Tag Archives: MERS

Oregon Court Holds That Oregon’s Non-Judicial Foreclosure Statute Does Not Require Presentment of the Note

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The court in Buckland v. Aurora Loan Services, Josephine County No. 10 CV 1023 (March 18, 2011) granted the defendant’s motion to dismiss the plaintiff’s complaint for wrongful foreclosure with prejudice.

MERS, although not being a party to the case, the plaintiff’s complaint contained claims that MERS lacked the power to appoint a trustee as it was not the beneficiary of the plaintiff’s deed of trust. The plaintiff’s complaint also alleged that Aurora was required to prove it was the note holder before directing the trustee to non-judicially foreclose. The court considered the plaintiff’s contentions, but ultimately dismissed the plaintiffs’ claims.

The court relied on the cases cited in Aurora’s motion to dismiss, including Stewart v. Mortgage Electronic Registration Systems, Inc. (holding that presentment of note not required and MERS is a valid deed of trust beneficiary). The court ultimately held that Oregon’s non-judicial foreclosure statute does not require presentment of the note.

Indiana Supreme Court Allows Citimortgage to Intervene in ReCasa’s Foreclosure Proceeding

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In Citi v. Barnabas, 975 N.E.2d 805 (Ind. 2012), the Indiana Supreme Court held that Citimortgage had a right to intervene in ReCasa’s foreclosure proceeding and sale since Citi held a first mortgage on the property, reversing the decision of the Court of Appeals and trial court.

The homeowner, Barnabas, granted a first mortgage on the property in 2005 to Irwin Mortgage Corp. (Irwin) with MERS designated as nominee and mortgagee, which later assigned the mortgage to Citimortgage (Citi). In 2007, Barnabas granted a second mortgage to ReCasa. Barnabas defaulted on the second mortgage and ReCasa commenced foreclosure proceedings in 2009. In response to the foreclosure proceedings, Irwin filed a disclaimer of interest in the property. When Citi learned the property was already sold through ReCasa’s foreclosure sale, Citi filed a motion to intervene, which was denied by the trial court. The Court of Appeals upheld the trial court’s decision.

The Supreme Court found the trial court erred in denying Citi’s motion, as ReCasa didn’t dispute the validity of the assignment from MERS to Citi, but rather argued that MERS lacked a property interest, and therefore so did Citi. However, the court stated that “the assignee of rights under a contract stands in the shoes of the assignor and can assert any rights that the assignor could have asserted,” citing Lake Cnty. Trust Co. v. Household Merch., Inc., 511 N.E.2d 512, 514 (Ind. Ct. App. 1987) giving MERS the same property interest as the original lender.

When examining the mortgage language, the court found MERS’s designation as both “nominee” and “mortgagee” to be conflicting based on standard definitions for both terms, rendering the mortgage ambiguous. To determine MERS’s interest, the court looked to the parties’ intent and found that the legal title held by MERS was sufficient to give MERS foreclosure rights, acting as agent for the lender, Irwin.

ReCasa further argued that Irwin’s disclaimer of interest extinguished MERS’s property rights. The court notes that MERS has an agency relationship not only to Irwin, but also to all its member banks, and therefore does not disclaim the interests of another member bank in the property, such as Citi.

Although Citi’s motion to intervene was untimely, the court held that if Citi were not permitted to intervene, its interest would be destroyed in its entirety, prejudicing Citi. The court further noted that although intervention is typically “disfavored,” it is appropriate in certain “extraordinary and unusual circumstances,” particularly when “the petitioner’s rights cannot otherwise be protected.” Bd. of Comm’rs of Benton Cnty. v. Whistler, 455 N.E.2d 1149, 1153–54 (Ind. Ct. App. 1983). Furthermore, Citi’s delay in filing was a direct result of ReCasa’s failure to notice either Citi or MERS of the foreclosure proceedings. ReCasa argued that notice to an attorney representing Citi in the Barnabas bankruptcy proceeding provided Citi with actual knowledge of the foreclosure. But the court held that “actual knowledge of the suit does not satisfy due process or give the court in personam jurisdiction.” Overhouser v. Fowler, 549 N.E.2d 71, 73 (Ind. Ct. App. 1990) (quoting Glennar Mercury Lincoln, Inc. v. Riley, 167 Ind. App. 144, 152, 338 N.E.2d 670, 675 (1975)).

