February 19, 2013
Utah District Court Holds that Plaintiff’s TILA Claims Are Time-Barred and that MERS Does Not Need to Possess the Note in Order to Appoint a Trustee or Authorize a Trustee to Foreclose
In Rhodes v. Aurora Loan Services, No. 2:10 CV 00230 TC, 2010 WL 3219310 (D. Utah Aug. 13, 2010), the United States District Court of Utah granted Defendants’ motion to dismiss Plaintiff’s claims.
In October 2006, Plaintiff refinanced the loan on his residence. On August 26, 2009, after Plaintiff failed to make payments on his loan, James Woodall, the trustee appointed by MERS, recorded a notice of default on Plaintiff’s residence. Plaintiff sent a notice of rescission of the loan pursuant to the Truth in Lending Act (TILA) on November 10, 2009. Defendants allegedly provided deficient TILA disclosures to Plaintiff including an incorrect payment schedule and an improper notice of interest rate for an adjustable rate mortgage.
Plaintiff filed a claim for violation of TILA and for rescission under TILA. The court found that both of these claims were time-barred. First, any claim for violation of TILA must be brought “within one year from the date of the occurrence of the violation.” The court stated that in the Tenth Circuit, “the statute of limitations on TILA claims runs from the time the consumer credit transaction was consummated.” The court went on to say that since there was not “legal basis for tolling the statute of limitations in this case,” the time ran on Plaintiff’s TILA claims in October 2007, one year after Plaintiff refinanced the loan on his residence. Second, if the lender never submits the required TILA disclosures, which is what was alleged in this case, “the borrower’s right to rescission expires three years after the consummation of the transaction.” Plaintiff claims to have delivered notice of rescission on November 10, 2009, more than three years after he consummated his loan transaction in October 2006.
Plaintiff also filed a claim for fraud, contending that Defendants initiated non-judicial foreclosure without showing ownership of the note. The court pointed to a large body of case law in supporting its proposition that “MERS has the authority to foreclose in behalf of the lender and that MERS need not possess the note in order to appoint a trustee in behalf of the lender who does hold the note.” In addition, the court referenced Utah Code Ann. § 57-1-21 to 38 in stating that there is “no requirement that the beneficiary produce the actual note in order to authorize the trustee to foreclose on the property secured by the note.” Therefore, the court granted Defendant’s motion to dismiss both the TILA claims and fraud claim.
February 19, 2013 | Permalink | No Comments
Utah District Court Holds that MERS has Authority to Initiate Non-Judicial Foreclosure and to Assign Beneficial Interest
In Burnett v. Mortgage Electronic Registration Systems, Inc., No. 1:09 CV 00069 DAK, 2009 WL 3582294 (D. Utah Oct. 27, 2009), the United States District Court of Utah held that Mortgage Electronic Registration Systems, Inc (“MERS”) had authority to initiate non-judicial foreclosure on property of the plaintiff and to appoint a successor trustee. In this case Plaintiff received a loan in order to purchase a home. In conjunction with the loan, Plaintiff signed a trust deed, which identified MERS as “beneficiary.” The trust deed also gave MERS the right to “exercise any or all of [Lender’s] interests, including, but not limited to, the right to foreclose and sell the property; and to take any action required of Lender.” Plaintiff defaulted under the trust deed, and thereafter, MERS appointed Woodall as Successor Trustee. MERS initiated foreclosure on Plaintiff’s property and Woodall carried out the foreclosure.
The plaintiff brought forth six separate claims against Defendants including: (1) violations of the Fair Debt Collection Practices Act, (2) violations of the Utah Consumer Sales Practices Act, (3) breach of duty, (4) a request for declaratory judgment, (5) violations under § 57-1-31 of the Utah Code and (6) slander of title. The court stated that the “driving argument underlying all of Plaintiff’s claims is that MERS lacked authority to initiate the foreclosure of the Property or to appoint Woodall Successor Trustee. Plaintiff argues that because MERS was without authority to appoint Woodall Successor Trustee that Woodall also lacked authority.”
However, the court found that “the Deed of Trust expressly gives MERS both the authority to foreclose and the authority to appoint a successor trustee.” The court went on to say that upon Plaintiff’s default in payments, “MERS had authority to ‘take any action’ required of Lender, including the right to appoint Woodall trustee and the right to foreclose and sell the property.” Thus, the court dismissed Plaintiff’s complaint.
February 19, 2013 | Permalink | No Comments
February 18, 2013
Idaho Bankruptcy Court Rules Banks/MERS Lacked Authority to Transfer Notes
In In re WIlhem, 407 B.R. 392 (Bankr. D. Idaho 2009), the Idaho Bankruptcy Court, ruling in 5 similar cases, held that movant banks lacked standing to seek stay relief, and therefore, denied their motions. Movants did not demonstrate possession of the note, or any transaction by which they acquired ownership of the notes in question. Movants did not establish MERS had the authority to transfer the notes, and therefore, cannot rely on the MERS assignments to establish an interest in the notes to give them standing.
