February 21, 2013
Superior Court of New Hampshire Denies Homeowners’ Consumer Protection Claims, Finds MERS has Authority to Assign Mortgage
In Powers v. Aurora Loan Services, 2011 WL 4428713, the Superior Court of New Hampshire denied plaintiff/homeowners’ petition for injunctive relief and lifted the stay on foreclosure.
Plaintiffs had sued Aurora for numerous violations of the New Hampshire Consumer Protection Act, including deceptive debt collection (RSA 358-C); fraud, and negligence. Plaintiffs had originally executed a note secured by a mortgage with GreenPoint Mortgage Funding, Inc. (“Greenpoint”). The mortgage named MERS as nominee and mortgagee. Approximately one year after signing, Aurora became the servicer of the loan. Two years later plaintiffs defaulted. Aurora had previously worked out three previous forbearance agreements with the homeowners, however after plaintiffs defaulted on the third modification Aurora instituted a foreclosure proceeding.
Plaintiffs’ only legal challenge was that Aurora lacked standing because MERS, as nominee, lacked the authority to assign the mortgage to Aurora. The court, citing Black’s Law Dictionary and other decisions nationwide, disagreed. The court summarized, “[t]he Powers (homeowners) knew who their mortgagee was; they communicated with the mortgagee and entered into a number of repayment and forbearance agreements.” The court also rejected their claims that the complex nature of the mortgage’s ownership obfuscated the current mortgagee.
The court also addressed MERS ability to assign its interest in the mortgage as it related to Aurora’s standing. Acknowledging “there is no New Hampshire case law on point” the court discussed developments nationwide and concluded MERS had the authority to transfer the mortgage to Aurora. In addition, the court referred to the language in the mortgage itself, which reflected MERS’ authority to assign its interest. Accordingly, the court dismissed plaintiffs’ claims for injunctive relief and lifted the stay on foreclosure.
February 21, 2013 | Permalink | No Comments
Rhode Island Superior Court Addresses Issues Payette Did Not
In Kriegel v. Mortgage Electronic Registration Systems, PC2010-7099 (R.I. Sup. October 13, 2011), the court granted the defendant’s motion to dismiss the plaintiff’s claim. The plaintiff sought a declaratory judgment and petition to quiet title for his property. The plaintiff argued that the language in the mortgage barred the foreclosing party from having the right to execute the statutory power of sale.
The court relied on the holding in Payette v. Mortgage Electronic Registration Systems in finding that as a matter of law “foreclosure sales conducted by MERS or by one of MERS’ assignees [are] valid.” The court then went on to address the issues that Payette‘s holding did not cover.
The plaintiff alleged that he was misled into believing the original Lender was his mortgagee. However, the court found that “even if true … the clear and unambiguous language in the Mortgage instrument signed by Plaintiff [ ] designated MERS as the mortgagee and nominee to the lender numerous times.”
The court also relied on precedent to dismiss the plaintiff’s claim that designating MERS as the mortgagee disconnects the note and Mortgage, resulting in both becoming void.
The court next addressed a challenge of MERS’ assignment of the mortgage to FNMA, the foreclosing party. The court found that Payette held that “the homeowner lacked standing to challenge the propriety of MERS’ assignment of a mortgage.” In this case, the court acknowledged that Payette was decided on a summary judgment, while this case is a motion to dismiss. However, the court held that “because standing does not raise a question going to the merits of the controversy, it is also appropriately raised on a motion to dismiss.” Since the plaintiff was not a party to the assignment between MERS and FNMA nor did the assignment cause an injury in fact to the Plaintiff, the court dismissed this challenge as well.
Finally, the plaintiff challenged the ability of GreenTree, the servicer for FNMA, to foreclose. The plaintiff argued that GreenTree was not a “Lender” under either the Mortgage agreement or in the relevant statutory authority. However, the court found that the language of the Mortgage agreement states “the mortgagee or its assigns may invoke the Statutory Power of sale.” In addition, the court rejected the plaintiff’s narrow interpretation of the statute and found that GreenTree could properly foreclose the property.
The court ultimately granted the defendant’s motion to dismiss the plaintiff’s claims.
February 21, 2013 | Permalink | No Comments
Ohio Appellate Court Holds that Bank Has Standing even though Assignment Was Not Recorded Before Bank Initiated Foreclosure Action
In Deutsche Bank Nat’l Trust Co. v. Ingle, No. 92487, 2009 WL 2400852 (Ohio Ct. App. Aug. 6, 2009), the Court of Appeals upheld the trial court’s decision to grant summary judgment in favor of Deutsche Bank National Trust Company (the “Bank”) because the assignment to the Bank was executed before the Bank initiated the foreclosure action.
In 2006, mortgagor executed a purchase money mortgage loan and adjustable rate note from First Franklin, granting the mortgage to MERS as nominee. In 2008, the note was sold and the mortgage assigned to the Bank. Afterward, the Bank foreclosed on the property. After the Bank initiated the foreclosure action, it recorded the assignment. The court granted summary judgment in favor of the Bank, and mortgagor appealed.
