February 21, 2013
Reiss on Federal Housing Policy
Law360 ran a story on President Obama’s vision for America’s housing policy and asked for my reaction:
For a piece of mortgage-related legislation to have any chance of passing, it has to require that a borrower pay some kind of down payment so as to remain responsible for at least a small amount of risk, said David Reiss, a professor of real estate and consumer financial services law at Brooklyn Law School.
“What we’ve seen fail pretty consistently is [legislation in which] the homeowner has no skin in the game at all,” and is allowed to obtain a loan — often backed by the government — without putting down a cent, he said.
While this type of policy may help more Americans become homeowners, it does little to fix the housing finance system, which needs a major overhaul, according to Reiss.
“This is the time to reset the market in a rational way, where private lenders make responsible loans because they are doing responsible underwriting,” he said. “Setting up the framework for that should be happening now, even though right now government lending in the residential sector is really the dominant form of lending.”
The rest of the story is here (behind a paywall).
February 21, 2013 | Permalink | No Comments
Reiss on Pino Robo-Signing Case
I had blogged about the case here. Law360 interviewed me about the broader significance of the case:
Despite its application to just Florida, real estate and foreclosure attorneys around the country have been keeping tabs on the case, according to Brooklyn Law School professor David Reiss. The ruling highlights a trend around the country of foreclosure mills and debt collection firms “making thousands of filings and paying very little attention to whether the filings are accurate,” he said.
Reiss said the court could have taken broader action by stating clearly that fraudulent filings undercut the rule of law.
“You could easily imagine a court saying that the kind of behavior alleged here does impugn the litigation process and [that] the court can take actions to remedy it,” Reiss said. “I’m not saying they made a mistake, but if you are aware of behavior that is taking advantage of the judicial system, I think I can imagine another set of judges saying, ‘We have the inherent authority to handle that.'”
The rest of the story is here (behind a paywall, alas).
February 21, 2013 | Permalink | No Comments
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
