Via: Atty Brian M. Levine

SUPREME COURT – STATE OF NEW YORK
Present:
HON. THOMAS A. ADAMS.
Supreme Court Justice

DEUTSCHE BANK NATIONAL TRUST COMPANY AS
TRUSTEE FOR THE REGISTERED HOLDERS OF
MORGAN STANLEY ABS CAPITAL I INC. TRUST
2007-HE7 MORTGAGE PASS- THROUGH CERTIFICATES,
SERIES 2007- HE7
Plaintiff (s) ,

-against-

NELSON VASQUEZ, EDIS VASQUEZ, PETRO, INC.,
COMMISSIONERS OF THE STATE INSURACE FUN,
“JOHN DOE #1” through “JOHN DOE #12” et al,
Defendant (s) .

Motion by defendants Nelson and Edis Vasquez pursuant to CPLR 2221 for reargument
of this court’ s order dated September 7 2011 which denied defendants’ application to vacate
a default in timely answering the complaint is granted, and upon reargument the prior order is
vacated and the motion is granted and defendants’ default is excused and defendants ‘ proposed
answer annexed to the original moving papers as Exhibit “F” is deemed timely served.

This action in foreclosure is brought by plaintiff Deutsche Bank National Trust
Company as Trustee for the Registered Holders of Morgan Stanley ABS Capital I Inc. , Trust
2007-HE7, Mortgage Pass Through Certificates, Series 2007-HE7. The plaintiff Trust holds
securities backed by mortgages, one of which secures the subject property located in
Hempstead, New York, at 664 Wilis Street. The property was purchased by defendants
Nelson Vasquez and Edis Vasquez in 2006, and was originally encumbered by a mortgage in
the sum of$435 100.00 in favor lender New Century Mortgage Corporation (New Century).

Acting as nominee for New Century, Mortgage Electronic Registration Systems, Inc.
(hereafter MERS) recorded the mortgage in January of2007 with the Nassau County Clerk, and
on November 16, 2009, again acting as nominee for New Century, electronically assigned the
mortgage to the plaintiff Trust. The MERS signature affixed to the Assignment is dated January
2011. The County Clerk recording receipt for the Assignment is dated March 30, 2011. The
first default in payment occurred September 1 2010.
[* 1]

Regarding the authority ofthe nominee MERS, the Mortgage states:

MERS” is Mortgage Electronic Registration Systems, Inc. MERS is a
separate corporation that is acting solely as nominee for Lender and
Lender s successors and assigns. . . FOR PURPOSES OF RECORDING
THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD (italic
emphasis supplied).

Defendants defaulted in timely answering the complaint, and on the prior application
sought leave to vacate their default and serve a late answer. By order dated September 7, 2011
this court denied the motion holding that defendants failed to establish a reasonable excuse for
the default and failed to offer a meritorious defense. They now seek reargument.

The motion for reargument is designed to afford a part “an opportunity to establish that
the court overlooked or misapprehended relevant facts or misapplied (a) controlling principle
of law (Foley v. Roche 68 AD2d 558 567 (Ist Dept 1979)).

As this court has overlooked a principle of law, which is discussed below, the motion for
reargument is granted and the merits of the prior motion are examined.

When moving to extend the time to answer or to compel the acceptance of an untimely
answer, defendants must establish a reasonable excuse for the default and demonstrate a
meritorious defense to the action (Maspeth Federal Sav. and Loan Assoc. v. McGown
AD3d 890, 891 (2d Dept 2010)). On the prior motion defendants asserted “law office failure
to excuse the delay in serving an answer, and as a proposed meritorious defense, asserted interalia
that plaintiff lacked standing to bring this action, as the Trust was not an assignee or a
holder of the Mortgage Note at the time this action was commenced.

DISCUSSION – STANDING

It is well established that “foreclosure of a mortgage may not be brought by one who has
no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity” (Kluge
v. Fugazy, 145 AD2d 537, 538 (2d Dept 1988)). In answer to defendants’ prior motion , the
plaintiff Trust for the first time produced a copy of the Adjustable Rate Note dated December
2006 by which defendants Nelson and Edis Vasquez promised to pay $435 100.00 “to the
order” of the New Century Mortgage Corporation, the Lender. Plaintiff produced only a copy
the Note which is not indorsed, either to plaintiff or in blank, and thus has not been negotiated.
Negotiation is necessary to render plaintiff a “holder” as defined by the Uniform Commercial
Code.

At the outset, it us useful to review the governing statutes for the rules of transfer
regarding negotiable instruments. Pursuant to UCC 9 3-202 negotiation is defined as the “the
transfer of an instrument in such form that the transferee becomes a holder . If the instrument
is payable “to order , as is the Note here, it is negotiated “by delivery with any necessary
indorsement”. Only a “bearer” instrument can be negotiated by delivery without an indorsement
(UCC 9 3-202).

The types of indorsements are governed by UCC 9 3-204, and include “special”
indorsements and “blank” indorsements. A special indorsement specifies the person “to whom
or to whose order” the instrument is payable (UCC 93-204(1)). In contrast, an indorsement in
blank “specifies no particular indorsee and may consist of a mere signature” (UCC 93-204(2)).
The Note offered in support by plaintiff was payable “to the order” of New Century and
was not indorsed, neither specially nor in blank. Accordingly it does not evidence the requisite
negotiation by the lender and thus does not establish a prima facie showing that the plaintiff
Trust is a “holder” of the Note.

Inadequate documentation raises serious issues of public policy and it has been said that
it is “of the utmost importance that the attorneys practicing before (the) Court maintain integrity
in preparing the documentation of. . . mortgage obligations” as doing otherwise “causes risk
that’ (t )he debtor and his/her family may lose their home , and the debtor and other creditors may
lose significant equity in foreclosure.
‘ “
(In re Obasi WL 6336153, * 8 (Bkrtcy SDNY 2011)).
Real Property Actions and Proceedings Law practice commentary explains:

submissions of faulty documentation, unauthorized or missing assignments of notes
and/or mortgages, improper notarizations, conflicts of interest and inadequate review
of loan documentation by so-called robo-signers, prompted Chief Judge Lippman to
state that “(w)e cannot allow the courts in New York State to stand by idly and be
part to what we know is a deeply flawed process, especially when that process
involves basic human needs–such as a family home–during this period of economic
crisis,” which resulted in the issuance on October 20, 2010 by the Office of Court
Administration of Administrative Order 548/10 requiring counsel in residential
foreclosures to fie an affirmation certifying that counsel has taken reasonable steps
including inquiry with lenders and careful review of papers fied to verify the
accuracy of documentation

(Rudolph de Winter, Practice Commentaries, RP APL 9 1301 , 2011).

