October 16, 2013
California Court Found That MERS Held Interests in the Property and Rejected the Plaintiff’s Argument that MERS Lacked Standing
The California court in deciding Nacif v. White-Sorensen, et al., NO. D056993. (San Diego Ct. Sup. Ct., 2009), determined that MERS held interests in the property and rejected the plaintiff’s argument that MERS had no standing because it was not qualified as a foreign corporation.
The court found that the under California law, MERS’s status as a “nominee” on a deed of trust means that it had the right to initiate foreclosure proceedings as the lender’s agent.
October 16, 2013 | Permalink | No Comments
October 15, 2013
Court Finds That MERS, as the Beneficiary Under the Deed, Had the Authority to Assign its Beneficial Interest
The United States District Court, Northern District California in Benham v. Aurora Loan Services, No. C-09-2059, (N.D.Cal. 2009) dismissed the plaintiff’s claims in the entirety.
The plaintiff brought a litany of claims. Among the plaintiff’s claims, was that MERS and violated the Rosenthal Fair Debt Collection Practices Act (“RFDCPA” or “Rosenthal Act”), Cal. Civ. Code 1788 et seq. FAC ¶¶ 62-65. Plaintiff also alleged negligence and fraud.
After considering the plaintiff’s contentions the court dismissed all of the plaintiff’s claims. The court found, that MERS as the beneficiary under the deed of trust had the authority to assign its beneficial interest under the deed of trust to assignee.
October 15, 2013 | Permalink | No Comments
California Eastern District Court Notes There is no Requirement for the Production of the Original Note to Initiate a Non-Judicial Foreclosure Sale Under California Law
The California Eastern District Court in Castaneda et al v. Saxon Mortgage Services, Inc. et al., No. 2:2009cv01124 (E.D. Cal. 2010) dismissed the plaintiff’s claim alleging wrongful foreclosure due to foreclosing party’s lack of note.
Plaintiffs Cesar and Suzzanne Castaneda filed this action against defendants Saxon Mortgage Services, Inc., plaintiffs’ action purported to state a claim for “wrongful foreclosure” against Saxon. Plaintiffs attempted to base this claim on California Commercial Code section 3301, alleging that Saxon was not in possession of the note, was not a beneficiary, assignee or employee of the entity in possession of the note, and was therefore not a “person entitled to enforce” the security interest on the property in accordance with section 3301. (SAC ¶¶ 187-89.)
The court however found that section 3301 did not govern non-judicial foreclosures, which is governed by California Civil Code section 2924.Further, the court noted there is no requirement for the production of the original note to initiate a non-judicial foreclosure sale under California law.
October 15, 2013 | Permalink | No Comments
Southern District of California Holds that Production of Original Note is Not Required to Proceed with a Non-Judicial Foreclosure
The United States District Court for the Southern District of California in Putkkuri v. Recontrust Co., Case No. 08cv1919 WQH (AJB) (S.D.Cal. 2009) granted the defendants’ motion to dismiss.
The plaintiff in this case demanded written proof of the defendants’ right to proceed in foreclosure, and the plaintiff claimed that no such proof had been offered. The plaintiff alleged that the defendants “engaged in a pattern and practice of utilizing the non-judicial foreclosure procedures of this State to foreclose on properties when they do not, in fact, have the right to do so.”
The plaintiff also alleged that in pursuing non-judicial foreclosure, defendants falsely represented that they had a right to payment under plaintiff’s residential loan, which was secured by the deed of trust. However, after considering the plaintiff’s claims the court dismissed them, holding that production of the original note is not required to proceed with a non-judicial foreclosure.
October 15, 2013 | Permalink | No Comments
Mortgage Reform Schooling on 30 Year Term
S&P has posted U.S. Mortgage Finance Reform Efforts and the Potential Credit Implications to school us on the current state of affairs in Congress. It provides a useful lesson on three major mortgage reform bills introduced in Congress this year. They are the Housing Finance Reform and Taxpayer Protection Act of 2013 (Corker-Warner); Protecting American Taxpayers and Homeowners ACT of 2013 (PATH); and the FHA Solvency Act.
