March 5, 2014
Illinois Court Finds that Assignment was Proper, Thus Wells Fargo Could Foreclose
The court in deciding Wells Fargo Bank, N.A. v. Abatangelo, 2013 IL App (1st) 130423-U (Ill. App. Ct. 1st Dist. 2013) affirmed the lower court’s ruling in favor of plaintiff Wells Fargo. The court determined Wells Fargo had standing to bring the foreclosure action.
Mr. Abatangelo challenged the lower court’s grant of summary judgment on Wells Fargo’s foreclosure complaint, specifically its finding that Wells Fargo had standing to foreclose on the mortgage. On this appeal, Mr. Abatangelo contended that the lower court erred in granting summary judgment because (1) the mortgage contract did not properly assign the right to foreclose to Wells Fargo; and (2) the trial court improperly considered new arguments raised by Wells Fargo for the first time in a reply brief in support of their motion to dismiss.
After considering the arguments put forward by Abatangelo the court affirmed the lower court decision.
March 5, 2014 | Permalink | No Comments
The Court found That Bank of America had Standing Even After Merger
The court in deciding Bank of Am., N.A. v. Harris, 2013-Ohio-5749 (Ohio Ct. App., Cuyahoga County 2013) found Bank of America had standing after merger.
Plaintiff moved for summary judgment arguing that Bank of America lacked standing to foreclosure because the bank was “a party solely by virtue of a purported assignment from MERS.” Plaintiff argued that MERS had no authority to assign the mortgage to Bank of America, and thus, Bank of America had no standing to bring the suit.
The court found that the bank had standing to bring a foreclosure action because it was the real party in interest at the time that a foreclosure complaint was filed. The court noted that a party who received an assignment of mortgage from MERS as a nominee had standing to foreclose when the borrower defaulted. The court found that here the bank had possession of the note, therefore, it was the current holder of the note and entitled to enforce it under R.C. 1303.31. Further, the court found that after the merger, the bank stepped into the shoes of the absorbed company and had the ability to enforce, thus no further action was necessary to become a real party in interest.
March 5, 2014 | Permalink | No Comments
United States District Court Rejects Claim Under the Washington Consumer Protection Act
The United States District Court for the Western District of Washington in deciding Massey v. BAC Home Loans Servicing LP, 2013 U.S. Dist. 180472 (W.D. Wash. Dec. 23, 2013) granted defendants’ motions for summary judgment.
Plaintiff Cindy T. Massey asserted a claim under the Washington Consumer Protection Act against defendants in connection with non-judicial foreclosure proceedings. Defendants Freddie Mac and MERS, together, brought a separate motion for summary judgment. After considering the plaintiff’s arguments the court granted defendants’ motions for summary judgment.
In regards to her CPA claim the court found that the plaintiff failed to identify any deceptive acts perpetrated by Freddie Mac. For that reason alone the CPA claim against Freddie Mac failed.
Ms. Massey also argued that Bank of America did not possess the authority to initiate non-judicial foreclose proceedings on the property for various reasons, the primary of which was the characterization of MERS as the beneficiary on the deed of trust. Specifically, Ms. Massey argued that the assignment of the deed of trust to Bank of America was void, that the Appointment of Northwest Trustee as successor trustee was void, and that Bank of America did not hold the Note when it initiated foreclosure. After considering this argument the court found that they were without merit.
March 5, 2014 | Permalink | No Comments
March 4, 2014
Housing Affordability Challenges
The Center for Housing Policy has issued a report, The Housing Affordability Challenges of America’s Working Households. It finds that
Overall, 15.6 percent of all U.S. households (18.1 million households) were severely housing cost burdened in 2012. Severely cost burdened households are those that spend more than half of their income on housing costs. Renter households are more than twice as likely to be housing cost burdened than owner households. In 2012, 24.7 percent of all renter households were severely burdened compared to 10.5 percent of all owner households. (1)
Unsurprisingly, “the nation’s lowest income households face the most severe challenges” as nearly “eight in ten extremely low-income working households, and over a third of very low-income working households, are severely housing cost burdened.” (3) The paper concludes that “unless housing production increases substantially — particularly in the highest cost markets — rents are going to continue to rise . . ..” (4)
This simple point — that there is not enough supply to meet demand is made time and again by scholars and policy analysts. But that simple truth bangs up against the arguments of those who oppose development for a variety of reasons: because it can be an agent of localized gentrification, because it changes the fabric of communities, because it can benefit business interests.
There is some truth to all of these arguments and many people can make them in good faith. But one cannot be a proponent of affordable housing without supporting a meaningful increase in housing production. Here in NYC, the de Blasio Administration has appeared to embrace this fundamental truth. In many parts of the country, however, people claim to support affordable housing and strict limits on housing construction. Affordable housing advocates have to call them out on that contradiction as the two policies are in direct conflict with each other.
