Arkansas District Court Dismisses Recording Fee Case
In Brown v. Mers, No. 11-cv-06070 (W.D. Ark., 2012), the Arkansas District Judge dismissed a recording-fee lawsuit filed against MERS and held that state laws do not require mortgage assignments to be recorded. The case had transformed into a class action suit alleging that mortgage assignments were made without the payment of transfer fees to the counties. The court believed that use of the MERS System fulfills the purpose of the recording statutes and payment is made when the mortgage when the mortgage is recorded in public land records. Moreover, Arkansas law does not provide for a duty to record mortgages. Without a duty to record mortgages, the court found that MERS did not deprive defendants of any entitlement.
February 8, 2013 | Permalink | No Comments
February 7, 2013
Minnesota District Court Holds that MERS Could Foreclose on Homeowners’ Property even though MERS was not the Holder of the Promissory Note
In Kraus v. CitiMortgage, Inc., CIV. 11-3213 DWF/FLN, 2012 WL 1581113 (D. Minn. May 4, 2012), the Minnesota District Court found that homeowners/borrowers’ complaint lacked particularity.
Plaintiffs are thirteen homeowners and loan borrowers who executed promissory notes with six different lenders that relate to seven different properties. According to the complaint, five notes were secured by mortgages executed in favor of MERS and two were secured by mortgages executed in favor of CitiMortgage.
Plaintiffs allege that: 1) they executed original promissory notes and mortgages with entities different from Defendants who now claim the legal right to foreclose; 2) Defendants do not have physical possession of the original notes, Defendants sold the original notes through a pooling and servicing agreement, and Defendants purported to transfer legal title to the original notes to a separate and distinct legal entity; 3) Defendants cannot assert the right of foreclosure under the mortgages because they do not have clear legal title to the original notes; and 4) Usset is a law firm acting as an agent for purposes of enforcing defaults on Plaintiffs’ notes and foreclosing their mortgages. Plaintiffs allege that Usset falsely represented that its principal was entitled to foreclose and recorded false documents.
Defendants argue that Plaintiff’s Complaint violated Rule 8 of the Federal Rules of Civil Procedure. Under Rule 8(a)(2), a complaint must include “a short and plain statement of the claim showing that the pleader is entitled to relief. While the Rule 8 pleading standard does not require ‘detailed factual allegations,’ it does demand ‘more than an unadorned, the-defendant-unlawfully-harmed-me accusation.’ A complaint will not suffice if it ‘tenders naked assertion[s]’ devoid of further factual enhancement.’” Here, Plaintiffs’ complaint asserted thirteen causes of action involving thirteen Plaintiffs, seven different mortgage loans and properties, and four separate Defendants. Plaintiffs did not specify which factual claims were asserted against any particular Defendant. Thus, the Court concluded that such pleading was inadequate and that Rule 8 required greater specificity than found in Plaintiffs’ complaint.
Regardless, based on Jackson v. Mortg. Elec. Registration Sys., Inc.,770 N.W.2d 487, 500 (2009); Stein v. Chase Home Finance, LLC, 662 F.3d 976, 980 (8th Cir. 2011); and Butler v. Bank of Am., Civil no 11 461, 2011 WL 2728321, at *6 (D. Minn. July 13, 2011), it does not matter whether Defendants could establish that they held the promissory notes in order for Defendants to initiate a foreclosure by advertisement. In addition, Plaintiffs did not allege that Defendants were not the record owners of any mortgage at the time they initiated a foreclosure by advertisement. Further, Plaintiffs did not allege facts showing a defect in the mortgage instrument or mortgage assignment. Thus Plaintiffs failed to establish why Defendants were not entitled to foreclose.
In addition, the court held that Plaintiffs’ fraud claim against Usset fails. Plaintiffs’ fraud claim depended upon the discredited argument that only the holder of the promissory note may foreclose on a mortgage by advertisement. Plaintiffs also failed to allege their fraud claim with sufficient particularity. Thus, ultimately, the court granted Defendants’ motion to dismiss in its entirety.
February 7, 2013 | Permalink | No Comments
Oregon District Court Holds that MERS could Assign Deed of Trust and Wells Fargo Bank could Initiate Foreclosure Proceedings
In Neilson v. Wells Fargo Bank, NA, CV 10-1516-MO, 2011 WL 3476523 (D. Or. Aug. 9, 2011), the Oregon District Court granted Wells Fargo Bank’s motion for summary judgment because Neilson (homeowner) failed to show a likelihood of success and failed to raise serious questions on the merits.
Neilson moved for preliminary injunction to prevent the foreclosure of his home. The Court noted, however, that a preliminary injunction will only be granted if Neilson could show a likelihood of success on the merits and if Neilson could show that serious questions were raised on the merits. Here, Neilson made three claims against Wells Fargo.