DOCUMENTATION

A foreclosure plaintiff has the requisite standing to commence a mortgage foreclosure
action if “it is both the holder or assignee of the subject mortgage and the holder or assignee
of the underlying note at the time the action is commenced”
(Bank of New York v. Silverberg,
86 AD3d 274, 279 (2d Dept.20 11) (emphasis supplied)). In this action plaintiff does not allege
that it is an assignee ofthe Note, but instead, as previously referenced, produced a copy of the
original Note between defendants and New Century. They argue that delivery of the unindorsed
Note was sufficient to confer standing. On the prior motion the court overlooked the necessity
of proper indorsement required to transfer ownership and render the transferee a holder.
The requirement of negotiation to effect a legal transfer and establish standing is
fundamental and well recognized, if not always explicitly stated. (compare First Trust Nat.
Assoc. v. Meisels 234 AD2d 414 (2d Dept 1996) with HSBC Bank USA v. Hernandez
AD3d , 2012 WL 579706 (2d Dept 2012)). Standing is established where the plaintiff
both the assignee ofthe mortgage and, by indorsement, the holder ofthe underlying note at the
time the foreclosure action was commenced” (First Trust Nat. Assoc. v. Meisels 234 AD2d 414
supra). When the note secured by the mortgage is a negotiable instrument it “requires
indorsement on the instrument” or “on a paper so firmly affixed thereto as to become a part
thereof’ in order to effectuate a valid assignment of the instrument
(Slutsky v. Blooming Grove

Inn 147 AD2d 208, 212 (2nd Dept. , 1989), cf, UCC 3-202(3), (4); see also, HSBC Bank USA
Nat. Assoc. v. Miler 26 Misc3d 407 (Sup. Ct. Sullvan County 2009); HSBC Bank USA, Nat.
Assoc. v. Miler 26 Misc.3d 407, 412 (Sup. Ct. Sullvan County 2009)). So vital is the
indorsement, as a foundation of negotiable instruments law, that “mere possession of a
promissory note endorsed in blank Gust like a check) provides presumptive ownership of that
note by the current holder (Deutsche Bank Nat. Trust Co. v. Pietranico, 33 Misc.3d 528, 545
(Sup. Ct. Suffolk County 2011)). The indorsement must predate commencement of the
foreclosure action. (HSBC Bank USA, Nat. Assoc. v. Miler, supra: Deutsche Bank Nat. Trust
Co. v. McRae, 27 Misc.3d 247, 251 (Sup. Ct. Allegany County 2010)).

In Deutsche Bank Nat. Trust Co. v. McRae, the plaintiff, to establish standing,
submitted an additional copy of a note which was different from the one attached to the
complaint. The court rejected it, stating:

Plaintiff submitted a second copy of the Note, which for the first time
contained … an endorsement in blank by First Franklin Financial
Corporation. The endorsement in blank, however, is undated. In stark
contrast, the copy of the Note attached to the complaint bears no such
endorsements. Obviously, the endorsements . post-date the
commencement of this case. .. and are ineffective.

(Deutsche Bank Nat. Trust Co. v. McRae, supra (emphasis original)).
Documentation often has been addressed in the context of an application in bankptcy
court to lift the automatic stay of a foreclosure, where state substantive law governs the inquiry
(In re Escobar 457 BR 229 239 (Bkrcy EDNY 2011)). Relying upon Bank of New York
Silverberg (86 AD3d 274 supra)), Escobar required an assignment ofthe note to the plaintiffs
in banptcy or a properly indorsed note evidencing negotiation as proof of status as owner or
holder of the note at issue (In re Escobar 457 BR 229, 239 (Bkrcy EDNY 2011), supra).
Escobar held that the movants “met this burden of proofthrough their uncontroverted affidavit
testimony that they are holders of the Notes by virtue of possession of the original notes
executed with endorsements in blank. . . (In re Escobar, supra at p 241). In re Agard held
that under New York law the movant can prove holder status “by providing the Court with proof
of a written assignment of the Note, or by demonstrating that (the movant) has physical
possession of the Note endorsed over to it” (In re Agard, 444 BR 231 , 246 (Bkrcy EDNY
2011)).

The court finds that absence of an indorsement on the subject Note constitutes a
meritorious defense regarding plaintiff s standing, and now turns to the reasonable excuse
required of defendants for their default. On the prior motion, counsel for defendants asserted
that he believed he had mailed the answer but was “confused” on that issue, and had not done
so.

Law office failure, in the discretion ofthe court, may be considered a reasonable excuse.
Indeed, in the banptcy context, which is equitable in nature, the equitable powers ofthe court
may be called upon (Deutsche Bank Nat. Trust Co. v. Luden 91 AD3d 701 (2d Dept 2012)).
In Luden the Second Deparment found circumstances similar to those here acceptable where
the attorney prepared an answer which the defendants signed ” but, unbeknownst to the
defendants, the attorney failed to fie and serve the answer unti some two months later (supra).

In the exercise of this court’ s discretion and in light of the proposed defense regarding
standing, and the further issues discussed below, this court is prompted to accept the proffered
excuse, and not sit “idly by” in this foreclosure action in which the defendants have touched
upon serious issues of public policy and standing. Accordingly, the prior order is vacated and
upon reargument the proposed answer is deemed timely served nunc pro tunc. Plaintiff shall
have thirt days after service of a copy of this order to respond to counterclaims.

Also influencing this court’ s determination on reargument are the repeated issues
regarding standing which revolve around proper assignments, particularly of mortgage notes
which have ensued following creation of the MERS system and the birth of mortgage backed
securities.

MERS

Courts have struggled with the MERS system since it was created in 1993. In Matter of
MERSCORP v. Romaine (8 NY3d 90, 96 (2006)), the Court of Appeals addressed the first
MERS issue and held that the Suffolk County Clerk was obligated to record and index MERS
mortgages, assignments and discharges thereof. The court touched upon MERS history, in
relevant part as follows:

In 1993 , the MERS system was created by several large participants
in the real estate mortgage industry to track ownership interests in
residential mortgages. Mortgage lenders and other entities, known as
MERS members, subscribe to the MERS system and pay annual fees for
the electronic processing and tracking of ownership and transfers of
mortgages. Members contractually agree to appoint MERS to act as their
common agent on all mortgages they register in the MERS system.

(Matter of MERSCORP. v. Romaine, 8 NY3d 90, 96 (2006)). The process dispenses with
public recording of interim transfers; “instead they are tracked electronically in the MERS’
private system (Matter of MERSCORP. v. Romaine, 8 NY3d 90, 96 (2006)).

In other words, MERS is privately retained by financial institution to keep records of
secondary market mortgage transfers displacing the official public record keepers, e. , the
various state County Clerks. MERS’ records, unlike official public documents , are not entitled
to a presumption of regularity (see, Prince, Richardson on Evidence (Farrell, 11th ed.) 9
120), nor are they transparent to non members or the mortgagor. MERS has no ownership
interest in the principal or interest ofthe various holdings, cannot collect interest or principal
and generally remains listed as nominee and/or mortgagee for the original lender in the public
record for the life of the mortgage regardless of the number of assignments in the secondary
market. MERS claims authority to assign mortgages, and to foreclose upon a default, based
upon the agreements between it and its clients as well as the original mortgagor (see in general
In re Agard, 444 B.R. 231 , 248-249 (Bkrcy EDNY 2011), and cases cited therein).

