Tag Archives: banks

First Circuit Grants Wells Fargo’s Motion to Dismiss Plaintiff-Homeowner’s Suit to Preclude Foreclosure Sale

Posted on by

The court in McKenna v Wells Fargo Bank, N.A. Case No. 11-1650 (C.A. 1, Aug. 16, 2012) was faced with questions relating to the district court’s subject matter jurisdiction. Here, Wells Fargo’s primary assertion in its removal papers – “that there was federal question jurisdiction present in the case” – turned out to be mistaken as no federal claim was present. However, diversity jurisdiction was found to be sufficient enough to support the state statutory claims that were asserted in the complaint.

Wells Fargo brought a foreclosure action against the plaintiff [McKenna], the plaintiff responded by asserting a right to rescind the mortgage and then filed suit to preclude the foreclosure sale.

The plaintiff claimed a right to rescind on the grounds that [1] Wells Fargo had provided her with only one Truth in Lending disclosure statement at the time of the loan rather than two copies, and [2] Wells Fargo had understated the finance charge in its Truth in Lending statement by more than $35. The lower court then issued a preliminary injunction restraining Wells Fargo from taking further action to sell the plaintiff’s home.

On March 10, 2010, Wells Fargo removed the case to the federal district court in Massachusetts. Wells Fargo asserted that federal question jurisdiction existed. The bank then moved to dismiss for failure to state a claim, and the district court granted the motion. On review, the court found that diversity jurisdiction existed as Wells Fargo was a bank and a citizen of the state where it is “located.” The bank’s location being North Dakota, and the plaintiff being a citizen of Massachusetts, allowed for diversity jurisdiction.

On review the court determined that the plaintiff’s complaint alleged that Wells Fargo made certain misrepresentations. However, the court found that the plaintiff failed to specify the time or place of these misrepresentations or their real content and, as the district court held, these assertions were “too vague to meet the particularity requirement of Rule 9.” The First Circuit affirmed the lower court’s ruling. Further, the suit was not timely under the federal Truth in Lending Act, 15 U.S.C. 1635(a), and the complaint failed to state claims under the equivalent state law.

Massachusetts District Court Dismisses Homeowner-Plaintiff’s Challenge to Assignment Due to Lack of Standing

Posted on by

The two actions from Oum v. Wells Fargo Bank, N.A., et al, 1:11-cv-11663, No. 23 (D.Mass. Jan. 4, 2012) reflected nearly identical facts. Both cases arose from an allegedly invalid assignment of a mortgage from defendant Sand Canyon to Wells Fargo.

Plaintiffs argued that because the assignments of their mortgages were invalid, the foreclosures by Wells Fargo as trustee on their homes were invalid as well. After considering the plaintiff’s contentions, the court dismissed the plaintiff’s claims, after holding that the non-party plaintiffs lacked standing to challenge the assignment.

Plaintiffs had asked the court to enjoin Wells Fargo from proceeding with any eviction action [Count 1]; to quiet title by declaring them the “sole owners” of the properties [Count 2]; and to grant appropriate relief for Wells Fargo as trustee’s breach of the duty of good faith and reasonable diligence [Count 3].

Defendants argued that plaintiffs lacked standing to challenge the validity of the assignments Sand Canyon made to Wells Fargo as trustee of their respective mortgages because plaintiffs were neither parties to the contractual assignments, nor were they third-party beneficiaries. Plaintiffs argued that because they had a “claim of rightful legal ownership” to the respective properties, they have standing to contest the “cloud” on their wrongfully divested title. The court sided with the defendants, finding that an assignment is a contract, and the plaintiffs were not parties to the contract.

Massachusetts Supreme Court Affirms Lower Court’s Judgment in Favor of Plaintiff Who Claimed the Bank Pursuing Foreclosure on His Property, Lacked Legal Standing to Do So

Posted on by

In U.S. Bank National Ass’n v. Ibanez, 458 Mass. 637, 941 N.E.2d 40 (2011), the Massachusetts Supreme Court affirmed a lower court’s ruling in favor of a plaintiff who alleged that the bank pursuing foreclosure on his property had no legal standing to do so.

The Supreme Court held that; the first purchaser failed to show it was the mortgage holder at time of foreclosure, the second purchaser failed to show it was the mortgage holder at time of foreclosure, the holding of note was insufficient to show authority to foreclose, post foreclosure sale assignments were insufficient to show authority, and the ruling did not warrant prospective application.

In reviewing the lower court’s ruling, the Massachusetts Supreme Court found that the lower court judge did not err in concluding that the securitization documents submitted by the plaintiffs failed to demonstrate that they were the holders of the Ibanez and LaRace mortgages, respectively, at the time of the publication of the notices and the sales. The judge, therefore, did not err in rendering judgments against the plaintiffs and in denying the plaintiffs’ motions to vacate the judgments

On appeal, the plaintiff raised three other arguments. First, the plaintiffs initially contended that the assignments in blank, identifying the assignor but not the assignee, not only “evidence and confirm the assignments that occurred by virtue of the securitization agreements,” but “are effective assignments in their own right.” But in their reply briefs they conceded that the assignments in blank did not constitute a lawful assignment of the mortgages.

The court noted that their concession was appropriate, citing the long-standing principle that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; thus the court did not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment.

get money in advance

Second, the plaintiffs contended that, because they held the mortgage note, they had a sufficient financial interest in the mortgage to allow them to foreclose. However, the court found that under Massachusetts’s law, where a note has been assigned but there is no written assignment of the mortgage underlying the note, the assignment of the note does not carry with it the assignment of the mortgage.

Third, the plaintiffs argued that post-sale assignments were sufficient to establish their authority to foreclose when taken in conjunction with the evidence of a presale assignment. However, the court disagreed, finding that where an assignment is confirmatory of an earlier, valid assignment made prior to the publication of notice and execution of the sale, that confirmatory assignment may be executed and recorded after the foreclosure, and doing so will not make the title defective.

New York Times Criticizes $8.5b Foreclosure Settlement

Posted on by

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.”