First, Neilson claimed that MERS was not the beneficiary of the deed of trust and thus had no right to assign it. The court noted, however, that MERS was the proper beneficiary as evidenced by the deed of trust, and had the right to exercise steps necessary to recover the debt owed by the lender.
Second, Neilson claimed that Wells Fargo engaged in fraud. But Neilson failed to provide adequate details supporting his claim. Thus, under Rule 9(b) of the Rules of Civil Procedure, Neilson’s claim did not raise serious questions on the merits.
Lastly, Neilson claimed that Wells Fargo violated the Real Estate Settlement Procedures Act (RESPA) by failing to provide him with “information regarding the owner of the note, documentation of ownership of the note and deed of trust, and the role played by MERS in the underlying transaction.” This argument failed as well, however, because RESPA violations are penalized with monetary damages, not by setting aside foreclosure proceedings.
The court ultimately held that Neilson failed to show a likelihood of success on the merits and failed to show that serious questions were raised on the merits. Thus the Court granted Wells Fargo’s motion for summary judgment.
February 7, 2013 | Permalink | No Comments
Rhode Island Superior Court Adopts Payette Opinion
In Breggia v Mortgage Electronic Registration Systems, et al., C.A. No. PC 2009-4144 (R.I. Super. April 3, 2012), the plaintiff brought a declaratory judgment claim to quiet title following a foreclosure sale. The plaintiff alleged a defective foreclosure sale occurred.
The defendants moved for an entry of judgment on the pleadings. During the course of the litigation, Porter was decided. As a result, the parties submitted supplemental memoranda to discuss the impact of the decision on their case. The court noted that the memoranda submitted by the defendants were not a part of the pleadings. In addition, the documents the plaintiff included were attached to a motion, not to the pleading. As a result, the court found that it may convert the motion to a motion for summary judgment because the parties, particularly the plaintiff who opposed the conversion, had a “reasonable opportunity to present all materials made pertinent to such a motion.” Payette v. Mortgage Electronic Registration Systems, No. PC-2009-5875, 2011 WL 3794701 (R.I. Sup. August 22, 2011).
In addressing the summary judgment motion, the court compared the facts of the case to Payette. The court found the plaintiffs failed to distinguish the facts in this case from the facts in Payette. The court found in both cases, the plaintiffs expressly granted MERS the statutory power of sale in the mortgage agreement. In addition, the plaintiffs granted MERS the power to assign its interests, which was done so in this case through a blank endorsement.
As a result, the court granted the defendant’s motion for summary judgment.
February 7, 2013 | Permalink | No Comments
First Circuit Hears RI Case Involving Hundreds of Foreclosures
The First Circuit has heard oral argument on February 5th in In Re Mortgage Foreclosure Cases. In that consolidated case, a Rhode Island District Court judge had stayed over 700 foreclosures until a good faith attempt to settle the cases under the auspices of a special master has run its course. The court issued a memorandum and order denying a motion for a stay pending appeal.
The homeowners claim that the mortgages being foreclosed upon were improperly assigned, but this appeal does not reach the substance of the dispute.
February 7, 2013 | Permalink | No Comments
February 6, 2013
$127 Million LPS Robo-Signing Settlement with 47 A.G.s
The Lender Processing Services, Inc. press release is here.
The $2.5 million Michigan settlement relating to the overall total $127 million settlement can be found here. In the Michigan settlement, LPS did not admit “any violation of law.” (2) Nonetheless, there are some interesting admissions, including, that
- some mortgage loan documents executed by employees of LPS subsidiaries contain “unauthorized signatures, improper notarizations, or attestations of facts not personally known to or verified by the affiant” and some may contain “inaccurate information relating to the identity, location, or legal authority of the signatory, assignee, or beneficiary or to the effective date of the assignment.” (5)
- LPS subsidiaries “recorded or caused to be recorded Mortgage Loan Documents with these defects in local land records offices or executed or facilitated execution on behalf of the Servicers knowing some of these Mortgage Loan Documents would be filed in state courts or used to comply with statutory, non-judicial foreclosure processes.” (5)
- employees of LPS subsidiaries signed mortgage loan documents in the name of other employees. (5)
Brad and I discuss the importance of following the letter of the law when dealing with the assignment of mortgage notes in Dirt Lawyers and Dirty REMICs. It should go without saying that that applies to judicial and non-judicial foreclosure processes as well. We will be addressing that subject in our forthcoming piece with KeAupini Akina which should be out later this month.
With this latest settlement, only Nevada has an ongoing suit against LPS.
February 6, 2013 | Permalink | No Comments
