About Gloria Liu

Gloria is a second year student at Brooklyn Law School. She graduated from Wellesley College in 2009 with a BA in International Relations and English. She has interned with The Topps Company, Inc, and just completed an externship with Brooklyn Law School's Bankruptcy clinic. She is on the Journal of Corporate, Financial and Commercial Law and wrote her journal note on Sec. 619 of the Dodd-Frank Act. She continues to be interested by Dodd-Frank and hopes to branch into financial compliance.

United States District of Georgia Rejects Wrongful Foreclosure Claim

In Nicholson v. OneWest Bank,1:10-CV-0795-JEC/AJB, 2010 WL 2732325 (N.D. Ga. Apr. 20, 2010) , the court rejected homeowner’s wrongful foreclosure claim. Homeowners  argued that OneWest Bank was not entitled to foreclose on property because there had been no assignment of the original note from American Mortgage Express Corporation to any other party. They did acknowledge that MERS “purported” to make an assignment of the security deed to IndyMac Federal Bank FSB, but argued that there is no other transfer of record. They also argued that the splitting of the mortgage and the note rendered the mortgage a nullity. The court found that the evidence demonstrates that American Mortgage was granted a security deed and under this deed homeowners “grant[ed] and convey[ed] to MERS (solely as nominee of Lender and Lender’s successors and assigns) and the successors and assigns of MERS, with power of sale,” the property. MERS, in a document entitled “Assignment of Note and Security Deed,” conveyed to IndyMac Federal Bank FSB the Security Deed and the Note.  Afterwards, the FDIC, as receiver for IndyMac, in an Assignment of Security Deed, assigned to OneWest that certain Security Deed or Deed to Secure Debt executed by the homeowners. This document was found to demonstrate strong evidence that OneWest holds both the Security Deed under which it may exercise the power of sale and the Note. Therefore, the court held that OneWest is lawfully entitled to foreclose on Plaintiff’s property because the homeowner did not demonstrate that OneWest was not entitled to foreclose.

United States District Court of California Rejects Wrongful Foreclosure Claim

In Saldate v. Wilshire Credit Corp. 711 F.Supp.2d 1126 (CA E.D. 2010), the court granted motion to dismiss and held that non-judicial foreclosure was not “debt collection” subject to California’s Rosenthal Fair Debt Collection Practices Act (RFDCPA); loan servicer did not owe a duty to mortgagor, as would support mortgagor’s negligence claim; Real Estate Settlement Procedures Act (RESPA) did not provide a private right of action for disclosure violations; mortgagor failed to state a RESPA claim for damages resulting from loan servicer’s failure to respond to his qualified written request (QWR); mortgagor failed to state claims for fraud or negligent misrepresentation; and mortgagor failed to state a claim for wrongful foreclosure. Mortgagor completed a loan for the property with the loan terms memorialized in a promissory note which was secured by a deed of trust on the property. The deed of trust was recorded and identifies WMC Mortgage Corp. (“WMC”) as lender, Westwood Associates as trustee, and MERS as beneficiary. By a Corporate Assignment of Mortgage/Deed of Trust MERS assigned the deed of trust to Wells Fargo. By a Substitution of Trustee Quality Loan Service Corporation substituted as trustee for Westwood Associates. Quality later filed a Notice of Default and Election to Sell under Deed of Trust. The court rejected the mortgagor’s wrongful disclosure claim because the absence of an allegation of ability to tender amounts owed dooms a purported wrongful foreclosure claim. Therefore, the mortgagor’s inability to make monthly payments reflects inability to tender amounts owed to bar a claim to challenge foreclosure.

United States Western District Court Rejected Claim that MERS is not a Beneficiary

In Cebrun v. HSBC Bank USA, N.A., No. C10-5742-BHS, 2011 WL 321992 (W.D. Wash. Feb. 2, 2011), the court rejected homeowner’s claims “regarding MERS not being a beneficiary under the security instrument.” The Court considered that plaintiffs had signed a mortgage that expressly named MERS as beneficiary. The deed of trust was recorded and designated MERS as the beneficiary under the deed of trust. MERS then assigned its beneficial interest to HSBC. This assignment was made under a Pooling and Servicing Agreement and was recorded. Quality Loan Service Corporation later became the successor trustee under the deed of trust. Due to a default, the property was foreclosed and HSBC obtained the property. The court found that the claims regarding MERS not being a beneficiary under the security instrument is without merit because the homeowners did acknowledge that “MERS is the beneficiary under this Security Instrument” and therefore, had the right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument. Moreover, the court stated that other courts consistently hold, when evaluating similar deeds, that MERS acted as a beneficiary and possessed the rights set out above.