The Court of Appeals ruled the Bank had standing to initiate the foreclosure action. Although the Bank did not record the assignment until after the complaint was filed, the mortgage and note were assigned before the Bank filed the foreclosure action. Further, mortgagors never requested an oral hearing, never filed a brief in opposition to the Bank’s motion, and never requested an extension of time to file an opposition brief. Moreover, mortgagors did not provide any evidence to prove their affirmative defenses, counterclaims, or the existence of any material issues of facts. Thus, the trail court correctly granted summary judgment to the Bank as a matter of law.
February 21, 2013 | Permalink | No Comments
Ohio Appellate Court Affirms Summary Judgment in Favor of Bank Despite Bank Commencing Foreclosure Action Before Executing Mortgage Assignment
In Bank of New York v. Stuart, No. 06CA008953, 2007 WL 936706 (Ohio Ct. App. March 30, 2007), the appellate court affirmed summary judgment in favor of the Bank of New York (the “Bank”) despite the fact that the Bank initiated the foreclosure action before the mortgage was assigned to the Bank.
Mortgagors executed a mortgage and note with Countrywide Home Loans, Inc. (“Countrywide”). On May 16, 2005, the Bank foreclosed on the property as trustee, while mortgagors denied the Bank was the lawful holder of the note. The Bank then filed a motion for summary judgment and attached an assignment dated October 19, 2005 from Countrywide. The trial court granted this motion and mortgagors appealed.
The appellate court affirmed summary judgment in favor of the Bank. The court stated, “this Court has found case law to support [Bank’s] claim that filing the assignment with the trial court before judgment was entered was sufficient to alert the court and [mortgagors] that [Bank] was the real party in interest.” Therefore, mortgagors were not prejudiced by the assignment and the Bank “was a real party in interest for the purposes of filing the foreclosure action.”
February 21, 2013 | Permalink | No Comments
Ohio Court Holds that a Bank Cannot Cure Lack of Standing by a Subsequent Mortgage Assignment
In Wells Fargo Bank, Nat’l Assoc. et al. v. Byrd, 897 N.E.2d 722 (Ohio Ct. App. 2008), the Court of Appeals ruled that Wells Fargo (the “Bank”) lacked standing because it commenced a foreclosure action before executing a mortgage assignment.
Mortgagors executed a note and mortgage with WMC Mortgage Corporation (“WMC”). On January 23, 2007, the Bank filed a complaint for foreclosure against mortgagors. On March 2, 2007, WMC assigned the note and mortgage to the Bank. The magistrate entered summary judgment for the Bank. However, the trial court dismissed the case with prejudice. The Bank appealed.
The court held “that in a foreclosure action, a bank that was not the mortgagee when suit was filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage.” Civ. R. 17(A), which states “no action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest,” is inapplicable in this case since the Bank did not join or substitute WMC in the case, nor did WMC ratify the Bank’s action. The court also ruled that this dismissal should be without prejudice, because it was not a dismissal on the merits.
February 21, 2013 | Permalink | No Comments
Ohio Appellate Court Holds that Bank Lacks Standing Because It Commenced a Foreclosure Action Before Mortgage Was Assigned to Bank
In Wells Fargo Bank, N.A. v. Jordan, No. 91675, 2009 WL 625560 (Ohio Ct. App. March 12, 2009), the Ohio Court of Appeals ruled that the trial court erred in granting summary judgment, because Wells Fargo (the “Bank”) was not the real party in interest on the date it filed its complaint for foreclosure.
In 2003, mortgagor executed a note and mortgage with Delta Funding Corporation. In 2007, mortgagor defaulted on the loan, and the Bank filed a complaint for judgment, foreclosure, and relief on August 3, 2007. On August 22, 2007, the mortgage was assigned to the Bank. The trial court granted the Bank’s motion for summary judgment and motion to dismiss. Mortgagor appealed.
This court reversed and remanded the trial court’s decision to grant summary judgment to the Bank. In doing so, the court cited Wells Fargo Bank, N.A. v. Byrd, 897 N.E.2d 722 (Ohio Ct. App. 2008), which held that “in a foreclosure action, a bank that was not the mortgagee when suit was filed cannot cure its lack of standing by subsequently obtaining an interest in the mortgage.” Here, the mortgage was not assigned to the Bank until three weeks after the Bank filed for foreclosure. Thus, the Bank did not have standing when it initiated the action.
February 21, 2013 | Permalink | No Comments
February 20, 2013
Asset Quality Misrepresentation in RMBS Market
By David Reiss
Piskorski, Seru & Witkin have posted Asset Quality Misrepresentation by Financial Intermediaries: Evidence from RMBS Market, in which they “identify misrepresentations by comparing the characteristics of mortgages in the pool that were disclosed to the investors at the time of sale with actual characteristics of these loans at the same time and show that such misrepresentations constitute a significant proportion of the loans.” (2) In particular, they
identify two, relatively easy-to-quantify, dimensions of asset quality misrepresentation by intermediaries during the sale of mortgages. The first misrepresentation concerns loans that are reported as being collateralized by owner-occupied properties when in fact these properties were owned by borrowers with a different primary residence (e.g., a property acquired as an investment or as a second home). The second form of misrepresentation concerns loans that are reported as having no other lien when in fact the properties backing the first (senior) mortgage were also financed with a simultaneously originated closed-end second (junior) mortgage. (3)
The paper has some extraordinary findings:
The conclude that these “results suggest that RMBS investors had to bear a higher risk than they might have perceived based on the contractual disclosure.” (4)
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February 20, 2013 | Permalink | No Comments