bank of america | FORECLOSURE FRAUD | by DinSFLA - Part 2

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Abigail C. Field: Our Government Blessed Foreclosure Fraud

Abigail C. Field: Our Government Blessed Foreclosure Fraud


Abigail C. Field-

The mortgage settlement signed by 49 states and every Federal law enforcer allows the rampant foreclosure fraud currently choking our courts to continue unabated. Yes, I realize the pretty language of Exhibit A promises the banks will completely overhaul their standard operating procedures and totally clean up their acts. Promises are empty if they’re not honored, and worthless if not enforceable.

We know Bailed-Out Bankers’ promises are empty, so what matters is if the agreement is enforceable. And when it comes to all things foreclosure fraud, the enforcement provisions are laughable. But before I detail why, let’s be clear: I’m not being hyperbolic. The bankers running and profiting most from our bailed-out banks are totally dishonest when dealing with the public, and their promises are meaningless.

To see their dishonesty in the mortgage context, read the complaint filed in the mortgage deal, or my take on it here. But the bankers don’t limit their lying, cheating and stealing to homeowners. They abuse their clients the same way. Most broadly damaging, the bankers steal from taxpayers on a federal, state and local level and practically everybody else too. Fraud is just how they do business. When dealing with bankers, you can’t do business on a handshake.

[REALITY CHECK]

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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Countrywide Home Loans vs America’s Wholesale Lender | California Western Dist. Court – “Trademark™ Infringement”

Countrywide Home Loans vs America’s Wholesale Lender | California Western Dist. Court – “Trademark™ Infringement”


UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION

COUNTRYWIDE HOME LOANS, INC.;
BANK OF AMERICA CORPORATION;
BANK OF AMERICA, N.A.,

Plaintiffs,

v.

AMERICA’S WHOLESALE LENDER, INC., a
New York Corporation…

Defendants

Excerpt:

Plaintiff Countrywide Home Loans, Inc. (“CHLI”) will arguably go down in history as the most prolific predatory lenders of all time. One would think this is a matter beyond reasonable dispute by way of a few examples, this point will be illustrated:

PDF LINK BELOW

[AWL v Countrywide]

[ipaper docId=87131409 access_key=key-1dx8oku674s13eoo5cvl height=600 width=600 /]

 

 

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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Johnson v. HSBC BANK USA, Dist. Court, SD California – Pooling and Servicing Agreement (“PSA”) allowed for homeowner to show improper transfers

Johnson v. HSBC BANK USA, Dist. Court, SD California – Pooling and Servicing Agreement (“PSA”) allowed for homeowner to show improper transfers


 

GREGORY JOHNSON, an individual, Plaintiff,
v.
HSBC BANK USA, NATIONAL ASSOCIATION AS TRUSTEE FOR THE ELLINGTON TRUST SERIES 2007-1; BANK OF AMERICA, N.A.; and Does 1-10, inclusive, Defendants.

 

 Case No. 3:11-cv-2091-JM-WVG.

United States District Court, S.D. California. 
March 19, 2012.

ORDER DENYING MOTION TO DISMISS Docket No. 12.

JEFFREY T. MILLER, District Judge.

On September 12, 2011, Plaintiff Gregory Johnson brought a complaint against HSBC Bank USA, National Association as Trustee for the Ellington Trust Series 2007-1 (“HSBC”) and Bank of America, N.A. (“BOA”). BOA has filed a motion to dismiss (“MTD” or “motion”). Plaintiff filed an opposition on February 17, 2012. HSBC originally failed to answer the complaint, but jointly moved with Plaintiff to set aside default. The court granted that motion, and HSBC now joins BOA’s motion to dismiss with no further argument. Neither Defendant has filed a reply brief. For the reasons stated below, the motion is DENIED.

I. BACKGROUND

In December of 2006, Plaintiff obtained a loan from Fremont Investment & Loan (“Fremont”) in order to purchase property located in Oceanside, California. Compl. ¶ 24. The Deed of Trust named Mortgage Electronic Registration Systems (“MERS”) as the nominee and beneficiary of the Deed of Trust. ¶ 24. The complaint alleges that Fremont “attempted to securitize and sell [the] loan to another entity or entities” that were “not HSBC Bank or the Ellington Trust.” ¶ 25. Consequently, HSBC “is merely a third-party stranger to the loan transaction.” ¶ 26. Plaintiff alleges that despite his requests, BOA (apparently his mortgage servicer), has failed to verify the debt and amount owed.[1] ¶ 26.

