April 9, 2013
Massachusetts Appellate Court Upholds MERS’ Authority to Assign Mortgage
In Bassilla v. GMAC Mortgage, et al., No. 09-J-519 (Mass. App. Ct. Dec. 4, 2009), Court upheld MERS’ authority to assign the mortgage as the mortgagee. Such authority to assign its mortgage interest was held to exist despite the fact that MERS did not own or hold the underlying promissory note. This Court specifically held that MERS, “the lender’s nominee and record title holder had the ability to make a valid assignment.”
April 9, 2013 | Permalink | No Comments
No News to Report on Preemption
The Fourth Circuit recently reversed a dismissal of a fraud claim in McCauley v. Home Loan Investment Bank, F.S.B.; Deutsche Bank National Trust Company. The main issue on appeal was whether the Home Owners’ Loan Act preempted the homeowner’s state law claims arising from a mortgage originated by a federal savings association. While the court affirmed the dismissal of the unconscionability claim as preempted by HOLA, it held that the fraud claim “only incidentally affects lending, it is not preempted by HOLA or its implementing regulation . . ..” (12-13)
As to the unconscionability claim, the court found that McCauley “in essence asks us to impose new, substantive requirements on mortgage lenders.” (10) But as to the fraud claim, the court found that HOLA and its implementing regulation were not intended to “preempt state laws that establish the basic norms that undergird commercial transactions.” (7, citation omitted) McCauley does not blaze a new path on preemption, but it is consistent with a number of recent decisions that refuse to broadly preempt state consumer protection laws, a welcome trend.
April 9, 2013 | Permalink | No Comments
April 8, 2013
Rule of Law Cuts Both Ways
The New York Appellate Division (2d Dep’t) reversed orders by Justice Schack of New York Supreme Court (Kings County) in HSBC Bank USA, N.A. v. Taher. Justice Schack became something of a folk hero to many for holding lenders’ feet to fire for their lackadaisical approach to various formal requirements for foreclosures. But he has been accused of playing fast and loose with the law himself. Just as many have rightly said that lenders should be made to comply with the law governing foreclosures, those opposing lenders must do the same. The Appellate Division wrote
Since Emmanuel was decided approximately two months before the Supreme Court improperly directed dismissal of the complaint in the instant action, sua sponte, for lack of standing, we take this opportunity to remind the Justice of his obligation to remain abreast of and be guided by binding precedent. We also caution the Justice that his independent internet investigation of the plaintiff’s standing that included newspaper articles and other materials that fall short of what maybe judicially noticed, and which was conducted without providing notice or an opportunity to be heard by any party (citation omitted) was improper and should not be repeated. (4)
There can be the rule of law without justice, but there can be no justice without the rule of law.
April 8, 2013 | Permalink | No Comments
April 7, 2013
Michigan District Court Dismisses Homeowner’s Action to Declare Foreclosure Null and Void
In Olesuk v Fed. Natl. Mort. Assoc., 2:12-cv-11001 (Dist. Ct. Mich. 2012), the court dismissed an action by homeowners against the parties involved in the multiple assignments of their mortgage, including MERS (Defendants). Homeowners brought the action after defaulting on their mortgage, seeking a declaration that the foreclosure action brought by the mortgagee be declared null and void. The homeowners brought the following claims: “(1) Quiet Title; (2) Fraud in the Assignment against JPMorgan and Chase Home (related to the 2009 assignment); (3) Fraud in the Assignment against Chase Home and MERS (related to the 2010 assignment); (4) Fraud in the Signatures (Robosigning); (5) that Defendants are not the real parties in interest and lack standing to foreclose, and; (6) Slander of Title.”
Homeowners’ claims rested on two facts. First, they claimed that the notarized certifications of the 2009 and 2010 assignments were false and therefore the assignments were invalid. Second, homeowners claimed that Fannie Mae executed an unrecorded assignment of the note to a REMIC, that the REMIC was not a party to the subsequent transfers of the mortgage, and thus the assignments were invalid.
The court rejected all of homeowners’ claims. The first and fifth claims were based on an argument “that Defendants may not foreclose on the property because the allegedly fraudulent or forged signatures and the transfer to the REMIC trust rendered the assignments invalid.” The court rejected this argument because “as non-parties to the assignments, [homeowners] lack standing to challenge their validity.”
