February 11, 2013
Maryland District Court Dismisses Mortgagor’s Claims to Invalidate Foreclosure
In Parillon v. Fremont Investment & Loan, et al., Civil No. L-09-3352, 2010 WL 1328425 (D. Md. March 25, 2010), the court granted bank/MERS’s motion to dismiss with respect to all of mortgagor claims, because Plaintiff mortgagor “filed a conclusory complaint that fails to state any grounds upon which the loan to him might be invalidated or the foreclosure enjoined.”
In 2006, Plaintiff obtained a loan from Defendant Fremont Investment & Loan (“Fremont”) and granted Defendants a lien against his residence, with Defendants Fremont as Trustee and MERS as beneficiary. Defendant Litton Loan Servicing LP (“Litton”) sent Plaintiff a Notice of Foreclosure, with the foreclosing parties being Defendant HSBC and Defendant Ace Securities Corp. Home Equity Loan Trust. Plaintiff filed a complaint and Defendants Fremont, Litton, MERS, and Wells Fargo moved to dismiss.
Defendant Wells Fargo’s motion to dismiss was granted, because the complaint contained “no specific information regarding Wells Fargo’s role in the events at issue.”
With respect to all other Defendants, the court dismissed Plaintiff’s claim for quiet title because Plaintiff “executed a deed of trust granting the mortgagee an interest in his property,” and so his residence was not vested in him alone. The court similarly dismissed Plaintiff’s rescission based on fraud claim, breach of contract claim, and his claims under the Maryland Protection of Homeowners in Foreclosure Act and the Home Ownership and Equity Protection Act, because all failed to allege any elements or facts regarding such claims.
Meanwhile, Plaintiff’s claim under the Fair Debt Collection Practice Act was dismissed, because it “specifically exempts defendants attempting to collect their own debts, mortgagors, and mortgage servicing companies.” Plaintiff’s Real Estate Settlement Procedures Act and Truth in Lending Act claims were also dismissed because they were (1) time-bared with respect to damage and (2) conclusory with respect to equitable relief.
Lastly, the court dismissed Plaintiff’s breach of fiduciary duty claim, because “Maryland courts don’t recognize a separate tort of breach of fiduciary duty.”
February 11, 2013 | Permalink | No Comments
Federal District Court in Idaho Rules for Banks/MERS in Foreclosure Case
In Showell v. BAC Home Loans Servicing, L.P., 4:11-CV-00489-CWD, 2012 WL 4105472 (D. Idaho Sept. 17, 2012), the Court granted Defendants’ motions to dismiss. The Court once again held that since Idaho is a nonjudicial foreclosure state, standing, or proof of ownership of the underlying note, is not required before a proceeding is initiated. Plaintiff Homeowners’ quiet title claim failed because a “mortgagor cannot without paying his debt quiet title as against the mortgagee.” Additionally, MERS was found to have authority to foreclose on the defaulted property. MERS was given the authority to exercise the rights described in the Deed on behalf of the lender as the lender’s agent. Additionally, Plaintiffs’ argument that MERS did not have the ability to assigned interests based upon its “nominee” status was dismissed by the Court since “there is no requirement in the Deed of Trust that the original Lender grant MERS permission to assign MERS’s interest in the Deed of Trust to lenders’ successor in interest.” Plaintiffs’ various other claims were dismissed for failure to support their claims, or state a claim at all. The most common of the arguments that were dismissed was that the Note and Deed being split renders them unenforceable. The Court concluded that splitting the Note and Deed does not preclude the proper Defendant from foreclosing on the Deed of Trust.
February 11, 2013 | Permalink | No Comments
Federal District Court in Idaho Grants Defendants (Bank et. al.) Motion to Dismiss in Foreclosure Case
In Cherian v. Countrywide Home Loans, 1:12-CV-00110-BLW, 2012 WL 2865979 (D. Idaho July 11, 2012), the Court granted Defendants’ motion to dismiss and denied Plaintiff Homeowner’s motion for a temporary restraining order and motion to amend his complaint.
Plaintiff sought to enjoin the foreclosure sale of his property on multiple grounds.
- The Court held that P could not quiet title. He had “not alleged an ability or willingness to tender the balance due on the loan” which was fatal to his claim. Additionally the court explained that P’s allegations that U.S. Bank failed to follow the applicable non-judicial foreclosure statutes does not excuse his lack of tender or otherwise save his claim.
- Plaintiff did not allege any facts to support his claim that Defendants failed to comply with Idaho’s foreclosure statutes
- Securitization of the Note did not impact the right to foreclose and did not discharge the Plaintiff’s obligation to repay the loan
- The Court held, consistent with its holding in Trotter v. Bank of New York Mellon, (see earlier post), that proof of Note ownership is not a prerequisite to initiating a non-judicial foreclosure proceeding on a deed of trust.
- The Court held that splitting the Note and Deed of Trust did not extinguish the right to foreclose. The Court explained that “use of the MERS system does not eliminate a party’s right to foreclose – even accepting the premise that use of MERS splits the note from the deed.
- The Court concluded that MERS “had the authority to assign its beneficial interest in the deed of trust to the foreclosing bank.”
- The Court held, as it had done before, that the “activity of foreclosing on [a] property pursuant to a deed of trust is not the collection of a debt within the meaning of the” Fair Debt Collection Practices Act (“FDCPA”), and lenders and mortgage companies are not “debt collectors” within the meaning of the FDCPA. Moreover, “MERS’ role as beneficiary of the Deed of Trust was established at the loan’s origination prior to [Plaintiff’s] default, and therefore it is also exempt under the FDCPA
- Plaintiff failed to allege a violation of the Idaho Consumer Protection Act.