Specifically, Plaintiff alleges that the document purporting to assign the Deed of Trust from MERS to HSBC (Compl. Ex. A), dated May 29, 2008, was fraudulent, in part because the assignment was executed after the closing date of the trust, which violates the Pooling and Servicing Agreement (“PSA”).[2] ¶ 28-29. Plaintiff also alleges that Treva Moreland, “the purported signatory of the purported `Assignment’, was not the `Assistant Secretary’ for MERS and lacked the requisite corporate and legal authority to effect an actual `assignment’ of Plaintiff’s Note and Mortgage.” ¶ 38. The complaint states that Treva Moreland signs thousands of property record documents without any authority, and thus any amount Plaintiff owes is subject to equitable offset by damages owed by Defendants.

The complaint further alleges that in October of 2010, HSBC “caused a document purporting to be a Substitution of Trustee (`Substitution’) to be recorded with the County of San Diego.” ¶ 57. The substitution purported to substitute Quality Loan Service Corporation (“Quality”) as trustee, but Plaintiff claims that no such transfer ever occurred. ¶ 57. The complaint states that under California law, the lender must be the party to appoint the successor trustee, and HSBC was not the lender.

In the summer of 2009, Plaintiff sought a loan modification from Wilshire, the original servicer of Plaintiff’s loan. ¶ 66. At some point the loan “was sold or transferred to BOA.” ¶ 67. Plaintiff made nine payments under the modified plan, but BOA refused to honor the new plan. ¶ 68. After much confusion, Plaintiff obtained a loan modification from BOA to be effective February 1, 2011. ¶ 79. In March of 2011, Plaintiff sent a Qualified Written Request letter to verify the debt owed, but BOA did not provide a substantive response. ¶ 83.

Plaintiff also alleges that Defendants have not properly credited payments he has made on the mortgage and have incorrectly calculated interest. ¶ 85. He claims that Defendants knew at all times that Plaintiff was paying incorrect amounts. ¶ 86. As a result of their actions, Plaintiff’s credit has been damaged and his home has been made unmarketable because “the title to Plaintiff’s home has been slandered [and] clouded.” ¶ 89. Finally, the complaint states that “Plaintiff has offered to and is ready, willing, and able to unconditionally tender his obligation.” ¶ 96.

Based on these factual allegations, the complaint seeks relief under seven causes of action, each applied to both Defendants: (1) declaratory relief under 28 U.S.C. §§ 2201-2202; (2) negligence; (3) quasi-contract; (4) violation of 12 U.S.C. § 2605; (5) violation of 15 U.S.C. § 1692; (6) violation of Cal. Bus. & Prof. Code § 17200 et seq.; (7) accounting.

II. LEGAL STANDARD AND DISCUSSION

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) challenges the legal sufficiency of the pleadings. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). In evaluating the motion, the court must construe the pleadings in the light most favorable to the non-moving party, accepting as true all material allegations in the complaint and any reasonable inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003). The Supreme Court has held that in order to survive a 12(b)(6) motion, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court should grant 12(b)(6) relief only if the complaint lacks either a “cognizable legal theory” or facts sufficient to support a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).

A. Viability of Attack on Loan Securitization

1. Ability to Challenge Loan Securitization

The threshold issue of whether Plaintiff can make any claim related to the loan’s securitization affects the viability of many of the individual claims discussed below. BOA cites Rodenhurst v. Bank of America, 773 F.Supp.2d 886, 899 (D. Haw. 2011) for its statement that “[t]he overwhelming authority does not support a cause of action based upon improper securitization.” However, the discussion cited in that case centers on plaintiffs who claim that securitization itself violates the agreement between the mortgagor and mortgagee. Here, Plaintiff does not dispute the right to securitize the mortgage, but alleges that as a result of improper procedures, the true owner of his mortgage is unclear. As a result, he has allegedly been paying improper entities an excess amount.

