January 13, 2014
New York Appellate Court Holds that Plaintiff Bank Did not Have Standing as Mortgage Holder
The New York State Appellate Division, Second Department in Midland Mortg. Co. v. Imtiaz, 110 A.D.3d 773 (2d Dept. 2013), held that the Plaintiff did not have standing to initiate the action because it failed to establish its status as the mortgage-holder in the case.
The Plaintiff, Midland Mortgage Company (“Midland”), filed an action on January 25, 2010, alleging that it was the valid mortgage lien holder for the Defendant Misbah Imtiaz’s (“Imtiaz”) property. On April 26, 2010, Imtiaz moved to dismiss Midland’s claim and alleged that MERS, as nominee for Opteum Financial Services, LLC, was the true mortgage holder and that Midland therefore did not have standing for to initiate the action. Midland later conceded that it did not have standing for the action since it was not the mortgagee, but a servicer of the mortgage, and instead filed a joinder motion to substitute U.S. Bank National Association (“U.S. Bank”) as the plaintiff, claiming that MERS had sold the mortgage to U.S. Bank. Although Imtiaz opposed the substitution, the trial court granted Midland’s motion and allowed the substitution of U.S. Bank as the plaintiff. Imtiaz appealed the decision.
The Second Department reversed the trial court’s decision and held that neither Midland nor U.S. Bank had standing to maintain the action. The Second Department found that Midland failed to show that U.S. Bank was the actual mortgage holder because Midland did not provide sufficient evidence of the alleged assignment from MERS to U.S. Bank to prove its status as the valid mortgage holder. The Court also found that the Plaintiffs failed to show that U.S. Bank, as a potential intervenor in the action as a substitute plaintiff, had a “real and substantial interest in the outcome of the proceedings” pursuant to CPLR 1012(a)(3).
January 13, 2014 | Permalink | No Comments
January 10, 2014
Tax Incentives for Sustainable Homeownership
Harris, Steuerle and Eng have published New Perspectives on Homeownership Tax Incentives in Tax Notes. The report presents
three tax reforms designed to promote homeownership that are fundamentally different from earlier proposals. Many of those earlier proposals would convert existing deductions into credits but would mistakenly, in our view, perpetuate flaws in the current system — namely, the failure to adequately promote the accumulation of home equity. The reforms examined here instead share the common characteristic of subsidizing homeownership through a channel other than the deductibility of mortgage interest, which is the largest tax expenditure for housing. These reforms include a first-time home buyer tax credit, a refundable tax credit for property taxes paid, and an annual flat amount tax credit for homeowners — all largely paid for by restricting the home mortgage interest deduction to a rate of 15 percent. Although far from perfect, these reforms would provide a better and more efficient allocation of housing subsidies and ultimately provide a somewhat larger incentive for wealth accumulation than current policy does. Our simulations show that relative to existing incentives, each policy would raise home prices and make the tax code more progressive. (1315)
This report has some drawbacks, such as overstating the case that empirical studies reinforce “the notion that homeownership improves American communities.” (1315) In fact, the empirical literature is decidedly ambiguous about the spillover and wealth accumulation effects of homeownership, particularly when the last few years are taken into account (I discuss these ambiguities here).
But the report also presents some creative ways to change the incentives that are found in the tax code. They argue, for instance, that it is better to incentivize the accumulation of home equity than unfettered mortgage borrowing. And they make proposals that would do just that. Worth a read.
January 10, 2014 | Permalink | No Comments
January 9, 2014
Weigh in on Mortgage Closing “Pain Points”
The Consumer Finance Protection Bureau has issued a Request for Information Regarding the Mortgage Closing Process. The CFPB wants
information from the public about mortgage closing. Specifically, the Consumer Financial Protection Bureau (CFPB) seeks information on key consumer “pain points” associated with mortgage closing and how those pain points might be addressed by market innovations and technology.
