October 3, 2013
Court Holds That Mortgagor Lacks Standing to Challenge the Propriety of Mortgage Assignments Under Rhode Island Law
The Rhode Island magistrate judge in Cosajay v. Mortgage Electronic Registration Systems, Inc., C.A. No. 10-442-M (D.R.I. June 23, 2011) issued “Reports and Recommendations,” holding that according to Rhode Island law a mortgagor “lacks standing to challenge the propriety of mortgage assignments and the effect those assignments, if any, could have on the underlying obligation.”
The Plaintiff challenged the validity of the assignments on multiple grounds, including MERS’ authority to execute the assignment. The magistrate however determined that under Rhode Island law, only parties to a contract may seek to have rights declared under a contract.
October 3, 2013 | Permalink | No Comments
Washington Court Rejects Plaintiff’s Claims That MERS’ Assignment was Fraudulent
The Washington court in Bain v. Metropolitan Mortgage Group, Inc., 2010WL891585 (W.D. Wash. Dist. Ct., March2010), rejected the plaintiff’s contentions that an assignment by MERS was executed fraudulently.
The plaintiff based his claims around the execution of a mortgage assignment by a person designated as an officer of MERS, but who was not also a MERS employee.
The court, in rejecting the plaintiff’s arguments that the assignment was executed fraudulently, noted that the non-employee signors did not commit an affirmative misrepresentation of fact, because of the fact that, for purposes of signing the papers, the non-employee signors misrepresented nothing: [the IndyMac signor] and [the MERS signor] did bear the titles that they used. The employees’ use of the titles was expressly authorized by contracts with IndyMac and MERS.
Thus there was nothing deceptive about using an agent to execute a document, and the court also noted that such practice is commonplace in deed of trust actions.
October 3, 2013 | Permalink | No Comments
Texas Court Plaintiff’s Challenges the Authority of MERS to Assign its Lien Interest to a Successive Party
The Texas court in Eskridge v. Federal Home Loan Mortg. Corp., No. 6:10-CV-285, (W.D. Tex., 2011) dismissed Plaintiff’s claims to challenges the authority of MERS to assign its lien interest to a successive party.
The plaintiff unsuccessfully argued that she had superior title because the note as well as the deed of trust was split. Further, plaintiff alleged that MERS lacked authority under the note to transfer either the note and/or the deed of trust. Consequently, any transfer made by MERS in regard to the Note to BAC was allegedly void.
However, the court determined that the plaintiff lacked standing to contest the various assignments, as she was not a party to the assignments. The court further reasoned that even if she had standing, her allegations were without merit because MERS was given the authority to transfer the documents in the deed of trust.
October 3, 2013 | Permalink | No Comments
Ohio Court Dismisses Plaintiff’s Claim That Defendant Lacked Standing to Foreclose
The Ohio court in Turner v. Lerner, Sampson & Rothfuss, 776 F.Supp.2d 498 (2011) granted in part and denied in part the defendant’s motion to dismiss. The plaintiffs alleged that defendant [Lerner] engaged in the widespread practice of filing and prosecuting mortgage foreclosure actions, although many of Lerner’s clients lacked proper standing to sue.
The United States District Court, N.D. Ohio considered the plaintiff’s claims that there were violations of FDCPA and Ohio unfair practices act violations, based on the law firm’s filing of foreclosure lawsuits where its clients allegedly lacked proper standing because the law firm client’s employees executed allegedly fraudulent assignments of mortgages from non-party MERS.
In following recent Ohio case law, the court dismissed the case due to the plaintiff’s lack of standing the validity of the assignments of mortgages. The court noted that it was generally accepted law that a litigant who is not a party to an assignment lacks standing to challenge assignment of that note.