Ninth Circuit district courts have come to different conclusions when analyzing a plaintiff’s right to challenge the securitization process as Plaintiff has here. See Schafer v. CitiMortgage, Inc., 2011 WL 2437267 (C.D. Cal. 2011) (denying defendants’ motion to dismiss declaratory relief claim, which was based on alleged improper transfer due to alleged fraud in signing of documents); Vogan v. Wells Fargo Bank, N.A., 2011 WL 5826016 (E.D. Cal. 2011) (allowing § 17200 claim when plaintiffs alleged that assignment was executed after the closing date of securities pool, “giving rise to a plausible inference that at least some part of the recorded assignment was fabricated”). But see Armeni v. America’s Wholesale Lender, 2012 WL 603242 (C.D. Cal. 2012) (dismissing declaratory relief, quasi-contract, UCL, and accounting claims because “plaintiff lack[ed] standing to challenge the process by which his mortgage was (or was not) securitized because he is not a party to the PSA”); Junger v. Bank of America, N.A., 2012 WL 603262 at *3 (C.D.Cal. 2012).

Here, the court finds that Plaintiff is not categorically excluded from making claims based on allegations surrounding the loan’s securitization.[3] As in Vogan, and unlike Armeni, Plaintiff here alleges both violations of the PSA and relevant law. BOA has not sufficiently demonstrated that violations of law associated with the loan’s securitization can go unchecked because Plaintiff is not a party to the PSA.

Other cases cited by BOA on this issue are irrelevant or inapplicable here.

2. Sufficiency of Allegations of Improper Assignment

BOA also argues that Plaintiff makes no showing that the assignment was improper. It claims that Treva Moreland was authorized to assign the Deed of Trust, and there was no violation of the statute, asserting that “[n]owhere in [the complaint] does [Plaintiff] allege facts showing the Assignment was defective, invalid, or somehow voidable.” MTD at 4. However, the complaint states that MERS had no knowledge of the assignment, that Treva Moreland was never appointed to “assistant secretary” by the MERS board of directors, and thus there was no authority to make the assignment.

While BOA cites no case law on this point, Plaintiff provides persuasive authority to demonstrate that courts have accepted allegations such as his. In Kingman Holdings, LLC v. CitiMortgage, Inc., 2011 WL 1883829 (E.D. Tex. 2011), the court assessed a fraud claim against CitiMortgage in which the plaintiff alleged that MERS’ appointment of an assistant secretary (“Blackstun,” who later made the assignment) was invalid because it was not approved by the board of directors. The court upheld the fraud claim under the 9(b) standard, finding that Plaintiff’s allegations were plausible and that if Blackstun had no authority to bind MERS, then MERS filed a fraudulent document after he executed the assignment.

Similarly, in Vogan, the court denied defendants’ motion to dismiss a § 17200 claim because, as here, the plaintiff pleaded that Wells Fargo recorded a fabricated assignment of the loan because the assignment was executed after the closing date of the mortgage-backed security pool, “giving rise to a plausible inference” of fabrication. Id. at *7. Here, in addition to attacking Treva Moreland’s authority, Plaintiff has alleged that the assignment was made after the closing date of the trust, as required by Section 2.1 of the PSA.

B. Tender Requirement

BOA also argues that a plaintiff “must tender the entire unpaid balance of the loan to maintain an action challenging foreclosure.” MTD at 4. However, as BOA separately points out, Plaintiff is not currently in foreclosure—BOA rescinded its Notice of Default in March of 2011. BOA fails to acknowledge this fact in its argument, merely citing cases supporting the existence of the tender rule in actions for wrongful foreclosure.

Even if the fact of foreclosure were at issue, BOA has not sufficiently demonstrated that the tender rule should apply here. Plaintiff is not challenging Defendants’ compliance with the foreclosure law, but is claiming that defendants did not properly receive the assignment of their loan. The “tender requirement does not apply to this case because” Plaintiff challenges “the beneficial interest held by [Defendants] in the deed of trust, not the procedural sufficiency of the foreclosure itself.” Vogan at *8.

C. Declaratory Relief

BOA seeks dismissal of the declaratory relief claim because the issues “will be resolved by the other claims for relief.” MTD at 5. It also argues that the California foreclosure statute does not recognize a judicial action to determine whether a party foreclosing is authorized to do so.

The Ninth Circuit has explained that while there is no bar to declaratory relief if legal remedies exist, a court’s discretion should lead it to refuse to grant declaratory relief unless it would clarify the parties’ interests or relieve the uncertainty giving rise to the proceeding. U.S. v. Washington, 759 F.2d 1353, 1356-57 (9th Cir. 1985). The Schafer court upheld a declaratory relief claim in a similar action to this one, noting that there was a controversy over whether the assignment of a deed of trust was fraudulent, and the cause of action was not duplicative. 2011 WL 2437267 at *4.

