April 12, 2013
Texas Court of Appeals Holds that MERS has Standing
Hunt v. MERS, No. 03-10-00031-CV, 2010 WL 3271966 (Tex. Ct. App. Aug. 20, 2010), the court rejected the homeowner’s argument that MERS lacked standing. The court found that the homeowner did not present any arguments or authorities addressed to the merits but instead purports to challenge “standing” by alleging that neither MERS, Inc., nor its successor, Deutsche Bank National Trust Company, as Indenture Trustee Under the Indenture Relating to IMH Assets Corp., Collateralized Asset-Backed Bonds, Series 2004-1, has “standing” to sue because MERS was listed on the deed of trust for the property as the “nominee” and “mortgagee,” not the “lender.” The court held that the complaint was without merit.
April 12, 2013 | Permalink | No Comments
On Fairy Tales for the Subprime Era
Practicum has posted my short article, The Emperor’s New Loans: A Cautionary Tale from the Subprime Era, today. It begins
A body of folk tales from the subprime mortgage era is now being written. Some are in PowerPoint. Some are in video format. Some appear in the guise of a non-fiction account. After all, isn’t The Big Short just Jack the Giant Slayer—with the little guys not only ending up with the gold, but also with the big guys dead on the ground? And some stories, like the one below, are just plain old fairy tales.
You might ask why a complex financial crisis needs such folk tales. And I would tell you that they are necessary because they help us to identify the essence of the crisis. They can also make the significance of the crisis clear to non-experts. And they can help shape government responses to the last crisis in order to avert potential future crises. Luckily, noted storyteller Philip Pullman offers us some guidance on finding the essence of a story.
The rest of the article can be found here.
April 12, 2013 | Permalink | No Comments
April 11, 2013
District Court of Oregon Holds that Assignment is Proper
In Stewart v. MERS, No. CV-09-687-PK, 2010 WL 1055131 (D. Or. Feb. 9, 2010), the court granted MERS’ motion to dismiss and found that U.S. Bank was a real party in interest because the assignment from MERS to U.S. Bank was proper under Oregon law. The loan documents indicate that the homeowner executed a Deed of Trust encumbering the Property, delivered to and for the benefit of MERS, as nominee for BNC Mortgage Inc. The Deed of Trus was recorded. The homeowner later defaulted under the terms of the Deed of Trust. The Deed of Trust was subsequently assigned to U.S. Bank as Trustee for Structured Asset Securities Corporation Mortgage Pass-Through Certificates. The assignment was recorded and U.S. Bank appointed NWTS as the successor and foreclosing trustee. The homeowner filed a complaint alleging that US Bank was not a “real party in interest” and therefore did not have “standing to bring this Trustee’s Sale,” and sought an injunction to halt the foreclosure proceedings. The court upheld the lower court’s conclusion that production of the original Note and Deed of Trust satisfied the demand for “proof” that they had a right to proceed with the foreclosure. Moreover, the Oregon Trust Deed Act does not require presentment of the Note or any other proof of “real party in interest” or “standing,” other than the Deed of Trust. Assignment and appointment of a successor trustee must be recorded in the real property records, and in this case the statutory requirements were met because assignment and appointment of a successor trustee were recorded.
April 10, 2013
Can’t Stand It, Just Show Me The Note
The federal District Court for Massachusetts issued a Memorandum and Order in Ross v. Deutsche Bank National Trust Company that has two interesting aspects. First, it follows the 1st Circuit’s recently decided Culhane. Second, it reaffirms that “show me the note!” is alive and well in Massachusetts. The Rosses alleged that Deutsche Bank violated Massachusetts statutory foreclosure scheme. These alleged violations included: 1. lack of standing and 2. Deutsche Bank did not have “valid title to either the Note or the Mortgage and thus lacks the legal authority to conduct a foreclosure sale of the subject property.” (7-8)
The bottom line on standing: the Massachusetts Supreme Court (in Eaton v. Fannie Mae), along with the federal District Court of Massachusetts and the First Circuit have been requiring “strict compliance with the regulations governing who has legal standing to foreclose . . ..” (8)
The bottom line on “show me the note:” this court was willing to carefully parse the chain of title to a note and mortgage. In this case, they had been owned by New Century which was dissolved by a bankruptcy court. The court found that “the Rosses have stated a plausible claim that the [] assignment from New Century to Deutsche Bank was invalid.” (13) So, while some courts are not so strict about establishing the legal chain of title to a note and mortgage,we now know that this court is.