Southern District Court of Texas Dismissed Complaint that MERS Lacked Standing

In Maxwell v. Chase Home Finance, No. H-09-4038, 2011 WL 181345 (S.D. Tex. Jan. 19, 2011), the court dismissed homeowner’s “cookie cutter” complaint that MERS lacked standing to sue. Maxwell, the homeowner, alleged (1) that Chase Home Finance violated these provisions, (2) that they did not supply or execute a Promissory Note to accompany the Texas Security Deed, and (3) that the Texas Security Deed was transferred and sold without proper notice. He further complained that MERS was used to foreclose on his real property and conclusorily charged that MERS has no standing to bring an action for foreclosure. The court found most of the claims to be barred by the statute of limitations. It also found that the complaint was a “third bite of the apple” and that permitting another amendment to the complaint would not only be inappropriate, but would be prejudicial. Therefore the motion was dismissed.

Texas Court of Appeals Upholds MERS’ Authority to Conduct a Non-Judicial Foreclosure

In Athey v. MERS, 314 S.W.3d 161 (Tex. Ct. App. 2010), the appellate court affirmed trial court’s grant of summary judgment to MERS, holding that MERS was the beneficiary of the deed of trust and, therefore, had authority to conduct a non-judicial foreclosure.

The homeowners executed a promissory note payable to Decision One Mortgage Company, LLC. The note was secured by 2.5057 acres, and the homeowners executed a deed of trust that named MERS as Decision One’s nominee and the mortgagee. The note was entitled:

TEXAS HOME EQUITY NOTE

(Cash Out—Adjustable Rate—First Lien)

(LIBOR Six-Month Index (As Published in the Wall Street Journal)— Rate Caps)

THIS NOTE CONTAINS PROVISIONS ALLOWING FOR CHANGES IN MY INTEREST RATE AND MY MONTHLY PAYMENT. THIS NOTE LIMITS THE AMOUNT MY INTEREST RATE CAN CHANGE AT ANY ONE TIME AND THE MAXIMUM RATE I MUST PAY.

In contrast to this language, the homeowners contended that an unnamed representative of Decision One told them at closing that the note had a fixed interest rate. The homeowners corroborated this contention with an affidavit from a disinterested person who was also present at closing. Two years later, Decision One raised the interest rate from 7.79% to 10.79%.The homeowners became delinquent, and HomEq Servicing Corporation, as servicer for MERS, accelerated the note when the delinquency was not cured and initiated foreclosure proceedings.

With regards to their allegation of fraud, the court found that the evidence did not establish the trickery, artifice, or device necessary to void a promissory note. The oral representation upon which they rely is directly, clearly, and conspicuously contradicted by the note’s heading and introductory paragraph. They rejected the argument that a fraudulent inducement cause of action can never lie merely because the operative oral representation is contradicted by a provision within the contract.

The court also rejected the argument that there is no evidence establishing that MERS is the owner and holder of the note. It reasoned that MERS never contended that it owned or held the note and the evidence established that Decision One was the owner and holder. The court found that it was the deed of trust that clearly gives MERS the authority to initiate foreclosure.

Texas Court of Appeals Holds that MERS has Standing

Hunt v. MERS, No. 03-10-00031-CV, 2010 WL 3271966 (Tex. Ct. App. Aug. 20, 2010), the court rejected the homeowner’s argument that MERS lacked standing.  The court found that the homeowner did not present any arguments or authorities addressed to the merits but instead purports to challenge  “standing” by alleging that neither MERS, Inc., nor its successor, Deutsche Bank National Trust Company, as Indenture Trustee Under the Indenture Relating to IMH Assets Corp., Collateralized Asset-Backed Bonds, Series 2004-1, has “standing” to sue because MERS was listed on the deed of trust for the property as the “nominee” and “mortgagee,” not the “lender.” The court held that the complaint was without merit.