Much judicial scrutiny has been give to the impact and effect MERS private
agreements on the legal sphere of foreclosure, with judicial opinions ranging from full
recognition ofMERS standing to foreclose on properties in default , and authority to the assign
not only mortgages and servicer agreements, but also promissory notes (see Deutsche BankNat.
Trust Co. v. Pietranico, 33 Misc.3d 528, 545 (Sup. Ct. Suffolk Cty. 2011)).

In high contrast is a line of cases represented by In re Agard (444 B.R. 231, 245-46
(Ban.E.D.N. Y.20 11)) where MERS is limited to recording mortgage assignents as nominee
of the original lender “with no other legal power or standing

Indeed, in a terse description the court found the allegations of the parties and
documentation they provided at odds, to wit:

it is notable in this case that the Assignment of Mortgage was by MERS
as nominee for First Franklin, the original lender.

By the Movant’s and MERS’s own admission, at the time the assignment
was effectuated, First Franklin no longer held any interest in the Note.

The documentation provided to the Court in this case… is stunningly
inconsistent with what the parties define as the facts of this case.

(In re Agard 444 B.R. 231 , 254 supra). Agard is informative for the breadth of authority
it reviews in considering the issues generated by the MERS system, some presaged by then
Chief Judge Judith Kaye and Judge Ciparick in MERSCORP, Inc. v. Romaine ( NY3d 90
(2006)). Agard rejected the parties contention that the Note and Mortgage traveled together in
all transfers effectuated by MERS, stating:

By MERS’s own account, the Note in this case was transferred among its
members, while the Mortgage remained in MERS’s name. MERS admits
that the very foundation of its business model as described herein requires
that the Note and Mortgage travel on divergent paths. Because the Note and
Mortgage did not travel together, Movant must prove not only that it is
acting on behalf of a valid assignee of the Note, but also that it is acting on
behalf of the valid assignee of the Mortgage.

(In re Agard, 444 B.R. 231 , 247, supra).

As noted, The Court of Appeals of the State of New York held that the Suffolk County
Clerk was “compelled to record and index mortgages, assignments of mortgage and discharges
of mortgage” naming MERS “the lender s nominee or mortgagee of record” (MERSCORP, Inc.
v. Romaine, 8 NY3d 90 (2006)). Judge Ciparick, concurring, sought “to highlight the narow
breadth” of the holding, to frame those issues not decided and identify policy concerns needing
attention, stating:

if MERS succeeds in its goal of monopolizing the mortgage nominee
market, it wil have effectively usurped the role of the county clerk that
inevitably would result in a county’s recording fee revenue being
substantially diverted to a private entity. . . MERS’ s success will arguably
detract from the amount of public data available concerning mortgage
ownership. . . that are used to analyze trends in lending practices. .. once
an assignment of the mortgage is made, it can be difficult, if not
impossible, for a homeowner to find out the true identity of the loan holder
(MERSCORP, Inc. v. Romaine 8 NY3d 90, 100 supra (Ciparick, 1. concurring)).

In a prescient partial dissent, former Chief Judge Judith Kaye, emphasized the very
foundation and purpose of the Recording Act, which is to “protect the rights of innocent
purchasers… without knowledge of prior encumbrances and to establish a public record which
would furnish potential purchasers with notice. . . of previous conveyances . She noted the
incongruity presented between the business and public interests, one a system “developed as
a tool for banks and title companies” and the other “venerable real property laws regulating
the market” (MERSCORP, Inc. v. Romaine 8 NY3d 90, 101 supra (Kaye, J. dissenting)
(internal quotations deleted)).

Judge Kay identified important issues which remained unresolved such as those
concerning the underlying validity of the MERS mortgage instrument-in particular, whether
its failure to transfer beneficial interest renders it a nullity under real property law, whether
violates the prohibition against separating the note from the mortgage, and whether MERS has
standing to foreclose on a mortgage. . . (MERSCORP, Inc. v. Romaine. supra at p 102 nl).

The Second Department had cause recently to address one of those issues, whether
MERS had authority to assign the power to foreclose. In Bank of New York v. Silverberg (86
AD3d 274 (2d Dept 2011)), where a consolidation agreement gave MERS the right to assign
the mortgages but did not “specifically” give it the right to assign the underlying notes, the
court held that “because MERS was never the lawful holder or assignee of the notes. . . MERS
was without authority to assign the power to foreclose to the plaintiff’ (Bank of New York
Silverberg, 86 AD3d 274 281 283 (2d Dept 2011)). Regarding the impact of this failure of
documentation on MERS recording of “approximately 60 million mortgage loans , the court
stated that it was “mindful” of the possible impact of its decision on the mortgage industry, yet
notwithstanding such impact,

the law must not yield to expediency and the convenience of lending
institutions. Proper procedures must be followed to ensure the reliability of
the chain of ownership, to secure the dependable transfer of property, and
to assure the enforcement of the rules that govern real property.

(Bank of New York v. Silverberg, 86 AD3d 274 283 supra).

The court notes that it has not overlooked plaintiff s contention that this motion is
untimely. The court clerk’ s return of defendants ‘ timely motion for re argument for correction
of a scrivener s error using January 2011 when January 2012 was intended and correcting the
return date is deemed timely.

Dated: MAY 08 2012
ENTERED
MAY 11 2012
NASSAU COUNTY
COUNTY CLERK’S OFFICE
4924-11+. wpd
[* 9]

HW-

The California state Assembly and Senate passed a package of bills giving Attorney General Kamala Harris new powers to pursue financial crimes. The legislation is moving to the governor for signature.

The twin bills (AB 1763 and SB 1474) allow Harris to convene a special grand jury in order to prosecute alleged crimes in different jurisdictions, which would aid the Attorney General as part of the national mortgage fraud task force formed in January.

Under current law, separate grand juries are required to cover fraud victims located all over the state. Charges must be filed in each county where a single defendant may have committed a crime.

[HOUSING WIRE]

We Must Not Speak Uncomfortable Truths to Power: Why I Won’t be Briefing Congress about Derivatives

The Big Picture- By William K. Black

When I was the Deputy Director of FSLIC, House Banking Committee Chairman St Germain was helping Speaker Wright hold the FSLIC recapitalization bill hostage to extort favors for Texas control frauds, including Don Dixon’s Vernon Savings (which was providing prostitutes to the State of Texas’ top S&L regulator and was building towards having 96% of its ADC loans in default – which is why we referred to it as “Vermin”). The attack on our agency was that we were mad dogs biased against Texas S&Ls and causing the Texas crisis by closing too many insolvent but well-run Texas S&Ls. Our response had many elements, but one of our principal points was that the Texas S&Ls we were closing were typically control frauds. At this juncture, St Germain’s staffers made a mistake. They requested that we testify on a host of issues, but the invite letter had a zinger, premised on an article saying that the Feds were slow to prosecute frauds in the Southwest. The invite specifically called for us to respond and discuss the role of fraud in the Southwest. We used the opportunity to explain the extensive role of fraud in Texas S&L failures.

