April 16, 2013
Eleventh Circuit Holds that Claim under TILA is Time-barred
In Johnson v. Mortgage Electronic Registration Systems, Inc., 252 Fed. Appx. 293 (11th Circ. 2007), the Eleventh Circuit dismissed borrower’s claims under the Truth in Lending Act (“TILA”), because they were time-barred.
On March 17, 2001 Johnson executed a loan from Homegold Financial Inc. The loan was transferred to Household Mortgage Services (“Household”) and MERS held the security deed as nominee for Household. Plaintiff filed a complaint alleging that Household and MERS “failed to make certain disclosures required by [TILA] and sought rescission of her loan and other remedies.” MERS moved to dismiss and the District Court granted summary judgment in favor of MERS. Plaintiff appealed.
Under TILA, the borrower is entitled to a right of rescission, which is “triggered” either (1) by notifying the creditor or (2) “in the face of a judicial or non-judicial foreclosure.” Both of these rights to rescission expire upon the three-year anniversary of the loan transaction. Since Johnson exercised her right to rescission three years and six months after executing the loan, her claim is barred. Since she did not show fraud, the district court properly granted summary judgment.
April 16, 2013 | Permalink | No Comments
Georgia District Court Allows Homeowner Plaintiff to Amend Fraud Claim but Dismisses Wrongful Disclosure Claim
In LaCosta v. McCalla Raymer, Civil Action No. 1:10-CV-1171-RWS, 2011 WL 166902, Civil Action (N.D. Ga. January 18, 2011), the Court ruled that Homeowner Plaintiff could amend her fraud claim, but dismissed Plaintiff’s other claims stemming from an alleged modification on her loan and subsequent foreclosure.
Plaintiff executed a loan and note from Home America Mortgage, Inc. in 2008 and granted a security deed to MERS, which granted MERS power of sale and the power to foreclose on the property. Subsequently, MERS assigned the security deed to BAC Home Loans {“BAC”). Plaintiff attempted to arrange a mortgage modification with BAC and represents that BAC agreed to a monthly payment of $837.00 until the modification was finalized. Despite paying $837.00 per month, the loan was declared to be in default. BAC initiated foreclosure and Plaintiff filed claims objecting to the foreclosure. Plaintiff also moved for a temporary restraining order, while Defendant moved to dismiss for failure to sufficiently state a claim.
The District Court denied Plaintiff’s motion for a temporary restraining order since Plaintiff did not show “a substantial likelihood of success on the merits of her wrongful foreclosure claim.” The Court dismissed Plaintiff’s claim for wrongful disclosure, because “Plaintiff unequivocally granted MERS the power to sell the Property if she were not able to comply with the terms of the Note,” and for defective notice of foreclosure sale since Georgia law does not assert that “a secured creditor may not utilize an agent to serve notice on a debtor of the initiation of foreclosure proceedings.” Further, the Court dismissed Plaintiff’s claim for an invalid assignment because Plaintiff cited no relevant Georgia Statute or relevant case law that stated BAC needed to have an ownership interest in the Deed and the Note. Finally, the Court dismissed Plaintiff’s FDCPA Claim because notice of the foreclosure to Plaintiff was proper.
With regard to Plaintiff’s fraud claim “based upon representations supposedly made by Defendant BAC concerning a modification of [Plaintiff’s] mortgage,” the Court gave Plaintiff an opportunity to amend her Complaint since the Complaint currently fails to “provide the requisite level of detail needed to adequately allege fraud.”
Eleventh Circuit Court of Appeals Affirms Dismissal because Mortgagor Plaintiff Failed to State a Claim
In Milani v. One West Bank FSB, 491 Fed. App’x. 977 (11th Circ. 2012), the Court of Appeals affirmed the District Court’s decision to dismiss Mortgagor Plaintiff’s claims for (1) wrongful foreclosure, (2) to quiet title, and (3) for fraud.
