Editor: David Reiss
Brooklyn Law School

November 18, 2013

Maine Supreme Judicial Court Holds that a NonHolder in Possession of a Mortgage Can Initiate a Foreclosure Action

By Karume James

The state Supreme Judicial Court of Maine in Wells Fargo Bank, N.A. v. Burek, 2013 WL 5760946 (2013) held that Wells Fargo properly initiated a foreclosure action against two homeowners, even though the court found that Wells Fargo was not the actual mortgage holder under Maine real estate law.

In the case, the Plaintiffs Kenneth and Shelley Burek entered a mortgage for $324,000 with Union Federal Bank of Indianapolis (“UFBI”) in 2004. UFBI initially sold the mortgage to Fannie Mae (this sale was not recorded) and then subsequently sold the mortgage to MERS in 2005. MERS eventually sold the mortgage to the Defendant, Wells Fargo Bank, in 2009. The Defendant executed a loan modification with the Plaintiffs in 2009 that lowered their interest rate and extended the original loan term to help them avoid foreclosure. However, Wells Fargo initiated a foreclosure action against the Plaintiffs in 2010 in Maine Superior Court after they defaulted on the mortgage.

At trial, the Plaintiff’s challenged the Defendant’s status as the mortgage holder with the right to enforce the foreclosure. The Bureks alleged that the Defendant was not the holder because the specific document designating Wells Fargo as the mortgage holder (the allonge), was not attached to the “assigning document” (sale agreement), as required under Maine’s real estate law.

While the Defendant presented evidence at trial that it was the mortgage holder, including the promissory note and loan modification agreement between both parties and the entire mortgage file that had both the allonge and the agreement, the court held that the Defendant failed to prove that it was the mortgage holder under the relevant real estate law. However, the court found that the Defendant was a “nonholder in possession” and was still entitled to enforce the foreclosure. The trial court ordered a foreclosure judgment for the Defendant in the amount of $308, 211.21.

The Plaintiffs filed a motion to amend the judgment on the grounds that 1) the unrecorded mortgage sale to Fannie Mae to undermine the chain of title from UFBI to Wells Fargo and that 2) the Defendant did not have the right to foreclose as a nonholder in possession.

The trial court denied the motions and the Plaintiff’s appealed. The Supreme Judicial Court of Maine affirmed the trial court’s judgment. The Supreme Judicial Court affirmed the judgment because the Plaintiff’s failed to raise the chain of title issue during the trial, and did not show that the Defendant acted in bad faith in “withholding” the unrecorded Fannie Mae assignment since it was in Wells Fargo’s file that was admitted into evidence.  The court also found that the Defendant was properly considered a nonholder in possession under the relevant statutes and was therefore entitled to initiate the foreclosure.

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