April 10, 2013 | Permalink | No Comments
April 9, 2013
United States District Court of Nevada Holds that under Nevada Law, Foreclosure Proceedings can be Commenced by the Beneficiary
In Ramos v. MERS, No. 2:08-CV-1089, 2009 WL 5651132 (D. Nev. Mar. 5, 2009), court concluded that, under Nevada law, foreclosure proceedings can be commenced by “the beneficiary, the successor in interest of the beneficiary, or the trustee” and, thus, that MERS had a right to foreclose. Since the deed of trust expressly named MERS as beneficiary, MERS had the right to commence foreclosure and to appoint the substitute trustee. In their purchase of a home, homeowners made a loan and the deed of trust on the loan with Bayporte designated MERS as the beneficiary, and authorized MERS to act as a nominee. MERS then executed a Substitution of Trustee, naming Cal-Western as the trustee under the Deed of Trust. Cal-Western issued and recorded a “Notice of Breach and Default and of Election to Cause Sale of Real Property Under Deed of Trust.” The property was sold at a trustee’s sale. Homeowners claimed that the foreclosure on their home was wrongful and alleged that the party that authorized the foreclosure was not authorized to do so, that the sale was not carried out in accordance with Nevada law, and that Nevada law authorizing non-judicial foreclosures and Defendants’ actions in accordance therewith violate Plaintiffs’ rights to procedural and substantive due process. The court dismissed this claim because they found that MERS was empowered to foreclose on the property and to appoint Cal-Western as substitute trustee for purpose of conducting the foreclosure.
April 9, 2013 | Permalink | No Comments
U.S. Bankruptcy Court of Western District Missouri Holds that Agency Relationship created when MERS is Designated as a Nominee
In re Tucker, 441 B.R. 638 (Bankr. W.D. Mo. 2010), court held that designation of MERS as a nominee in the Mortgage is “more than sufficient to create an agency relationship between MERS and the Lender and its successors in Missouri” and that MERS may exercise any rights that the Lender may exercise under the Mortgage. The case arose from a challenge made by the Chapter 7 trustee. The Trustee asserted that the movant was not the holder of both the Note and Deed of Trust on the date of the bankruptcy filing, that the Note and Deed of Trust were split as of that date, and that the Deed of Trust is now unenforceable. The Debtor had signed an Adjustable Rate Note and a Deed of Trust, which identifies the Lender as “New Century Mortgage Corporation. The Deed of Trust goes on to state that the beneficiary of the Deed of Trust is MERS as “nominee” for the Lender and its successors and assigns.That Deed of Trust was properly recorded with the Recorder of Deeds. While the Note had been assigned several times prior to the bankruptcy, no assignment of the Deed of Trust had been recorded prior to that date. Therefore, as of the date of bankruptcy, the records of the Recorder of Deeds still showed that New Century was the grantee under the Deed of Trust and that MERS, as nominee for New Century, was the beneficiary under the Deed of Trust. Nevertheless, the court concluded that assuming that the note-holder is a member of MERS, thereby creating an agency relationship, the fact that MERS is identified as the beneficiary under a deed of trust for the benefit of the note-holder does not create a split between the note and deed of trust.
April 9, 2013 | Permalink | No Comments
Careful When Putting Shoe on Other Foot
By David Reiss
Nestor Davidson has posted a very useful article to SSRN, New Formalism in the Aftermath of the Housing Crisis. The article notes that as “borrower advocates have responded to [the] surge in mortgage distress, they have found success raising a series of largely procedural defenses to foreclosure and mortgage-related claims asserted in bankruptcy.” (391)
Davidson points out that this “renewed formalization in the mortgage distress system is a curious turn in the jurisprudence” because from “the earliest history of mortgage law, lenders have had a tendency to invoke the hard edges of law’s formal clarity, while borrowers have often resorted to equity to obtain a measure of substantive fairness in the face of such strictures.” (392)
What I particularly like about this article is that it takes the broad view on downstream (homeowner foreclosure and bankruptcy) litigation. Instead of painting a pointillistic portrait of all of this “mortgage distress” litigation (a standing case here, a chain-of-assignment case there), Davidson identifies a pattern of formalistic defenses being raised by homeowners and puts it into historical context.
Davidson warns of the potential unintended consequences of this development: “The borrower push to emphasize formalism in mortgage practice, however understandable, may thus give primacy to the set of judicial tools least amenable to claims of individual substantive justice.” (430)
I don’t think that I agree that this new formalism will bite homeowners in the end. As Davidson himself acknowledges, “formalism need not be equivalent on both sides . . ..” (430) But I do agree with his conclusion:
For those concerned about the long-term structural balance between procedural regularity and substantive fairness embodied in the traditional realms of law and equity, the brittleness that the new formalism may be ushering in is worth considering and, perhaps, cause for redoubling efforts to find structural solutions to a crisis that even now continues. (440)
Share this:
Like this:
April 11, 2013 | Permalink | 1 Comment