February 11, 2013
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
Eighth Circuit Court of Appeals Holds that Bank, as Holder of legal Title, could Commence Foreclosure-by-Advertisement
In Stein v. Chase Home Fin., LLC, 662 F.3d 976 (8th Cir. 2011), The United States Court of Appeals, Eighth Circuit, held that the holder of legal title to a mortgage did not need to possess the corresponding promissory note before instituting non-judicial foreclosure by advertisement.
In October 2006, Stein (mortgagor) refinanced his home. In exchange for a $484,000 loan, Stein signed a promissory note and granted Chase Bank a mortgage on his home to secure payment of the note. The terms of the note and mortgage made both instruments freely assignable or otherwise transferable without giving prior notice to Stein. In January 2007, Stein obtained a loan from National City Bank in the amount of $100,000, signed a promissory note, and granted National a second mortgage on his home to secure payment of the loan. Both mortgages were recorded in Hennepin County.
Stein defaulted on Chase’s mortgage by failing to make a loan payment. Chase notified him that a foreclosure proceeding would commence. On September 28, 2008, Chase Bank assigned the Mortgage to Chase Home Finance. Subsequently, Chase Home Financial commenced foreclosure and bought the property. Stein had six months to redeem the property by paying Chase the amount it paid at the sheriff’s sale plus interest. After Stein failed to exercise his right of redemption, National exercised its statutory right of redemption as a junior lienholder and purchased Stein’s home from Chase.
Stein then brought this law suit in state court challenging the validity of both the foreclosure of his home by Chase Home Financial, LLC, and the redemption of his home by a junior lienholder, National City Bank. The case was removed to District Court where Chase’s motion for summary judgment was granted. Stein appealed alleging that: Minnesota law required Chase to hold both the mortgage and the promissory note at the time of foreclosure, genuine issues of material fact remained as to whether Chase held the note, and National’s redemption was invalid because the foreclosure was invalid.
First, the court cited Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487 (Minn.2009) for the proposition that a party can hold legal title to the mortgage without holding an interest in the promissory note. The court stated that a mortgagee of record does not lose legal title when the mortgagee transfers interest in the promissory note. In other words, the right to enforce the mortgage through foreclosure by advertisement lies with the legal, rather than equitable, holder of the mortgage. Here, Chase Bank was the mortgagee of record and held legal title to Stein’s mortgage. Chase Bank then assigned the mortgage to Chase Home Financial. Thus, Chase Home Financial was the party entitled to commence a foreclosure by advertisement, even if the promissory note had been transferred to someone else.
Second, the court held that the District Court properly granted Chase Home Financial’s motion for summary judgment, because Stein failed to raise genuine issues of material fact showing Chase Home Financial was not the holder of the note at the time of foreclosure. The record indicated that Chase Bank transferred the mortgage and the promissory note to Chase Home Financial on September 28, 2009—before they commenced foreclosure by advertisement. Additionally, Stein did not present any evidence in District Court that contradicted the clear language of the September 2008 “Assignment of Mortgage” from Chase Bank to Chase Home Financial.
Finally the court rejected Stein’s arguments regarding the validity of National’s redemption. Because Stein’s challenge directly tied to his claim that Chase Home Financial’s foreclosure was invalid—and considering that the court concluded that the foreclosure was valid—Stein’s arguments failed.
February 11, 2013 | Permalink | No Comments
Minnesota District Court Holds that a Mortgagee is not Required to Have an Interest in the Promissory Note in Order to Foreclose
In Butler v. Bank of Am., N.A., CIV. 11-461 DWF/TNL, 2011 WL 2728321 (D. Minn. July 13, 2011), Minnesota District Court denied the Butlers’ motion to remand and granted Bank of America, BAC Homes Loans Servicing, LP, and Peterson, Fram & Bergman, P.A. (PFB)’s motion to dismiss. The Butlers (homeowners) and “all others similarly situated” motioned to remand the case to state court while the Banks filed a motion to dismiss. In addition, PFB, who acted as foreclosure counsel for the Banks, also filed a motion to dismiss.
The Butlers are Minnesota homeowners who alleged that the Banks asserted an invalid and voidable mortgage against Butlers’ home. The Butlers alleged that 1) Defendants did not have actual physical possession of the Butlers’ original note, and 2) the Banks or their predecessors in interest securitized and sold the original note into a pooling and servicing agreement, and in the process of securitizing the note and mortgage, the Banks predecessors in interest purported to transfer legal title to the note and mortgage to a separate and distinct legal entity. Thus, the Butlers alleged that the Banks did not have valid, clear legal title to the original note and could not assert rights under the Mortgage nor remove the Butlers from their home. The Butlers also alleged that the original note was not an unconditionally enforceable negotiable instrument and therefore the banks could not assert the right to foreclose on the mortgage.
The Butlers supported their motion to remand by claiming that the federal district court did not have original jurisdiction under the Class Action Fairness Act (CAFA). The Butlers alleged that the Banks failed to offer evidence showing that the amount in controversy exceeded $5,000,000 and that the putative class contains at least 100 members. The Court noted, however, that the Banks had a litigation specialist testify that “BAC has researched its serving system and determined that there are more than 100 loans secured by property in the state of Minnesota that were acquired by Countrywide Bank, FSB, and subsequently acquired by BOA… records of these loans show that [the] remaining outstanding principle… exceeds, $25 million.” Thus, the Court concluded that the Banks offered sufficient evidence that the jurisdictional requirements were met under the definition of the putative class.
The Butlers also supported their motion to remand by alleging that the Banks offered nothing in support of their alternative claim of jurisdiction under 28 U.S.C. § 1332(a). The Banks contended that the Court had subject matter jurisdiction, via the parties’ diversity of citizenship, because the Butlers fraudulently joined PFB. The Court noted that when a Plaintiff joins a non-diverse party, Defendant may avoid remand to state court by demonstrating that the non-diverse party was fraudulently joined. Here, the Butlers fraud claim is based on the legal theory that the Banks cannot assert the right to foreclose because the Butlers’ original note was not an unconditionally enforceable negotiable instrument. The Court held that this legal theory had no basis in Minnesota law, and thus concluded that the Court had subject matter jurisdiction over the action.
Although the Butlers did not mention any wrongdoing on behalf of PFB, in response to PFB’s motion to dismiss, the Butlers claimed that they alleged fraud against all Defendants including PFB. Their claim depended upon the legal theory that only the holder of the promissory note may foreclose on a mortgage. However, the Minnesota Supreme Court in Jackson v. Mortgage Elec. Registration Sys., 770 N.W.2d 487 (2009) rejected this argument. Thus, the Court granted PFB’s motion to dismiss.
With regards to the Banks’ motion to dismiss, the Court stated that although the Butlers asserted sixteen causes of action, their sole wrongdoing alleged was that the Banks foreclosed on their property without holding the promissory note and without the legal authority to do so. However, the Court in Jackson held that a mortgagee is not required to have any interest in the promissory note in order to foreclose. Because the Butlers did not allege that the foreclosure proceeding was initiated on behalf of an entity other than the mortgagee holding legal title, and since documents submitted by the parties establish that the Mortgage was assigned to BAC; the assignment was recorded; and that the foreclosure sale was conducted in the name of BAC as record holder of legal title, the Court granted the Banks’ motion to dismiss.
February 11, 2013 | Permalink | No Comments
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