While it is possible that declaratory relief will be unnecessary, it would be premature to dismiss the cause of action at this point. BOA has failed to show how resolution of each of the other claims will necessarily provide all of the requested relief if they are granted. Further, it remains possible that some or all of Plaintiff’s other claims will not survive to trial—if that occurs, declaratory judgment could serve to clarify the parties’ interests.

D. Negligence

The complaint alleges that HSBC and BOA were negligent because they demanded mortgage payments when they did not have the right to enforce that obligation. This allegedly caused Johnson to overpay in interest, among other things. As a result of the “reckless negligence, utter carelessness, and blatant fraud of the Defendants,” Plaintiff’s chain of title has been “rendered unmarketable and fatally defective.” Compl. ¶ 110.

Defendants’ motion to dismiss argues that they had no duty of care here, because Plaintiff “does not plead facts supporting a finding that Defendant’s conduct exceeded the scope of its conventional role as a lender.”[4] MTD at 6. Plaintiff states that his relationship with BOA is not conventional because the loan has been securitized, so “Defendants hold Plaintiff’s payments for the benefit of the certificate holders.” Pl. Opp. at 20. Further, Plaintiff argues that a lender that offers a loan modification has gone beyond its conventional role.

The rule that a lender does not have a duty to a borrower is only a “general rule,” and only applies to situations where a lender plays its conventional role. E.g., Taheny v. Wells Fargo Bank, N.A., 2010 WL 5394315 (E.D. Cal. 2010). Accepting the allegations of the complaint as true, BOA has gone beyond the typical lender’s role. As in Ansanelli v. JP Morgan Chase Bank, N.A., 2011 WL 1134451 at *7 (N.D. Cal. 2011), BOA established a loan modification plan with Plaintiff, made excessive interest charges and made “derogatory credit reports to credit bureaus.” Compl. ¶ 109. More generally, Plaintiff alleges that BOA did not have the legal authority to demand payments from Plaintiff because of the assignment’s invalidity. If BOA was not a lender legally authorized to collect payments from Plaintiff, the general rule shielding actual lenders from liability would not apply.

More generally, the court finds that the allegations Plaintiff has put forth meet the federal pleading standard under Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). While yet to be proven, Plaintiff presents plausible allegations of misconduct that, if true, would entitle him to relief.

E. Quasi-Contract

Based upon the same factual allegations, Plaintiff seeks to recover on a quasi-contract cause of action. BOA maintains that in California a quasi-contract claim is the same as a claim for unjust enrichment, and such an action does not lie if an express agreement governs the parties’ rights. Further, BOA argues that the rule of tender applies under Cal. Civ. Code § 1691(b), which governs rescission of a contract.

BOA is correct that a plaintiff may not recover on a quasi-contract action if an express agreement exists. E.g., Cal. Med. Ass’n, Inc. v. Aetna U.S. Healthcare of Cal., 94 Cal. App. 4th 151, 172 (2001). However, as Plaintiff points out, the complaint alleges that there is no valid agreement governing the transaction between Plaintiff and BOA. Thus, if Plaintiff succeeds in showing that BOA was not authorized to collect payment, he may be able to recover based on quasi-contract. For the same reason, BOA’s § 1691 argument fails—it does not state why the tender rule should apply if no contract exists.

F. Violation of 12 U.S.C. § 2605 — The Real Estate Settlement Procedures Act

The complaint alleges that Plaintiff sent a Qualified Written Request (“QWR”) to BOA in March of 2011 asking for information to verify the validity of the debt at issue. However, BOA failed to provide the legally-required information, only providing a partial history of the account.

BOA’s motion to dismiss states that instead of including information about why the account was in error, the QWR “includes a list of document demands which appear to be entirely irrelevant to a valid QWR under RESPA.” MTD at 9. Further, BOA maintains that Plaintiff’s damage claims are not sufficiently specific.

1. Whether Plaintiff Failed to Submit a Proper QWR

Generally, Ninth Circuit courts have held that a QWR must relate to the servicing of a loan, rather than its creation or modification. Gates v. Wachovia Mortg. FSB, 2011 WL 2602511 at *3 (E.D. Cal. 2010). Further, the “borrower’s inquiry must include a statement of the reasons for the belief of the borrower . . . that the account is in error or provide sufficient detail to the servicer regarding other information sought by the borrower.” Id; 12 U.S.C. § 2605(e).

