Circ. 2012), the Court of Appeals affirmed the District Court’s decision to dismiss Mortgagor Plaintiff’s claims for (1) wrongful foreclosure, (2) to quiet title, and (3) for fraud.

In 2005, Plantiff refinanced his home by signing an adjustable-rate note with IndyMac Bank, FSB and a security deed with Defendant MERS, which granted MERS power of sale on the property. MERS subsequently assigned the security deed to Defendant OneWest Bank. Plaintiff failed to make payments and Defendant OneWest Bank foreclosed on his property. Plaintiff then filed a complaint alleging that OneWest Bank cannot foreclose because the Defendants illegally securitized residential mortgages and because the assignment to Defendant OneWest Bank was fraudulent. The District Court granted Defendant’s motion to dismiss and Plaintiff appealed.

Because Plaintiff acknowledged that MERS assigned the security deed to Defendant OneWest Bank, “Plaintiff’s complaint does not contain sufficient factual matter – accepted as true – to state a wrongful foreclosure claim that is plausible on its face.” Further, Plaintiff has not stated a fatal defect in Defendant OneWest Bank’s title and therefore Plaintiff’s quiet title claim also fails. Finally, Plaintiff’s fraud claim fails because Defendant OneWest Bank did not have “a duty to disclose or communicate the material information” nor did Plaintiff identify a materially false representation that Defendant made. Thus, there was no error in the District Court’s decision to dismiss and deny Plaintiff leave to amend his complaint.

Michigan District Court Dismisses Mortgagor’s Claims to Void a Foreclosure Sale Because the Redemption Period Had Expired

In Duff v. Federal Nat. Mortg. Ass’n, No. 2:11-cv-12474, 2012 WL 692120 (E.D. Mich. Feb. 29, 2012), the District Court dismissed Mortgagor Plaintiff’s claims to void the foreclosure sale because Plaintiff failed to state a claim and the period of redemption had expired.

In 2007, Mortgagor Plaintiff refinanced his home with Quicken Loans, Inc., and MERS was the mortgagee. Subsequently, MERS assigned the mortgage to Defendant JP Morgan Chase Bank (“Chase”). Plaintiff defaulted and Chase initiated foreclosure by advertisement. “Plaintiff’s house was sold at a Sheriff’s Sale to Defendant Fannie Mae.” The Sheriff’s deed was executed and the six-month redemption period had ended when Plaintiff was served with a complaint to terminate Plaintiff’s tenancy of the property. Plaintiff then commenced an action asserting four separate claims, and Defendant moved for summary judgment.

Before dismissing each of Plaintiff’s claims individually, the District Court noted that Plaintiff lacks standing to bring any claim regarding this matter. Since Plaintiff commenced the lawsuit after the redemption period and did not show irregularity, “Plaintiff . . . lack[s] standing to challenge the foreclosure of, and his eviction from, the property.”

In Plaintiff’s first claim, Plaintiff, relying on Residential Funding v. Saurman, 805 N.W.2d 183 (Mich. 2011) and Bakri v. MERS, No. 297962, 2011 WL 3476818 (Mich. Ct. App. Aug. 9, 2011), argued that Defendant had no power to foreclose because the “assignment is not sufficient to establish a record chain of title as required by MCL §600.3204 since MERS did not have an interest to assign to Chase.” However, Bakri v. Mers relied on Residential Funding v. Saurman in reaching this conclusion. Later, Residential Funding v. Saurman was overturned on appeal. Accordingly, the Court here declined to follow Bakri v. Mers and dismissed this claim.

Counts Two, Three, and Four were similarly dismissed. Plaintiff claimed “defendants violated the Home Affordable Modification Program . . . under both a negligence theory (Count II) and a breach of contract theory (Count III).” These arguments both failed because the Home Affordable Modification Program provides no private right of action. Lastly, Plaintiff asserted an equitable estoppel claim. The District Court dismissed this claim since it is a defense and cannot be asserted by a plaintiff in a cause of action.

Michigan Court of Appeals Holds that Foreclosure is Void Because Mortgagee Commenced the Foreclosure Before It Obtained an Interest in the Indebtedness

In Davenport v. HSBC Bank USA, 739 N.W.2d 383 (Mich. Ct. App. 2007), the Court of Appeals held that the foreclosure was void ab initio because Assignee Defendant did not have an interest in the indebtedness secured by the mortgage when it commenced the foreclosure proceedings.

