January 28, 2013
Northern District of Ohio Holds that Mortgage Conveys Beneficial Interest to MERS as Nominee, Mortgagee
In Meehan v. Mortgage Elec. Registration Sys., Inc., 1:11CV363, 2011 WL 3360193 (N.D. Ohio Aug. 3, 2011), the United States District Court for the Northern District of Ohio held that MERS had a beneficial interest in the property based on the language of the mortgage agreement. In this case, the homeowners filed an action to quiet title, claiming, “MERS has no beneficial interest in the mortgage. . . [further,] MERS’s interest is adverse and constitutes a cloud on the title to [the] property.” MERS claimed it had a beneficial interest in the property because the mortgage named MERS as nominee for the lender as well as the mortgagee. The court found that the contract language was clear and an action to quiet title, which is an equitable remedy, was not available to the homeowners in this case. Thus, the court held that the homeowners claim was without merit and granted MERS’s motion to dismiss.
January 28, 2013 | Permalink | No Comments
January 25, 2013
Southern District of Ohio Unable to Determine Lenders’ Standing, Orders Lenders to Submit More Evidence or Have Case Dismissed
In In re Foreclosure Cases, 521 F. Supp. 2d 650 (S.D. Ohio 2007), the United States District Court for the Southern District of Ohio reviewed 27 private foreclosure actions based on federal diversity jurisdiction. In this case, the court was concerned with the issues of standing and subject matter jurisdiction, and was dissatisfied with the evidence submitted by the lenders. The court concluded by ordering the lenders to “submit evidence [within 30 days] showing that they had standing in the above-captioned cases when the complaint was filed and that this Court had diversity jurisdiction when the complaint was filed. Failure to do so will result in dismissal without prejudice to refiling if and when the plaintiff acquires standing and the diversity jurisdiction requirements are met.”
January 25, 2013 | Permalink | No Comments
Ohio Appellate Court Holds that Lender, as the Real Party in Interest, has Standing to Foreclose
In Countrywide Home Loans Servicing, L.P. v. Shifflet, 2010-Ohio-1266, the Court of Appeals of Ohio, Third District held that the lender had standing to bring a foreclosure action against the homeowners. The homeowners argued that “MERS, rather than [lender], was the holder of the mortgage, rendering [MERS] the real party in interest.” The court rejected this argument, and based their determination on the evidence submitted by the lender. The evidence submitted was (1) an affidavit from the lender’s assistant vice president stating that the lender is the holder of the mortgage deed and note, and (2) an assignment executed by MERS that assigned all of its right, title, and interest in the subject mortgage deed and note to the lender. The court found this evidence dispositive, stating, “[g]iven the affidavit of [the lender’s assistant vice president] and, more importantly, the documentary evidence of the assignment of the mortgage and note to [the lender], the trial court did not err in granting summary judgment to the lender.”
January 25, 2013 | Permalink | No Comments
Foreclosure = Debt Collection
The Sixth Circuit ruled in Glazer v. Chase Home Finance LLC, __ F.3d ___ (Case No. 10-3416, Jan. 14, 2013) that “that mortgage foreclosure is debt collection under” the Fair Debt Collection Practices Act. (2) As Glazer indicates, courts have been split on this issue, but the trend seems to be in accord with Glazer.
Of particular note to lawyers: “Lawyers who meet the general definition of a “debt collector” must comply with the FDCPA when engaged in mortgage foreclosure. And a lawyer can satisfy that definition if his principal business purpose is mortgage foreclosure or if he “regularly” performs this function.” (16)
January 25, 2013 | Permalink | No Comments
January 24, 2013
Ohio State Court of Appeals Holds that Bank has Standing to Foreclose
In Deutsche Bank Natl. Trust Co. v. Traxler, 2010-Ohio-3940, the Court of Appeals, Ninth District of the State of Ohio held that the bank had standing to commence a foreclosure action against the homeowners. The homeowners argued that the bank lacked standing because the bank did not possess the mortgage and note at the time it commenced its action. The court rejected this argument, holding, “a bank need not possess a valid assignment at the time of filing suit so long as the bank procures the assignment in sufficient time to apprise the litigants and the court that the bank is the real party in interest.” The court looked at the assignments of the mortgage and note, and found that both were valid. Specifically, the court rejected the homeowner’s argument that MERS lacked authority to assign the mortgage. The court found that where MERS is designated as both the nominee and mortgagee of the mortgage, it has authority to assign the mortgage. However, the court went even further and stated, “assuming that MERS did not have the authority to assign the mortgage, however, we. . . conclude that the proper transfer of the promissory note, which the mortgage secured, amounted to an equitable assignment of the mortgage.” Thus, the court concluded that the homeowner’s arguments be rejected and the bank had standing to foreclose.