In 2005, Plantiff refinanced his home by signing an adjustable-rate note with IndyMac Bank, FSB and a security deed with Defendant MERS, which granted MERS power of sale on the property. MERS subsequently assigned the security deed to Defendant OneWest Bank. Plaintiff failed to make payments and Defendant OneWest Bank foreclosed on his property. Plaintiff then filed a complaint alleging that OneWest Bank cannot foreclose because the Defendants illegally securitized residential mortgages and because the assignment to Defendant OneWest Bank was fraudulent. The District Court granted Defendant’s motion to dismiss and Plaintiff appealed.
Because Plaintiff acknowledged that MERS assigned the security deed to Defendant OneWest Bank, “Plaintiff’s complaint does not contain sufficient factual matter – accepted as true – to state a wrongful foreclosure claim that is plausible on its face.” Further, Plaintiff has not stated a fatal defect in Defendant OneWest Bank’s title and therefore Plaintiff’s quiet title claim also fails. Finally, Plaintiff’s fraud claim fails because Defendant OneWest Bank did not have “a duty to disclose or communicate the material information” nor did Plaintiff identify a materially false representation that Defendant made. Thus, there was no error in the District Court’s decision to dismiss and deny Plaintiff leave to amend his complaint.
April 16, 2013 | Permalink | No Comments
April 15, 2013
6th Circuit Upholds Foreclosure by Lender Under Michigan Law
The 6th Circuit upheld a foreclosure under Michigan law in Conlin v. MERS et al., (Case No. 12-2021, April 10, 2013). Plaintiff Conlin sought to have the foreclosure sale of his property “set aside based on alleged defects in the assignment of the mortgage on the property from Defendant Mortgage Electronic Registration Systems to Defendant U.S. Bank.” (2) The Court noted that “Michigan courts have held that once the statutory redemption period lapses [as had occurred in this case], they can only entertain the setting aside of a foreclosure sale where the mortgagor has made ‘a clear showing of fraud, or irregularity.'” (5, citation omitted) Furthermore, the fraud “‘must relate to the foreclosure procedure itself.'” (6, citation omitted)
Conlin claimed that the assignment from MERS to U.S. Bank “was forged or ‘robo-signed.'” (7) He also claimed that “MERS had no capacity to assign the Mortgage to U.S. Bank.” (7) The Court noted that third parties typically do not have standing to challenge an assignment unless the challenge would render “the assignment absolutely invalid or ineffective, or void.'” (7, citation omitted) The Court determined that the Michigan Supreme Court held that ‘”defects or irregularities in a foreclosure proceeding result in a foreclosure that is voidable, not void ab initio‘” and that borrowers must be prejudiced by lender’s failure to comply with the foreclosure statute’s requirements. (8, citation omitted)
The court concluded:
Even were the assignment from MERS to U.S. Bank invalid, thereby creating a defect in the foreclosure process under § 600.3204(1)(d), Plaintiff has not shown that he was prejudiced. He has not shown that he will be subject to liability from anyone other than U.S. Bank; he has not shown that he would have been in any better position to keep the property absent the defect; and he has not shown that he has been prejudiced in any other way. Additionally, he has also failed to make the clear showing of fraud in the foreclosure process required to challenge the foreclosure after the expiration of the six-month redemption period. (9)
April 15, 2013 | Permalink | No Comments
April 12, 2013
Massachusetts Bankruptcy Court Denies Motion for Relief from Stay
In In Re Hayes, 393 B.R. 259, 261-62 (Bankr. D. Mass. 2008), the Debtor, Hayes, filed a voluntary Chapter 13 petition involving property encumbered by a mortgage, which secured an adjustable rate note. The note and mortgage identified Argent Mortgage Company, LLC as the Lender. AMC Mortgage Services then filed a proof of claim and attached a copy of the note and mortgage, as well as a loan history. 16 months after AMC filed a proof of claim on behalf of Argent Mortgage Company, LLC, it filed a “Transfer of Claim Other Than for Security” pursuant to which “AMC purported to transfer the proof of claim it filed on behalf of Argent Mortgage Company, LLC to Citi Residential Lending, Inc., as loan servicer for the secured creditor Deutsche Bank National Trust Company, as Trustee, in trust for the registered holders of Argent Securities Inc.” Deutsche Bank then filed a Motion for Relief from Stay.