Mortgagor Plaintiff executed a mortgage. “The initial mortgagee assigned its interest to another entity, which in turn assigned the mortgage to defendant on October 31, 2005.” Plaintiff defaulted on the mortgage and “Defendant initiated foreclosure proceedings, publishing its first notice on October 27, 2005.” At the sheriff’s sale, Defendant purchased the property. Plaintiff commenced a lawsuit in order to have the foreclosure voided and “any continuing proceedings enjoined, on the ground that defendant published its first notice of foreclosure several days before it actually acquired its interest in the indebtedness.” The trial court granted summary judgment in favor of the Defendant. Plaintiff appealed.

The Court of Appeals held that the trial court erred in granting summary judgment in favor of the Defendant, and that “the foreclosure proceedings were void ab initio.” According to MCL §600.3204(1)(d), the foreclosing party must be “either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage.” Here, Defendant admitted it did not own the mortgage when it commenced the foreclosure. Further, this “is not a mere notice defect,” which would render a foreclosure by advertisement voidable. Rather, “it is a structural defect that goes to the very heart of defendant’s ability to foreclose by advertisement in the first instance.” Accordingly, the foreclosure was void ab initio.

Note: This case was abrogated by Kim v. JPMorgan Chase Bank.

Michigan District Court Grants MERS’s Motion for Summary Judgment because, as Mortgagee, MERS had Standing To Foreclose

In Corgan v. Deutsche Bank National Trust Co., No. 1:09-cv-939, 2010 WL 2854421 (W.D. Mich. July 20, 2010), the District Court granted MERS’s motion for summary judgment because MERS had the right to foreclosure as “Mortgagee” pursuant to the mortgage documents.

Mortgagor Plaintiff executed a loan agreement with the note naming MERS as the “Mortgagee” and Decision One Mortgage Company as “Lender.” The note was transferred to Deutsche Bank. Later, Mortgagor Plaintiff signed a modification agreement. Then, Mortgagor Plaintiff defaulted on the note and MERS commenced foreclosure proceedings and was eventually granted a sheriff’s deed. Plaintiff claims that MERS had no standing to initiate foreclosure proceedings since it is not the owner of the mortgage note.

The Court concluded that Plaintiff agreed that MERS had the right to foreclose on the property because such right was expressly stated in the mortgage, and was not changed by any subsequent change in ownership. Thus, the Court granted summary judgment in favor of MERS.

Michigan Appellate Court Holds that Party with Ownership of an Interest in the Note May Only Foreclose by Judicial Process

In Bakri v. MERS, No. 297962, 2011 WL 3476818 (Mich. Ct. App. Aug. 9, 2011), the Court of Appeals held that Defendants may only foreclose by judicial process since they only had an ownership interest in the note, and not an ownership interest in the indebtedness secured by the mortgage.

In 2004, Mortgagor Plaintiff entered into a loan with America’s Wholesale Lender and granted Defendant MERS a mortgage on the property. MERS assigned the mortgage to Defendant Bank of New York Mellon. Mortgagor Plaintiff defaulted and Defendant Trott & Trott served a Notice of Mortgage by Foreclosure Sale. Mortgagor Plaintiff filed an action to quiet title to the property and invalidate the mortgage it granted to MERS and the assignment of the mortgage to Defendant Bank of New York Mellon. Defendants moved for summary disposition. The trial court granted the motion and Plaintiff appealed.

The Court of Appeals reversed the Trial Court’s decision, which granted summary judgment in favor of the Defendants. The Court stated that the mortgage and the assignment thereof were valid, but Defendants only had the power to foreclose by judicial process and not by advertisement. The mortgage plaintiff granted to MERS stated that “MERS had the power to assign the mortgage and that MERS and its assigns had the power to sell the property…(and) MERS could foreclose on the property.” However, “[b]ecause defendant Bank of New York Mellon did not possess an interest in the indebtedness, it was not authorized to foreclose by advertisement on plaintiff’s property . . . . Instead, defendant Bank of New York Mellon must seek to foreclose by judicial process.” (citing Residential Funding Co., LLC v. Saurman, 292 Mich. App. 321 (2011).

Notes: (1) Duff v. Federal Nat. Mortg. Ass’n, No. 2:11-cv-12474, 2012 WL 692120 (E.D. Mich. Feb. 29, 2012) declined to follow this case. (2) Residential Funding Co., LLC v. Saurman, 292 Mich. App. 321 (2011), was cited by this case, but was overturned on appeal in Residential Funding v. Saurman, 805 N.W.2d 183 (Mich. 2011).