In Buchanan v. HSBC Mortg. Servs., 993 N.E.2d 275, 2013 Ind. App. LEXIS 404, 2013 WL 4507932 (Ind. Ct. App. 2013), the Indiana Court of Appeals held that HSBC had the right to foreclose on the homeowners’ mortgage, dismissing homeowners’ allegations that the HSBC assignment was unauthorized. The Buchanans procured a loan from Accredited Mortgage Lenders in 2006, which named MERS as mortgagee and nominee. Later that year, MERS sold the loan to HSBC, who began foreclosure proceedings in 2008 after the homeowners defaulted. HSBC’s motion for summary judgment was granted in 2012, which homeowners appeal from here. The Indiana Court of Appeals upheld the decision of the trial court, finding that the homeowners presented no evidence that MERS lacked authority to assign the note and mortgage. The Buchanans alleged that the assignment was rendered invalid because an endorsement was not attached to the note in the complaint, and because the allonge was blank and not dated. However, the court held the assignment was valid and endorsed to HSBC in blank under Indiana Code Section 26-1-3.1-109(a)(2) which states “A promise or order is payable to bearer if it: . . . (2) does not state a payee,” showing that HSBC was the holder of the “bearer instrument” pursuant to Indiana Code Section 26-1-3.1-301(1). The court further found no evidence that the allonge was not affixed to the note, and states that HSBC is permitted to amend its complaint to attach the allonge to the note. Homeowners also failed to produce evidence that the signatory of the HSBC assignment lacked authority to sign on behalf of Accredited. Ultimately the court found that no issue of genuine or material fact existed.
Tag Archives: valid assignment
BAC Not Required to Evidence Holding Note in Texas Fourth Court of Appeals
In Lowery v. Bank of America, N.A., 2013 Tex. App. LEXIS 13114 (Tex. App. San Antonio Oct. 23, 2013), the Texas Fourth Court of Appeals affirms summary judgment for BAC Home Loan Servicing, LP dismissing homeowner’s claim that without evidence of holding the note, BAC lacked standing to foreclose. The homeowner sought an injunction from the nonjudicial foreclosure initiated by BAC in 2011, alleging wrongful foreclosure as the note did not name BAC or MERS, and further alleging that MERS improperly assigned the note to BAC. The court cites the Reinagel holding that the assignment of mortgage presumptively assigns the note as well, and that BAC is not required to show evidence of holding the note. On these grounds, the court found the homeowner produced less than a scintilla of evidence to show BAC lacked authority to foreclose, and further failed to show the signatory at MERS lacked authority.
Homeowners in Fifth Circuit Fail to Defeat Deutsche Bank Assignments
In Reinagel v. Deutsche Bank Nat’l Trust Co., 2013 U.S. App. LEXIS 22133 (5th Cir. Tex. July 11, 2013), the U.S. Court of Appeals for the Fifth Circuit upheld the Texas district court’s decision to grant Deutsche Bank’s motion to dismiss the homeowners’ complaint alleging the loan assignments were invalid due to robo-signing. The Reinagels refinanced their property in 2006 with Argent Mortgage Company, LLC who sold the loan to Deutsche Bank where it was pooled and sold to investors. The sale of the loan to Deutsche Bank was not documented until 2008, when the assignment was executed. The first assignment of the deed of trust failed to reference the promissory note. A second assignment was executed in 2009, expressly naming the subject note.
After the homeowners defaulted on payments, the state court granted the order for foreclosure in 2010, naming Deutsche Bank as mortgagee with right to foreclose. The Reinagels brought this action for a temporary injunction alleging that the assignments were “robo-signed” and as such facially void. They further argued that the assignments violated the pooling and service agreement (“PSA”), which did not permit transfers into the Deutsche Bank trust after October 1, 2006. The case was removed to the district court on diversity grounds, where the court later granted Deutsche Bank’s motion to dismiss the complaint. The Fifth Circuit affirmed this decision on appeal, finding the Reingals’ challenge of the the assignments unconvincing. The court held that although a non-party to a contract cannot enforce said contract, the obligor may defend on any ground which renders the assignment void, giving homeowners standing as they assert the assignments are facially void. The first assignment was held valid, as the court notes “the transfer of a mortgage presumptively includes the note secured by the mortgage” even if it doesn’t expressly reference the note; the validity of the second assignment is irrelevant here. Additionally, the Reinagels cited no precedent to support invalidating the assignments solely on account of robo-signing, or that violations of the PSA would invalidate the assignments. Further, the court did not find sufficient evidence of robo-signing in regard to either assignment. The court is careful to note that its decision is a narrow one, and provides a warning to banks: “we merely reaffirm that under Texas law facially valid assignments cannot be challenged for want of authority except by the defrauded assignor. We do not condone ‘robo-signing’ more broadly and remind that bank employees or contractors who commit forgery or prepare false affidavits subject themselves and their supervisors to civil and criminal liability.” Id at 12.
Indiana Supreme Court Allows Citimortgage to Intervene in ReCasa’s Foreclosure Proceeding
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.