BOA has not argued that the QWR was unrelated to servicing of the loan, but states that Plaintiff did not provide “a statement or supporting documentation of his reasons for believing the account was in error.” MTD at 9. While Plaintiff may not have stated the reasons he believed the account was in error, Defendant provides no argument on why it believes that the QWR failed to “provide sufficient detail to the servicer regarding other information sought by the borrower,” merely arguing that the list of document demands “appear to be entirely irrelevant to a valid QWR under RESPA.” MTD at 9. While some courts have found QWRs inadequate because they related to the creation or modification of a loan, the QWR here requested information that related to “making the payments of principal and interest with respect to the amounts received from the borrower.” 12 U.S.C. § 2605. For example, the QWR requested collection notes concerning the loan, as well as the name and contact information of the entity to which BOA was purportedly making the payments received from Plaintiff. While all of the information requested by Plaintiff may not have been validly sought under the statute, the QWR provided sufficient information concerning several requests for information that should have garnered a response by BOA. See Tamburri v. Suntrust Mortg., Inc., 2011 WL 6294472 at *7 (N.D. Cal. 2011) (noting that QWR requesting documentation supporting collection and enforcement efforts, including documents in support of enforcement of promissory note and deed of trust and a list of assignments “arguably request[ed] information as to how the servicer has handled [plaintiff’s] account”).

While BOA states that it provided a complete response following its initial letter confirming receipt and promising to provide a response, it has not detailed or produced the alleged response.

2. Whether Plaintiff Adequately Pled Damages

Plaintiff may recover for actual damages suffered under 12 U.S.C. § 2605(f)(1)(a). BOA asserts that Plaintiff has failed to plead damages adequately. Generally the requirement for damages has been interpreted liberally. Yulaeva v. Greenpoint Mortg. Funding, Inc., 2009 WL 2880393 at *15 (E.D. Cal. 2009). While Plaintiff does not provide substantial factual support, the allegations are sufficient to state a claim at the pleading stage—Plaintiff has specifically alleged that he sought certain information, BOA denied him his statutorily required information, and the failure to receive that information caused him to pay more than was necessary on his loan and to incur costs in repairing his credit.

G. Violation of 15 U.S.C. § 1692 — Fair Debt Collection Practices Act

The complaint states that BOA violated the FDCPA through making various false representations in its attempt to collect on the loan. The MTD asserts that the FDCPA’s definition of a “debt collector” does not include a mortgage servicer or an assignee of the debt, “where the `debt was not in default at the time it was obtained by [a servicing company].'” MTD at 10 (citing 15 U.S.C. §1692a(6)(F)). Further, it argues that a foreclosure on a property based on a deed of trust does not constitute collection of a debt within the meaning of the FDCPA.

Plaintiff agrees that the statute’s definition of “debt collector” does not include an entity attempting to collect a debt that was not in default when the debt was obtained by that entity. However, he has alleged that BOA took over servicing the debt sometime after September 2009, Compl. ¶ 67, and the debt went into default in May 2008. According to BOA, the default notice was not rescinded until 2011. BOA does not address this issue in its MTD.

BOA also argues that “foreclosure on a property based on a deed of trust does not constitute collection of a debt within the meaning of the FDCPA,” citing Hulse v. Ocwen Federal Bank, FSB, 195 F.Supp.2d 1188, 1204 (D. Or. 2002). In that case, the judge decided that “[f]oreclosing on a trust deed is distinct from the collection of the obligation to pay money . . . . Payment of funds is not the object of the foreclosure action.” Id. First, many courts have registered disagreement with this decision. See, e.g., Albers v. Nationstar Mortg., LLC 2011 WL 43584 (E.D. Wash. 2011) (noting that Hulse’s reasoning has been rejected by the Fourth and Fifth circuits and limited in other circumstances).

Second, as Plaintiff points out, he does not allege that foreclosure of the property constituted the violation; instead, he believes the demands of payment and threats were unlawful. Hulse held that “any actions taken by [defendant] in pursuit of the actual foreclosure may not be challenged as FDCPA violations,” but “plaintiffs may maintain any FDCPA claims based on alleged actions by [defendant] in collecting a debt.” Hulse at 1204. Based on this, even if the court were to accept Hulse’s reasoning, the FDCPA claim survives.

H. Violation of Cal. Bus. & Prof. Code § 17200

Plaintiff alleges that BOA has engaged in unfair, unlawful, and fraudulent business practices by executing misleading documents, executing documents without proper authority to do so, and demanding payments for non-existent debt, among other things.

