Tag Archives: banks

California Eastern District Court Notes There is no Requirement for the Production of the Original Note to Initiate a Non-Judicial Foreclosure Sale Under California Law

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The California Eastern District Court in Castaneda et al v. Saxon Mortgage Services, Inc. et al., No. 2:2009cv01124 (E.D. Cal. 2010) dismissed the plaintiff’s claim alleging wrongful foreclosure due to foreclosing party’s lack of note.

Plaintiffs Cesar and Suzzanne Castaneda filed this action against defendants Saxon Mortgage Services, Inc., plaintiffs’ action purported to state a claim for “wrongful foreclosure” against Saxon. Plaintiffs attempted to base this claim on California Commercial Code section 3301, alleging that Saxon was not in possession of the note, was not a beneficiary, assignee or employee of the entity in possession of the note, and was therefore not a “person entitled to enforce” the security interest on the property in accordance with section 3301. (SAC ¶¶ 187-89.)

The court however found that section 3301 did not govern non-judicial foreclosures, which is governed by California Civil Code section 2924.Further, the court noted there is no requirement for the production of the original note to initiate a non-judicial foreclosure sale under California law.

Rhode Island Court Rules That under State law, Only Parties to a Contract May Seek to Have Rights Declared Under a Contract

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The Rhode Island court in deciding Fryzel v. MERS, No. CA 10-352 (D.Ri., 2011) decided that under Rhode Island law, only parties to a contract may seek to have rights declared under a contract. The court found that the plaintiff lacked standing to challenge the transfer of the promissory note or assignment of mortgage granted by Plaintiff.

The plaintiff’s complaint disputed AHMSI’s ability to foreclose by challenging the validity of the assignments of their mortgage. The plaintiff further claimed that AHMSI was not entitled to foreclose under the terms of the ‘Pooling and Servicing Agreement’. However, the court found that it was undisputed that plaintiffs were not parties to the assignment agreements or to the PSA. Thus, plaintiffs did not have standing to assert legal rights based on the specified documents.

Court of Civil Appeals of Alabama, in Favor of Borrower, Vacates and Dismisses Judgment

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The court in Nelson v. Federal National Mortgage Association, 97 So.3d 770 (2012) the Court granted Fannie Mae’s summary judgment as to its ejectment action against the borrower because the Court found that Fannie Mae received valid title to the property from MERS subsequent to the foreclosure sale conducted by MERS. However, on appeal, court of civil appeals of Alabama vacated the lower court’s judgment and dismissed the appeal.

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The court of civil appeals reversed a decision by the lower court holding that under the state’s law MERS had the power and authority to conduct the foreclosure sale in its own name and the special warranty deed from MERS to Fannie Mae was valid and gave Fannie Mae superior legal title to the property. On appeal this was reversed.

Likewise, the lower court also originally held that an assignment of mortgage from MERS to the servicer was unnecessary for MERS to proceed with the foreclosure on behalf of the servicer. Accordingly the court of civil appeals also vacated this.

Hawaiin Court Rejects Plaintiff’s Allegations of Fraud Against MERS and Grants Summary Judgement

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The court in Sakugawa v. MERS et al, D. Hawaii, 1:10-cv-00028 (Feb. 25, 2011) granted summary judgment in favor of MERS. Thus rejecting the plaintiff’s accusations for fraud and claims of state law violations regarding loan origination.

The court also found that MERS was not involved in the loan origination process and was not in contact with the plaintiff regarding the transaction. Thus the court found that there was no basis to find that MERS committed any fraudulent, unfair or deceptive acts regarding the loan consummation.

The Court found that MERS was the correct mortgagee under the security instrument, thus the mortgage permitted MERS to foreclose and sell the property.

Oregon Court Stops Foreclosure Pending Clarification in State Court as to MERS Stating Borrower Has “Likelihood of Success Against MERS…”

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The court in Rinegard-Guirma v. Bank of America, et al., Civil Case No. 10-1065-PK, (2010) enjoined the defendants [Bank of America, et al.] from foreclosing on the plaintiff’s [Rinegard-Guirma] property.

