About Rafe Serouya

Rafe is a second year student at Brooklyn Law School, graduating in May 2014 with a Real Estate Law Certificate. Rafe received his B.S. from Rutgers University, Rutgers Business School with a major in Finance and minor in Music. He has interned with the New York State Office of the Attorney General in the Real Estate Finance Bureau, and is currently interning at the Brooklyn Law School Corporate and Real Estate Clinic.

D.C. District Court Rules Bank Has Standing in Foreclosure Case

In McCarter v. Bank of New York, 873 F. Supp. 2d 246 (D.D.C. 2012), Plaintiff Homeowner was issued a mortgage loan of $270,000 which was reduced to a Deed of Trust and Promissory Note. Plaintiff then applied for a loan modification, which was later denied and Defendant Bank foreclosed on Plaintiff’s property. Plaintiff sought an injunction preventing the Bank from “attempting to take any action to take possession of the property….”

The Plaintiff brought 20 causes of action in addition to her request for injunctive and declaratory relief, and damages. The Defendants argued that Plaintiff’s claims were “’conclusory,’ ‘unclear,’ and ‘insufficiently pled’” and Plaintiff also failed to provide Defendants notice of the claims being raised against them. An example of one of Plaintiff’s conclusory allegations was that “BANA sold her a ‘deceptive loan product’ and unlawfully foreclosed on her property.”

The Court said that Plaintiff failed to state a claim upon which relief could be granted, and “failed to allege facts that would allow the court to draw the reasonable inference that the defendants are liable for any of the misconduct alleged.” The Court also found Plaintiffs allegations were merely conclusory statements and were not “sufficient to raise a right to relief above the speculative level.” The Court agreed with Defendants and granted their Motions to Dismiss.

D.C. District Court Holds Bank Has Right to Record Deed and Deeds of Trust Previously Unrecorded Due to Clerical Error Not Cured By Original Property Owner

In Wells Fargo Bank, N.A. v. Wrenn, CIV.A. 08-165 (CKK), 2009 WL 1705692 (D.D.C. June 18, 2009), Wrenn purchased property from Stevens, and Wrenn simultaneously entered into a home mortgage loan transaction, pursuant to which she executed two Promissory Notes and two Deeds of Trust. Wells Fargo was the servicer and legal holder of the notes, HSBC the assignee of the notes, and MERS the legal holder of the Deeds of Trust for the benefit of Wells Fargo. There was a clerical error and the Deed from Stevens to Wrenn and the Deeds of Trust were never recorded. Plaintiffs were unable to obtain Stevens’ signature on the necessary recordation forms, and have been unable to record the Deed or Deeds of Trust.

Plaintiffs’ complaint seeks an order to compel Stevens to re-execute the Deed for the proper recordation. Stevens was served with a copy of the complaint, but he failed to timely respond. Plaintiffs wanted to move for entry of default, but could not because Stevens was engage in active military service. Counsel was appointed on behalf of Stevens which eventually revealed that Stevens had ceased his military service. Plaintiffs then filed a Motion for Default Judgment against Stevens and the Court found that “Stevens conveyed the subject property to Wrenn, and that Plaintiffs have the right to record the Deed and the Deeds of Trust. Additionally, Stevens’ failure to timely respond to the complaint resulted in a default judgment entered against him.

Idaho Bankruptcy Court Rules Banks/MERS Lacked Authority to Transfer Notes

In In re WIlhem, 407 B.R. 392 (Bankr. D. Idaho 2009), the Idaho Bankruptcy Court, ruling in 5 similar cases, held that movant banks lacked standing to seek stay relief, and therefore, denied their motions. Movants did not demonstrate possession of the note, or any transaction by which they acquired ownership of the notes in question. Movants did not establish MERS had the authority to transfer the notes, and therefore, cannot rely on the MERS assignments to establish an interest in the notes to give them standing.

Federal District Court in Virginia Rules for Banks/MERS in Foreclosure Case

In Tapia v. U.S Bank, N.A., 718 F. Supp. 2d 689 (E.D. Va. 2010) aff’d, 441 F. App’x 166 (4th Cir. 2011), the Court granted all of Defendants’ motions to dismiss. The Judge held that declaratory judgment that the foreclosure proceeding was deficient was inappropriate given that the foreclosure had already taken place. MERS was held to have standing to foreclose since the Deed of Trust authorized MERS to foreclose the Property in the event that Plaintiff Homeowners defaulted on the loan. “By signing the Deed of Trust, Plaintiffs agreed that MERS, as nominee for Lender and Lender’s successors and assigns, had the right to foreclose the Property and recognized that MERS could take any action required of Lender.” The court rejected Plaintiffs’ argument that standing is required before a foreclosure proceeding is initiated since standing is not required in Virginia, which is a non-judicial foreclosure state. The Court dismissed various other claims by Plaintiffs due to lack of factual or legal bases to support those claims.