The court rejected the second, third, and fourth claims because homeowners could not “establish that they relied to their detriment upon the allegedly forged signatures or fraudulent assignments.” The court then rejected the sixth claim because “the assignments, fraudulent or not, do not disparage Plaintiffs’ claim of title.”
April 7, 2013 | Permalink | No Comments
District Court for the Northern District of Illinois Finds No Wrongdoing in MERS’s Assignment & Deutsche Bank’s Ensuing Foreclosure
In Long v. One West Bank, No. 11 C 703 (N.D. Ill. 2011), the District Court for the Northern District of Illinois denied OneWest Bank, MERS & Deutsche Bank’s motion to dismiss in part as moot, and granted the motion in part. Additionally, the court denied defendant Albertelli’s motion to dismiss as moot.
Plaintiff Tammy Jo Long entered into a residential mortgage loan with Taylor, Bean, & Whitaker (TBW) in 2005 for property located in Georgia. Plaintiff Castle Home Builder’s, Inc. allegedly invested in improving the property and maintained a claim against the property. After numerous requests to identify the current lawful owner and holder of the Note and Security Deed, Ms. Long stopped making payments. While Deutsche represented that it was the owner in a non-judicial foreclosure proceeding, plaintiffs contended that TBW’s bankruptcy had precluded any transfer of interest in the Note to Deutsche. Plaintiffs also contended that Deutsche used a fabricated copy of the Note and Assignment to support their foreclosure action.
Plaintiffs’ amended complaint alleged six separate counts:
- Violations of the Fair Dept Collection Practices Act (FDCPA)
- Violation of the Illinois Uniform Deceptive Trade Practices Act
- Violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (Fraud Act)
- Violations of the Fair Credit Reporting Act
- Wrongful foreclosure
- Quiet title claim
Plaintiffs consented to voluntarily dismiss all claims against defendant Albertelli. Plaintiffs also consented to dismissing counts 2, 4, and 6 against OneWest Bank, MERS and Deutsche Bank without prejudice.
The court discussed TBW’s bankruptcy, and the validity of the copy of the Note and Assignment of Deed. First, the court concluded TBW’s bankruptcy was irrelevant to the assignment since MERS was the grantee under the Security Deed. Second, the court rejected the claim that a copy of the note was insufficient, stating “[t]here is no requirement…that an original promissory note be produced in order to execute a valid assignment, and Plaintiffs have failed to point to any law providing such a requirement.” Third, the court rejected claims that the assignment violated the Pooling and Servicing Agreement (PSA), concluding plaintiffs lacked standing to assert the claims as they were not parties to the PSA nor had they cited any precedent holding that an assignment is invalid because it conflicts with the PSA.
Wrongful foreclosure
The court concluded that plaintiffs had not “alleged any facts that would plausibility [sic] suggest that Defendants engaged in a wrongful foreclosure action or that Plaintiffs were damaged by any unlawful conduct by Defendants relating to the foreclosure.” Therefore, they granted defendant’s motion to dismiss the wrongful foreclosure claim.
FDCPA Claims
The court concluded that the FDCPA was inapplicable in this case because the debt related to commercial debt rather than consumer debt. Additionally, the court noted plaintiffs “failed to point to precedent indicating that a non-judicial foreclosure is considered debt collection activity protected by the FDCPA.” Therefore, they granted defendant’s motion to dismiss the FDCPA claims.
Fraud Act
The court also rejected plaintiffs’ fraud claims, concluding that “Deutsche was assigned the power of sale and there [were] no allegations that plausibly suggest that the foreclosure sale was unlawful.” Accordingly, the court concluded plaintiffs failed to meet FRCP Rule 9(b) particularity requirements.
April 7, 2013 | Permalink | No Comments
The Michigan Eastern District Court Grants MERS and other Defendants’ Motion to Dismiss Because Homeowners Failed to State a Claim
In Safford v. Precision Funding, 09-14925-BC, 2010 WL 548504 (E.D. Mich. Feb. 9, 2010), the court granted Defendants’ motion to dismiss.