The CFPB seeks to encourage the development of a more streamlined, efficient, and educational closing process as the mortgage industry increases its usage of technology, electronic signatures, and paperless processes. The next phase of CFPB’s Know Before You Owe initiative aims to identify ways to improve the mortgage closing process for consumers. This project will encourage interventions that increase consumer knowledge, understanding, and confidence at closing.
This notice seeks information from market participants, consumers, and other stakeholders who work closely with consumers. The information will inform the CFPB’s understanding of what consumers find most problematic about the current closing process and inform the CFPB’s vision for an improved closing experience. (79 F.R. 386)
The CFPB is particularly interested in responses to the following questions:
1. What are common problems or issues consumers face at closing? What parts of the closing process do consumers find confusing or overwhelming?Show citation box
2. Are there specific parts of the closing process that borrowers find particularly helpful?
3. What do consumers remember about closing as related to the overall mortgage/home-buying process? What do consumers remember about closing?
4. How long does the closing process usually take? Do borrowers feel that the time at the closing table was an appropriate amount of time? Is it too long? Too short? Just right?
5. How empowered do consumers seem to feel at closing? Did they come to closing with questions? Did they review the forms beforehand? Did they know that they can request their documents in advance? Did they negotiate?
6. What, if anything, have you found helps consumers understand the terms of the loan? (79 F.R. 387)
It is rare that a federal agency requests information and comments from the Average Joe, Joe Sixpack and Joe the Plumber. So this is a chance for educated consumers of mortgages to be heard at the highest levels about the flaws in the home loan closing process. I encourage readers of REFinblog.com to make their voices heard!
January 9, 2014 | Permalink | No Comments
Oregon Court Dismisses Plaintiff’s Oregon Revised Statute § 86.745(1) Claim
The court in Woods v. United States Bank N.A., 2013 U.S. Dist. LEXIS 146485 (D. Or. 2013) ultimately granted the defendants’ motion to dismiss, and dismissed with prejudice.
Plaintiffs sought a declaratory judgment voiding and setting aside the foreclosure of their property on the ground that the May 25, 2011, notice of default and election to sell listed only MERS as the beneficiary and did not identify USB as beneficiary, and, therefore, the Notice of Default did not comply with the requirements of Oregon Revised Statute §86.745(1).
Defendants asserted that plaintiffs’ claim was barred by Oregon Revised Statute § 86.770 because plaintiffs did not and could not allege they did not receive the notice required under Oregon Revised Statute §86.740, the foreclosure sale was completed, and the property was sold to a bona fide purchaser.
The court noted that this court, other courts in this district, and Oregon state courts have held §86.770 bars rescission of a foreclosure sale when a borrower has received the notice required under §86.740 and the property is sold to a bona fide purchaser.
Here, Plaintiffs admitted they received notice of the foreclosure sale within the time required under the OTDA, that the property was sold to a bona fide purchaser, and that the sale of the property was recorded.
The court thus concluded that plaintiff’s claim was barred under §86.770(1) and, therefore, granted defendants’ motion to dismiss.
January 9, 2014 | Permalink | No Comments
California Appeals Court Affirms Lower Court’s Decision to Sustain Defendant’s Demurrer
The court in deciding Nehme v. Bac Home Loans Servicing, 2013 Cal. App. Unpub. LEXIS 7366 (Cal. App. 2d Dist. Oct. 15, 2013) affirmed the lower court decision.
Plaintiff (William Nehme) brought this action for fraud, rescission, and other claims after he lost his home through foreclosure. This case was an appeal of a lower court judgment entered in favor of defendants Bank of America, N.A. as successor by merger to BAC Home Loans Servicing, LP; Recon Trust Company, N.A.; Landsafe Title of California, Inc. erroneously named as Landsafe Title Corporation; Mortgage Electronic Registration Systems, Inc.; and MERSCORP, Inc., after the trial court sustained defendants’ demurrer without leave to amend. After considering the appeal, the court affirmed the lower court’s decision.