Given the current mood in D.C., S&P somewhat optimistically states that there “seems to be a bipartisan commitment to encourage private capital support for the U.S. housing market while winding down Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that hold dominant positions in the mortgage market.” (1) S&P uses this report as an opportunity to “comment on the potential credit implications of these mortgage finance reform efforts on several market sectors.” (1)
In this post, I focus on, and criticize, S&P’s analysis of the appropriate role of the 30 year fixed-rate mortgage. S&P states that
The 30-year fixed-rate mortgage has contributed significantly to housing affordability in the U.S. And while some market players have looked at current rates on jumbo mortgages (those that exceed conforming-loan limits) and suggested that the private market could support mortgage interest rates below 5%, we think this view is distorted. Jumbo mortgage rates carrying the lowest interest rates, for the most part, are limited to a narrow set of borrowers who have FICO credit scores above 750 and equity of roughly 30% in their homes. We don’t believe that these same rates would be available to average prime borrowers, such as those with credit scores of 725 and 25% equity in a property. (3)
While I think that S&P is probably right about the limited usefulness of comparing current jumbo loans to a broad swath of conforming loans, I see no support in their analysis for the assertion that the “30-year fixed-rate mortgage has contributed significantly to housing affordability in the U.S.” First, a 30-year FRM typically carries a higher interest rate than an ARM of any length. Second, a typical American household only stays in a home for about seven years. Thus, a 30-year FRM provides an expensive insurance policy against increases in interest rates that most Americans do not end up needing.
While we may end up providing governmental support for the 30-year FRM because of its longstanding popularity, S&P’s mortgage reform school should be based on facts, not fancy.
October 15, 2013 | Permalink | No Comments
Georgia District Court Holds Foreclosure May Be Wrongful Where Security Deed and Note Are “Split”
In Morgan v. Ocwen Loan Servicing, LLC, No. 1:10-cv-3555-AT (N.D.Ga. July 7, 2011), homeowner obtained a residential mortgage loan memorialized by two documents: a promissory note and a security deed. The original grantee of the promissory note was Guaranteed Rate. The original grantee of the security deed was MERS “as nominee” for Guaranteed Rate and its successors and assigns. Guaranteed Rate later transferred the note to Taylor, Bean & Whitaker. Subsequently, MERS executed a purported assignment of the security deed to Ocwen.
The court rejected the argument that the security deed is void because of the fact that MERS was named as the grantee-as-nominee in the security deed rather than Guarantee Rate, the actual lender and payee on the note. It reasoned that the argument is is unsupported by Georgia law as separation of the note and security deed creates a question of what entity would have the authority to foreclose, but does not render either instrument void.
In addressing the question of wrongful foreclosure, the court held it need not reach the question of whether an agent for the holder of the debt can carry out a power of sale foreclosure under Georgia law, as Ocwen did not advertise the foreclosure as agent for any disclosed principal.
October 15, 2013 | Permalink | No Comments
Missouri Court of Appeals Holds that MERS Does not have Authority to Assign without Holding Note
In Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 621 (MO Ct. of App., E. D., Mar. 3, 2009), the court held that MERS did not have the authority to assign its interest because it did not hold the promissory note. BNC Mortgage Inc. (BNC) was the lender and payee of the promissory note. In the deed of trust, Millsap, Singer & Dunn, P.C. was the trustee. The deed of trust, however, did not name BNC as the beneficiary, but instead names MERS, solely as BNC’s nominee. The promissory note does not make any reference to MERS. The note and the deed of trust both require payments to be made to the lender, not MERS. MERS, as nominee for BNC, later assigned the deed of trust to Ocwen. The assignment of the deed of trust also contained language that this assignment also transferred any and all notes described in the deed of trust.
The court reasoned that because the note becomes unsecured in the event that the note and the deed of trust are split, there was no evidence in the record or the pleadings that MERS held the promissory note or that BNC gave MERS the authority to transfer the promissory note. Therefore, MERS could not transfer the promissory note and the language in the assignment of the deed of trust purporting to transfer the promissory note is ineffective. MERS never held the promissory note, thus its assignment of the deed of trust to Ocwen separate from the note had no force. As Ocwen holds neither the promissory note, nor the deed of trust, Ocwen lacks a legally cognizable interest and lacks standing to seek relief from the trial court.
October 15, 2013 | Permalink | No Comments