In August 2004, Jeffrey Safford and Denise Safford purchased their home and obtained a fixed rate mortgage loan for $124,000 with lender First Federal of Northern Michigan. In 2006 the Saffords refinanced their loan with Countrywide Home Loans Inc., and secured the note by granting a mortgage on the property to MERS as nominee for Countrywide and Countrywide’s successors and assigns. Precision Funding and other Defendants asserted that the Saffords defaulted on their loan. An advertisement for the mortgage sale was published four times between August 15, 2008 and September 5, 2008. MERS purchased the property for $150,411.92 at the foreclosure sale on October 10, 2008. Then, on October 15, 2008 MERS transferred its interest to Countrywide for one dollar by quit claim deed. The Saffords alleged that MERS, as a nominee, had no financial or other interest in whether or not a mortgage loan was repaid and no standing to pursue a foreclosure of the Saffords’ mortgage. Defendants motioned to dismiss the Saffords’ claims for failure to state a claim.
The Saffords first alleged that they relied on the representations of Defendants in entering into the refinances of their principal home loan. The court held that Defendants were entitled to dismissal of the Saffords’ fraudulent inducement claims because the Saffords plead conclusory statements rather than any particularized facts as to the actions of those Defendants. Next, the Saffords alleged a breach of contract claim against Defendants. The court dismissed the Saffords’ breach of contract claim, however, because it was barred by the statute of frauds—the Saffords did not allege the breach of a written agreement.
The Saffords alleged that none of the Defendants were the owners of the indebtedness nor had an interest in the indebtedness because it had been securitized to Precision One and not properly transferred to the other Defendants. Under Michigan law, a party may foreclose if “the party foreclosing the mortgage is either the owner of the indebtedness or of an interest in the indebtedness secured by the mortgage or the servicing agent of the mortgage.” Here, the Defendants claimed that Countrywide foreclosed the loan and the Saffords alleged that Defendants did not have the requisite interest since the loan was securitized to Precision One. But the Saffords did not defend their allegation in response to the Defendants’ motion to dismiss, nor had they provided an explanation as to how the alleged securitization would affect Defendants’ interests. As a result, the court granted Defendants’ motion to dismiss
April 7, 2013 | Permalink | No Comments
April 6, 2013
Minnesota District Court Denies Plaintiffs’ Quiet Title Claim Because of Default; Plaintiffs Fail to Sufficiently Allege Slander of Title Claim
In Novak v. JP Morgan Chase Bank, CIV. 12-589 DSD/LIB, 2012 WL 3638513 (D. Minn. Aug. 23, 2012), the United States District Court of Minnesota granted the defendants’ motion to dismiss the plaintiffs’ claims.
In the case at hand, each plaintiff executed a promissory note and mortgage of real property in Minnesota. Thereafter, each plaintiff defaulted. Each defendant either initiated foreclosure-by-advertisement proceedings against a particular plaintiff or threatened such proceedings in accordance with the respective mortgages. Every mortgage in this case states that the lender or its successors or assignees “may require immediate payment in full of all sums secured by the mortgage and may invoke the power of sale” when a mortgagor defaults under the mortgage. The mortgages are in various stages of default, ranging from potential foreclosure to completed sheriff’s sale. Plaintiffs’ sought to quiet title and also claimed slander of title. The court dismissed each of these claims in turn.
First the court denied the plaintiffs’ quiet title claim. The court reasoned, “actions to quiet title and determine adverse claims are equitable actions,” and a “plaintiff who seeks equity must come into court with clean hands.” The court found that plaintiffs in the present action came to the court with “unclean hands” because they had each defaulted on their respective mortgage loans by failing to make promised payments. The plaintiffs wanted to make their respective mortgages invalid after defaulting. The court concluded that the plaintiffs in this case sought equitable relief “from an outcome of their own creation.”
The court then considered the plaintiffs’ slander of title claim. To state a claim of slander of title, a plaintiff must allege facts that show: (1) That there was a false statement concerning the real property owned by the plaintiff; (2) that the false statement was published to others; (3) that the false statement was published maliciously; and (4) that the publication of the false statement concerning title to the property caused the plaintiff pecuniary loss in the form of special damages. The court stated that the plaintiffs failed to “allege facts from which the court could infer that defendants made a false statement, that defendants acted with malice or that plaintiffs suffered any pecuniary damages from the publication of amounts due on their mortgages.” Thus, the claim was dismissed.
April 6, 2013 | Permalink | No Comments