The day of the hearing…

[THE BIG PICTURE]

The Guardian-

A national campaign representing more than 50,000 families caught up in America’s foreclosure crisis has been launched, with the aim of making mortgage relief a key issue in battleground states during the 2012 election.

The Home Defenders League, launched on Thursday, plans to be active in 17 states across the US recruiting members via phone and door-to-door campaigns. Staffed by people who themselves are suffering from foreclosure, the HDL wants to create a powerful lobby in swing states like Florida, Colorado, Nevada and elsewhere.

This weekend it will hold more than 20 rallies, phone banks and house parties to recruit supporters in a three-day membership drive. It is planning to tap into some of the 15.7 million American homeowners suffering from foreclosure or whose houses are “underwater” and thus worth far less than their mortgages.

It seeks to vet politicians…

[THE GUARDIAN]

This is all part of the plan. They gave loans to many individuals who could not afford them.

Bloomberg-

The Federal Housing Administration today disputed a report that foreclosure starts on loans it insures spiked by 74 percent from March to April.

New foreclosures on FHA-backed loans rose to 63,126 in April from 36,311 a month earlier, mortgage-data provider Lender Processing Services Inc. (LPS) said yesterday in the report. FHA said its own numbers showed an 11 percent drop to 18,975.

LPS may have erred extrapolating numbers from its database of information on 40 million loans, FHA spokesman Lemar Wooley said in an e-mail. Mitch Cohen, a spokesman for LPS, didn’t immediately respond to a request for comment.

“The bottom line is that the numbers in the LPS report for April simply don’t accord with our data,” Wooley said.

[BLOOMBERG]

Richard Zombeck-

Never mind that JPMorgan lost, by some estimates, $30 billion dollars due to bad bets or that the Facebook IPO cost investors millions, “when internal analysts learned that Facebook’s numbers were going to be worse than expected, the company and its bankers didn’t tell everyone, but just ‘selectively disclosed’ information to a small group of ‘preferred investors,” according to Matt Taibbi, of Rolling Stone. It is business as usual on Wall Street and of no concern to us, the unwashed masses. Meanwhile, JPMorgan CEO, Jamie Dimon is out and about again, railing against regulation.

This isn’t the first time Dimon’s complained about too much regulation. Here’s Huffington Post Hunter Stuart’s “Jamie Dimon Really, Really Hates Financial Regulation” mashup. Dimon has called regulation anti-American, anti-business, an attack on work ethic and successful people. He’s even gone so far as to call public criticism of bankers “a form of discrimination.” All this from a guy who has to sit in the back of the limo, drink from his own fountain, and makes his money betting with other people’s pensions, savings, and retirement funds.

[HUFFINGTON POST]

Bloomberg-

Sherry Hunt never expected to be a senior manager at a Wall Street bank. She was a country girl, raised in rural Michigan by a dad who taught her to fish and a mom who showed her how to find wild mushrooms. She listened to Marty Robbins and Buck Owens on the radio and came to believe that God has a bigger plan, that everything happens for a reason.

She got married at 16 and didn’t go to college. After she had her first child at 17, she needed a job. A friend helped her find one in 1975, processing home loans at a small bank in Alaska. Over the next 30 years, Hunt moved up the ladder to mortgage-banking positions in Indiana, Minnesota and Missouri, Bloomberg Markets magazine reports in its July issue.

[BLOOMBERG]

H/T Vermont Trotter from www.ProtectAmericasDream.com

by xclucifer

from a comment on youtube.

His name is Rep.Mike Bost.

He was talking in the house.

They gave him a 200 page Bill to read in about 15 minutes.

Apparently they do this quite often.

(One of those, sign the Bill, learn about it later).

He was upset because he wants to be a responsible Rep to the people,

however, the house makes it difficult.

This judge should slam this private registry that is in fact problematic once and for all. Just look at who is behind the machine…the banks that are sued for fraud each and every day.

Wait until someone gets the opportunity to audit the money no doc trail.

Reuters-

Attorneys for the state of Delaware struggled at a court hearing on Wednesday to keep alive a closely watched lawsuit against MERS, the electronic mortgage registry accused of abuses in housing foreclosures.

The state’s lawsuit, announced at press conference in October, is seen as a test case for addressing concerns that homes were being seized from defaulted borrowers without following proper procedures.

The Mortgage Electronic Registration Systems Inc, known as MERS, is an electronic-lien registry created by the mortgage banking industry as a way to streamline and speed up the mortgage recording and transfer process.

[REUTERS]

This is pretty cool and simple.

By joining, you will allow Thunderclap to tweet “Hear our voices and stop the rollback of Dodd-Frank” once on your behalf, along with other supporters. Please head over to Matt’s campaign to send his message out by clicking the image below.

image: Rollingstone

Reuters-

When the Securities and Exchange Commission sued six former top officials from the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac) last December, public skepticism toward the cases was plentiful. The two lawsuits, which named three executives from each company, alleged that the defendants misled investors about their firms’ exposure to the risky mortgages.

New York Times columnist Joe Nocera called the lawsuits “extraordinarily weak,” noting the lack of gotcha emails or evidence of potential insider trading by the defendants. On the Case columnist Alison Frankel was also dubious. She noted that even though the cases centered on the lack of adequate disclosures, the SEC had charged four of the defendants with securities fraud.

“That’s a high bar, in which the agency has to show the defense acted with fraudulent intent,” wrote Frankel.

We now have a better understanding of how the SEC intends to clear that hurdle…

[REUTERS ON THE CASE]

Current-

Viewpoint” host Eliot Spitzer and Rolling Stone contributing editor Matt Taibbi consider how the Securities and Exchange Commission, which is tasked with regulating the financial industry, has yet to prosecute any high-profile banks or executives in the aftermath of the financial crisis of 2008.

Taibbi cites Lehman Brothers as a particularly glaring example: “That was a case where there was just ample evidence of all kinds of transgressions.” Taibbi goes on, “They just overlooked all these companies. It’s not like they don’t have cases to make, they’re just not making them.”

[Viewpoint w/ Eliot Spitzer]

A little background on Mr Stevens: MBA head David Stevens “Cozy” with Banks While at the FHA

and he wasn’t at the Mortgage Bankers Assoc. for very long either…so what’s up?

MSN-

ATLANTA, May 30, 2012 /PRNewswire/ — SunTrust Banks, Inc., STI announced today that David Stevens, currently President and CEO of the Mortgage Bankers Association (MBA 0.00%, news), will join the Company as President of SunTrust Mortgage, Inc., effective July 16, 2012.  He will assume responsibility for the day-to-day operations of the business, including sales, production, fulfillment, and mortgage capital markets, and report to SunTrust Mortgage CEO Jerome Lienhard.

Mr. Stevens, 55, will be based in Washington, D.C., and maintain offices in both Washington and Richmond, Va., where SunTrust Mortgage has a significant corporate presence.

“David Stevens is a high-caliber leader, professional and individual,” said Mr. Lienhard.  “His subject matter knowledge and leadership abilities are well known, as is his tireless commitment to our industry.  I am personally delighted to welcome such a well-respected colleague to our business and look forward to the transformational change he will drive.”