The court found that Deutsche Bank failed to establish that Argent Mortgage Company, LLC effectively assigned the mortgage executed by the Debtor to it or that Argent Mortgage Company, LLC’s grant of authority to Citi Residential Lending, Inc. under the Limited Power of Attorney was sufficient to empower Citi Residential Lending, Inc. to execute the Confirmatory Corporation Assignment, on its behalf, so as to effectively transfer the mortgage Argent Mortgage Company, LLC to Deutsche Bank. Therefore, citing authority that states that “those parties who do not hold the note or mortgage and who do not service the mortgage do not have standing to pursue motions for relief or other actions arising from the mortgage obligation,” the court denied Deutsche Bank’s Motion for Relief from Stay.
April 12, 2013 | Permalink | No Comments
United States District of Georgia Rejects Wrongful Foreclosure Claim
In Nicholson v. OneWest Bank,1:10-CV-0795-JEC/AJB, 2010 WL 2732325 (N.D. Ga. Apr. 20, 2010) , the court rejected homeowner’s wrongful foreclosure claim. Homeowners argued that OneWest Bank was not entitled to foreclose on property because there had been no assignment of the original note from American Mortgage Express Corporation to any other party. They did acknowledge that MERS “purported” to make an assignment of the security deed to IndyMac Federal Bank FSB, but argued that there is no other transfer of record. They also argued that the splitting of the mortgage and the note rendered the mortgage a nullity. The court found that the evidence demonstrates that American Mortgage was granted a security deed and under this deed homeowners “grant[ed] and convey[ed] to MERS (solely as nominee of Lender and Lender’s successors and assigns) and the successors and assigns of MERS, with power of sale,” the property. MERS, in a document entitled “Assignment of Note and Security Deed,” conveyed to IndyMac Federal Bank FSB the Security Deed and the Note. Afterwards, the FDIC, as receiver for IndyMac, in an Assignment of Security Deed, assigned to OneWest that certain Security Deed or Deed to Secure Debt executed by the homeowners. This document was found to demonstrate strong evidence that OneWest holds both the Security Deed under which it may exercise the power of sale and the Note. Therefore, the court held that OneWest is lawfully entitled to foreclose on Plaintiff’s property because the homeowner did not demonstrate that OneWest was not entitled to foreclose.
United States District Court of California Rejects Wrongful Foreclosure Claim
In Saldate v. Wilshire Credit Corp. 711 F.Supp.2d 1126 (CA E.D. 2010), the court granted motion to dismiss and held that non-judicial foreclosure was not “debt collection” subject to California’s Rosenthal Fair Debt Collection Practices Act (RFDCPA); loan servicer did not owe a duty to mortgagor, as would support mortgagor’s negligence claim; Real Estate Settlement Procedures Act (RESPA) did not provide a private right of action for disclosure violations; mortgagor failed to state a RESPA claim for damages resulting from loan servicer’s failure to respond to his qualified written request (QWR); mortgagor failed to state claims for fraud or negligent misrepresentation; and mortgagor failed to state a claim for wrongful foreclosure. Mortgagor completed a loan for the property with the loan terms memorialized in a promissory note which was secured by a deed of trust on the property. The deed of trust was recorded and identifies WMC Mortgage Corp. (“WMC”) as lender, Westwood Associates as trustee, and MERS as beneficiary. By a Corporate Assignment of Mortgage/Deed of Trust MERS assigned the deed of trust to Wells Fargo. By a Substitution of Trustee Quality Loan Service Corporation substituted as trustee for Westwood Associates. Quality later filed a Notice of Default and Election to Sell under Deed of Trust. The court rejected the mortgagor’s wrongful disclosure claim because the absence of an allegation of ability to tender amounts owed dooms a purported wrongful foreclosure claim. Therefore, the mortgagor’s inability to make monthly payments reflects inability to tender amounts owed to bar a claim to challenge foreclosure.
April 12, 2013 | Permalink | No Comments