The plaintiff, Natache D. Rinegard-Guirma, filed a Motion for a temporary restraining order and preliminary injunction seeking to enjoin a foreclosure sale of her residence. The court granted the plaintiff’s motion for preliminary injunction and continued to enjoin the foreclosure of her property until the claim regarding MERS was resolved by the state court.

Bankruptcy Court Rules MERS Has Standing and the Customary Rights of a Mortgagee Under a Mass. Mortgage and May Act Under the Mortgage

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The Massachusetts bankruptcy court hearing In re Sonya D. Huggins f/k/a SONYA D. HICKS, Debtor Chapter 13, Case No. 05-18826-RS overruled the Huggins’ objection to the standing of the nominee to seek relief from the automatic stay and ordered an evidentiary hearing on the motion for stay relief.

After Huggins commenced her Chapter 13 case, the court denied a motion by a nominee mortgagee for relief from stay to foreclose a mortgage on the debtor’s residence but ordered monthly adequate protection payments. The nominee filed a second stay relief motion under 11 U.S.C.S. § 362(d), and the debtor objected.

Huggins maintained that the nominee could not stay relief in bankruptcy because it had no rights to enforce the mortgage outside bankruptcy. The court disagreed, finding that the nominee was acting for a lender that held the note, thus there was no disconnection between the note and the mortgage. The nominee was the record mortgagee under the terms of the mortgage with its powers expressly set forth, and Mass. Gen. Laws Ch. 244, § 14 expressly authorized the exercise of sale powers by a mortgagee or a person authorized to sell, which was precisely the position of the nominee.

The court concluded that the denial of the nominee’s foreclosure right as mortgagee could lead to anomalous and perhaps inequitable results, such as the lender being able to foreclose despite the fact that it was not named as mortgagee or that no one could foreclose. Thus, as the court concluded, the nominee had standing to foreclose on the lender’s behalf. As to relief from stay, the court concluded that there was no irrefutable presumption that the property was necessary for an effective reorganization under 11 U.S.C.S. § 362(d)(2)(b). The debtor was required to proffer evidence on those issues.

Arkansas Court Rules That MERS Did Not Violate the State’s Statutory Foreclosure Act

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The court in Coley et al v. Accredited Home Lenders Inc et al (E.D. Ark. 2011) dismissed the homeowner-plaintiff’s claims against MERS pursuant to Federal Rules of Civil Procedure 12(b)(6). In granting MERS’ motion to dismiss the court considered, then rejected the plaintiff’s contentions.

First, the plaintiff alleged that the defendants failed to comply with the notice requirements of 12 U.S.C. 1701x(c)(5), a provision of National Housing Act that requires private lenders servicing non-federally insured home loans to advise borrowers of any home ownership counseling that they of the US Department of Housing and Urban Development may offer. The court however, reasoned that regardless of whether the defendants were in compliance with the act or not, the act does not create a private right of action.

Next, the plaintiff alleged that the defendants violated the state Statutory Foreclosure Act concerning non-judicial foreclosures, and they sought to enjoin the defendants from proceeding with the foreclosure sale. They also sought an order declaring the mortgage’s notice of default and intention to sell, the limited power of attorney, and the corporate assignment of mortgage to be fatally defective and invalid. The court however rejected this contention.

Third, the plaintiffs argued that even if the assignment was valid, the subsequent notice of default and intention to sell was invalid because it was prepared and filed by the Law Offices of Shapiro & Kirsch more than two weeks before HSBC executed a limited power of attorney giving Shapiro & Kirsch the power to act on its behalf. The court rejected this argument, as they noted that whether the notice of default was valid was moot because the non-judicial foreclosure described in the notice was cancelled. Thus, Shapiro & Kirsch would be required by law to file a new notice of default and intention to sell before a sale could take place.