[MSN]

When you conceal the identity of something on purpose and it’s flat out misleading, isn’t this a deceptive practice?

Daily Press-

WILMINGTON, Del. (AP) — A company that runs a nationwide electronic mortgage registry is asking a Delaware judge to dismiss a deceptive trade practices lawsuit filed by the Delaware attorney general’s office.

A Chancery Court judge was to hear arguments Wednesday on a motion by Virginia-based Mortgage Electronic Registration Systems Inc. to dismiss what it says is an absurd and baseless lawsuit.

State officials sued MERS last fall, saying it has sown confusion among consumers, investors and other stakeholders in the mortgage finance system and damaged the integrity of Delaware’s land records system.

[DAILY PRESS]

Via: floridaforeclosurefraud

Despite earlier reports that The Law Offices of David J. Stern has shut its doors forever, the firm still appears to be functioning.

1441 Brickell Avenue

15th Floor

Miami, Fl 33131

See Below:

 [ipaper docId=95243014 access_key=key-1fcq488vl73niu51wemh height=600 width=600 /]

MarketWatch-

Attorneys representing former home appraisal manager Kyle W. Lagow, who blew the whistle on widespread fraud at Countrywide Financial, today announced the final settlement of Mr. Lagow’s whistleblower action. Mr. Lagow’s whistleblower suit sparked an investigation culminating in the historic $1 billion settlement between the Department of Justice and Bank of America BAC +4.06% , a settlement that was itself part of the larger global bank settlement announced last month, the second largest government civil settlement in history.

Also announced was final settlement of fraud claims by Gregory Mackler, a whistleblower who challenged Bank of America’s fraudulent handling of the Home Affordable Modification Program meant to help millions of struggling homeowners. His claim, which led to the return of over $6 million to the Department of Treasury from Bank of America, was also part of the global bank settlement.

Lagow worked at LandSafe, Inc., an appraisal company owned by Countrywide Financial and ultimately acquired by Bank of America, from 2004-2008. According to his unsealed complaint, Mr. Lagow observed widespread disregard for laws that regulate Federal Housing Administration (FHA) underwriting and home appraisals.

[MARKET WATCH]

Minus the aggressive occupiers against the police.

Via: YouTube

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Under the U.C.C., a “payee” who “receive[d] delivery of [an] instrument” may bring an action for conversion against a depository bank who caused payment to be made to “a person not entitled to enforce the instrument.” N.J.S.A. 12A:3-420. A person “receives delivery of [an] instrument” under N.J.S.A. 12A:3-420 “when the check comes into the payees possession, as for example when it is put into the payee’s mailbox.” Ibid., comment…

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3933-09T1

MORTGAGE ELECTRONIC

REGISTRATION SYSTEMS,

INC., and HOMECOMINGS FINANCIAL,

LLC.,

Plaintiffs-Respondents,

v.

AMBOY NATIONAL BANK, n/k/a/

AMBOY BANK, MAGDY OMAR, and

NASER BELOSA,

Defendants,

and

BANK OF AMERICA,

N.A., f/k/a FLEET BANK,

Defendant-Appellant.

________________________________

May 24, 2012

Submitted March 30, 2011 – Decided

Before Judges Fuentes, Nugent and Newman.

On appeal from Superior Court of New Jersey,

Law Division, Hudson County, Docket No. L-3436-08

Law Offices of Gregg S. Sodini, LLC, attorneys for

appellant (Michael T. Collins, of counsel;

Lauren Graham Delehey, on the brief).

McDowell Riga, attorneys for respondents

(Joseph F. Riga, on the brief).

PER CURIAM

In this appeal, we are required to determine whether a payee who rejects and returns a check to the payor has standing to hold a depositor bank liable for thereafter permitting a third party to fraudulently convert the proceeds of the check. Stated differently, we must decide whether the return of the check by the payee constituted an intentional and voluntary surrender of the instrument under N.J.S.A. 12A:3-604(a); and if such action does constitute a surrender, whether it revokes the payee’s standing to enforce payment of the check under N.J.S.A. 12A:3-420(a).

I

This dispute arose when homeowner Magdy Omar ostensibly sought to refinance an outstanding loan, which was originally issued in 2003 by Metro Center Mortgage, Inc., (Metro) and secured by a first-lien mortgage on real property Omar owned in the City of Bayonne. Metro named as nominee the Mortgage Electronic Registration Systems (MERS). MERS then assigned the mortgage to JP Morgan, who designated Homecomings Financial Network, Inc. (Homecomings) as the servicer of the loan.

Although Omar defaulted on the Metro loan, he was able to refinance the loan in 2004 through FGC Commercial Mortgage Finance, d/b/a/ Fremont Mortgage (Fremont). Homecomings generated a payoff statement of the 2003 loan that reflected an outstanding balance of $298,219,57, with a per diem rate of interest accrual of $79.95. At the closing for the refinance loan, Fremont’s agent, Yorktown Title LLC, sent Homecomings a check in the amount of $298,219.57,1 along with a transmittal letter that stated that the check was intended to payoff the 2003 Metro loan. Of particular relevance here, the transmittal letter also indicated that if the funds were insufficient, the check should be applied to the debt and Homecomings should contact the sender.

It is undisputed that Homecomings received the check and that, according to the per diem rate, the payoff amount was short by $559.65 in accrued interest. However, instead of applying the $298,219.57 check to the outstanding loan balance and contacting Yorktown to arrange for the receipt of the additional accrued interest, Homecomings returned the check to Yorktown, insisting that the check was insufficient to discharge the loan. The record also shows that Yorktown sent the payoff check to Homecomings a second time, and that Homecomings again rejected it.

Instead of returning the payoff check to Yorktown, Homecomings returned the check to Omar, the delinquent borrower. Upon receipt of the check, Omar decided to conspire with a cohort to steal the proceeds of the check. On May 7, 2004, Naser Belosa formed a New Jersey company by the name of Homecomings Financial Service, Inc. On May 10, 2004 Belosa opened a business account at Fleet Bank, now Bank Of America (BOA), in the name of the newly formed company.

On May 24, 2004, working in concert with Omar, Belosa presented the payoff check, made payable to “Homecomings Funding,” to BOA for deposit into the Homecomings Financial Services, Inc., account. The check was endorsed in type with the words, “Homecomings Financial.” Amboy National Bank n/k/a/ Amboy Bank (“Amboy”), debited the Yorktown account and paid the check after it was presented to Amboy for payment from BOA. Omar and Belosa thereafter shared the proceeds of the laundered check by writing checks to themselves and other business entities.

On January 3, 2005, MERS filed a complaint in foreclosure against Omar in the Chancery Division, General Equity Part. It was at this point that plaintiff discovered the fraud perpetrated by Omar and Belosa. MERS amended its complaint shortly thereafter to name Fremont as a defendant, alleging that it held a subordinate lien on the property. Fremont filed an answer and defenses to MERS complaints and a third-party complaint against Homecomings alleging that it had sent a payoff check to Homecomings. Homecomings answered Fremont’s third-party complaint and filed its own third-party complaint against BOA, Amboy, Omar, and Belosa.

