February 21, 2013
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 19, 2013
1st Circuit Holds that MA Borrowers Can Challenge Mortgage Assignments
A First Circuit panel (including Justice Souter) ruled that under Massachusetts law, “a mortgagor has standing to challenge a mortgage assignment as invalid, ineffective, or void (if, say, the assignor had nothing to assign or had no authority to make an assignment to a particular assignee).” (14) The court concisely sets forth what is at issue in the case:
The fact pattern here is emblematic: the mortgagor’s note was delivered to one party (the lender) and then transferred; the mortgage itself was granted to a different entity, Mortgage Electronic Registration Systems, Inc., and later assigned to the foreclosing entity. We are asked, as a matter of first impression for this court, to pass upon not only the legality and
effect of this arrangement but also the mortgagor’s right to challenge it. The substantive law of Massachusetts controls our inquiry. (2-3, footnotes omitted)
There are some important dicta in the case. The court states that “there is no reason to doubt the legitimacy of the common arrangement whereby MERS holds bare legal title as mortgagee of record and the noteholder alone enjoys the beneficial interest in the loan.” (16)
February 19, 2013 | Permalink | No Comments
Eastern District of North Carolina Requires Homeowners to Allege Ability to Fully Tender Outstanding Balance of Loan to State a Claim for Rescission Under TILA, Dismisses All Other Claims
In Ward v. Sec. Atl. Mortg. Elec. Registration Sys., Inc., 858 F. Supp. 2d 561 (E.D.N.C. 2012), appeal dismissed (May 30, 2012) the Eastern District of North Carolina granted defendants’ motion to dismiss claims brought against them by borrowers for violations of the Truth In Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).
Plaintiffs executed a note with Security Atlantic Mortgage (“SAM”) in 2007, in 2010 they instituted this suit claiming SAM, MERS, and BAC Home Loans Servicing, LP (“BAC”) had violated TILA, the Home Ownership and Equity Protection Act (“HOEPA”), RESPA, the Fair Credit Reporting Act (“FCRA”), the Equal Credit Opportunity Act (“ECOA”), and the Federal Trade Commission Act (“FTCA”). In the court’s first order, they granted defendants’ motion to dismiss, finding almost all of plaintiffs’ claims were deficient, but they gave plaintiffs 21 days to correct the pleadings and correct their failure to make service on SAM. Plaintiffs’ amended complaint did not address the service issue, accordingly claims against SAM were dismissed without prejudice. BAC and MERS filed a motion to dismiss the amended complaint.
- TILA claims
Plaintiffs claimed a number of disclosure violations under TILA, and contended that MERS did not have standing as nominee nor have legal authority to transfer the note.
The court started its discussion by noting that TILA only applies to creditors and assignees, and provides that a servicer is not to be treated as an assignee “unless the servicer is or was the owner of the obligation.” 15 USC 1641(f)(1) Here, however, the plaintiffs expressly identified BAC as the lender in their Notice of Right to Cancel, and amended complaint. The court found plaintiffs’ allegations were sufficient to raise a plausible inference BAC presently owns the note and qualifies as an “assignee” under TILA.
While plaintiffs made no allegations that MERS is or was an assignee of the loan, the court denied MERS’ motion to dismiss with respect to rescission claims because without MERS it might not be possible for the court to afford complete relief to plaintiffs.
Disclosure
The court dismissed plaintiffs’ causes of action relating to TILA mandated disclosures, as they failed to allege sufficient facts to state a claim. Additionally, the court noted, the one year statute of limitations would have barred plaintiffs’ claims even if they had pled sufficient facts.
Rescission
The court acknowledged plaintiffs’ right to rescind had not expired since the original creditor had never given them the requisite copies of notice. However, using its equitable powers, the court required plaintiffs to allege an ability to fully tender the amount owed on the loan. Without such an allegation, the amended complaint would fail to state a claim for rescission under TILA.
- RESPA claims
Plaintiffs also claimed BAC violated RESPA by failing to:
- Provide notice of the loan assignment to BAC for servicing 15 days before assignment and
- Respond to written inquiry for an accounting of all payments
For the first claim, the court dismissed because the true claim was against the unnamed party who assigned the loan to BAC.
For the second claim, the court noted plaintiffs made a request they purported to be a Qualified Written Request (“QWR”), but the court found that it was actually a communication “challenging the validity of the loan, not a communication relating to the servicing of the loan as defined by statute.” Thus, the writing did not qualify as a QWR and BAC’s failure to respond did not subject BAC to RESPA liability. The court went on to note that plaintiffs also failed to state a claim under 12 USC 2605(e)- because they failed to allege any pecuniary loss attributable to the RESPA violation.
Since plaintiffs made no factual allegations relating to FCRA, ECOA, or FTCA, or for punitive damages relating to “harassment, emotional distress and displacement,” the court dismissed these claims with prejudice.
Accordingly, all of plaintiffs’ claims were dismissed with prejudice except their claim for rescission under TILA, which was dismissed with leave to amend within 14 days and required an allegation proving their ability to tender the loan proceeds.
February 19, 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