BOA concedes that violation of another law serves as a predicate for stating a cause of action under § 17200, but states that “Plaintiff must plead facts to support the underlying statutory violation.” MTD at 11. Because the court has upheld Plaintiff’s other claims, the § 17200 claim must be upheld under the unlawful prong. See, e.g., Vogan v. Wells Fargo Bank, N.A., 2011 WL 5826016 at *6-7 (upholding § 17200 claim because court had also upheld claim under Truth in Lending Act, 15 U.S.C. §1641(g)).

I. Accounting

Plaintiff also requests an accounting for all payments made. BOA states that a request for accounting must be tied to another actionable claim, and Plaintiff has no viable claims. BOA also states that Plaintiff has not alleged he is owed a balance.

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” Tamburri v. Suntrust Mortg., Inc., 2011 WL 6294472 at *17 (N.D. Cal. 2011) (quoting Teselle v. McLoughlin, 173 Cal.App.4th 156, 179 (2009) (also noting that the purpose of requesting an accounting is “to discover what, if any, sums are owed to the plaintiff” and that “an accounting may be used as a discovery device”)).

Further, “[a] request for a legal accounting must be tethered to relevant actionable claims.” Harvey G. Ottovich Revocable Living Trust Dated May 12, 2006 v. Washington Mutual, Inc., 2010 WL 3769459 (N.D. Cal. 2010). While the complaint does not specifically “tether” the request for accounting to another single cause of action, it is clearly based on the same set of circumstances that is the basis for most of the causes of action in this case—the collection of money that was not actually due to Defendants.

Because Plaintiff has pleaded viable claims that are related to the same facts under which he requests an accounting, the court declines to dismiss the accounting claim at this time.

J. Motion to Strike Request for Punitive Damages and Fees

Defendant has made a motion to strike the request for punitive damages, arguing the “complaint is patently insufficient to support” such a claim. Fed. R. Civ. P. 12(f) allows a court to strike an insufficient defense or “any redundant, immaterial, impertinent, or scandalous matter.”

BOA cites to Bureerong v. Uvawas, 922 F.Supp.1450 (C.D. Cal. 1996), which holds that a motion to strike may be used when damages are not recoverable as a matter of law. However, a more recent Ninth Circuit case, Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970 (9th Cir. 2010), held that “Rule 12(f) does not authorize district courts to strike claims for damages on the ground that such claims are precluded as a matter of law.” Id. at 974-75. Thus, without any argument that the claim for punitive damages is redundant, immaterial, impertinent, or scandalous, BOA’s motion cannot succeed.

BOA also asks the court to strike the request for attorney’s fees, claiming there is no contractual or statutory basis for the award. However, as Plaintiff points out, RESPA allows for attorney’s fees. 12 U.S.C. §2605(f)(3) (providing that costs may be recovered “together with any attorneys [sic] fees incurred in connection with such action”).

III. CONCLUSION

For the reasons stated above, the motion to dismiss is DENIED. Defendants’ motion has failed to demonstrate that Plaintiff’s claims were implausible or precluded as a matter of law.

IT IS SO ORDERED.

[1] While Plaintiff does not dispute that he owes money on the loan, he disputes the amount owed and “seeks the Court’s assistance in determining who the holder in due course is of his Note and Deed of Trust.” ¶ 22.

[2] Plaintiff admits he is not a party to or beneficiary of the PSA, but claims that the failure to securitize his note should prevent HSBC and BOA from claiming any interest in the mortgage.

[3] BOA has failed to apply its argument concerning the loan’s securitization to any of Plaintiff’s specific claims, and the court declines to perform this task.

[4] BOA also denies the existence of proximately-caused damages, but does not directly address the alleged damages from derogatory credit reports and excessive interest charges.

[ipaper docId=86890530 access_key=key-1qbfbamphivp774i494b height=600 width=600 /]

image: Housing Wire

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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John Walsh: Foreclosure settlement, consent orders do not conflict

John Walsh: Foreclosure settlement, consent orders do not conflict


Lets not confuse the word “Flaw” with “Fraud”…There is a major difference!

HW-

John Walsh, acting Comptroller of the Currency, said the recent $25 billion mortgage servicing settlement reached between the big banks and state attorneys general does not conflict or double-up on requirements servicers have to follow in consent agreements banks signed with the OCC and other regulators last year. 