The court was hesitant to outline MERS’s rights as a mortgagee under Indiana statute, though it noted the original statute might soon require modernization to account for changes in the mortgage industry.

Florida Court Dismisses Class Action Against MERS Over Unpaid Recording Fees

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The court in Fuller v. MERS, No. 11cv-1153 (M.D. Fla., June 27, 2012) was “confronted with an old problem: the difficulty of reconciling new technology with old law, thus raising the centuries old separation of powers controversy.” In deciding this case the court found that the Florida statute, which created the recording system, was a creature of statute, as such the remedy the plaintiff sought was to be granted by the legislature and not the courts.

In reaching its decision, the court found that the statute creating Florida’s public recording system did not provide a private right of action, as such Fuller was barred from bringing common law claims based on the statute. Fuller’s claims included civil conspiracy, a Writ of Quo Warranto, unjust enrichment, as well as fraudulent and negligent misrepresentation. Fuller claimed that these claims were independent of the Florida statute, however, he admitted that the statute was the only source of his authority.

The court found that all of Fuller’s claims failed on their merits. Fuller argued that MERS attempted to usurp his function as the recorder of public instruments and sought a Writ of Quo Warranto. However, MES successfully argued that no law required payment of recording fees when a mortgage is assigned but not recorded.

Fuller failed to establish a conspiracy, as MERS did not commit an unlawful act. The court noted that the recording of mortgages is “at the complete discretion of the party wishing to record the document.” Accordingly, MERS was under no legal obligation to record the assignment or pay the recording fees. Fuller’s unjust enrichment claim was also rejected, as MERS had no duty to record, so Fuller could not establish that he had conferred any benefit on MERS. Lastly, Fuller’s fraudulent and negligent misrepresentation claims were based on the assumption that MERS falsely designated itself as the mortgagee on recorded instruments. The court rejected this assumption.

Bank of America and MERS Motion for Dismissal Granted Against Homeowner-Plaintiff in Reconsideration of Order Denying Preliminary Injunction in Foreclosure Proceeding

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In Harris v. Americas Wholesale Lender, No. 2011-659-CH (Macomb Cty. Cir. Ct. June 8, 2011) the court granted the defendant’s motion for dismissal of all the homeowner-plaintiff’s claims in foreclosure proceeding.

Defendants Countrywide, Bank of America, and MERS moved for summary disposition against plaintiff-homeowner under MCR 2.116(C)(7) and (C)(8). Plaintiff moved for reconsideration of the lower court’s denial for preliminary injunction and another motion for entry of default judgment.

Plaintiff alleged five counts; [1] fraud, [2] breach of contract, [3] collusion, [4] conversion, and finally [5] unjust enrichment. In assessing these claims the court found that they were all without merit.

In regards to the plaintiff’s alleged fraud claim the court dismissed it as frivolous as plaintiff could not, and had not, produced any evidence to support the allegation. Upon considering the second count, the court likewise dismissed as the plaintiff failed to show any cognizable allegation of a breach of contract.

The claim of collusion was also dismissed as the court found that the plaintiff failed to plead the claim with particularity. Accordingly, the claim of conversion was also dismissed as the plaintiff failed to explain, to the court’s satisfaction, how a claim of conversion could be supported. Finally, the claim of unjust enrichment was found to be without merit, as the court found that the plaintiff failed to show how an unjust enrichment took place.