February 18, 2013 | Permalink | No Comments
February 17, 2013
North Carolina Appellate Court Finds for Home Owners, Concluding Bank Did Not Produce Sufficient Evidence of Assignment
In In re Adams, 204 N.C. App. 318, 693 S.E.2d 705 (2010) the Court of Appeals of North Carolina overturned the Superior Court and held that the alleged holder (Nationwide), while not required to present the original note and deed, was required to prove that the original note holder had transferred or assigned its interest in the note. Accordingly, it reversed the order authorizing the substituted trustees to foreclose.
Hannia Adams had executed a note with Novastar Mortgage, Inc. (“Novastar”) as the lender. To secure this loan, she and Clayton Adams executed a deed of trust which identified Novastar as the lender and Burke & Associates as the trustee. Roughly four years later Monica Walker, Matressa Morris and Nationwide sought to be appointed as substituted trustees for Burke & Associates. Their appointment identified Deutsche Bank for Soundview (“Deutsche Bank”) as the current owner and holder of the note. One week after the appointment, at the “instruction of the owner and holder of the note,” Monica Walker filed a petition with the county clerk requesting a hearing to permit respondents to show cause as to why the court should not allow a foreclosure sale to proceed.
The Clerk of Wake County Superior Court found Deutsche Bank was the holder of the note, the note was in default, and the instrument securing the debt gave the note holder the right to foreclose through power of sale. On appeal, the Superior Court affirmed based on testimony from Nationwide’s team lead in the foreclosure department and an affidavit from an assistant secretary at Deutsche Bank, and respondents appealed again.
The Court of Appeals held that under North Carolina law, the lender must prove four elements to establish their right to foreclose:
- 1. [A] valid debt of which the party seeking to foreclose is the holder
- 2. Default
- 3. Right to foreclose under the instrument
- 4. Notice to those entitled to such
The court further broke down part one to its constituent parts:
- 1. Is there sufficient competent evidence of a valid debt?
- 2. Is there sufficient competent evidence that the party seeking to foreclose is the holder of the notes that evidence the debt? (internal citations omitted)
Here the only issue was whether Deutsche Bank presented competent evidence that it was the current holder of the note.
Respondents argued Deutsche Bank’s evidence was insufficient as it was only photocopies of the note and deed of trust. However, the court cited another appellate decision for the principle that “the best evidence rule was inapplicable…when the opposing party admits that the documents shown [to them] are correct copies.” Since respondents did not dispute that the copies were correct, the court concluded the bank was not required to produce the originals.
However, the court went on to state “mere possession of a note by a party to whom the note has neither been indorsed nor made payable does not suffice to prove ownership of holder status.” (internal citations omitted, emphasis in original) Here, since the photocopies indicated the original holder was Novastar, not Deustche Bank, and the photocopies did not indicate Novastar negotiated, indorsed or transferred the note to Deustche Bank, respondents claimed they were insufficient to establish Deutsche Bank was the current holder of the note.
The court rebutted that it is settled procedure that affidavits can be used as competent evidence to establish statutory elements in de novo foreclosure appeals. Here, the testimony through affidavit from the assistant secretary of Deutsche Bank and the in-person testimony from Ms. Cole indicated Deutsche Bank was the current holder of the note and deed of trust. One gap remained however. As the court stated “however, neither the in-person testimony…nor the testimony by affidavit…expressly showed that Novastar transferred or assigned its interest in the note or deed of trust to Deutsche Bank.” Since neither the photocopies nor the testimony explained how the note and deed of trust were assigned, the court found the evidence presented was not sufficient to establish that the note was payable to Deutsche Bank and reversed accordingly.
February 17, 2013 | Permalink | No Comments
District Court of North Dakota Finds MERS has Standing to Foreclose, Rejects All Twelve of Plaintiff’s Challenges
In Bray v. Bank of Am., 1:09-CV-075, 2011 WL 30307 (D.N.D. Jan. 5, 2011) appeal dismissed, 435 F. App’x 571 (8th Cir. 2011), the court denied plaintiff’s ten motions, including his motion for summary judgment, and granted defendants’, Bank of America and Countrywide Home Loans, motion for summary judgment.
Plaintiff, Thomas Bray, received a loan from America’s Home Loans (“AHL”), and the corresponding mortgage listed MERS as the mortgagee. The proceeds of the loan were distributed to Security State Bank, a third party individual, and plaintiff Bray, who conceded that he used the funds to pay for his living expenses. Bank of America’s witness testified that the note was then transferred from AHL to Decision One Mortgage, Decision One then transferred its interest to Bank of America, roughly one month later Bank of America transferred its ownership interest to Bank of New York Melon, but remained the servicer of the note and the mortgage. MERS’ witness corroborated that their records showed that Bank of New York Mellon was the current beneficial owner of the note.
Plaintiff challenged the current foreclosure action under twelve different theories, including disputing the ownership of the note and mortgage, violations of the FDCPA, TILA, and claiming allodial title.
First, the court found that under the North Dakota Century Code, MERS had standing to foreclose as it owned both the note and the mortgage. The ensuing assignments did not change the fact that MERS was both the mortgagee and nominee for the original lender and its successors and assignees.
