March 20, 2013
In Vawter v. Quality Loan Service Corp. of Washington, 707 F.Supp.2d 1115 (W.D. Wash. Apr. 22, 2010), the court dismissed the homeowner’s claim on the basis that MERS was properly a beneficiary and entitled to effect sale of defaulted‐upon property. The homeowners applied for a loan to refinance their home. This culminated in the execution of an adjustable-rate note in the amount of $328,000 with Paul Financial, LLC. The note was secured by a deed of trust, which listed Paul Financial as the lender, MERS as the beneficiary, “acting solely as a nominee for Lender and Lender’s successors and assigns,” and First American Title Insurance Company as the trustee. The note was transferred from Paul Financial to Chase. The homeowners were notified that Homecomings Financial would begin servicing their loan. They were then told by Homecomings Financial that Washington Mutual Bank, which was subsequently acquired in part by Chase, would take over the servicing of their loan. The homeowners argued that when Chase obtained possession of the note they knew he was the “purported holder” and could not “properly ascertain its real role in connection with their mortgage loan.” The parties to the Deed of Trust also changed over time. MERS assigned its beneficial interest under the Deed of Trust to Chase. The homeowners acknowledged that MERS was listed on the Deed of Trust as holding the beneficial interest, but contested whether MERS was actually entitled to serve as the beneficiary, asserting that “[t]he entirety of MERS’ representations about its role and authority to act is false.” The court dismissed these claims and found that MERS was properly a beneficiary given the language in the note.
Moreover, the court looked at the Deed of Trust Act (“DTA”). In Washington, the DTA defines a dead of trust as a form of three-party mortgage. In 1965, the Washington legislature enacted the DTA which involving not only a lender and a borrower, but also a neutral third party called a trustee. Under the definition in the DTA, the court found that the homeowners failed to plead a viable claim under the DTA and Washington law. They stated that the cause of action, though styled in the complaint as a claim for wrongful foreclosure, is properly construed as a claim for wrongful institution of non-judicial foreclosure proceedings since the trustee’s sale was discontinued.| Permalink