December 2, 2012
Idaho District Court Rules for Homeowner in Foreclosure Dispute under Deed of Trust
In Ralph v. MetLife, No. CV 2010-0200 (D. Idaho Aug. 10, 2011), in granting partial summary judgment for the plaintiff homeowner, the court found that the defendant bank lacked authority to maintain a non-judicial foreclosure since MERS did not have a beneficial interest in the deed of trust to rightfully transfer to the defendant. Since defendant was incapable of initiating a non-judicial foreclosure, they are incapable of complying with I.C. 45-1505, the statute governing trust deed foreclosures.
December 2, 2012 | Permalink | No Comments
November 29, 2012
New Jersey Bankruptcy Court Finds that “Non-Holder” Cannot Enforce Mortgage Note
In In re Kemp, 440 B.R. 624 (Bankr. D.N.J. 2010) the debtor/plaintiff brought an adversary proceeding to expunge a proof of claim filed on behalf of Bank of New York by loan servicer Countrywide Home Loans. At all relevant times, the original note appears to have been either in the possession of Countrywide or Countrywide Servicing. Judge Wizmur found that under New Jersey’s UCC, the fact that the owner of the note (Bank of New York) never had possession of the note was fatal to its claim as it did not qualify as a “holder.” The court also found that upon the purported sale of the note and mortgage to Bank of New York, the note was not properly indorsed to the new owner. Thus, the Bank of New York could not enforce the note, and the court disallowed the bank’s claim. The court also held that the originator of the note, although in possession of the note, could not enforce the note on behalf of the bank because the bank did not have authority to enforce the note.
November 29, 2012 | Permalink | No Comments
Florida Court Holds Bank Lacked Authority to Foreclose Absent Substantiation of Note Assignments
In Gee v. U.S. Bank Nat. Ass’n, 72 So. 3d 211 (Fla. Dist. Ct. App. 2011) the court held that summary judgment against appellant/homeowner was inappropriate because U.S. Bank failed to establish its authority to foreclose. A copy of the mortgage and two assignments, from Advent Mortgage (the original mortgagee) to Option One (first assignee) and from American Home (as successor in interest of Option One) to U.S. Bank, was insufficient to establish bank’s authority to foreclose mortgage, absent any showing how American Home (subsequent assignee) came to be a successor in interest to Option One (first assignee).
November 29, 2012 | Permalink | No Comments
Texas Appellate Court Holds that Formal Transfer of Deed is Not Required to Initiate Foreclosure
In Robeson v. Mortgage Electronic Registration Systems, Inc., No. 02-10-00227-CV (Tex. App. –Fort Worth [2nd Dist.] 2012, pet. denied), the Texas Court of Appeals affirmed a summary judgment motion by MERS and the Midfirst bank granted by the trial court. The homeowner plaintiff argued that the bank did not have standing to accelerate the loan and begin foreclosure on January 2009 because the deed of trust was assigned to the Bank on February 2009 and there was no evidence of an endorsement of the note (the note contained a blank endorsement).
The Court of Appeals held that, as to the blank endorsement in the note, no special endorsement is necessary under the Texas Business and Commercial Code, only possession of the note. Two vice presidents of Midfirst bank testified that the bank held both the note and the deed of trust. In addition, one testified that both the note and deed of trust were received on October 2008. Since the plaintiff did not challenge the accuracy of the statements made, the court found that the evidence was sufficient. The court also held that the date the deed of trust was assigned does not create a factual issue of when the interests were transferred to the bank relying on a prior holding that an assignment of the deed of trust from MERS to a lender dated two years after the actual date of transfer does not raise a factual issue of whether the assignment was fabricated. The court held that the date of transfer is not evidence of when the bank is entitled to initiate foreclosure relying on prior holdings which found that the mortgage typically follows the note it secures.
The deed of trust granted both the lender and the beneficiary various lender’s rights in the agreement, particularly the power of sale. As a result, the court stated that MERS was authorized to exercise the right to invoke the power of sale in the deed of trust.
The Texas Supreme Court recently denied the petition for review of this case.
November 29, 2012 | Permalink | No Comments
November 28, 2012
New York Attorney General Sues J.P. Morgan for Fraudulent and Deceptive Acts in Promoting and Selling Mortgage-Backed Securities
In New York v. J.P. Morgan Securities LLC, No. 451556/2012 (County of New York Oct. 10, 2012), the New York Attorney General sued J.P. Morgan (and several of its affilliates, including entities formerly a part of Bear, Stearns & Co.) for its role in connection with the creation and sale of residential mortgage-backed securities (RMBS). The multiple allegations include (1) J.P. Morgan’s systematic failure to fully evaluate loans and disregard for defects uncovered by its limited review, (2) its failure to reform practices and disclose information to investors, (3) its failure to confirm that loans were originated in accordance with applicable underwriting guidelines (including assurance that loans were extended to borrowers who demonstrated a willingness and ability to repay), (4) its failure to follow due diligence processes that it communicated to investors, (5) its disregard for defects that the watered-down due diligence uncovered, and (6) its failure to properly respond to defects uncovered through post-purchase quality control. The complaint alleges that J.P. Morgan had integrated the securitization process by controlling the originator and MBS sponsor and that those entities colluded to defraud investors of proceeds paid by the originator to the sponsor to settle re-purchase claims.
November 28, 2012 | Permalink | No Comments
HSH Nordbank Sues Barclays Bank for Fraud in Issuing Mortgage-Backed Securities
In HSH Nordbank v. Barclays Bank, No. 652678/2011 (New York County Apr. 2, 2012), HSH Nordbank claims that Barclays Bank issued MBS offering materials that included false and misleading statements regarding (1) assignment of mortgages and notes to trusts, (2) the tax treatment of trusts as REMICs, (3) occupancy status of homes secured by mortgages, (4) the combined loan-to-value ratios of mortgages, and (5) compliance with underwriting standards.
November 28, 2012 | Permalink | No Comments
November 27, 2012
New Affordable Housing Goals Set for Fannie and Freddie
The FHFA issued a final rule. The summary is as follows:
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act) requires the Federal Housing Finance Agency (FHFA) to establish annual housing goals for mortgages purchased by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises). FHFA previously established housing goals for the Enterprises through 2011. This final rule establishes new levels for the housing goals for 2012 through 2014, consistent with the requirements of the Safety and Soundness Act.
The new goal levels are lower than those from the last couple of years. For a taste of the controversy surrounding affordable housing goals see this, this and this on the one hand and see this, this and this on the other. My own take is that Wallison and Pinto make broad claims about the negative effects of affordable housing goals that attach big effects to long ago events. Their claims have not been supported empirically and have not gone through a peer review process. That being said, I think it is valuable to draw attention to the unintended effects of government policies. Going forward, Congress and the FHFA should be very careful in their program design to ensure that housing policies have their desired effects — no more, no less.
November 27, 2012 | Permalink | No Comments