As a matter of case management, the Chancery Division stayed all claims except those involving priority of liens between Fremont and Homecomings. The Chancery Division thereafter held a bench trial on the foreclosure/lien priority matter and ruled in favor of Freemont. The court found that Homecomings’ decision to reject and return the payoff check constituted a “discharge” of its mortgage, resulting in Fremont having priority. On Homecomings’ appeal, we affirmed the Chancery Division in a Per Curiam unpublished opinion. Mortgage Electronic RegistrationSystems, Inc., v. MagdyOmar, Docket No. A-5187-06, (App. Div. May 15, 2008).

Homecomings’ complaint against BOA was then tried in the Law Division on a stipulated record, admitted exhibits, and the affidavit of Scott Zeitz, a witness for the Payee Parties. The Law Division judge found in favor of Homecomings.

Against this factual record, we will now address the arguments raised by BOA.

II

In the foreclosure action before the Chancery Division, the trial court found that “Homecomings should have accepted that first . . . payoff check and applied it to the amount owed the first time it was sent [a check] by Yorktown Title. And had of course that had been done, considering . . . it was only $559.65 short, all of this, of course wouldn’t have happened.”

As the Chancery Division’s allusion to a “first check” implies, the court found that Yorktown sent Homecomings the payoff check a second time. The Chancery Division found that Homecomings compounded this error by inexplicably returning the payoff check to Omar.

But it’s clear to me [the Chancery Division judge] that . . . Homecomings should have accepted the first payoff. But even if they were not obligated to accept the first payoff check[] [t]he credible evidence in this matter based upon Ms. Durham [the agent for Yorktown Title]’s testimony and the times [sic] that have been marked into evidence, [along] with the stipulated facts, led this Court to believe that Homecomings, in fact, received both checks[] [a]nd sent them back for whatever reason . . . to Mr. Omar, who then converted those funds through his own . . . use

This critical error by Homecomings gave Omar the opportunity to conspire with Belosa to carry out the theft of these funds and triggered the chain of events that inexorably led to this civil action. As the Chancery Division found, and we affirmed, despite the de minimis nature of the shortfall, Homecomings intentionally returned the payoff check on two separate occasions. In so doing, Homecomings unequivocally communicated its intention to reject this check. See Mortgage ElectronicRegistration Systems, Inc.,v. Magdy Omar, supra, Slip op. at 13.

In this appeal BOA argues that the trial court erred when it applied common law principles of negligence and conversion to the claims brought by Homecomings. According to BOA, banking transactions of the nature involved here are exclusively governed by the U.C.C. Thus, BOA argues that N.J.S.A. 12A:3-406(a) bars Homecomings’ claims because, as the Chancery Division found in the foreclosure action, Homecomings’ failure to exercise ordinary care substantially contributed to its loss.

At this court’s request, both sides submitted supplemental briefing on the question of whether Homecomings’ decision to return the check issued by Yorktown constituted an intentional and voluntary surrender of the instrument under N.J.S.A. 12A:3-604(a); and, if such surrender occurred, whether it revokes Homecomings’ entitlement or standing to enforce payment of the check under N.J.S.A. 12A:3-420(a).

We now reverse the trial court and hold that by voluntarily returning the check issued by Yorktown, Homecomings’ actions constituted a surrender of the instrument pursuant to N.J.S.A. 12A:3-604(a), thus depriving Homecomings of standing to seek payment of the check under N.J.S.A. 12A:3-420(a).

Under the U.C.C., a “payee” who “receive[d] delivery of [an] instrument” may bring an action for conversion against a depository bank who caused payment to be made to “a person not entitled to enforce the instrument.” N.J.S.A. 12A:3-420. A person “receives delivery of [an] instrument” under N.J.S.A. 12A:3-420 “when the check comes into the payees possession, as for example when it is put into the payee’s mailbox.” Ibid., comment 1. Delivery is required because it is not until this point when the payee becomes the holder or a “person entitled to enforce the check.” Ibid. If the check is not delivered to the payee, the underlying obligation for which the check was issued is not affected, and therefore, the payee’s right to enforce the underlying obligation remains fully intact. Ibid. The drawee can still bring an action under N.J.S.A. 12A:3-417(a)(1) against the depository bank for breach of warranty. However, because the payee’s rights to enforce the underlying obligation against the payor are unaffected, there is no reason to give the payee an additional remedy for conversion. Ibid.

A payee can also “discharge [an] obligation of a party to pay the instrument by an intentional voluntary act, such as surrender of the instrument to the party . . . .” N.J.S.A. 12A:3-604a. Consequently, a discharge of the obligation to pay would simultaneously revoke any entitlement the payee had to enforce payment on the instrument. If no entitlement to enforce payment exists, there can be no right to sue for conversion under N.J.S.A. 12A:3-420. A depository bank “is strictly liable for conversion on a forged or stolen instrument” to a party that received delivery.2 Leeds v. Chase ManhattanBank, 331 N.J. Super. 416, 422 (App. Div. 2000) (citing N.J.S.A. 12A:3-420, comment 1); wseealso New Jersey Lawyers’Fund for Client Prot.v. First Fidelity Bank,N.A., 303 N.J. Super. 208, 226-27 (App. Div.), cert. denied, 152 N.J. 13 (1997).

Here, the Law Division found that Homecomings received the check, and that BOA was strictly liable to Homecomings under N.J.S.A. 12A:3-420a. As previously noted, however, it is undisputed that Homecomings rejected and returned the check on two separate occasions, and that its employees caused the check to be erroneously sent to Omar. By finding liability under N.J.S.A. 12A:3-420, the Law Division overlooked the legal significance of Homecomings’ actions. Returning the check, either to the payor or to a third party interloper, served as a discharge pursuant to N.J.S.A. 12A:3-604a.

Because Homecomings discharged Yorktown’s obligation to pay on the instrument, it cannot assert a cause of action for negligence against the depositor bank. Although N.J.S.A. 12A:3-420 only discusses that an instrument must be delivered to the payee for the payee to have standing under the conversion provision, Homecomings’ discharge under N.J.S.A. 12A:3-604a relieved Yorktown of paying on the instrument, and likewise severed any right Homecomings had to enforcement. The return of the check also severed any right Homecomings had to sue for conversion under N.J.S.A. 12A:3-420.

We thus reverse the Law Division judgment holding BOA liable to Homecomings for conversion under N.J.S.A. 12A:3-420.

Reversed.

1 The check was made payable to Homecomings Funding, not Homecomings Financial Network, Inc.

2 “The justification for strict liability upon the depository bank is that ‘the loss should normally come to rest upon the first solvent party in the stream after the one who forged the indorsement . . . .'” Leeds, supra, 331 N.J. Super. at 423 (quoting 2 James J. White & Robert S. Summers, Uniform Commercial Code 18-4 at 209-10 (4th ed. 1995)).

Michael Drouin and Kathleen
Drouin

v.