October 3, 2013 | Permalink | No Comments
October 2, 2013
Lifting a Shadow from Qualified Residential Mortgages
The self-named Shadow Financial Regulatory Committee of the American Enterprise Institute has issued a statement on The New Qualified Residential Mortgage Rule Proposal. The Shadow Committee argues that agencies promulgating the newest version of the QRM rule
completely abandoned the Act’s requirement for a separate high-quality QRM. Instead, they proposed a QRM that was essentially the equivalent of the QM. This not only violated the congressional intent and nullified the retainage, but it pushed the US mortgage system back toward the very policies that fed the housing bubble, the mortgage meltdown and the financial crisis. It responds to those want the mortgage finance system to make mortgage credit widely available, but it ignores the need for a stable system that will avoid a future crisis. (2)
This is not fully accurate. The QRM proposal does not violate congressional intent because Congress merely stated that the QRM be “no broader” than the QM. (Dodd-Frank Act Section 941) There is also a fair amount of fear-mongering here because the Shadow Committee does not propose how we can responsibly balance credit availability with systemic stability.
Nonetheless, the Shadow Committee is right to note that the rules governing mortgages must balance a number of competing goals.
When the proposed rule was released, I had written that it should incorporate a “benefit ratio” which
compares “the percent reduction in the number of defaults to the percent reduction in the number of borrowers who would have access to QRM mortgages.” (20) A metric of this sort would go a long way to ensuring that there is transparency for homeowners as to the likelihood that they can not only get a mortgage but also pay it off and keep their homes.
A benefit ratio would not only help ensure that homeowners received sustainable mortgages, but it would also address the systemic concerns raised by the Shadow Committee. This is because the benefit ratio would protect lenders from their own worse instincts as they lower their underwriting standards in pursuit of increased market share in a booming market.
October 2, 2013 | Permalink | No Comments
Southern District of California Bankruptcy Court Holds that MERS’ Role as Beneficiary Does Not Provide Protection Against Foreclosure Deficiencies
In In re Doble , BK 10-11296-MM13, 2011 WL 1465559 (Bankr. S.D. Cal. Apr. 14, 2011), the court held that MERS’ limited role as beneficiary of the deed of trust did not provide protection against foreclosure deficiencies. MERS’ role did not provide the banks with the authority to enforce the deed of trust, the ability to assign the note without an endorsement, or an exception to recordation obligation. The homeowner owned property encumbered by a deed of trust secured by a promissory note payable to Plaza Home Mortgage, Inc. The deed of trust identified Plaza as “lender” and MERS as the beneficiary.
October 2, 2013 | Permalink | No Comments
California Court of Appeals Holds that MERS has Authority to Assign Beneficial Interest
In Forbes v. Countrywide Home Loans, Inc., E051309, 2011 WL 4985965 (Cal. Ct. App. Oct. 20, 2011), homeowner had acquired a single-family residence and later refinanced the property by obtaining two loans. Mortgage Funding, Inc. was the lender of both loans, and the loans were secured by two deeds of trust that were recorded. ReconTrust, the successor trustee under the first deed of trust, initiated nonjudicial foreclosure proceedings by recording a notice of default. (Civ. Code, § 2924, subd. (a).) The notice of default includes a declaration stating: “Countrywide tried with due diligence to contact the borrower in accordance with California Civil Code Section 2923.5 . . . .” Countrywide was the original servicer of the loan, and later changed its name to BAC. ReconTrust then recorded a notice of trustee’s sale under the first deed of trust, and conducted a sale. MERS was the original beneficiary under the foreclosing first deed of trust. Pursuant to an instrument titled “Corporation Assignment of Deed of Trust”, MERS transferred its beneficial interest, “together with” the promissory note, to FNMA. Homeowner then filed a complaint asserting (1) breach of an oral forbearance agreement with BAC, under which BAC agreed not to foreclose on the property; and (2) “wrongful foreclosure” based on various irregularities or Civil Code violations in the foreclosure sale proceedings.
Court held that by executing the first deed of trust, homeowner agreed that MERS had the right to exercise, and could accordingly assign, “any or all” of the interests that homeowner granted to the Lender under the first deed of trust. These interests necessarily included the lender’s beneficial interest under the deed of trust, “together with” the lender’s right to collect all sums due under the note secured by the first deed of trust. Homeowner thus cannot state a cause of action to invalidate the sale or trustee’s deed based on his assertion that the deed of trust did not authorize MERS to initiate the foreclosure proceedings in the first instance, or based on his further assertion that the lender may not have, in fact, assigned the note to FNMA.
October 2, 2013 | Permalink | No Comments
