Tag Archives: Mortgage Electronic Recording System

The Court found That Bank of America had Standing Even After Merger

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The court in deciding Bank of Am., N.A. v. Harris, 2013-Ohio-5749 (Ohio Ct. App., Cuyahoga County 2013) found Bank of America had standing after merger.

Plaintiff moved for summary judgment arguing that Bank of America lacked standing to foreclosure because the bank was “a party solely by virtue of a purported assignment from MERS.” Plaintiff argued that MERS had no authority to assign the mortgage to Bank of America, and thus, Bank of America had no standing to bring the suit.

The court found that the bank had standing to bring a foreclosure action because it was the real party in interest at the time that a foreclosure complaint was filed. The court noted that a party who received an assignment of mortgage from MERS as a nominee had standing to foreclose when the borrower defaulted. The court found that here the bank had possession of the note, therefore, it was the current holder of the note and entitled to enforce it under R.C. 1303.31. Further, the court found that after the merger, the bank stepped into the shoes of the absorbed company and had the ability to enforce, thus no further action was necessary to become a real party in interest.

 

United States District Court Rejects Claim Under the Washington Consumer Protection Act

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The United States District Court for the Western District of Washington in deciding Massey v. BAC Home Loans Servicing LP, 2013 U.S. Dist. 180472 (W.D. Wash. Dec. 23, 2013) granted defendants’ motions for summary judgment.

Plaintiff Cindy T. Massey asserted a claim under the Washington Consumer Protection Act against defendants in connection with non-judicial foreclosure proceedings. Defendants Freddie Mac and MERS, together, brought a separate motion for summary judgment. After considering the plaintiff’s arguments the court granted defendants’ motions for summary judgment.

In regards to her CPA claim the court found that the plaintiff failed to identify any deceptive acts perpetrated by Freddie Mac. For that reason alone the CPA claim against Freddie Mac failed.

Ms. Massey also argued that Bank of America did not possess the authority to initiate non-judicial foreclose proceedings on the property for various reasons, the primary of which was the characterization of MERS as the beneficiary on the deed of trust. Specifically, Ms. Massey argued that the assignment of the deed of trust to Bank of America was void, that the Appointment of Northwest Trustee as successor trustee was void, and that Bank of America did not hold the Note when it initiated foreclosure. After considering this argument the court found that they were without merit.

United States District Court Rejects Show-me-the-Note Theory and SpIit-the-Note Theory Claims

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In deciding McWright v. Bank of Am., N.A., 2013 U.S. Dist. LEXIS 180500 (N.D. Tex. Nov. 7, 2013) the United States District Court for the Northern District of Texas rejected the plaintiff’s claims.

In her complaint, plaintiff raised the following causes of action: (1) violation of the federal Fair Debt Collection Practices Act, (2) Negligence, (3) Fraud, (4) Declaratory relief, and (5) Quiet Title. Because many of these claims were premised upon unfounded legal theories, the court first addressed the underlying theories before turning to the merits of each of plaintiff’s claims. In addressing the plaintiff’s claims the court uniformly rejected them.

Plaintiff unsuccessfully contended that defendants were required to show proof that they are the holder of the note prior to foreclosing on the property. However, the court noted that this “show-me-the-note” theory has been regularly rejected and would so be in this case as well.

To the extent plaintiff argued that MERS lacked the authority to transfer the loan, the court found that such an argument similarly fails. Moreover, the court denied the remaining plaintiff’s claims as lacking merit.

Kansas Court of Appeals Upholds Summary Judgment in Favor of Wells Fargo

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The Court of Appeals of Kansas in deciding Wells Fargo Bank, N.A. v. Richards, 2013 Kan. App. LEXIS 1160 (Kan. Ct. App. 2013) ultimately affirmed the lower court’s granting of summary judgment for Wells Fargo.

Plaintiff appealed the lower court’s decision granting summary to Wells Fargo Bank.

