September 20, 2013
Northern District of California Rules That MERS Had the Authority to Appoint a Substitute Trustee
The United States District of the Northern District of California dismissed fraud claims brought by plaintiff against MERS in Labra v. Cal-Western Reconveyance Corp., No. C 09-02537 PJH (C.D. Cal. 2010). The court also denied the plaintiff’s request for injunctive relief.
The Northern District of California court affirmed the lower court’s ruling that MERS had the authority to appoint a substitute trustee after finding that the deeds of trust explicitly stated that MERS was the nominal beneficiary under the deeds of trust. Further, it also provided that MERS had the right to foreclose and sell the property as well as take any action that a lender could take.
September 20, 2013 | Permalink | No Comments
California Court Finds That Under State Civil Code Section 2924(a), MERS Had the Right to Foreclose
The United States District Court for the Northern District of California Oakland Division in deciding Earl A. Dancy v. Aurora Loan Services, LLC, No: C10-2602 SBA (2010) found that the plaintiff’s contentions lacked merit.
The court found that the plaintiff’s assertion that neither the loan servicer nor MERS were the true beneficiaries of the subject deed of trust and therefore had no authority to institute foreclosure proceedings, lacked merit. The court held that the deed of trust expressly designated that MERS was acting solely as nominee for the lender and the lender’s successors and assigns.
Further, the court held that regardless of whether or not MERS owned the note or was entitled to any payments as a result, the fact remained that the deed of trust designated MERS as a beneficiary. Thus, under section 2924(a) of the California Civil Code, MERS had the right to foreclose.
September 20, 2013 | Permalink | No Comments
The United States District Court for the Eastern District of California Finds That MERS Was the Beneficiary and Did Not Breach Duty of Care
The United States District Court for the Eastern District of California in deciding Knowledge Hardy v. IndyMac Federal Bank, et al, No. CV F 09-935 (E.D. Cal. 2009) found that MERS was the beneficiary and did not breach a duty of care.
The court found that MERS did not breach duty of care owed to the borrower by acting as the beneficiary and assigning the deed of trust to IndyMac. The court found that MERS participation in the foreclosure failed to amount to a violation of the covenant of good faith and fair dealing.
September 20, 2013 | Permalink | No Comments
September 19, 2013
Court Holds That California State Law Did Not Require Possession of the Note to Commence a Non-Judicial Foreclosure
The court in Chilton v. Federal National Mortgage Association, No. 1:09-cv-02187-OWW-SKO (2010), held that California state law did not necessitate possession of the promissory note in order to proceed with a non-judicial foreclosure.
The court dismissed the plaintiff’s complaint, after hearing the plaintiff’s arguments alleging wrongful foreclosure and lack of standing. Even though MERS was not named as a party to the action, the plaintiff argued that based on recent Kansas case law, MERS did not have standing to foreclose since the note and deed of trust had been separated.
The court distinguished Kansas’s recent precedent from this case in that the court held that Kansas’s case law did not consider the requirements of California’s non-judicial foreclosure process.
September 19, 2013 | Permalink | No Comments
Reiss on Fannie/Freddie Loan Limits
Law360 quoted me in Time May Not Be Right To Limit Fannie, Freddie Loans (behind a paywall). It reads in part,
The Federal Housing Finance Agency has proposed lowering the maximum size of the loans Fannie Mae and Freddie Mac can purchase as part of an effort to attract more private-sector lending, but some experts warn that other market factors including rising interest rates will keep private lenders from filling the gap.
The FHFA announced earlier this month that it planned to reduce the maximum size of home mortgage loans eligible for backing by the government-sponsored enterprises. The move is part of the agency’s strategic plan of slowly backing away from the mortgage market and encouraging private capital to take its place. But some real estate attorneys and practitioners say private lenders need more than customers to convince them to take the plunge.
Many other environmental factors affect private lenders’ decisions about whether to enter the residential mortgage market, said Bob Bostrom, a shareholder of Greenberg Traurig LLP and former counsel to Freddie Mac.
Reducing the number of loans eligible for Fannie and Freddie backing and raising guarantee fees — another recent tactic — sound good in theory, but they don’t change the fact that the interest rate for a 30-year fixed-rate mortgage rose a full percentage point over the past several months and the housing market dipped correspondingly, Bostrom said.
“The housing recovery is extraordinarily fragile right now,” he said.
The steps the FHFA is taking to reduce the GSEs’ size and scope will work only when there’s a private sector ready to step in, experts say. Until then, these measures can only push the housing market backward, they warn.
* * *
Not everyone is convinced of this dark forecast, however. David Reiss, a Brooklyn Law School professor and real estate finance scholar, told Law360 on Thursday that he’s not convinced the FHFA’s moves will have a negative effect.
Although the pullback should be gradual, it must be done, because the government can’t continue to hold up the mortgage market indefinitely, he said.
Reiss says current market factors actually favor weaning borrowers off Fannie and Freddie, noting that private capital in the sector has increased — particularly in the market for jumbo loans — and that the overall housing market has stabilized.
“We’re past the immediate crisis,” he said. “There’s nothing going on right now that makes me think a downward adjustment in conforming loan limits won’t be met by an increase in capital from private lenders,” Reiss said.
September 19, 2013 | Permalink | No Comments
California Court of Appeals Holds That the Right to Challenge a Nominee’s Authority to Foreclose on Behalf of Note Holder Would Fundamentally Undermine the Non-Judicial Nature of the Process
The Fourth District California Court of Appeals in considering Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011), affirmed the lower court’s decision upholding MERS’ ability to initiate non-judicial foreclosure actions.
The appellant argued that he was entitled to bring a lawsuit to challenge whether MERS was authorized to initiate a foreclosure action, however the California Court of Appeals rejected this argument. In rejecting the appellant’s argument, the court held that the text of the statue failed to provide a judicial action to determine whether the person initiating the foreclosure process is indeed authorized. Further, the court noted that there were no grounds for implying such an action.
The Court found that “the recognition of the right to bring a lawsuit to determine a nominee’s authorization to proceed with foreclosure on behalf of the note holder would fundamentally undermine the non-judicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.”
September 19, 2013 | Permalink | No Comments
Court Holds MERS’ Previous Business Activities Prior to Proper Registration in California Did Not Render its Foreclosing Illegal
By Ebube Okoli
The court in Perlas et al v. MERS, No. C 09-4500 (N.D.Cal. 2010) held that MERS’ previous business activities prior to becoming registered to do business in California did not render its foreclosing activities illegal.
Despite the plaintiff’s arguments to the contrary, the court noted that since MERS is now registered in California any alleged error had since been retroactively fixed. The Court in delivering their holding also noted that MERS, acting as the lender’s agent, had the authority to initiate non judicial foreclosures.
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September 19, 2013 | Permalink | No Comments