Tag Archives: hsbc

Fieldstone Mortgage Company’s Bankruptcy Won’t Impact HSBC’s Right to Foreclose in Massachusetts

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In Marron v. HSBC Bank USA, N.A., Bankruptcy Appeal No. 11-40191-NMG (D. Mass. September 26, 2012), the District Court denied homeowners’ request for certification regarding MERS’s authority to assign their mortgage, and dismissed homeowners’ bankruptcy appeal holding that the Bankruptcy Court properly lifted the automatic stay allowing HSBC to foreclose.

The homeowners procured a loan from Fieldstone Mortgage Company, with MERS designated as nominee and mortgagee. MERS assigned the mortgage to HSBC, which began foreclosure proceedings in 2007 after the homeowners defaulted. In November of 2007, Fieldstone filed for bankruptcy.  The homeowners filed for bankruptcy in 2010, automatically staying foreclosure proceedings. In response, HSBC filed a petition for relief from the automatic stay, which was granted by the Bankruptcy Court.

Here, Trustee appeals from the Bankruptcy Court’s order lifting the stay and seeks to certify the following questions: 1) whether the assignment by MERS is valid under Massachusetts law without proof of authorization from the note holder, and 2) if the recorded assignment alone can establish the truth of its contents. The District Court upheld the decision of the Bankruptcy Court, holding that certification is not warranted, as Massachusetts law is reasonably clear regarding assignment validity.

There is no Massachusetts statute preventing MERS from assigning its mortgages, and the court notes that the Massachusetts Land Court acknowledged the validity of MERS’s assignments in several cases.  Randle  v. GMAC Mortgage, LLC, No. 09 MISC 408202 GHP (Mass. Land Ct. Oct. 12, 2010); Amtrust Bank v. T.D. Banknorth, N.A., No. 07 MISC. 350750 KCL (Mass. Land Ct. 2010).  The court also notes that it has, on numerous occasions, held that MERS has authority to assign mortgages, citing Kiah, in which the court held that even if MERS doesn’t hold the beneficial interest in the property, MERS has authority to transfer the mortgage on behalf of the beneficial owner. CIV.A. No. 10-40161-FDS (D. Mass. Mar. 4, 2011).

As to the bankruptcy of the lender, the court held that “a lender’s bankruptcy does not affect the ability of MERS to assign a mortgage,” citing Kiah. The clear language of the mortgage grants MERS authority as the nominee for the “lender and its assigns” to transfer the mortgage, unaffected by the lender’s bankruptcy status. The court notes that similar reasoning was used in Rosa, holding “the dissolution of the original lender does not affect MERS’s authority to assign a mortgage.” 821 F. Supp. 2d at 431.

The court further found the assignment valid pursuant to M.G.L. Ch. 183 § 54B. MERS’s assignment complies with the statute’s requirements and is therefore presumed valid. The court cites Culhane for this explanation of validity, finding no way in which MERS’s method for assigning mortgages contradicts the statute. 826 F. Supp. 2d at 373.

The court dismissed appellant’s argument that the foreclosure was improper, as HSBC didn’t hold the note. In Eaton , the court held that the term “mortgagee” refers to “the person or entity then holding the mortgage and also either holding the mortgage note or acting on behalf of the note holder.” Eaton v. Fed. Nat. Mortg. Ass’n, 462 Mass. 569 (2012). To avoid overuse of this broad interpretation, the court held that the ruling in Eaton would not impact foreclosures commenced before the Eaton decision. Since HSBC’s foreclosure occurred pre-Eaton, HSBC was entitled to foreclose. As a result, appellant’s argument that an evidentiary hearing should have been held to determine ownership of the note was also dismissed by the court as immaterial. The appeal was denied, and the foreclosure sale upheld.

Massachusetts Supreme Court Holds that Bank Lacks Standing to Bring SCRA Claim Against Homeowner

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In HSBC Bank USA, N.A. v. Matt, 464 Mass. 193 (2013), the Supreme Court of Massachusetts found that HSBC Bank USA, N.A. (HSBC) lacked standing to proceed with its claim against the homeowner in a servicemember proceeding. HSBC initially filed a complaint in the Land Court under the Massachusetts Soldiers’ and Sailors’ Civil Relief Act (Massachusetts Act) “to determine if [homeowner] was entitled to foreclosure protections under the Federal Servicemembers Civil Relief Act (Federal SCRA or SCRA).” The homeowner did not contest the fact that she was not entitled to protection under the SCRA. Instead, she disputed HSBC’s standing to bring a foreclosure action generally, arguing, “[HSBC] was not the clear holder of either her note or her mortgage.” Despite the fact that the homeowner “was not entitled to appear or be heard at the servicemember proceeding,” the court considered the standing question sua sponte.

The court held that in determining standing in servicemember proceedings, a bank must present evidence to prove their status as mortgagees, or else as agents of mortgagees. The court reversed the Land Courts decision holding that HSBC had standing because of a purported right to purchase the homeowner’s mortgage. However, the court noted that determinations of standing in servicemember proceedings do not establish (and thus do not eliminate) standing in foreclosure proceedings.

New York Supreme Court Holds that Assignee Bank Lacks Standing to Foreclose for Failure to Validate MERS’s Authority to Assign and Condemns Frivolous Conduct Relating to “Robosigning”

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In HSBC Bank v Taher, 32 Misc. 3d 1208(A) (Sup. Ct. 2011), the New York Supreme Court of Kings County held that an assignee bank conducting a foreclosure action must submit proof of the assignor’s authority to assign the mortgage, including the underlying note, on behalf of the original mortgagee in order for the assignee to lawfully conduct a foreclosure.

In this case, the court found that the assignee bank, HSBC, did not have standing to foreclose on Taher, the homeowner. The court stated, “the instant action must be dismissed because plaintiff HSBC lacks standing to bring this action. MERS lacked the authority to assign the subject Taher mortgage to HSBC and there is no evidence that MERS physically possessed the Taher notes.”

The court went on to explain that MERS must have authority to assign both the mortgage and the underlying note in order for an assignee to lawfully conduct a foreclosure. The court stated, “even if MERS had authority to transfer the mortgage to HSBC… MERS [was not] the note holder. . . . MERS cannot transfer something it never proved it possessed. . . . [Thus,] MERS was never the lawful holder or assignee of the notes described and identified in the consolidation agreement, the . . . assignment of mortgage is a nullity, and MERS was without authority to assign the power to foreclose to [HSBC]. Consequently, [HSBC] failed to show that it had standing to foreclose.”

In addition to finding that the assignee bank lacked standing, the court also took the opportunity in this case to highlight its intention to prevent the degradation of the foreclosure process, particularly concerning the practice of “robosigning.” Citing the need to “protect the integrity of the foreclosure process and prevent wrongful foreclosures,” the court announced its institution of a new filing requirement in any foreclosure action. This requirement is that assignees must “file an affirmation certifying that counsel has taken reasonable steps—including inquiry to banks and lenders and careful review of the papers filed in the case—to verify the accuracy of documents filed in support of residential foreclosures.” The court scrutinized HSBC’s foreclosure filing practices, which included instances where the court believed robosigning occurred, and reprimanded the bank and its counsel for its conduct. The court concluded that the conduct bordered on frivolous, and determined that further inquiry, by way of a hearing, was necessary.