Federal District Court in Virginia Rules for Lender/MERS in Foreclosure Case

In Merino v. EMC Mortgage Corporation, et. al., CIV.A 1:09-CV-1121, 2010 WL 1039842 (E.D. Va. Mar. 19, 2010), Plaintiff Homeowners executed two notes, and after defaulting filed suit alleging claims under the Fair Debt Collection Practices Act, claims for declaratory judgment, and quiet title. Plaintiffs challenged the authority of the various Defendants to enforce the deeds and notes that had been transferred. The Court stated that under Virginia law, “the holder of an instrument or a nonholder in possession of the instrument with the same rights as the holder may enforce the instrument.” Additionally, “absent a contrary provision, notes are generally freely transferable, and the transferee retains the right to enforce the instrument.” The Court found that “Plaintiffs offered no allegation that they reached an agreement with a noteholder or took any other action which would suffice to discharge the obligation under Virginia law.” Furthermore, as seen in many cases, the court held that the “split” of the deeds from the notes did not render the deeds unenforceable, and under Virginia law, “when a note is assigned, the deed of trust securing that debt necessarily runs with it.” The Court agreed with the finding in a similar cases that there is no basis to support Plaintiffs’ contention that because the default by Plaintiffs “triggered insurance for any losses caused” they are “discharged from the promissory notes and the Property is released from the deeds of trust. The declaratory relief count was dismissed for the same reason as in Horvath, which was that the foreclosure had already occurred. Declaratory judgment is a forward looking mechanism and would therefore serve no purpose here. Finally, the quiet title claim was dismissed because Plaintiffs offered no plausible basis on which the Court can conclude that they possessed good title to the property.

Federal District Court in Virginia Rules for Lenders/MERS in Foreclosure Case

In Ramirez Alvarez v. Aurora Loan Services, 01:09CV1306, 2010 WL 2934473 (E.D. Va. July 21, 2010), Plaintiffs purchased the property at issue by executing two promissory notes and two deeds of trust. Defendant was the holder of the first promissory note of  $436,000. Plaintiffs became delinquent in their mortgage payments and after MERS appointed a substitute trustee foreclosure occurred soon after. Defendant, the purchaser of the foreclosed property instituted an Unlawful Detainer action to remove Plaintiffs from the property and Aurora was granted possession of the property.

Plaintiffs brought multiple claims in this case all of which failed as a matter of law. Two of the claims were “that (1) the defendants lacked authority to foreclose under Virginia’s non-judicial foreclosure statutes and (2) that the loan securitization process has split the Note from the Deed of trust making it unenforceable and/or credit default swaps related to the securitization of the notes have already satisfied the Plaintiff’s mortgage obligations.” These claims were dismissed for Plaintiffs’ failure to support their claims. Additionally, the Court held that MERS had the authority and ability to enforce the terms of the security instruments.

Federal District Court in Virginia Rules for Bank/Lender Defendants in Foreclosure Case

In Horvath v. Bank of New York, 2010 WL 538039 (E.D. Va. Jan. 29, 2010) aff’d, 641 F.3d 617 (4th Cir. 2011), Plaintiff Homeowner defaulted on his loan and his was being foreclosed upon. Plaintiff filed complaint against the Bank of NY, Countrywide Home Loans and others. In Count I he was seeking a declaration that the foreclosure was “void.” This count was dismissed since declaratory relief is reserved for forward looking actions and foreclosure on the property had already occurred. In Count III he alleged that Defendant Equity Trustees as a trustee under the deeds of trust at issue breached its fiduciary duty owed to him by failing to perform “reasonable due diligence” before moving forward with the foreclosure. Under Virginia law, a trustee under a deed has no such duty, and only has the duties listed in the deed. Plaintiff did not allege that any such duties exist in the deed and therefore Count III was dismissed.

In Count IV Plaintiff also claimed that Defendants had no valid interest in the Property and sought quiet title, but he failed to allege sufficient facts to support his claim. The court in analyzing Plaintiff’s legal theory concluded that he was not “discharged from his obligation under the promissory note at issue because of his original lenders’ sale and assignment of the notes,” and also that the “split” of the promissory note from the deeds of trust does not render the deeds unenforceable.

Plaintiff also failed to allege facts sufficient to establish that Defendants Equity and Countrywide acted as debt collectors entitling him to make a claim against them under the Fair Debt Collection Practices Act.

Lastly, in Count VI, Plaintiff claimed fraud on the part of Equity and Countrywide by misrepresenting their authority to conduct a foreclosure, but failed to allege sufficient facts.

The District Court decision was later affirmed by the 4th Circuit after Plaintiff appealed. See opinion here.