In this appeal, plaintiff asserted that (1) Wells Fargo lacked standing to bring the foreclosure action; (2) the lower court erred in holding Wells Fargo’s possession of the promissory note he signed was insufficient to enforce and foreclose the mortgage it secures; (3) Wells Fargo did not experience/suffer a default; (4) there was no contract because the note and mortgage were split; and (5) Richards was not afforded due process.

After examining the record and considering the arguments of the parties, this court held that there was no merit to any of Richards’ arguments. Consequently, this court affirmed the lower court.

 

 

Subprime Mortgage Conundrums

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Joseph Singer has posted Foreclosure and the Failures of Formality, or Subprime Mortgage Conundrums and How to Fix Them (also on SSRN). Singer writes,

One of the striking features of the subprime era is that banks acted without adequate regard for state property law. They were intent on serving the national and international financial markets with new and more profitable products, and they treated state property law as an obstacle to get around rather than a foundation on which to build. Rather than sell mortgages to families that could afford them, they hoodwinked the vulnerable by picking their pockets. Rather than honestly disclose the high risks associated with subprime loans, they paid rating agencies to give them AAA ratings, inducing investors to take risks they neither were prepared for nor understood. The banks made huge amounts of money marketing mortgages to people who could not afford to pay them back while offloading the risks of such deals onto hapless third parties. And rather than observe longstanding laws and customs designed to clarify property titles, banks evaded requirements of publicity and formality that traditionally governed real estate transactions. In short, the banks misled both borrowers and investors while undermining property titles. This was both a clever and a profitable way to engage in  business, but it was neither honorable nor responsible. (501, footnotes omitted)

Brad Borden and I have made a similar point in our debate with Joshua Stein, but Singer’s article plays it out in far greater depth. The article is a property prof’s cri de coeur over the near death of real property law principles during the early 2000s subprime boom, but it is also a very thorough inquest. The article concludes with a review of tools that are available to respond to failures in the mortgage market. All in all, it provides a nice overview of what led to the crisis as well as potential policy tools that are available to prevent future ones.

 

Michigan Appeals Court Upholds Summary Judgment and Finds that Bank’s Purchase did not Violate MCL 600.3228

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The court in deciding Bank of N.Y. Mellon Trust Co. Nat’l Ass’n v. Robinson, 2013 Mich. App. 2170 (Mich. Ct. App. 2013) upheld the lower court’s grant of summary judgment.

In this action for possession of a foreclosed property, defendants appealed as of the summary disposition that the lower court granted in favor of the plaintiff on the defendant’s counterclaims. After considering the defendant’s arguments the court affirmed the lower court’s ruling.

On appeal, the defendant raised two issues with regard to the underlying mortgage. First, the defendant argued that the plaintiff, through its predecessor, committed fraud in the execution of the mortgage. Second, the defendant alleged that the plaintiff did not have the right to foreclose because there was no evidence of record that the defendant’s note was assigned to plaintiff. The defendant also argued that the bank’s purchase violated MCL 600.3228, which required that a purchase by a mortgagee at a foreclosure sale be made “fairly and in good faith.”

After considering the defendant’s contentions the court ultimately affirmed the lower court’s ruling.

Kansas Court of Appeals Finds Note Splitting Argument Lacked Merit

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The court in deciding Wells Fargo Bank, N.A. v. Richards, 2013 Kan. App. 1160 (Kan. Ct. App. 2013) ultimately upheld the lower court’s decision.

The plaintiff [Chester E. Richards, Jr.], appealed the lower court’s decision which granted summary judgment to Wells Fargo.

Plaintiff had asserted (1) Wells Fargo lacked standing to bring the foreclosure action; (2) the lower court erred in holding Wells Fargo’s possession of the promissory note he signed was insufficient to enforce and foreclose the mortgage it secures; (3) Wells Fargo did not experience/suffer a default; (4) there was no contract because the note and mortgage were split; and (5) Richards was not afforded due process.

The court examined the record and considered the arguments of both the parties and held that there was no merit to any of the plaintiffs’ arguments. Consequently, the court affirmed the decision from the lower court.