December 5, 2012
Washington State Supreme Court Holds that MERS is Not a Lawful Beneficiary Under Washington’s Deed of Trust Act and Homeowners May Have a Cause of Action Against MERS Under Washington’s Consumer Protection Act
Sitting en banc, the Washington Supreme Court in Bain v. Metropolitan Mortgage Group, Inc., 285 P.3d 34 (Wash. 2012) answered two of three certified questions from the Federal District Court for the Western District of Washington in favor of two homeowners. In this case, the homeowners’ deeds of trust named MERS as the beneficiary and nominee for the lender, and named the title company as the trustee. The homeowners eventually fell behind in the payments, and MERS, acting as beneficiary of the deeds of trust, named successor trustees who commenced foreclosure proceedings. The assignments of the promissory notes were not recorded. The homeowners sought injunctions to stop the foreclosures, and the cases are pending in federal court. The district court hearing the case certified three questions of state law to the state supreme court.
The first question was “whether MERS is a lawful beneficiary with the power to appoint trustees within the deed of trust act if it does not hold the promissory notes secured by the deeds of trust.” The court held that “only the actual holder of the promissory note or other instrument evidencing the obligation may be a beneficiary with the power to appoint a trustee to proceed with a nonjudicial foreclosure on real property. Simply put, if MERS does not hold the note, it is not a lawful beneficiary.”
The second certified question was “what is the legal effect of Mortgage Electronic Registration Systems, Inc., acting as an unlawful beneficiary under the terms of Washington’s Deed of Trust Act?” The court declined to answer this question based on the record and briefing before them.
The third certified question was “does a homeowner possess a cause of action under Washington’s Consumer Protection Act against Mortgage Electronic Registration Systems, Inc., if MERS acts as an unlawful beneficiary under the terms of Washington’s Deed of Trust Act?” The held that “if the first word in the third question was ‘may’ instead of ‘does,’ our answer would be ‘yes.’ Instead, we answer the question with a qualified ‘yes,’ depending on whether the homeowner can produce evidence on each element required to prove a CPA claim.” The elements of a CPA claim are “(1) unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in his or her business or property; (5) causation.” (internal quotations omitted).
December 5, 2012 | Permalink | No Comments
Borden & Reiss: “Once a Failed REMIC, Never a REMIC”
This article analyses how courts may reach results that undercut arguments that REMICs were the owners of the mortgage notes and mortgages for tax purposes. And even if the majority of states rule in favor of REMICs, the few that do not can destroy the REMIC classification of many mortgage-back securities that were structured to be—and promoted to investors as—REMICs. This is because rating agencies require that REMICs be geographically diversified in order to spread the risk of defaults caused by local economic conditions, REMICs hold notes and mortgages from multiple jurisdictions. Most, if not all, REMICs own mortgages notes and mortgages from states governed by laws that the courts determine do not support REMIC eligibility for the mortgages from those jurisdictions. This diversification requirement makes it very likely that REMICs will have more than a de minimis amount of mortgages notes that do not come within the definition of qualified mortgage under the REMIC regulations. Professionals who helped structure these securitizations may face liability if the IRS were to find that a purported REMIC was just purported and not a REMIC.
December 5, 2012 | Permalink | No Comments
Opposition to FHFA Increase in Guaranty Fees for States with Lengthy Foreclosures
Senators from the five affected states have written a letter to the FHFA’s DeMarco. This debate presents a choice between risk-based pricing on the one hand and what is generally considered a pro-homeowner legal regime on the other.
The FHFA’s notice is here.
December 5, 2012 | Permalink | No Comments
December 3, 2012
NY AG Sues Credit Suisse over Bad Due Diligence
The complaint is here. The allegations are similar to those that the NY AG made against JPMorgan.
December 3, 2012 | Permalink | No Comments
December 2, 2012
Federal Bankruptcy Court in Idaho Rules that MERS was not a Party in Interest and Lacked Standing to Bring Motion for Stay of Relief
In In re Sheridan, 08-20381-TLM, 2009 WL 631355 (Bankr. D. Idaho Mar. 12, 2009), the Idaho Bankruptcy court held that a party making a motion for stay of relief must be a party in interest. This was defined to mean that the motion must be brought by one who has a pecuniary interest in the case and, in connection with secured debts, by the entity that is entitled to payment from the debtor and to enforce security for such payment. That entity is the real party in interest. It must bring the motion or, if the motion is filed by a servicer or nominee or other agent with claimed authority to bring the motion, the motion must identify and be prosecuted in the name of the real party in interest
The Court held for the bankruptcy trustee in finding that MERS, the movant, was not the party in interest and the identity of the holder of the note appears to be a fact in dispute. Movant also failed to provide an adequate record showing it was a party in interest with standing entitled to seek relief.
December 2, 2012 | Permalink | No Comments
Federal District Court in Idaho Rules for Bank, MERS, et al. in Finding Trustee was Properly Appointed
In Van Kirk v. Bank of America, 1:11-CV-00621-BLW-RE, 2012 WL 4524457 (D. Idaho Oct. 1, 2012), the District Court in Idaho agreed with the magistrate judge that, as a valid beneficiary, MERS properly assigned its interest in the deed of trust to Bank of America, which, in turn, properly appointed Northwestern successor trustee. The court found that MERS as beneficiary under the deed of trust does not create a split between the note and the deed of trust, and the agency relationship remains for subsequent parties to whom the note is properly assigned, and thus Northwest was properly appointed and is a valid Trustee of the deed of trust.
December 2, 2012 | Permalink | No Comments
Federal District Court in Idaho Rules Bank has Standing in Foreclosure Case
In Purdy v. Bank of America, No. 1:11-CV-00640-EJL-REB (D. Idaho Sept. 26, 2012), in granting Bank of America’s motions to dismiss, the Federal District Court in Idaho agreed with the magistrate judge that the securitization of a note does not affect the right to foreclose on a deed of trust. The Court was persuaded by another case that the Fair Debt Collection Practices Act (“FDCPA”) was not intended to include non-judicial foreclosure actions, as the non-judicial foreclosure process does not rise to the level of a “debt collection activity” under the FDCPA, and the plaintiff homeowner’s claim that the banks are debt collectors and in violation of the Act . Lastly, the court held the alleged defect in recording the power of attorney status of Bank of America is insufficient to invalidate the statutory non-judicial foreclosure process, with which the bank complied.
December 2, 2012 | Permalink | No Comments
