Tag Archives: stay foreclosure

Michigan District Court Holds That MERS Cannot Foreclose by Advertisement But Can Assign its Security Interest

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In Knox v. Trott & Trott, No. 10-13175, Dist. Court, (Michigan 2011) the court denied the plaintiff’s motion for reconsideration under Rule 60(b)(3) and (4). Knox maintained that the court erred in rejecting his argument that the defendants lacked standing under Mich. Comp. Laws 600.3204(1)(d) to foreclose on his property.

Plaintiff based his request on a previous Michigan court of appeals case, Info-Hold, Inc. v. Sound Merchandising, Inc. 538 F.3d 448, 455 (6th Circ. 2008). However, the court distinguished that case from the present case, as the former dealt with the narrow issue of whether MERS could foreclose by advertisement or whether it must use judicial foreclosure. In the present case, the court stressed that absent a showing by MERS that it owned “an interest in the indebtedness secured by the mortgage,” it lacked authority under the Michigan statute to foreclose.

In the present case, however the court found that MERS was not the foreclosing entity. As such, its status as defendant in the litigation fell outside the parameters of the issue resolved in Residential Funding.

Utah Court Holds That Under Utah Law, MERS Was Not Required to Identify the Note-Holder in Order to Permit the Trustee to Proceed With Foreclosure

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The plaintiff in Nielsen v. Aegis Wholesale Corporation, MERS et al., No. 10-606 (D. Utah May 4, 2011) argued that MERS divided the deed of trust as well as the promissory note. The court, in reaching their decision and rejecting the plaintiff’s argument, noted that “the court adopted the defendant’s argument that plaintiff had latched onto a failed theory—that a note and trust deed can be ‘split’ and rendered null and void.” The court subsequently dismissed the plaintiff’s claims against MERS with prejudice.

The court further went on to state that, “by law, each successor to the note also received the benefit of the security, and by contract, MERS was appointed as the nominee beneficiary under the First Deed of Trust. Contrary to the plaintiff’s argument, MERS had established its rights with respect to foreclosure on the security and MERS had, at all relevant times been, entitled to act as beneficiary under the First Deed of Trust.”

The court further noted that under Utah law, MERS was not required to identify the note holder in order to permit the trustee to proceed with foreclosure.

Oregon Court Rejects Plaintiff’s Argument That the Trust Deed Can Only be Foreclosed if a Single Entity Holds Both the Note and Deed

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After receiving a Notice of Default and Election to Sell, the plaintiff in Spencer v. Guaranty Bank et al., No. 10CV0515ST, Deschutes Co. Circuit (May 5, 2011) sought an injunction barring MERS, as well as the other defendants, from bringing a foreclosure action. The court granted the defendants’ Motion to Dismiss with prejudice.

In addition to the court granting the motion to dismiss, the court also noted that the plaintiff “made no claim that she was not in default nor that any requirement of ORS 86.735 were not satisfied,” the court held that MERS satisfied the statutory definition of “beneficiary” under ORS 86.705. Specifically, the court identified that it was “not persuaded that Mortgage Electronic Registration Systems couldn’t act in that capacity, even if it is not the holder of the note.”

Moreover, the court also rejected the plaintiff’s argument that the trust deed can only be foreclosed if a single person or entity holds both the note and deed, noting that ORS 86.770(2) protects the plaintiff from a lawsuit seeking enforcement of the note after the non-judicial sale. “The bottom line is that plaintiff sought to retain ownership, apparently forever, of a property for which she has not paid nor even alleges that she intends to pay for. She has not stated a claim.”

Massachusetts Supreme Court Dismisses Try Title Action Due To Lack Of Subject Matter Jurisdiction

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In Bevilacqua v. Rodriguez, 460 Mass. 762 (2011), theMassachusetts Supreme Court handled the issue of whether a plaintiff had standing to maintain a try title action under G.L. c. 240, §§ 1-5, where he was in physical possession of real property but his chain of title rested on a foreclosure sale conducted by someone other than “the mortgagee or his executors, administrators, successors or assigns.”

In this case, the purchaser of property, after foreclosure of a mortgage, brought an action to try title against mortgagor. The purchaser alleged, that because foreclosure sale had been conducted by assignee before the mortgagee had actually assigned mortgage, a cloud existed on purchaser’s title. This action was dismissed, and an appeal ensued. On review, the Massachusetts Supreme Court affirmed the lower court’s holding. However, the court modified the lower court’s holding, finding that the dismissal should have been entered without prejudice.

The court found that the lower court properly raised the issue of whether the plaintiff had record title to the property such that he had standing to bring a try title action. The court found that the plaintiff had not identified a basis on which the court could conclude that the plaintiff had record title to the property such that a try title action could be sustained.

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.

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

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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.

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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.

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.