February 13, 2013
Robo-Signing as Abuse of Process?
Apparently not. The Florida Supreme Court issued a narrow ruling in Pino v. Bank of New York that a trial court does not have the authority “to grant relief from a voluntary dismissal where the motion alleges fraud on the court in the proceedings but no affirmative relief on behalf of the plaintiff has been obtained from the court.” (3)
In Pino,the homeowner defendant had sought to have the trial court strike “a notice of voluntary dismissal of the mortgage foreclosure action” and have “the case reinstated in order for the trial court to then dismiss the action with prejudice as a sanction to the mortgage holder for allegedly filing fraudulent documentation regarding ownership of the mortgage note.” (2)
As the court noted, the question before it was very limited. It indicates that the “case is not about whether a trial court has the authority in an ongoing civil proceeding to impose sanctions on a party who has filed fraudulent documentation with the court.” (2) That being said, if the judiciary has an epidemic of fraudulent filings in plain sight — foreclosure filings with facially flawed documentation– could it and should it have done more? If foreclosure mill law firms (and debt collection law firms) realize that they can file flawed papers and either withdraw or correct them later on, where are defendants, particularly unrepresented ones, left?
The common law already acknowledges the tort of Abuse of Process which awards damages against a party who maliciously and intentionally perverts judicial process. And yet, the judiciary has taken very few systemic measures to address what has become a dominant business model for foreclosure and debt collection law firms. So, the Florida Supreme Court is right that it only addressed a limited question under Florida law. It could have sought to rule more broadly about the judiciary’s inherent authority to protect the process of litigation. (See 33) But it chose not to.
The Court does acknowledge that there are bigger issues at play, as it asked the Florida Civil Procedure Rules Committee to consider whether additional sanctions should be available to courts to address fraudulent pleadings. (43) But it is also time for the courts to deal with the bigger questions. How should courts deal in particular with robo-signing practices endemic to the 50 states? How does the rule of law suffer when officers of the court are not required (i) to do due diligence as to their own filings and (ii) to stand by them when they turn out to be fraudulent or materially flawed? And how can that state of affairs best be remedied?
February 13, 2013 | Permalink | No Comments
February 12, 2013
Mortgage Mediation Program May Come to Attention of Oregon Legislature
Oregon had created a mediation program in 2012 but the program faced opposition from the banks because they believed the authorizing bill was unclear and exposed them to liability.
Lenders have shifted from nonjudicial foreclosures to court-supervised foreclosures, which are more costly and time-consuming. The number of court-supervised foreclosures in Oregon has exploded. Washington County, for example, recorded 840 judicial foreclosures during the first 11 months of 2012, compared with 199 during all of 2011.
Sens. Brian Boquist, R-Dallas, and Lee Beyer, D-Springfield, plan to introduce legislation to close loopholes in the 2012 bill. Their goal is create a short-term way to establish clear title for foreclosures until the Supreme Court rules on a pending foreclosure case.
Read article here: https://www.oregonlive.com/opinion/index.ssf/2013/01/mortgage_mediation_mers_need_q.html
February 12, 2013 | Permalink | No Comments
The Michigan District Court holds that MERS has Standing to Initiate a Foreclosure by Advertisement
In Matthews v. Mortgage Elec. Registration Sys., 10-CV-13740, 2011 WL 2563180 (E.D. Mich. June 28, 2011), the Michigan District Court, affirmed the Magistrate Judge’s determination that MERS had standing to foreclose on the Matthews’ property.
Shelia and Eugene Matthews took out a mortgage in 2006. They defaulted on the loan leading to the initiation of foreclosure proceedings and a sheriff’s sale of their home in 2009. Nine months later, the Matthews’ filed this lawsuit against MERS and Fannie Mae. Magistrate Judge Randon issued a Report and Recommendation which granted Defendants’ motion to dismiss the Matthews’ complaint. The Matthews’ then filed a motion to vacate the Magistrate Judge’s report pursuant to Civil Rule 60(b) (Relief from a Judgment or Order).