American Home Mortgage
Servicing, Inc., Wells Fargo
Bank, N.A., and Option One
Mortgage Corporation

Civil No. 11-cv-596-JL, Opinion No. 2012 DNH 089.

United States District Court, D. New Hampshire.

May 18, 2012.

MEMORANDUM ORDER

JOSEPH N. LaPLANTE, District Judge.

At first blush, this case appears to present a question that has demanded the attention of state and federal courts throughout the country over the past several years: whether mortgagors have standing to challenge the validity of putative assignments of their mortgages to claimed assignees attempting to enforce those mortgages. Two of the defendants argue that mortgagors have no such standing, and have moved to dismiss the complaint for that reason. Upon closer scrutiny, however, the complaint does not squarely challenge the validity of an assignment, and thus does not implicate that question.

Plaintiffs Michael and Kathleen Drouin filed this action in state court seeking to enjoin American Home Mortgage Servicing, Inc., Wells Fargo Bank, N.A., and Option One Mortgage Corporation from foreclosing on the property securing their mortgage loan. The Drouins allege that American Home Mortgage and Wells Fargo (collectively, “Wells Fargo”), claiming to possess an assignment of their mortgage from Sand Canyon Corporation, the successor-in-interest to Option One (the original mortgagee), have demanded payment on the mortgage and threatened to foreclose if such payment is not made. But Sand Canyon cannot have assigned the mortgage to Wells Fargo, the Drouins allege, because it ceased holding any mortgages—including theirs—years before the alleged assignment.

Wells Fargo removed the case to this court, which has diversity jurisdiction over this matter under 28 U.S.C. § 1332. It then moved to dismiss, see Fed. R. Civ. P. 12(b)(6), asserting that the Drouins have no standing to challenge the assignment’s validity and that they may not maintain a cause of action seeking to enjoin the foreclosure sale. Both parties declined the court’s offer to hold oral argument on Wells Fargo’s motion.

The motion is denied. Whatever the merits of Wells Fargo’s argument as to the standing of a mortgagor to challenge the validity of an assignment, the gravamen of the Drouins’ complaint is not that the assignment from Sand Canyon to Wells was invalid (though there are overtones of that as well). Rather, the Drouins’ principal grievance is that, even if the assignment was technically “valid,” it cannot have served to assign their mortgage to Wells Fargo because Sand Canyon did not hold the mortgage, and could not assign what it did not have. Because the Drouins satisfy the requirements of standing as to that claim, and because New Hampshire law clearly establishes the right of mortgagors to file an action seeking to enjoin a foreclosure sale, the case may proceed.

I. APPLICABLE LEGAL STANDARD

To survive a Rule 12(b)(6) motion to dismiss for lack of standing, a complaint must “set forth reasonably definite factual allegations, either direct or inferential, regarding each material element needed to sustain standing.” Dubois v. U.S. Dep’t of Agric., 102 F.3d 1273, 1281 (1st Cir. 1996). When reviewing the complaint under this standard, the court “accept[s] as true all well-pleaded factual averments . . . and indulge[s] all reasonable inferences therefrom in [the plaintiff’s] favor.” Katz v. Pershing, LLC, 672 F.3d 64, 70-71 (1st Cir. 2012) (quotation and alteration omitted). The court “need not, however, credit “bald assertions, subjective characterizations, optimistic predictions, or problematic suppositions,” and “[e]mpirically unverifiable conclusions, not logically compelled, or at least supported, by the stated facts, deserve no deference.” Sea Shore Corp. v. Sullivan, 158 F.3d 51, 54 (1st Cir. 1998) (internal quotation marks omitted). The following background summary is consistent with that approach.

II. BACKGROUND

In 2004, Michael and Kathleen Drouin, borrowed $212,500 from Option One and, in return, granted it a mortgage on their Deerfield, New Hampshire residence. In early 2008, Option One discontinued its mortgage loan origination activities, sold its mortgage servicing business, and changed its name to “Sand Canyon Corporation.” Not long thereafter, the State of California found that Option One—a California corporation—had violated California Financial Code § 50205 and had “conduct[ed] business in such an unsafe and injurious manner as to render further operations hazardous to the public or to customers.” The state therefore prohibited it from conducting further residential mortgage lending and servicing, or, indeed, from doing any business at all. In an affidavit submitted in another, unrelated case in 2009, the President of Sand Canyon attested that Sand Canyon’s business at that time consisted solely of dealing with litigation claims, and that it did not own “any residential real estate mortgages.”

Notwithstanding that representation, and despite the fact that nothing subsequently happened to breathe new life into Sand Canyon, it purportedly assigned the Drouins’ mortgage to Wells Fargo on March 24, 2011. Wells Fargo has now demanded payment on the mortgage from the Drouins, claiming to stand in the shoes of the mortgagee by virtue of this assignment. It has also threatened the Drouins with foreclosure, scheduled a foreclosure sale (which the state court enjoined after this action was filed but before its removal to this court), and maintained that it may demand and collect mortgage payments from the Drouins unless they affirm and restructure its claimed rights under the mortgage.

III. ANALYSIS

Article III of the Constitution “limits the jurisdiction of federal courts to `Cases’ and `Controversies.’” Lujan v. Defenders of Wildlife, 504 U.S. 555, 559 (1992) (quoting U.S. Const. art. III, § 2, cl. 1). One facet of this case-or-controversy requirement is the doctrine of standing, which serves to ensure that the plaintiff “is a proper party to invoke judicial resolution of the dispute and the exercise of the court’s remedial powers.” Warth v. Seldin, 422 U.S. 490, 518 (1975). In order to establish standing to bring a claim, a plaintiff must demonstrate (1) an injury that is both “concrete and particularized” and “actual or imminent”; (2) “a sufficiently direct causal connection between the challenged action and the identified harm”; and (3) “that a favorable resolution of her claim would likely redress the professed injury.” Katz, 672 F.3d at 71-72 (citing Lujan, 504 U.S. at 560). These three constitutional elements of standing “apply with equal force in every case,” and are further supplemented by prudential concerns that “require a plaintiff to show that his claim is premised on his own legal rights (as opposed to those of a third party), that his claim is not merely a generalized grievance, and that it falls within the zone of interests protected by the law invoked.” Id. at 72.

Wells Fargo concedes that the constitutional requirements for standing are met because plaintiffs have alleged an actual injury that is traceable to its conduct and redressable by order of this court. Thus, only the prudential dimension of the standing requirement, and more specifically, the prohibition on raising a third party’s rights, is at issue here. Citing a lengthy list of cases, Wells Fargo contends that any enforceable rights in an assignment belong solely to the parties to, or intended beneficiaries of, the assignment. Because the Drouins are neither, it argues, any challenge they make to the assignment’s validity necessarily invokes the rights of third parties.

