February 5, 2013
Pennsylvania Bankruptcy Court Holds that Mortgage Servicer Lacks Standing to Make a Motion for Relief from Stay Placed on Mortgaged Property in a Bankruptcy Proceeding
In In re Michelin Alcide, 450 B.R. 526 (Bankr. E.D. Pa. 2011), the United States Bankruptcy Court for the Eastern District of Pennsylvania held that the mortgage loan servicer did not have standing to make a motion for relief from the automatic stay placed on the mortgaged property when debtor commenced a bankruptcy proceeding. In this case, Everhome Mortgage Company, the mortgage loan servicer for the Debtor’s mortgage holder, Everbank, filed a motion for relief from the automatic stay in order to foreclose on the debtor’s property. In response, the Debtor claimed that Everhome (1)”has not established it has the legal authority to enforce the Mortgage and therefore lacks standing” or, in the alternative, that Everhome (2) “is not a ‘party in interest’ or it is not the ‘real party in interest.’” The court agreed with the Debtor on both assertions.
In order for a party to file a motion for relief from the automatic stay, the burden is on the movant to prove that it has (1) some legally protected interest “that either has been adversely affected or that is in actual danger of being adversely affected,” and (2) the movant “must be asserting its own rights and not that of another entity,” meaning a “movant must have authority to enforce the mortgage under nonbankruptcy law.” Under Pennsylvania law, a mortgage loan holder or an assignee of the mortgage has the power to commence a foreclosure action and thus has the right to file a motion for relief from automatic stay. Conversely, a mortgage loan servicer may only file a motion for relief if it shows evidence that it has authority from the mortgage loan holder to initiate such proceeding on behalf of the mortgage loan holder.
Here, while Everbank did have a legally protected interest since it had a financial stake in the mortgage, it did not show it had authority form the mortgage loan holder to initiate a motion for relief from the stay on its behalf. A servicing agreement in which Everhome authorized Everbank to conduct mortgage foreclosure proceedings on its behalf would suffice, but no such servicing agreement was put into evidence. Thus, Everbank did not have standing and the court dismissed the motion without prejudice.| Permalink