February 12, 2013
Federal District Court in Virginia Rules for Lenders/MERS in Foreclosure Case
In Ramirez Alvarez v. Aurora Loan Services, 01:09CV1306, 2010 WL 2934473 (E.D. Va. July 21, 2010), Plaintiffs purchased the property at issue by executing two promissory notes and two deeds of trust. Defendant was the holder of the first promissory note of $436,000. Plaintiffs became delinquent in their mortgage payments and after MERS appointed a substitute trustee foreclosure occurred soon after. Defendant, the purchaser of the foreclosed property instituted an Unlawful Detainer action to remove Plaintiffs from the property and Aurora was granted possession of the property.
Plaintiffs brought multiple claims in this case all of which failed as a matter of law. Two of the claims were “that (1) the defendants lacked authority to foreclose under Virginia’s non-judicial foreclosure statutes and (2) that the loan securitization process has split the Note from the Deed of trust making it unenforceable and/or credit default swaps related to the securitization of the notes have already satisfied the Plaintiff’s mortgage obligations.” These claims were dismissed for Plaintiffs’ failure to support their claims. Additionally, the Court held that MERS had the authority and ability to enforce the terms of the security instruments.
February 12, 2013 | Permalink | No Comments
Federal District Court in Virginia Rules for Bank/Lender Defendants in Foreclosure Case
In Horvath v. Bank of New York, 2010 WL 538039 (E.D. Va. Jan. 29, 2010) aff’d, 641 F.3d 617 (4th Cir. 2011), Plaintiff Homeowner defaulted on his loan and his was being foreclosed upon. Plaintiff filed complaint against the Bank of NY, Countrywide Home Loans and others. In Count I he was seeking a declaration that the foreclosure was “void.” This count was dismissed since declaratory relief is reserved for forward looking actions and foreclosure on the property had already occurred. In Count III he alleged that Defendant Equity Trustees as a trustee under the deeds of trust at issue breached its fiduciary duty owed to him by failing to perform “reasonable due diligence” before moving forward with the foreclosure. Under Virginia law, a trustee under a deed has no such duty, and only has the duties listed in the deed. Plaintiff did not allege that any such duties exist in the deed and therefore Count III was dismissed.
In Count IV Plaintiff also claimed that Defendants had no valid interest in the Property and sought quiet title, but he failed to allege sufficient facts to support his claim. The court in analyzing Plaintiff’s legal theory concluded that he was not “discharged from his obligation under the promissory note at issue because of his original lenders’ sale and assignment of the notes,” and also that the “split” of the promissory note from the deeds of trust does not render the deeds unenforceable.
Plaintiff also failed to allege facts sufficient to establish that Defendants Equity and Countrywide acted as debt collectors entitling him to make a claim against them under the Fair Debt Collection Practices Act.
Lastly, in Count VI, Plaintiff claimed fraud on the part of Equity and Countrywide by misrepresenting their authority to conduct a foreclosure, but failed to allege sufficient facts.
The District Court decision was later affirmed by the 4th Circuit after Plaintiff appealed. See opinion here.
February 12, 2013 | Permalink | No Comments
Multnomah County Suing MERS and Big Banks
Multnomah County in Oregon is suing MERS and 18 other co-defendants for $38 million. The co-defendants include Bank of America, JPMorgan Chase, CitiMortgage, HSBC, Wells Fargo and Oregon banks Bank of the Cascades, Lewis and Clark Bank and West Coast Bank.
The county claims that MERS devastated the public property records system while helping clients avoid required transaction fees. The suit is based on theories of negligence, unjust enrichment and fraudulent misrepresentation.
Read article here: https://www.bizjournals.com/portland/news/2013/02/08/county-seeking-38-million-from-mers.html
February 12, 2013 | Permalink | No Comments
More on The DoJ’s S&P Lawsuit
Law360 interviewed me and others about the reliance on FIRREA in the Department of Justice’s complaint (story available here).
