REFinBlog

February 12, 2013

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.

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.

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.