Assignment Ball and Chain

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An undated Nationwide Title Clearing, Inc. “White Paper” (actually, more of an advertorial), Understanding Current Assignment Verification Practices, is making the rounds of the blogosphere. It opens,

The scrutiny of the completeness of collateral review and valid assignment chains has hit the mortgage industry hard, primarily because the industry went from  a securitization process that didn’t  require assignments to be recorded to a heavily scrutinized process requiring complete chains to be recorded at the county. This has made compliance extremely difficult for many lenders and others, especially because the industry went for so many years without this  level of scrutiny. (1)

I’ll say!

This widespread lack of assignments could have negative consequences under the REMIC Rules. This is particularly a concern if it undercuts claims by purported REMICs that they acquired mortgages within the time required by statute.

I also found this passage intriguing:

just because a loan is supposed to be in MERS doesn’t always mean it is. We’ve found many examples of loans never having been assigned to MERS on land record, as well as loans that have been assigned multiple times out of MERS by prior investors/servicers, I would assume due to a poor review and preparation process . . ..(4-5)

I am not sure how courts would unwind such transactions. But I am sure we will find out . . ..

Massachusetts District Court Dismisses Homeowner-Plaintiff’s Claim of Alleged Inadequacies in Foreclosure and Assignment of His Mortgage

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In Butler v. Deutsche Bank Trust Co. Americas, 2012 WL 3518560 (D Mass 2012), the court dealt with alleged inadequacies in the assignment and foreclosure of a mortgage. The plaintiff and mortgagor, Frank Butler, claimed that the defendant [Deutsche Bank] had wrongfully foreclosed on two separate occasions, slandered the property’s title, and violated G.L. c. 93A. Deutsche Bank moved to dismiss the complaint on the theory that the alleged inadequacies were not based on actionable legal theories that support the plaintiff’s claims. The court granted the bank’s motion to dismiss.

The plaintiff offered a number of theories to support his claim as to the invalidity of one or both of the foreclosure actions. First, he contended that the foreclosure actions were invalid because the bank did not hold the note secured by the mortgage and the mortgage assignments were not made in compliance with the Pooling and Servicing Agreement.

Next, the plaintiff contended that the foreclosure auctions were invalid because the assignments from MERS were invalid and a robo-signer was used. Lastly, he contended that the foreclosure auctions were invalid as the assignment was made without identifying the relevant trust.

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After review of the plaintiff’s contentions, the court found that they all lacked merit. The court relied on case law that dealt directly with all of the plaintiff’s contentions. Because none of the plaintiff’s theories as to the invalidity of either the assignment or the foreclosure was actionable, the court granted the defendant’s motion to dismiss.

Kansas Supreme Court Holds That a Non-Lender to a Mortgage is Not a Necessary Party in Foreclosure Action

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In Landmark Nat. Bank v. Kesler, 216 P.3d 158 (KS 2009), the court dealt with the issue of what exactly constitutes a necessary party to a foreclosure action. MERS and Sovereign Bank sought review of a lower court judgment, which held that a non-lender is not a contingently necessary party in a mortgage foreclosure action and that due process does not require that a non-lender be allowed to intervene in a mortgage foreclosure action.

At the heart of this appeal was whether the lower court abused its discretion in refusing to set aside the default judgment and refusing to join MERS as a contingently necessary party. The Supreme Court of Kansas found no such abuse and denied the motion to set aside the motion, a finding in line with the lower court.

The Supreme Court of Kansas held, as a matter of first impression, that the lower court did not abuse its discretion in denying the company’s motion to set aside default judgment or its motion to intervene as a contingently necessary party.

MERS contended further, that due process rights were violated as foreclosure action was consummated without MERS receiving notice of the proceeding and without MERS having the opportunity to intervene in the action. However, the court found that MERS failed to demonstrate that it possessed any tangible interest in the mortgage beyond a nominal designation as the mortgagor. Accordingly, the court held that the lower court’s refusal to allow the company to intervene did not violate its due process rights.