The court held that the Matthews’ did not challenge any of the Magistrate Judge’s findings of fact or conclusions of law. In addition, when MERS responded saying that the Matthew’s motion was not a proper basis for objecting a Magistrate Judge’s report, the Matthews’ did not correct their pleadings. Furthermore, Rule 60(b) only allows relief from a final judgment, order, or proceeding—a Report and Recommendation is not binding or final. Thus the court did not reach the merits of the Matthews’ motion.
The court also adopted the Magistrate Judge’s Report and Recommendation holding that MERS had standing to initiate a foreclosure by advertisement against the Matthews’ property. The Matthews’ claimed that MERS failed to have a valid security interest in the property and, as a result, violated Michigan’s foreclosure by advertisement statute. The court noted, however, that the Matthews’ voluntarily entered into a mortgage agreement with MERS as nominee for lender Quicken Loans, Inc. The Matthews’ mortgage contained a power of sale which gave MERS the right to foreclose and sell their property. Thus, the court held that the ability to foreclose by advertisement extended beyond the owner of the indebtedness and, therefore, MERS was within their right to pursue foreclosure by advertisement.
February 12, 2013 | Permalink | No Comments
Federal District Court in Virginia Rules for Banks/MERS in Foreclosure Case
In Tapia v. U.S Bank, N.A., 718 F. Supp. 2d 689 (E.D. Va. 2010) aff’d, 441 F. App’x 166 (4th Cir. 2011), the Court granted all of Defendants’ motions to dismiss. The Judge held that declaratory judgment that the foreclosure proceeding was deficient was inappropriate given that the foreclosure had already taken place. MERS was held to have standing to foreclose since the Deed of Trust authorized MERS to foreclose the Property in the event that Plaintiff Homeowners defaulted on the loan. “By signing the Deed of Trust, Plaintiffs agreed that MERS, as nominee for Lender and Lender’s successors and assigns, had the right to foreclose the Property and recognized that MERS could take any action required of Lender.” The court rejected Plaintiffs’ argument that standing is required before a foreclosure proceeding is initiated since standing is not required in Virginia, which is a non-judicial foreclosure state. The Court dismissed various other claims by Plaintiffs due to lack of factual or legal bases to support those claims.
February 12, 2013 | Permalink | No Comments
Federal District Court in Virginia Rules for Lender/MERS in Foreclosure Case
In Merino v. EMC Mortgage Corporation, et. al., CIV.A 1:09-CV-1121, 2010 WL 1039842 (E.D. Va. Mar. 19, 2010), Plaintiff Homeowners executed two notes, and after defaulting filed suit alleging claims under the Fair Debt Collection Practices Act, claims for declaratory judgment, and quiet title. Plaintiffs challenged the authority of the various Defendants to enforce the deeds and notes that had been transferred. The Court stated that under Virginia law, “the holder of an instrument or a nonholder in possession of the instrument with the same rights as the holder may enforce the instrument.” Additionally, “absent a contrary provision, notes are generally freely transferable, and the transferee retains the right to enforce the instrument.” The Court found that “Plaintiffs offered no allegation that they reached an agreement with a noteholder or took any other action which would suffice to discharge the obligation under Virginia law.” Furthermore, as seen in many cases, the court held that the “split” of the deeds from the notes did not render the deeds unenforceable, and under Virginia law, “when a note is assigned, the deed of trust securing that debt necessarily runs with it.” The Court agreed with the finding in a similar cases that there is no basis to support Plaintiffs’ contention that because the default by Plaintiffs “triggered insurance for any losses caused” they are “discharged from the promissory notes and the Property is released from the deeds of trust. The declaratory relief count was dismissed for the same reason as in Horvath, which was that the foreclosure had already occurred. Declaratory judgment is a forward looking mechanism and would therefore serve no purpose here. Finally, the quiet title claim was dismissed because Plaintiffs offered no plausible basis on which the Court can conclude that they possessed good title to the property.
February 12, 2013 | Permalink | No Comments
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