February 12, 2013 | Permalink | No Comments
February 11, 2013
CFPB Mortgage Disclosure Forms: Test And Verify
The CFPB is requesting comments relating to the collection of “information as part of quantitative research related to residential mortgage loan disclosures.” (8113) The purpose “of the quantitative testing will be to examine whether the disclosures aid consumers in understanding the terms of the mortgage loan that is the subject of the disclosure.” (8814) It is great that the CFPB is testing its tools to ensure that they work as intended. Government has put a lot of faith in the power of disclosures to help consumers make good financial decisions. It is important to test whether that faith is deserved.
February 11, 2013 | Permalink | No Comments
Federal District Court in Idaho Rule for Banks/MERS in Foreclosure Case
In Washburn v. Bank of America, N.A., 1:11-CV-00193-EJL, 2011 WL 7053617 (D. Idaho Oct. 21, 2011), the Idaho District Court recommended that the Defendants’ Motion to Dismiss be granted. Plaintiff Homeowner had defaulted on her loan and received a notice of default. Plaintiff sought quiet title to the property, challenged the transfer of the loan ownership, and contended that MERS did not have the authority to appoint a successor trustee to the Deed or to carry out a non-judicial foreclosure. The Court found that even though “the right to enforce the mortgage by foreclosure had expired by limitation, the plaintiff was required, in equity, to pay the mortgage debt to obtain relief under a quiet title action. The securitization of the loan and its transfer to another entity did not extinguish the security interest or otherwise impact the ability to foreclose on the trust deed. Also, for the purpose of the quiet title action, “the fact that MERS is named as the beneficiary does not change the rights or obligations of [Plaintiff] with regard to the Property.” Plaintiff’s argument that MERS lacks standing was misplaced since Plaintiff focused on the ability of MERS to enforce the right to payment. “But foreclosing on a trust deed is distinct from the collection of the obligation to pay money.” Additionally, there was no issue with MERS’s initiated foreclosure because foreclosure was initiated in the name of the lenders. MERS was also found to have the ability to appoint a successor trustee because the Deed of Trust expressly allowed MERS to do so.
On January 17, 2012, appeal by the Plaintiff was taken into consideration by the Court. The above Report and Recommendation was Incorporated and Adopted. The Defendants’ Motion to Dismiss was granted and the case was dismissed. Washburn v. Bank of America (January 17 2012).
February 11, 2013 | Permalink | No Comments
Pennsylvania Court Holds Bank Has Standing to Bring Mortgage Foreclosure Action Before an Assignment to Bank is Recorded
In US Bank v. Mallory, 982 A.2d 986 (Pa. Super. 2009), the Pennsylvania Superior Court affirmed an order of the Court of Common Pleas of Philadelphia, denying Appellant Mallory’s petition to strike and/or open the default judgment entered in favor of Appellee. Appellant alleged that the default judgment should be stricken because Appellee (1) did not “plead properly an assignment on the face of the record”; (2) did not have standing to bring the mortgage foreclosure action; and (3) “the trial court erred in denying Appellant’s petition to open default judgment.
In 2006, Appellant executed a mortgage with MERS. In 2007, Appellee filed a complaint in mortgage foreclosure against Appellant, and received a default judgment against Appellant. The property was listed for Sheriff’s sale, before which Appellant filed a petition to strike the default judgment. The Court of Common Pleas of Philadelphia denied the petition and Appellant appealed.
The court “conclude[d] that there was not a fatal defect apparent on the record such that the trial court erred in denying Appellant’s petition to strike.” Appellee stated in its mortgage complaint that “Plaintiff is now the legal owner of the mortgage and is in the process of formalizing an assignment of same,” whereby “sufficiently put[ting Appellant] on notice of Appellee’s claim of interest with regard to the subject mortgage.” First, Pa.R.C.P. 1147(a)(1) does not require “a recorded assignment as a prerequisite to filing a complaint in mortgage foreclosure.” Second, Appellee’s statement in the complaint excused Appellee from attaching a copy of the written assignment required under Pa.R.C.P. 1019. Third, the Appellee had standing to bring the foreclosure complaint because it was a real party in interest under Pa.R.C.P. 2002(a) since recordation of the assignment was a not a prerequisite. Regardless, Appellant’s petition to open the default judgment was properly denied, because Appellant’s petition was not promptly filed.
February 11, 2013 | Permalink | No Comments