The court also rejected plaintiff’s Fair Debt Collection Practices Act claim, finding that both Bank of America and MERS were not subject to the FDCPA as their activities did not constitute “debt collection” as defined in the statute. Additionally, AHL was explicitly excluded from the FDCPA as they were the original creditor. 15 U.S.C. §1629a(6)(F)(ii).
Plaintiff’s Truth In Lending Act (TILA) claim, that he had exercised his right to rescission under 12 C.F.R. §226.15, was also dismissed. The court found as a matter of law plaintiff had missed the three-day period to exercise his right of rescission by approximately three years.
In addition, the court rejected plaintiff’s claim that defendants had not produced the “wet ink” originals of the note and mortgage as they had been presented to him at a previous deposition.
They also found his claim that the transaction lacked consideration since the Federal Reserve Notes received were not backed by any hard asset “patently frivolous.” In addition the court rejected his claims that Bank of America acted ultra vires, that the defendants had violated the RICO Act as the loan was not connected to any gambling activities, and that the interest rates were usurious. Finally, the court rejected plaintiff’s claims of fraud, acquiescence by the defendants, violations of the Real Estate Settlement Procedures Act, and plaintiff’s claim to allodial title, which the court described as a “concept which has no place in modern American law.”
February 17, 2013 | Permalink | No Comments
The Michigan District Court holds that Aurora Bank has Standing to Foreclose on Homeowners’ Property
In Horton v. Aurora Bank FSB, 1:12-CV-365, 2012 WL 3307451 (W.D. Mich. Aug. 13, 2012), the Michigan District Court granted Defendants’ motion to dismiss Aaron and Suzanne Hortons’ claims.
In January 2007, the Hortons purchased property and executed a promissory note, with Lehman FSB, in exchange for a $148,000 loan. The Hortons then granted a mortgage to MERS who acted solely as nominee for the lender and the lender’s successors and assigns. The mortgage was recorded on January 31, 2007. MERS later assigned the mortgage to Aurora Loan Services LLC. The Hortons defaulted on their loan on or around August 12, 2010, so Aurora initiated foreclosure by advertisement proceedings on the property. On September 8, 2011, Aurora foreclosed on the property and a Sheriff’s Deed was recorded on September 22, 2011. One day before the redemption period expired, the Hortons filed a lawsuit against Defendants.
The Hortons filed a six-count complaint against eight entities and other unknown defendants. The Hortons alleged 1) wrongful foreclosure for failure to comply with various provisions of Michigan’s foreclosure statute; 2) quiet title; 3) slander of title; 4) unfair deceptive business practices; 5) intentional infliction of emotional distress; and 6) breach of the duty to negotiate in good faith. In response, Defendants filed a motion to dismiss.
First, the Hortons claimed that their mortgage was not properly recorded. But because the Hortons failed to provide a reason why the mortgage was improperly recorded the court dismissed the Hortons’ allegation. Second, the Hortons alleged that neither MERS, Lehman, nor Aurora owned the indebtedness, owned an interest in the indebtedness, or were the servicing agents. The court noted, however, that Aurora had an interest in the indebtedness because Aurora was the record holder of the Hortons’ mortgage. Thus, the court dismissed the Hortons’ second allegation.
Third, the Hortons’ alleged that foreclosure on their mortgage violated M.C.L. § 600.3204(3) which states “[i]f the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale . . . evidencing the assignment of the mortgage to the party foreclosing the mortgage.” Here, MERS assigned the recorded mortgage to Aurora, who recorded the assignment with the Barry County Register of Deeds. Thus, the court held, a record chain of title existed that evidenced the assignment of the mortgage from MERS to Aurora. Thus, Defendants did not violate M.C.L. § 600.3204(3).
Fourth, the Hortons’ alleged that one of the defendants adjourned the originally scheduled Sheriff’s Sale without publishing the required notices. The court dismissed this claim, however, because the Hortons did not support their allegation with any facts. Fifth, the Hortons’ claimed that Defendants did not negotiate in good faith, because Defendants responded to the Hortons’ requests to modify the subject loan with nothing more than cursory responses and flat denials. But the court held that cursory responses do not characterize Defendants’ failure to negotiate in good faith. Sixth, the court dismissed the Hortons’ allegation that Defendants engaged in unfair and deceptive business practices, because the Hortons’ provided no factual support for their claim.
Seventh, the Hortons alleged that one or more Defendants intentionally inflicted emotional distress on the Hortons by violating Michigan’s foreclosure statute. But because the Hortons did not validly claim that any Defendant violated Michigan’s foreclosure statute, the court dismissed the Hortons’ allegation.
Finally, Michigan law does not allow an equitable extension of the period to redeem property from a statutory foreclosure sale, in connection with a mortgage foreclosed on by advertisement, in the absence of a clear showing of fraud or irregularity. Furthermore, filing a lawsuit prior to the expiration of the redemption period is insufficient to toll the redemption period. Accordingly, since the Hortons failed to successfully show fraud or irregularities in the foreclosure process, the court granted Defendants’ motion to dismiss.
February 15, 2013 | Permalink | No Comments
