Author Archives: Gloria Liu

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.

California Court of Appeals holds that MERS Does Not Bear Burden of Proving Valid Assignment

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In Fontenot v. Wells Fargo Bank N.A, No. A130478, 198 Cal.App.4th 256 (Ca. Ct. App. 1st Dist. Aug. 11, 2011), Fontenot sued Wells Fargo Bank, MERS and three other entities after she defaulted and lost the property to foreclosure. In the fourth amended complaint, plaintiff alleged the foreclosure was unlawful because Wells Fargo had breached an agreement to forbear from foreclosure, and MERS made an invalid assignment of an interest in the promissory note relating to the property.

Fontenot had given Alliance Bancorp a $1 million promissory note, secured by a deed of trust in the purchased real property. MERS was identified as the “nominee” of the lender in the deed of trust. The court held that first, MERS did not bear the burden of proving a valid assignment and second, the lack of a possessory interest in the note did not necessarily prevent MERS from having the authority to assign the note. It reasoned that MERS may have had no power in its own right to assign the note, since it had no interest in the note to assign, MERS did not purport to act for its own interests in assigning the note. Rather, the assignment of deed of trust states that MERS was acting as nominee for the lender, which did possess an assignable interest.

The court also found that there was nothing inconsistent in MERS’s being designated both as the beneficiary and as a nominee. The legal implication of the designation is that MERS may exercise the rights and obligations of a beneficiary of the deed of trust, a role ordinarily afforded the lender, but it will exercise those rights and obligations only as an agent for the lender, not for its own interests.

New Mortgage Rule Said to be Proposed at End of August

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U.S. regulators will propose a new version of a rule requiring lenders to keep a stake in risky mortgages that they securitize in the last week of August.

Currently, the draft regulation numbers 500 pages and will be written by a panel of six agencies. It will replace a more stringent proposal for the Qualified Residential Mortgage rule.

The plan will require banks to retain a slice of mortgages when borrowers are spending more than 43 percent of their monthly income on all of their debt. The earlier version would have required banks to keep a stake in loans when borrowers were spending more than 36 percent of their income on all loan payments and in loans with a down payment of less than 20 percent. The rule will carve out mortgages backed by Fannie Mae and Freddie Mac.

https://www.bloomberg.com/news/2013-08-13/softer-u-s-mortgage-rule-said-to-be-proposed-at-end-of-august.html

GMAC to Pay Out

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In a statement by the Federal Reserve, GMAC Mortgage will pay $230 million to compensate borrowers for improper handling of foreclosures. GMAC Mortgage will pay about 232,000 borrowers to settle claims it improperly seized homes. In a deal similar to those regulators struck with 13 other mortgage servicers this year, the money goes to borrowers who faced foreclosure in 2009 and 2010.

Story here: https://www.bloomberg.com/news/2013-07-26/gmac-deal-with-fed-calls-for-230-million-to-pay-back-borrowers.html

Pre-Closing Credit Checks

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Since 2010, Fannie Mae has required lenders to recheck a borrower’s credit right before closing the mortgage. It is advised that borrowers not do anything that might affect their financial status quo until the mortgage has been closed. For example, purchasing a $3000 flat-screen television on a new credit card account may cause the loan to be sent back to underwriting.

Article can be found: https://www.nytimes.com/2013/07/07/realestate/pre-closing-credit-checks.html?adxnnl=1&adxnnlx=1373291990-/8qE0gsWAwJBjANdXsiVSw

S&P Seeking Dismissal of Suit

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In the wake of the 2008 Financial Crisis, Standard & Poor’s (S&P) has been accused of inflating its ratings to win business during the boom in mortgage investments. The Justice Department brought civil fraud charges accusing S.& P of knowingly giving complex packages of mortgages higher ratings than they deserved, stoking investor demand for the securities and driving up prices to where they crashed.

It has urged the court to dismiss the federal government’s civil case against it, saying the Justice Department had built a faulty complaint on “isolated snippets” of conversations rather than evidence of real wrongdoing. A hearing is scheduled for May 20.

Article here.

Bounced Mortgage Relief Checks

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In February, federal banking regulators reached a $9.3 billion pact with 13 major lenders to settle claims of foreclosure abuses like bungled loan modification and flawed paperwork. Under the deal, homeowners can receive up to $125,000 in cash relief.

Unfortunately, as some of the 1.4 million homeowners entitled to settlement funds went to go cash their much-anticipated checks, they found themselves on the receiving end of some bad news– the “funds were not available.”

Since the settlement, there have been a number of problems. For example, in Ohio, problems arose at Rust Consulting, a firm chosen to distribute the checks. After collecting the $3.6 billion from the banks, Rust had failed to move the money into a central account for distribution. Second, there have been bureaucratic delays like those arising from checks made out jointly to estranged divorcees.

Even though the settlement is supposed to bring relief to million of homeowners, this fiasco of “bounced checks” is just one of the latest “runarounds” leaving homeowners increasingly exhausted at the process.

 

Article here.

Read about settlement here.

Massachusetts Bankruptcy Court Denies Motion for Relief from Stay

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In In Re Hayes, 393 B.R. 259, 261-62 (Bankr. D. Mass. 2008), the Debtor, Hayes, filed a voluntary Chapter 13 petition involving property encumbered by a mortgage, which secured an adjustable rate note. The note and mortgage identified Argent Mortgage Company, LLC as the Lender.  AMC Mortgage Services then filed a proof of claim and attached a copy of the note and mortgage, as well as a loan history. 16 months after AMC filed a proof of claim on behalf of Argent Mortgage Company, LLC, it filed a “Transfer of Claim Other Than for Security” pursuant to which “AMC purported to transfer the proof of claim it filed on behalf of Argent Mortgage Company, LLC to Citi Residential Lending, Inc., as loan servicer for the secured creditor Deutsche Bank National Trust Company, as Trustee, in trust for the registered holders of Argent Securities Inc.” Deutsche Bank then filed a Motion for Relief from Stay.

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The court found that Deutsche Bank failed to establish that Argent Mortgage Company, LLC effectively assigned the mortgage executed by the Debtor to it or that Argent Mortgage Company, LLC’s grant of authority to Citi Residential Lending, Inc. under the Limited Power of Attorney was sufficient to empower Citi Residential Lending, Inc. to execute the Confirmatory Corporation Assignment, on its behalf, so as to effectively transfer the mortgage Argent Mortgage Company, LLC to Deutsche Bank. Therefore, citing authority that states that “those parties who do not hold the note or mortgage and who do not service the mortgage do not have standing to pursue motions for relief or other actions arising from the mortgage obligation,” the court denied Deutsche Bank’s Motion for Relief from Stay.