January 12, 2013
New Jersey Appellate Division Affirms Aurora Loan Servicing’s Foreclosure Judgment, Rejecting Homeowners’ “Exceptional Circumstances” Argument
In Aurora Loan Services, LLC v. Pagano, A-3887-10T1, 2011 WL 6153634 (N.J. Super. Ct. App. Div. Dec. 13, 2011) the Appellate Division of the Superior Court of New Jersey, Atlantic County, affirmed the denial of defendant/homeowners’ motion to vacate their default judgment of foreclosure.
Michael and Janet Pagano had first executed their note and mortgage in July 2007. After defaulting in June 2008, Aurora Loan Servicing commenced a foreclosure action in September 2008, stating the note and mortgage had been assigned to them by MERS, as nominee for AHM Mortgage. Michael Pagano then filed a voluntary Chapter 7 bankruptcy. However, Aurora received an order lifting the bankruptcy’s automatic stay, and a final judgment of foreclosure by default was entered in August 2009. After one pro se motion to vacate and a failed attempt at mediation, the Paganos sought to reargue under R. 4:50-1(f) and the “new law” made in Bank of New York v. Raftogianis, standing for the proposition that “foreclosing plaintiff[s] must have had ownership or control of the underlying debt as of the date of filing of the complaint.”
However, the trial judge found defendants’ motion time-barred and without justification for delay under R. 4:50-l(f). Further, the judge disagreed with defendants’ characterization of the earlier decisions as a “change in law” and concluded the foreclosure was “entirely appropriate.” On appeal, defendants argued exceptional circumstances were present to justify vacating the foreclosure, relying on the general recognition by the judiciary of controlling the integrity of the foreclosure process. However, because these matters were not presented to the trial judge, the court found they were precluded from addressing them. Further, the Appellate Division affirmed the trial judge’s reliance on the bankruptcy records, and found the foreclosure process “consistent with the interests of the holder of the debt” and that defendants were time-barred. Finally, the court addressed defendants’ exceptional circumstances argument and found that “new developments in case law generally do not qualify as such an extraordinary circumstance as to justify relief from a final judgment.” (internal citations omitted). Because there were no exceptional circumstances that would result in a grave injustice here, the Appellate Division affirmed the trial court in its entirety.
January 12, 2013 | Permalink | No Comments
New Jersey Appellate Division Finds Bank of New York Does Not Have Standing to Prosecute Foreclosure Action
In Bank of New York As Tr. For Certificate Holders CWABS, Inc. v. Cupo, A-1212-10T2, 2012 WL 611849 (N.J. Super. Ct. App. Div. Feb. 28, 2012) the Appellate Division of the Superior Court of New Jersey ruled in favor of homeowner Alexander Cupo’s motion challenging the propriety of Bank of New York’s foreclosure. In reversing the trial court, the Appellate Division cited Deutsche Bank Nat’l Trust Co. v. Mitchell for the prevailing standard in New Jersey that “a foreclosing mortgagee must demonstrate that it had the legal authority to enforce the promissory note at the time it filed the original complaint for foreclosure.” Here, because MERS, as nominee for the original lender (Countrywide) had assigned the promissory note and mortgage to plaintiff (Bank of New York) thirty-nine days after the complaint was filed, the court found Bank of New York did not have standing as an assignee to prosecute this foreclosure action. However, the court also remanded for purposes of determining whether there was an alternative basis to achieve standing pursuant to N.J.S.A. 12A:3-301.
January 12, 2013 | Permalink | No Comments
January 11, 2013
Before The Next Crisis: Now’s The Time to Rethink The Martin Act
The Martin Act, New York State’s far-reaching securities fraud statute, has been a powerful tool for New York law enforcement officials to pursue wrongdoing by financial institutions. It has a broad definition of fraud and a long statute of limitations. NY Attorneys General like Spitzer, Cuomo and Schneiderman have used it to bring whole industries in line.
