Author Archives: Abigail Pugliese

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.

Michigan Court Holds that Foreclosure Sale May Be Voidable When Assignee Does Not Record the Mortgage Before Foreclosure

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In Kim v. JPMorgan Chase Bank, N.A., 825 N.W2d 329 (Mich. 2012), the court held that a foreclosure sale was voidable since the assignment of the mortgage to Defendant Bank was not recorded.

Mortgagor Plaintiffs executed a mortgage agreement with Washington Mutual Bank (“WaMu”) in 2007. In 2008, WaMu collapsed and its receiver, the Federal Deposit Insurance Corporation (“FDIC”), transferred the mortgage to JP Morgan Chase (the “Bank”) pursuant to a purchase and sale agreement. In 2009, Mortgagor Plaintiffs sought to modify the loan and a WaMu representative told them they were not eligible for a modification until they were three months in arrears. Accordingly, Mortgagor Plaintiffs stopped paying their mortgage in order to be eligible for a modification. Instead of modifying the loan, Defendant Bank foreclosed and sold the property to itself at a sheriff’s sale even though it had not recorded the mortgage assignment. Mortgagor Plaintiffs filed a lawsuit claiming they had received a loan modification and that Defendant Bank did not pay fair market value at the sheriff’s sale. Defendant Bank moved for, and was granted, summary judgment on the basis that the mortgage transfer was by operation of law. “As a consequence MCL 600.3204(3), which requires that a mortgage assignment be recorded before initiation of a foreclosure by advertisement, was inapplicable.” Plaintiffs appealed and the Court of Appeals held that the foreclosure sale was void ab initio because Defendant Bank did not obtain mortgage by operation of law and therefore had to comply with MCL 600.3204(3). Defendant appealed.

The Supreme Court of Michigan reversed the Court of Appeals’ decision in part and held that the foreclosure was “voidable, not void ab initio.” The Court stated that the transfer here was not by operation of law since the Defendant Bank paid cash in exchange for the mortgage, and therefore Defendant Bank had to comply with MCL 600.3204(4), which “requires a party that is not the original mortgagee to record the assignment of the mortgage to it before foreclosing.” However, “defects or irregularities in a foreclosure proceeding result in a foreclosure that is voidable, not void ab initio.” The case was remanded to the trial court to determine whether Mortgagor Plaintiffs could prove the foreclosure sale was voidable.

Ohio Appellate Court Holds that Bank Has Standing even though Assignment Was Not Recorded Before Bank Initiated Foreclosure Action

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In Deutsche Bank Nat’l Trust Co. v. Ingle, No. 92487, 2009 WL 2400852 (Ohio Ct. App. Aug. 6, 2009), the Court of Appeals upheld the trial court’s decision to grant summary judgment in favor of Deutsche Bank National Trust Company (the “Bank”) because the assignment to the Bank was executed before the Bank initiated the foreclosure action.

In 2006, mortgagor executed a purchase money mortgage loan and adjustable rate note from First Franklin, granting the mortgage to MERS as nominee. In 2008, the note was sold and the mortgage assigned to the Bank. Afterward, the Bank foreclosed on the property. After the Bank initiated the foreclosure action, it recorded the assignment. The court granted summary judgment in favor of the Bank, and mortgagor appealed.

The Court of Appeals ruled the Bank had standing to initiate the foreclosure action. Although the Bank did not record the assignment until after the complaint was filed, the mortgage and note were assigned before the Bank filed the foreclosure action. Further, mortgagors never requested an oral hearing, never filed a brief in opposition to the Bank’s motion, and never requested an extension of time to file an opposition brief. Moreover, mortgagors did not provide any evidence to prove their affirmative defenses, counterclaims, or the existence of any material issues of facts.  Thus, the trail court correctly granted summary judgment to the Bank as a matter of law.

Ohio Appellate Court Affirms Summary Judgment in Favor of Bank Despite Bank Commencing Foreclosure Action Before Executing Mortgage Assignment

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In Bank of New York v. Stuart, No. 06CA008953, 2007 WL 936706 (Ohio Ct. App. March 30, 2007), the appellate court affirmed summary judgment in favor of the Bank of New York (the “Bank”) despite the fact that the Bank initiated the foreclosure action before the mortgage was assigned to the Bank.

Mortgagors executed a mortgage and note with Countrywide Home Loans, Inc. (“Countrywide”). On May 16, 2005, the Bank foreclosed on the property as trustee, while mortgagors denied the Bank was the lawful holder of the note. The Bank then filed a motion for summary judgment and attached an assignment dated October 19, 2005 from Countrywide. The trial court granted this motion and mortgagors appealed.

The appellate court affirmed summary judgment in favor of the Bank. The court stated, “this Court has found case law to support [Bank’s] claim that filing the assignment with the trial court before judgment was entered was sufficient to alert the court and [mortgagors] that [Bank] was the real party in interest.” Therefore, mortgagors were not prejudiced by the assignment and the Bank “was a real party in interest for the purposes of filing the foreclosure action.”

Ohio Court Holds that a Bank Cannot Cure Lack of Standing by a Subsequent Mortgage Assignment

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In Wells Fargo Bank, Nat’l Assoc. et al. v. Byrd, 897 N.E.2d 722 (Ohio Ct. App. 2008), the Court of Appeals ruled that Wells Fargo (the “Bank”) lacked standing because it commenced a foreclosure action before executing a mortgage assignment.