On appeal Nehme challenged only the trial court’s rulings on the first cause of action for fraud by bait and switch, second cause of action for rescission, and sixth cause of action for unfair business practices. Nehme argued that Countrywide committed fraud by substituting a deed of trust with a power of sale for the mortgage Nehme had requested, and that he signed the deed of trust by mistake.
After considering the plaintiff’s second round of arguments, the court concluded that, even after three attempts, Nehme failed to allege facts sufficient to state claims for fraud, rescission, and unfair competition, and therefore the court affirm the lower court’s judgment.
January 9, 2014 | Permalink | No Comments
Ohio Appeals Court Affirms Lower Court Decision Granting Summary Judgement in Favor of Bank of America
The court in deciding Bank of Am., N.A. v. Hizer, 2013-Ohio-4621 (Ohio Ct. App., Lucas County 2013) ultimately granted the defendant’s motion for summary judgment.
This case was an appeal from a judgment of the Lucas County Court of Common Pleas that granted summary judgment in favor of appellee Bank of America, N.A. in a foreclosure action filed by the bank after appellants Jennifer and Brian Hizer defaulted in payment on a note and mortgage held by the bank. After considering the appellants appeal, the court affirmed the judgment of the trial court.
This case involved a mortgage foreclosure action, the court affirmed a lower court decision that there was no abuse in discretion by denying appellants’ motion to strike the affidavit of appellee bank’s vice president, whose identity the bank failed to disclose in discovery and whom appellants were thus unable to depose, because they did not complain of the discovery violation until the bank moved for summary judgment, and did not show that they were prejudiced by their inability to depose the vice president.
The court noted that since appellants did not deny executing the note and mortgage or dispute the authenticity of the documents the bank offered, and produced no evidence to dispute the assignment of these documents to the bank. The evidence established that the bank was the holder of the note and mortgage. Thus, the court affirmed the lower court’s ruling in that there was no error in permitting the bank summary judgment.
January 9, 2014 | Permalink | No Comments
Texas Court Dismisses Action Claiming Fraud in Concealment, Fraud in Inducement, Quiet Title, & Rescission
By Ebube Okoli
The court in deciding Diaz-Angarita v. Countrywide Home Loans, Inc., 2013 U.S. Dist. LEXIS 147091 (S.D. Tex. 2013) eventually dismissed the plaintiff’s claims.
Plaintiff asserted causes of action for “fraud in the concealment,” fraud in the inducement, to quiet title, and for rescission. Defendants moved to dismiss.
In claims one and seven, plaintiff sought a declaratory judgment that the substitute trustee’s deed was void as there was no valid notice of foreclosure and no appointment of a substitute trustee recorded, and because there was no assignment of the note and deed of trust recorded.
In claim two, plaintiff sought a declaratory judgment that Defendants had no standing to foreclose. Claim three asserted “fraud in the concealment” based on the allegation that Defendants failed to inform Schonacher, the original borrower, that the loan was securitized. Plaintiff’s fourth claim asserted a fraud in the inducement claim based on the allegation that defendants misrepresented their entitlement to foreclose and that they were the holder and owner of the note.
In claim five, plaintiff asserted a quiet title claim under Texas law. In claim six, plaintiff asserted a cause of action for rescission, which is a remedy and not a recognized cause of action. After categorically analyzing the plaintiff’s claims the court ultimately dismissed all seven of the plaintiff’s claims.
Although a court typically may grant the plaintiff at least one chance to amend the complaint under Rule 15(a) before dismissing the action with prejudice. In this case, the court found that the plaintiff, who is represented by counsel, filed a complaint based on key facts that were within his own knowledge. The court noted that it appeared unlikely that the plaintiff could amend to state viable claims for relief. As a result, the Court enters the dismissal without leave to amend and dismissed with prejudice.
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January 9, 2014 | Permalink | No Comments