Tag Archives: mortgage

Wisconsin Court Grants Summary Judgment in Favor of GMAC

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The court in deciding GMAC Mortg., LLC v. Poley, 2013 Wisc. App. LEXIS 872 (Wis. Ct. App. 2013) affirmed the lower court’s decision in granting summary judgment in favor of GMAC.

In this foreclosure action, the circuit court granted summary judgment in favor of the mortgagee, GMAC Mortgage LLC. On appeal, mortgagor James Poley argued that the court should have stayed this foreclosure action as a result of a federal bankruptcy proceeding initiated by GMAC during the pendency of this action and, in any case, erred in granting summary judgment in favor of GMAC.

After considering the arguments the court concluded that the lower court did not err in determining that the bankruptcy proceeding did not prevent Poley from opposing summary judgment. The court also concluded that the lower court properly granted summary judgment. Therefore the court affirmed the decision of the lower court in all respects.

Reiss on Death and Mortgages

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Credit.com quoted me in What Happens to Your Mortgage After Death? It reads in part,

Death isn’t on the minds of most homeowners on closing day, naturally, unless it’s a fear of drowning in paperwork. But it’s really never too early to consider what happens to your mortgage should you pass away.

The financial obligation of a home loan does linger after death. There’s a host of scenarios regarding the mortgage’s ultimate disposition, all colored by a homeowner’s estate planning (or lack thereof) and other legal issues.

It isn’t a particularly pleasant topic, but a little bit of planning and paperwork can save your loved ones from considerable headache and hassle during an already difficult time.

“If you’re really thinking about your family’s long-term interests, purchase insurance so they can stay in your home upon your death, and have a will to make everything administratively easy,” said David Reiss, a law professor at Brooklyn Law School in New York.

Keeping the House

Nearly seven in 10 recent homebuyers are married couples, according to the National Association of Realtors, so we’ll focus on them. The co-borrowing spouse will typically be financially liable for the mortgage moving forward.

A spouse who plans to continue living in the home will need to keep current on payments. If you have a life insurance policy in play, your spouse may be able to use the payoff to keep up with or completely wipe out the mortgage balance.

Reiss recommends homeowners consider term life plans rather than actual mortgage term insurance, which can be more expensive.

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Older Homeowners

About a third of people 65 and older have a mortgage, according to the U.S. Census. For older homeowners, it’s important to talk with family members about the property’s long-term future.

Children and grandchildren may not share the same desire to keep a house in the family.

“Do you see it as something your family wants to keep?” Reiss said. “You want to make that as financially easy for them as possible.”

California Appeals Court Affirms Lower Court’s Decision to Sustain Defendant’s Demurrer

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The court in deciding Nehme v. Bac Home Loans Servicing, 2013 Cal. App. Unpub. LEXIS 7366 (Cal. App. 2d Dist. Oct. 15, 2013) affirmed the lower court decision.

Plaintiff (William Nehme) brought this action for fraud, rescission, and other claims after he lost his home through foreclosure. This case was an appeal of a lower court judgment entered in favor of defendants Bank of America, N.A. as successor by merger to BAC Home Loans Servicing, LP; Recon Trust Company, N.A.; Landsafe Title of California, Inc. erroneously named as Landsafe Title Corporation; Mortgage Electronic Registration Systems, Inc.; and MERSCORP, Inc., after the trial court sustained defendants’ demurrer without leave to amend. After considering the appeal, the court affirmed the lower court’s decision.

On appeal Nehme challenged only the trial court’s rulings on the first cause of action for fraud by bait and switch, second cause of action for rescission, and sixth cause of action for unfair business practices. Nehme argued that Countrywide committed fraud by substituting a deed of trust with a power of sale for the mortgage Nehme had requested, and that he signed the deed of trust by mistake.

After considering the plaintiff’s second round of arguments, the court concluded that, even after three attempts, Nehme failed to allege facts sufficient to state claims for fraud, rescission, and unfair competition, and therefore the court affirm the lower court’s judgment.

California Court Dismisses All 12 Claims

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The court in deciding Scott v. Saxon Mortg. Servs., 2013 U.S. Dist. LEXIS 146988 (N.D. Cal. Oct. 10, 2013) granted defendant’s motion to dismiss with leave to amend in part.

Plaintiff’s brought 12 claims against defendants. Plaintiff’s first claim for violation of California Business and Professions Code section 17200 predicated on violation of California Civil Code section 2923.5 and Plaintiff’s ninth claim for violation of California Civil Code section 2923.5. The court dismissed both without leave to amend.

Plaintiff’s second claim for breach of good faith and fair dealing was also dismissed with leave to amend; the third claim for slander of title was likewise dismissed without leave to amend.

Plaintiff’s fourth claim for “alter ago liability” and fifth claim for breach of contract were both dismissed without leave to amend. Unlike the former claims, plaintiff’s sixth claim for unjust enrichment was dismissed with leave to amend. However, plaintiff’s seventh claim for violation of California Business and Professions Code section 17200 was dismissed without leave to amend. Plaintiff’s eighth claim for predatory lending and violation of TILA were dismissed without leave to amend.

Plaintiff’s tenth claim for defamation and eleventh claim for false light were also dismissed without leave to amend. Lastly, plaintiff’s twelfth claim to void or cancel assignment of the deed of trust and the thirteenth claim for cancellation of a voidable contract were dismissed without leave to amend

Michigan Court Dismisses Fraud & RESPA Claims

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The court in deciding Neroni v. Bank of Am., N.A., 2013 U.S. Dist. LEXIS 149190 ( E.D. Mich. 2013) eventually granted the defendant’s motion to dismiss.