It is difficult to quarrel with the proposition that, at least in some cases, the obligor under a contract lacks standing to challenge the validity of the obligee’s assignment of its rights under that contract. In a diversity case such as this one, the court looks to state law to determine the nature of a plaintiff’s rights, see Utah ex rel. Div. of Forestry, Fire & State Lands v. U.S., 528 F.3d 712, 721 (10th Cir. 2008); Gen. Tech. Applications, Inc. v. Exro Ltda, 388 F.3d 114, 118 (4th Cir. 2004), and New Hampshire law recognizes the general rule that a “debtor cannot interpose defects or objections which merely render the assignment voidable at the election of the assignor or those standing in his shoes.” Woodstock Soapstone, Co., Inc. v. Carleton, 133 N.H. 809, 817 (1991) (emphasis omitted; quoting 6A C.J.S. Assignments § 115, at 780 (1975)). Thus, if the Drouins’ only theory of relief in this suit was that the assignment was invalid for some reason that would make it voidable by Sand Canyon, Wells Fargo’s motion might have some merit.

But that is not the Drouins’ only theory of relief, or even their principal one.^[1] Instead, the Drouins claim that Sand Canyon, according to its president’s own admission, did not hold any mortgages—including theirs—as of the date of the supposed assignment. Therefore, they maintain, Sand Canyon could not have passed any interest in the mortgage (including the right to foreclose) to Wells Fargo, regardless of the assignment’s “validity” as a purely technical matter. Simply put, the Drouins do not argue that the assignment was somehow technically deficient or flawed as a matter of law (and thus voidable or even void); they claim that the purported assignment never took place as a matter of fact, that it simply never occurred. Their theory—that the assignor, as a stranger to the mortgage, could not have transferred it to the assignee—”is not an attack on the Assignment itself,” and thus not governed by the case law holding that debtors lack standing to raise such attacks.^[2] Bailey v. Wells Fargo Bank, N.A., No. 09-4190, 2012 WL 1192785, at *6-7 (Bkrtcy. D. Mass. Apr. 10, 2012).

The New Hampshire case law governing the type of claims the Drouins actually assert here confirms their standing. As the New Hampshire Supreme Court has explained, “[a] debtor may, generally, assert against an assignee all equities or defenses existing against the assignor prior to notice of the assignment, any matters rendering the assignment absolutely invalid or effective, and the lack of plaintiff’s title or right to sue.” Woodstock Soapstone, 133 N.H. at 817 (emphasis omitted) (quoting 6A C.J.S. Assignments § 115, at 780 (1975)); cf. also Restatement (Second) of Contracts § 336(1) (1981) (“By an assignment the assignee acquires a right against the obligor only to the extent that the obligor is under a duty to the assignor; and if the right of the assignor would be voidable by the obligor or unenforceable against him if no assignment had been made, the right of the assignee is subject to the infirmity.”) (emphasis added). The Drouins’ argument that Sand Canyon did not hold their mortgage at the time of assignment falls into at least the first (if not all) of these categories. If Sand Canyon itself had, before the assignment, attempted to enforce the mortgage through foreclosure, the Drouins could have raised precisely the same defense against it that they now raise against Wells Fargo, i.e., that it did not in fact own their mortgage.

A recent case from the New Hampshire Superior Court, Newitt v. Wells Fargo Bank, N.A., No. 213-2011-CV-00173 (N.H. Super. July 14, 2011) (Arnold, J.), lends support to the Drouins’ position.^[3] The plaintiffs in Newitt also sought to enjoin Wells Fargo (acting there in its capacity as the trustee for a securitized trust) from foreclosing on the property securing their mortgage loan. In 2006 or 2007, the mortgagee had assigned the plaintiffs’ mortgage to Option One/Sand Canyon, which then, in 2010, purported to assign it to Wells Fargo. Id., slip op. at 2. As here, the plaintiffs—citing the selfsame affidavit of Sand Canyon’s president upon which the Drouins rely—argued that the 2010 assignment could not have transferred any interest in their mortgage to Wells Fargo, because Sand Canyon had ceased holding any mortgages by 2009 at the latest. Id. at 2-3. There, as here, Wells Fargo argued that the plaintiffs could not challenge the assignment. Id. at 3. Judge Arnold squarely rejected that argument, noting in the process (among other things) that “[t]he assignment from Sand Canyon to Wells Fargo of an interest which Sand Canyon did not possess” was no more effective to assign the mortgage “than the lack of any assignment at all.” Id. at 7.

Following the guidance set forth in Woodstock Soapstone and Newitt, this court concludes that the Drouins have standing to pursue their theory that Sand Canyon did not hold their mortgage, and thus could not have assigned it to Wells Fargo. Wells Fargo’s remaining argument,^[4] that the Drouins may not assert a cause of action seeking to enjoin foreclosure, is easily rejected. New Hampshire is a nonjudicial foreclosure state, in which a mortgagee or its assignee may foreclose on a property without first initiating an action in court. See N.H. Rev. Stat. Ann. § 479:22 et seq. Where, as here, a mortgagee attempts to undertake such a nonjudicial foreclosure, the foreclosure statutes specifically authorize the mortgagor to “assert defenses against the foreclosure by `petition[ing] the superior court . . . to enjoin the scheduled foreclosure sale.’” Bolduc v. Beal Bank, SSB, 994 F. Supp. 82, 90 (D.N.H. 1998) (quoting N.H. Rev. Stat. Ann. § 479:25, II) (some internal quotations omitted); see also Gordonville Corp. N.V. v. LR1-A Ltd. P’ship, 151 N.H. 371, 377 (2004) (plaintiff properly challenged nonjudicial foreclosure sale by petitioning the superior court to enjoin foreclosure). That is what the Drouins have done here.

IV. CONCLUSION

For the reasons set forth above, the motion to dismiss^[5] is DENIED.

SO ORDERED.

[1] The complaint does contain some allegations suggesting that the Drouins may seek to challenge the authority of one Tonya Hopkins, who signed the alleged assignment, to act on Sand Canyon’s behalf. That matter is the type of infirmity that would “merely render the assignment voidable” at Sand Canyon’s election, and therefore could not, by itself, convey standing on the Drouins here. See Woodstock Soapstone, 133 N.H. at 817 (obligor lacked standing to challenge signatory’s authority to execute assignment). But it is at best secondary to the Drouins’ principal theory of relief.

[2] This theory calls to mind the venerable maxim “nemo dat quod non habet,” i.e., one cannot give what one does not have. See Mitchell v. Hawley, 83 U.S. 544, 550 (1872); Chase v. Sanborn, 5 F. Cas. 521, 523 (Clifford, Circuit Justice, C.C.D.N.H. 1874) (No. 2,628).

[3] Wells Fargo argues that Newitt is “not binding or persuasive.” While it is true that Newitt is not a definitive statement of New Hampshire law, it is far more instructive on the issue of the nature of the Drouins’ rights under New Hampshire law than the extrajurisdictional authority Wells Fargo cites.

[4] The memorandum in support of Wells Fargo’s motion to dismiss also contains a section contending that the complaint “is insufficient on its face,” but the argument set forth in that section appears to be coextensive with Wells Fargo’s argument that the Drouins lack standing. To the extent that section seeks to make some other argument as to why the complaint does not state a claim, that argument is insufficiently developed and therefore waived. See F.T.C. v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 17 (1st Cir. 2010).

[5] Document no. 23.