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Mortgagors executed a note and mortgage with WMC Mortgage Corporation (“WMC”). On January 23, 2007, the Bank filed a complaint for foreclosure against mortgagors. On March 2, 2007, WMC assigned the note and mortgage to the Bank. The magistrate entered summary judgment for the Bank. However, the trial court dismissed the case with prejudice. The Bank appealed.

The court held “that in a foreclosure action, a bank that was not the mortgagee when suit was filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage.” Civ. R. 17(A), which states “no action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest,” is inapplicable in this case since the Bank did not join or substitute WMC in the case, nor did WMC ratify the Bank’s action. The court also ruled that this dismissal should be without prejudice, because it was not a dismissal on the merits.

Ohio Appellate Court Holds that Bank Lacks Standing Because It Commenced a Foreclosure Action Before Mortgage Was Assigned to Bank

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In Wells Fargo Bank, N.A. v. Jordan, No. 91675, 2009 WL 625560 (Ohio Ct. App. March 12, 2009), the Ohio Court of Appeals ruled that the trial court erred in granting summary judgment, because Wells Fargo (the “Bank”) was not the real party in interest on the date it filed its complaint for foreclosure.

In 2003, mortgagor executed a note and mortgage with Delta Funding Corporation. In 2007, mortgagor defaulted on the loan, and the Bank filed a complaint for judgment, foreclosure, and relief on August 3, 2007. On August 22, 2007, the mortgage was assigned to the Bank. The trial court granted the Bank’s motion for summary judgment and motion to dismiss. Mortgagor appealed.

This court reversed and remanded the trial court’s decision to grant summary judgment to the Bank. In doing so, the court cited Wells Fargo Bank, N.A. v. Byrd, 897 N.E.2d 722 (Ohio Ct. App. 2008), which held that “in a foreclosure action, a bank that was not the mortgagee when suit was filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage.” Here, the mortgage was not assigned to the Bank until three weeks after the Bank filed for foreclosure. Thus, the Bank did not have standing when it initiated the action.

Maine Court Upholds Summary Judgment in Favor of Bank

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In JPMorgan Chase Bank v. Harp, 10 A.3d 718 (Me. 2011), the court held that summary judgment in favor of the bank was proper, even though the Bank did not own both the mortgage and note when it filed its complaint.  Summary judgment was proper because the Bank had cured this defect at the time it filed for summary judgment, and because it met all other criteria for summary judgment.

In 2005, mortgagor “executed a note and mortgage to Nationwide Lending Corporation (“Nationwide”). An allonge to the note provided that payments would be made to Long Beach Mortgage Company.” In 2008, Washington Mutual, the successor to Long Beach Mortgage Company notified mortgagor he was in default for missed payments. In 2008, JPMorgan filed a foreclosure complaint against mortgagor. However, the assignment from Nationwide was not made until a month later, and was not recorded for a month after that. Still, the court granted summary judgment to JP Morgan. Mortgagor appealed.

The court concluded that the district court did not err in granting summary judgment since JPMorgan owned the note and mortgage at the time it filed for summary judgment. While it is true that “at the commencement of litigation, JPMorgan owned the note,” mortgagor failed to raise this issue until JPMorgan cured the defect. Moreover, pursuant to M.R. Civ. P. 17(a), JPMorgan’s failure to secure the assignment before commencing litigation was an “understandable mistake,” which did not change the cause of action or prejudice mortgagor.

Maine Court Holds MERS Lacks Standing, Allows Bank to be Substituted to Prosecute the Foreclosure Action, but Overturns Bank’s Summary Judgment Motion Because of Flawed Procedure

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In Mortgage Elec. Registration Sys., Inc. v. Saunders, 2 A.3d 289 (Me. 2010), the Supreme Court of Maine holds that (1) MERS lacks standing in the foreclosure action; (2) the substitution of the bank for MERS in the litigation was proper; and (3) summary judgment should not be granted.

In 2006, Mortgagor executed a note and mortgage with Accredited Home Lenders, Inc. (“Accredited”). The mortgage, not the note, mentioned that MERS was nominee for Accredited, had legal interest, and was the “mortgagee.” In 2009, MERS filed a complaint for foreclosure and moved for summary judgment, which was denied by the court. Deutsche Bank National Trust Company (“Bank”) then “moved . . . to substitute itself for MERS in the foreclosure proceedings,” noting that Accredited transferred the note to the Bank and that MERS transferred its interest in the note and mortgage to the Bank. The district court granted the Bank’s motion for substitution of parties, and later, granted the Bank’s motion for summary judgment. Mortgagor appealed.

The court here holds that MERS lacked standing to bring the foreclosure complaint. Despite being identified as a “mortgagee” in the mortgage document, “MERS is not a mortgagee pursuant to 14 M.R.S. § 6321 because it has no enforceable right in the debt obligation securing the mortgage.” Additionally, MERS did not prove it “suffered an injury fairly traceable to an act of the mortgagor and that the injury is likely to be redressed by the judicial relief sought.” Moreover, MERS lacks possession of any interest in the note.

The court also ruled that substitution of the Bank for MERS was permissible under M.R. Civ. P. 17(a) because MERS’s “prosecution of the case in its name is an understandable mistake. Further, the substitution did not “alter the cause of action” or “create any prejudice to the [mortgagors].”

The court also concluded that the district court erred in granting summary judgment “because . . . the flawed procedure . . . led to the court’s entry of foreclosure and sale and because there are genuine issues of material fact.” First, M.R.Civ. P. 52(b) and 52(e) “do not allow for reconsideration or amendment in the absence of a final judgment.” Second, the Bank’s motion to alter or amend did not include reference to the location, or street address, of the mortgaged property, pursuant to 14 M.R.S. § 6321.