All the demand side subsidies in the world (like Section 8 vouchers) won’t get people into housing if the supply isn’t there in the first place. Build it and working households will be sustainably housed. Don’t build it and they won’t be.
March 4, 2014 | Permalink | No Comments
March 3, 2014
United States District Court Rejects Show-me-the-Note Theory and SpIit-the-Note Theory Claims
In deciding McWright v. Bank of Am., N.A., 2013 U.S. Dist. LEXIS 180500 (N.D. Tex. Nov. 7, 2013) the United States District Court for the Northern District of Texas rejected the plaintiff’s claims.
In her complaint, plaintiff raised the following causes of action: (1) violation of the federal Fair Debt Collection Practices Act, (2) Negligence, (3) Fraud, (4) Declaratory relief, and (5) Quiet Title. Because many of these claims were premised upon unfounded legal theories, the court first addressed the underlying theories before turning to the merits of each of plaintiff’s claims. In addressing the plaintiff’s claims the court uniformly rejected them.
Plaintiff unsuccessfully contended that defendants were required to show proof that they are the holder of the note prior to foreclosing on the property. However, the court noted that this “show-me-the-note” theory has been regularly rejected and would so be in this case as well.
To the extent plaintiff argued that MERS lacked the authority to transfer the loan, the court found that such an argument similarly fails. Moreover, the court denied the remaining plaintiff’s claims as lacking merit.
March 3, 2014 | Permalink | No Comments
Kansas Court of Appeals Upholds Summary Judgment in Favor of Wells Fargo
The Court of Appeals of Kansas in deciding Wells Fargo Bank, N.A. v. Richards, 2013 Kan. App. LEXIS 1160 (Kan. Ct. App. 2013) ultimately affirmed the lower court’s granting of summary judgment for Wells Fargo.
Plaintiff appealed the lower court’s decision granting summary to Wells Fargo Bank.
In this appeal, plaintiff asserted that (1) Wells Fargo lacked standing to bring the foreclosure action; (2) the lower court erred in holding Wells Fargo’s possession of the promissory note he signed was insufficient to enforce and foreclose the mortgage it secures; (3) Wells Fargo did not experience/suffer a default; (4) there was no contract because the note and mortgage were split; and (5) Richards was not afforded due process.
After examining the record and considering the arguments of the parties, this court held that there was no merit to any of Richards’ arguments. Consequently, this court affirmed the lower court.
March 3, 2014 | Permalink | No Comments
Fannie and Freddie Boards: Caveat Fairholme
Fairholme Capital Management has sent stern letters to the the boards of Fannie Mae and Freddie Mac (the letters are essentially the same). Fairholme’s funds have millions of common and preferred shares in the two companies and Fairholme has taken a multi-pronged to trying to wring some value out of those shares. It has sued the federal government. It has offered to buy the two companies’ mortgage guaranty operations. Now, it is threatening the board of the two enterprises with personal liability for their actions and inaction.
In regard to the cash dividends that the two companies have paid to the Treasury as a result of their Preferred Stock Purchase Agreements (as amended), Fairholme writes,
It is common sense that no Board should approve cash distributions without independent financial advice as to the effect of such payments on the Company’s safety, soundness, and liquidity. Moreover, corporate laws generally prohibit the payment of dividends in many circumstances, imposing personal liability on Directors for illegal dividends – a liability that, pursuant to the Housing and Economic Recovery Act of 2008, is not assumed by the Conservator. (Fannie Letter, 3) (emphasis added)
This is a straightforward threat that will likely get the attention of the directors of the two companies and get them to check in with their D&O insurer before taking any further actions. But it is genuinely unclear what they should be doing at this point.
As I note in a forthcoming article, An Overview of the Fannie and Freddie Conservatorship Litigation (NYU J. Law & Bus.), the Fannie/Freddie shareholder litigation raises all sorts of complex and novel legal issues, and I am not willing to predict their outcomes. But I will go as far to say that Fairholme presents the way out of this mess as far clearer than it is — “Various solutions are simple, equitable, and need not be contentious.” (5) The ones that Fairholme has in mind likely involve large payouts for shareholders, one way or the other.
At the same time that Fairholme presents the solution as simple, it does acknowledge (as it really must) that the problem itself is not: “we are aware of no circumstance in which the controlling shareholder and its affiliates simultaneously act as director, regulator, conservator, supervisor, contingent capital provider, and preferred stock investor.” (3-4) Yup, this is one big mess with no real precedent. I am confident, however, that the federal government has no interest in reaching a settlement with shareholders that shareholders would find acceptable. So, no end in sight to this aspect of the Fannie/Freddie situation, a far as I can tell.
March 3, 2014 | Permalink | No Comments