Plaintiffs alleged claims against defendant [Bank of America, N.A.] for infringement of the Real Estate Settlement Procedures Act (“RESPA”) (Counts I–IV), common law fraud (Count V), common law silent fraud (Count VI), and common law breach of contract (Count VII).

Defendant responded by asserting that plaintiffs’ RESPA claims should be dismissed because (1) defendant had no legal obligation under RESPA to respond or, alternatively, (2) plaintiffs failed to plead any actual damages related to their RESPA claims. Defendant further asserted that plaintiffs had failed to adequately plead claims for fraud or breach of contract relating to defendant’s legal standing to foreclose on Plaintiffs’ Home.

After considering the merits of both claims, the court ultimately agreed with the defendant and granted the defendant’s motion to dismiss.

Imposing Order on Recording Chaos

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Dale Whitman has posted A Proposal for a National Mortgage Registry: MERS Done Right. This is great timing because he will be touching on some of the issues raised in this article in tomorrow’s webinar. His proposal for a national mortgage registry also shares things in common with elements of Adam Levitin‘s recent proposal.

Whitman’s abstract reads:

In this Article, Professor Whitman analyzes the existing legal regime for transfers of notes and mortgages on the secondary market, and concludes that it is highly inconvenient and dysfunctional, with the result that large numbers of market participants simply did not observe its rules during the huge market run-up of the early and mid-2000s. He also considers Mortgage Electronic Registration System (MERS), which was designed to alleviate the inconveniences of repeatedly recording mortgage assignments, but concludes that it was conceptually flawed and has proven to be an inadequate response to the problem. For these reasons the legal system was ill-prepared for the avalanche of foreclosures that followed the collapse of the mortgage market in 2007, and continues to be beset by litigation and uncertainty. This Article then provides a conceptual outline for an alternative National Mortgage Registry, which would supplant the present legal system and would provide convenience, transparency, and efficiency for all market participants. He concludes with a draft of a statute that could be enacted by Congress to create such a registry.

The article concludes:

A national mortgage loan Registry structured along the lines outlined here would resolve all of the major legal problems that beset the secondary mortgage market today. To be specific, the following problems would be put to rest.

1. The lack of clarity in the distinction between negotiable and nonnegotiable notes that exists today would become irrelevant for purposes of loan transfer. Negotiable and nonnegotiable notes would be treated exactly alike and would be transferred in the same manner.

2. The need to physically deliver original notes in order to transfer the right of enforcement – an extremely burdensome and inconvenient requirement for negotiable notes in today’s market – would be eliminated. Transfers would take place electronically with assurance that they would be recognized by local law in all jurisdictions.

3. The necessity of recording mortgage assignments in local recording offices would be eliminated. MERS was designed to remove the need for such assignments (except at the point when foreclosure was necessary), but the national Registry would accomplish this without the artificiality and con-fusion engendered by MERS’ “nominee” status.

4. Borrowers would be protected against competing claims by purported mortgage holders because the Registry’s records of loan holdings would be conclusive. Whether in cases of loan modification, payoff and discharge, approval of a short sale, or foreclosure, a borrower would know with certainty whether a purported holder’s claim to the loan was authentic, and whether its purported servicer was authorized to act.

5. All foreclosures, both judicial and non-judicial, could be conducted with assurance that the correct party was foreclosing. The Registry’s certificate could be recorded under state law and become a part of the chain of title of property passing through foreclosure, thus permitting future title examiners to verify that the foreclosure was conducted by the person authorized to do so. Concerns of title insurers about the validity of titles coming through foreclosure, currently a major worry, would be largely eliminated.

6. The current confusion and litigation about separation of notes from their mortgages, and about what proof is needed to foreclose a mortgage, would be brought to an end. The Registry’s certificate would provide all of the documentary evidence necessary to foreclose.

7. The holder in due course doctrine, with its potential for unfair harm to borrowers, would probably disappear in the context of mortgage loans as secondary market participants abandoned the practice of physical delivery of mortgage notes.

The system for transferring mortgage loans with which we are saddled today is a shambles. The result has been enormous uncertainty and likely huge financial loss for investors, servicers, and title insurers. It is time for Congress to act to create a sensible, simple, and efficient alternative. (68-69)

Many (including Brad Borden and I) have argued that the current recording system is horribly flawed. It is unclear whether there is sufficient political will to engage in a structural reform at this time. If there is not, expect to see another foreclosure mess once the current one has played itself out.

Ohio Court Finds That Plaintiffs Were Not Bona Fide Purchasers

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The Court of Appeals of Ohio, Fifth Appellate District, in deciding Bank of N.Y. Mellon v. Casey, 2013-Ohio-4686 (Ohio Ct. App., Fairfield County Oct. 21, 2013) affirmed the lower court’s judgment and held that the plaintiffs were not bona fide purchasers and the defendants had standing.

The court found that under the doctrine of lis pendens plaintiffs were not bona fide purchasers of a property encumbered by the mortgage because they took title during the pendency of a declaratory judgment action to which they were a party. Consequently, they did not take the property free from unrecorded liens. The claim that the mortgage was invalid was barred by res judicata as the validity of the mortgage was fully litigated in the declaratory judgment action.

Lastly, the court found that the defendant had standing to seek the foreclosure, as it was the current holder of the note and mortgage, and that it had physical possession of the note and mortgage documents.