The act has faced criticism from the financial sector for being farther reaching than federal securities laws and comparable statutes in other states. Because it is such a powerful too, various groups have promoted various amendments to increase its potency. The financial sector has opposed these attempts (and here) over the last few years to expand its reach by, for instance, creating a private right of action. Manhattan District Attorney Vance has also called for the Martin Act’s statute of limitations (currently six years or two years from when the injured party discovered or could have reasonably discovered fraudulent behavior) to be extended. The financial sector would not welcome such a move either, of course.
With the six year statute of limitations soon to run out on actions from the Subprime Boom, we should ask ourselves — how broad should the Martin Act be? On the one hand, New York must treat businesses fairly for fairness’ sake but also to maintain its dominant position as a global capital of capital. On the other hand, fairness demands that wrongdoers be punished and fraud be deterred by vigorous enforcement.
Now that we are about to have a breather between the last crisis and the next, we should try to come up with a principled balance between those two goals. That balance should be struck while our cooler heads are prevailing.
January 11, 2013 | Permalink | No Comments
New York Supreme Court, Appellate Division Holds that Assignee Bank Lacks Standing to Foreclose for Failure to Provide Evidence of Valid Note Assignment
In Bank of New York v Silverberg, 86 A.D.3d 274 (2d Dept. 2011), the court stated, “[t]he principal issue ripe for determination by this Court . . . is whether MERS, as nominee and mortgagee for purposes of recording, can assign the right to foreclose upon a mortgage to a [bank] in a foreclosure action absent MERS’s right to, or possession of, the actual underlying promissory note.” In making this determination, the court outlined the following rules regarding standing in foreclosure proceedings: “[i]n a mortgage foreclosure action, a [bank] has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced. . . . [A]n assignment of a note and mortgage need not be in writing and can be effectuated by physical delivery.”
The court found that in this case, “as ‘nominee,’ MERS’s authority was limited to only those powers which were specifically conferred to it and authorized by the [original mortgagee]. Hence, although . . . MERS [had] the right to assign the mortgages themselves, it did not specifically [have] the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS’s authority.” Based on these findings, the court concluded, “MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the corrected assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to the [bank]. Consequently, the [bank] failed to show that it had standing to foreclose.”
January 11, 2013 | Permalink | No Comments
New York Times Criticizes $8.5b Foreclosure Settlement
The New York Times published a story announcing an $8.5 billion settlement with 10 major banks to settle about four million foreclosure actions. The money will be split in two, with $3.3 billion going directly to 3.8 million homeowners, and the rest going towards lowering interest payments and loan amounts. The settlement is controversial, however, because in addition to the payout the settlement will also end the federal government’s review of those foreclosures, and the money is going to be split evenly amongst consumers regardless of whether harm was actually determined. Some believe that the settlement is the result of a flawed and incompetent review process, which became so costly and slow that the government decided to give up on the review. Others think that the rough justice achieved by the settlement is the closest that regulators can come to making victims of unlawful foreclosures whole again. Former FDIC chairwoman Sheila Bair was quoted in the article stating that the government is “mak[ing] the best out of a very bad situation.”
January 11, 2013 | Permalink | No Comments
January 10, 2013
Alabama District Court Continues to Uphold Enforceability of Mortgages Despite Split of Note and Mortgage
In Brooks v. Freddie Mac, 2011 WL 3794683 (AL District Court, 2011), the court held that once a mortgage is assigned to another, foreclosure action is not attributed to the assignor. Therefore, when MERS assigned its interest to another party, the foreclosure was not initiated or undertaken by MERS. The court also agreed with a number of Alabama cases that held that mortgages could still be enforceable even if the note and mortgage had originally been split. Therefore, MERS can serve as the mortgagee as nominee for a lender without invalidating the mortgage.
January 10, 2013 | Permalink | No Comments
Alabama District Court Finds that MERS had Standing to Foreclose Absent Showing of Fraud and Breach of Good Faith
In Mortensen v. MERS, 2010 WL 5376332 (AL Distr. Ct, 2010), the court did not find that refusal to modify a mortgage obligation constituted a breach of good faith and dealing. The court also held that that there was no fraud or deception in telling the mortgagee that “he had to be in default in order to negotiate the mortgage loan modification” because it was not a false statement per se. Therefore, MERS had standing to foreclose.
January 10, 2013 | Permalink | No Comments