January 24, 2013 | Permalink | No Comments
Center on Budget and Policy Priorities Report on Rental Assistance
The Center has issued a thought-provoking report, Renters’ Tax Credit Would Promote Equity and Advance Balanced Housing Policy. The summary states that
Over the past several decades, the nation’s housing policy has focused predominantly on increasing homeownership. Most federal housing expenditures now benefit families with relatively little need for assistance. About 75 percent of federal housing expenditures support homeownership, when both direct spending and tax subsidies are counted. The bulk of homeownership expenditures go to the top fifth of households by income, who typically could afford to purchase a home without subsidies. Overall, more than half of federal spending on housing benefits households with incomes above $100,000.
The report makes the obvious but politically delicate point that federal housing policy should assist low-income households as opposed to upper income households. The report proposes a well thought out renter’s tax credit that could complement existing programs like the Low Income Housing Tax Credit.
Whether a renter’s tax credit (budgeted at $5 billion in the report) is politically feasible at this time is another question entirely.
January 24, 2013 | Permalink | No Comments
January 23, 2013
Appellate Division of New Jersey Finds Deutsche Bank Did Not Have Standing to Foreclose Under NJSA 12A:3-301
In Deutsche Bank Nat. Trust Co. v. Mitchell, 422 N.J. Super. 214, 27 A.3d 1229 (App. Div. 2011) the Appellate Division of New Jersey reversed the trial court’s grant of summary judgment to plaintiff/Deutsche Bank. In doing so, the court found that Deutsche Bank did not prove it had standing at the time it filed the original complaint and its post-complaint amendment was insufficient to cure the default. Thus, Deutsche Bank lacked standing to foreclose.
The facts of this case are somewhat complex as the defendant/tenant, Ms. Jacqueline Bethea, was also a victim of a buy-lease-back “mortgage rescue scam.” After her mother passed away and her medical conditions worsened, Ms. Bethea had filed bankruptcy. However, while her petition was pending, she met Steve French, CEO of Elite Financial Services, who convinced her to dismiss the petition as he would help her save her home, pay off her debts, and improve her credit score. The plan was termed a buyout of the property, and included a straw-man, Mr. Mitchell, who would be awarded a $10,000 consulting fee for making the purchase. Additionally, the agreement provided for a $25,000 consulting fee to Elite for arranging the transaction. After two years renting, Ms. Bethea would be able to repurchase her home. However, the terms of the agreement proved unsustainable, as the payments Ms. Bethea was expected to make were higher than her original mortgage payments. In addition, while paying property taxes, utility bills and municipal charges as a tenant, Ms. Bethea’s proceeds from the original sale had been escrowed and drained through the course of the two year plan. Approximately 7 months later, Deutsche Bank filed a complaint for foreclosure against Mr. Mitchell and Ms. Bethea, who was included due to the $35,000 mortgage she had given to Mr. Mitchell in connection with the sale of the property originally. The day after the complaint was filed, Washington Mutual, as successor in interest to Long Beach Mortgage Company (the original mortgagee), assigned the mortgage to Deutsche Bank.
Ms. Bethea filed a number of affirmative defenses, including violations of the Truth In Lending Act (TILA), Home Ownership Equity Protection Act, Real Estate Settlement Procedures Act, and New Jersey Home Ownership Security Act, and a third-party complaint alleging violations of the Consumer Fraud Act, amongst other violations against Deutsche Bank, Mr. Mitchell, Mr. French and Elite. The trial court granted summary judgment to Deutsche Bank finding “the fact that the HUD-1 prepared by the third-party defendants is a lie does not put the lender on notice that the seller wasn’t going to be getting everything that she thought she was going to be getting out of the proceeds of the sale.” Additionally, the court found Deutsche Bank’s amended complaint cured its original defect of not possessing the mortgage on the date of filing.
The Appellate Division reversed, finding Deutsche Bank did not have standing at the time it filed its complaint as it did not possess the note. Under NJSA 12A:3-301, there are three categories of persons entitled to enforce negotiable instruments. The court explored each category and in turn rejected each one from application in this case.
First, Deutsche Bank argued they were entitled to foreclose as a party may enforce the instrument even if they are not in possession of the note. However, the court rejected this argument as it applies to only two specific categories. Under 12A:3-309, one may fit under this prong if the instrument has been lost, destroyed or stolen. Second, 12A:3-418 applies when an instrument has been paid or accepted by mistake. The court found neither scenario applicable to Deutsche Bank.
Second, the court found Deutsche Bank did not qualify as a “holder” of the instrument as the copy of the note it possessed was not “indorsed” within the meaning of NJSA 12A:3-204.
Third, the court found Deutsche Bank did not qualify as a “nonholder in possession of the instrument who has the rights of a holder” because it did not demonstrate it possessed the note at the time of filing.
Accordingly, the court reversed the order of summary judgment and remanded to determine whether, before the original complaint was filed, plaintiff was in possession of the note or had another basis to achieve standing.
The court also made one final interesting point related to plaintiff’s proof, finding the attorney’s certification based on the business records of Deutsche Bank insufficient. The court noted, “Attorneys in particular should not certify to facts within the primary knowledge of their clients.” (internal citations omitted).
January 23, 2013 | Permalink | No Comments