- Plaintiff alleged that U.S. Bank violated the Truth in Lending Act (“TILA”), but he did not allege that the Bank’s failure to provide notice “within 30 days after the date on which the mortgage loan was sold or otherwise transferred or assigned by Defendant MERS,” caused him to incur actual damages.
February 11, 2013 | Permalink | No Comments
Federal District Court in Idaho Rules for Bank on Various Claims and Dismisses Claim that MERS Was Not a Valid Beneficiary in Foreclosure Case
In Ohlsen v. Bank of America, 1:11-CV-00357-BLW, 2012 WL 4139530 (D. Idaho Sept. 18, 2012), Plaintiff Homeowners filed an objection challenging the Report and Recommendation of a Magistrate Judge that their complaint be dismissed. The Court here considered the Plaintiffs’ contentions and conducted a de novo review of the record. The Court agreed with the Magistrate Judge’s conclusion that Plaintiffs are in default on their mortgage obligations, have not tendered payment of their obligation, and thus are not entitled to quiet title. Plaintiffs’ various other theories, one being that MERS is not a valid beneficiary entitled to enforce the note, are not supported by the case law or loan documents. Plaintiffs’ other claims were not supported either.
February 11, 2013 | Permalink | No Comments
February 9, 2013
Utah District Court Holds that MERS has Authority to Assign Beneficial Interest
In Fowler v. ReconTrust Company, N.A., No. 2:10 CV 01143, 2011 WL 839863 (D. Utah March 10, 2011), the United States District Court of Utah held that Plaintiffs had no viable claim for quiet title because the trust deed executed by the plaintiffs was a valid encumbrance against their title. In the trust deed, MERS was named as “Beneficiary as nominee for Lender and its successors and assigns.” MERS later assigned beneficial interest of the trust deed to BAC Home Loans Servicing, LP (BAC). ReconTrust was subsequently appointed successor Trustee by BAC. The plaintiffs’ claimed that the trust deed was not valid, and this claim rested on the allegation that MERS lacked authority to assign beneficial interest under the trust deed.
The court, however, pointed out that past decisions “affirmed MERS’[s] power to act as the beneficiary of the Trust Deed as Lender’s nominee under Trust Deeds identical to this one.” Those cases found that MERS is able to take any actions required of the lender, including the ability to pursue foreclosure proceedings and assign beneficial interest. Thus, MERS’s assignment of beneficial interest to BAC, and BAC’s subsequent appointment of ReconTrust as the successor trustee, was valid. So, the trust deed is a legitimate encumbrance on Plaintiffs’ title.
February 9, 2013 | Permalink | No Comments
Utah District Court Holds that MERS has the Right to Foreclose on Property even though the Promissory Note was Sold for Purposes of Securitization
In Commonwealth Property Advocates v. Citimortgage, Inc., No. 2:10 CV 00885 CW, 2011 WL 98491 (D. Utah Jan. 12, 2011), the United States District Court of Utah held that MERS had a right to foreclose the property at issue regardless of the fact that the note was sold for purposes of securitization. In this case, the plaintiff’s claim that Defendants cannot foreclose on the property is premised on the notion that Utah Code Ann. § 57-1-35 provides that when lenders transfer a note for securitization, “it loses the rights granted in the trust deed and the authority to foreclose.” MERS was named in the trust deed as beneficiary and “nominee for Lender and Lender’s successors and assigns, and the successors and assigns of MERS.”
The court rejected plaintiff’s interpretation of § 57-1-35 and dismissed plaintiff’s claim. It found that “Plaintiff offers no evidence or legal argument that MERS cannot contract for the right and power of foreclosure regardless of who holds the note, or the beneficial interest under the trust deed. Nor does Plaintiff demonstrate that such rights are actually ‘lost by transfer of the debt.’ Utah Code Ann § 57-1-35 does not address whether the parties can agree by contract to have someone other than the beneficial owner of the debt act on behalf of that owner to enforce rights granted in a trust deed.”
February 9, 2013 | Permalink | No Comments
Tenth Circuit Holds that MERS has Authority to Initiate Non-Judicial Foreclosure in Utah
In Commonwealth Property Advocates, LLC v. Mortgage Electronic Registration Systems, Inc, 474 F. App’x 732 (10th Cir. 2012), the United States Court of Appeals for the Tenth Circuit held that Mortgage Electronic Registration Systems, Inc (“MERS”) had authority to initiate non-judicial foreclosure on property of the plaintiffs. In this case, the property owners filed a complaint alleging that MERS “had no authority to foreclose on their home because the obligation had been securitized and the investors, who actually own the debt, are unknown.” According to the plaintiffs, the securitization process severed the debt from its security, which, under Utah Code Ann. § 57-1-35, rendered the trust deed unenforceable. MERS claimed it had authority to foreclose because the trust deed “specifically established MERS as beneficiary and ‘nominee for Lender and Lender’s successors and assigns.’”
The court, quoting a Utah Court of Appeals decision, rejected plaintiffs’ argument that § 57-1-35 invalidated MERS’s authority to foreclose, reasoning that the statute “’simply describes the long-applied principle . . . that when a debt is transferred, the underlying security continues to secure the debt.’” In deferring to the Utah Court of Appeals decision, the court here found that Plaintiffs’ argument “’had no legal basis under Utah law’ because even assuming the securitization scheme divested defendant of their implicit authority to foreclose as holders of the trust deeds, ‘the trust deeds explicitly granted Defendants the authority to foreclose’ and § 57-1-35 in no way prohibits such an authorization.” Thus, the court held that Plaintiffs’ claim was without merit and granted MERS’s motion to dismiss.
February 9, 2013 | Permalink | No Comments