In 2010, regulators, including the OCC, examined 14 large federally regulated mortgage servicers and thrifts.

Last year, the agencies issued enforcement orders against all 14 institutions forcing them to take steps to review their foreclosure review processes and to offer aid to borrowers who suffered from flawed foreclosure practices.

[HOUSING WIRE]

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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BELL v. COUNTRYWIDE | Latest foreclosure ruling sides with Utah homeowners  Lawsuit » In split with other judges, jurist says BofA unit can’t rely on Texas law.

BELL v. COUNTRYWIDE | Latest foreclosure ruling sides with Utah homeowners Lawsuit » In split with other judges, jurist says BofA unit can’t rely on Texas law.


SLTrib-

Contrary to the findings of two other federal judges in Utah, U.S. District Judge Bruce Jenkins has ruled that Bank of America must follow state law when it forecloses on homeowners in this state.

Jenkins’ decision widens the split on the federal bench over legal questions about whether Bank of America’s ReconTrust unit has been illegally foreclosing on Utah homeowners. It also ups the stakes by declaring that a rule issued by the Comptroller of the Currency is contrary to Congress’ intent in passing laws that govern national banks.

[THE SALT LAKE TRIBUNE]

Full ruling below courtesy of leagle followed by PDF.

BELL v. COUNTRYWIDE BANK, N.A.

TIMOTHY R. BELL, an individual JENNIFER BELL, an individual, Plaintiffs, v. COUNTRYWIDE BANK, N.A. d/b/a BANK OF AMERICA CORPORATION, a Delaware corporation; BAC HOME LOANS SERVICING, LP, a Texas limited partnership; RECONTRUST COMPANY, N.A., a national association and DOES 1-5, Defendants.

 Civil No. 2:11-CV-00271-BSJ.

United States District Court, D. Utah, Central Division.
March 15, 2012.

Timothy R. Bell, an individual, Plaintiff, represented by Abraham C. Bates, MUMFORD RAWSON & BATES PLLC, Steven D. Crawley & Nariman Noursalehi, WASATCH ADVOCATES.
Jennifer Bell, an individual, Plaintiff, represented by Abraham C. Bates, MUMFORD RAWSON & BATES PLLC, Steven D. Crawley & Nariman Noursalehi, WASATCH ADVOCATES.
Countrywide Bank NA, a Delaware corporation doing business as Bank of America, Defendant, represented by Philip D. Dracht, FABIAN & CLENDENIN, Amy Miller, MCGUIRE WOODS LLP (DC), PRO HAC VICE & Philip C. Chang, MCGUIRE WOODS LLP (DC), PRO HAC VICE.
BAC Home Loans Servicing, a Texas limited partnership, Defendant, represented by Philip D. Dracht, FABIAN & CLENDENIN, Amy Miller, MCGUIRE WOODS LLP (DC), PRO HAC VICE & Philip C. Chang, MCGUIRE WOODS LLP (DC), PRO HAC VICE.
Recontrust Company NA, a national association, Defendant, represented by Philip D. Dracht, FABIAN & CLENDENIN & Amy Miller, MCGUIRE WOODS LLP (DC), PRO HAC VICE.

 

MEMORANDUM OPINION & ORDER
BRUCE S. JENKINS, Senior District Judge.
I. INTRODUCTION

This matter arises out of plaintiffs’ alleged default on a promissory note secured by a deed of trust on their primary residence. On October 8, 2009, defendant ReconTrust, a successor trustee, recorded with the Salt Lake County Recorder a notice of default and election to sell plaintiffs’ property to collect on the note.1 Plaintiffs filed a complaint challenging the prospective sale in Third District Court, Salt Lake County, Utah. Defendants subsequently removed the case to this court, alleging diversity.

At a hearing on August 30, 2011, plaintiffs represented that they “would like to bring an amended complaint seeking judicial determination about the right of ReconTrust [the successor trustee] to foreclose this trust deed.”2 Plaintiffs also requested leave to amend the complaint to state a cause of action for promissory estoppel on the loan modification issues.3 At that time, plaintiffs stated that “as to those two items, we’d like the Court’s leave to file an amended complaint and continue on our way.”4 The court granted leave to amend,5 ordering that plaintiffs file their amended complaint by September 16, 2011.6

Plaintiffs filed an amended complaint on September 15, 2011,7 which asserted the following among other things: (1) absence of authority of ReconTrust and “preliminary injunction” (as against all defendants), (2) breach of an alleged modified contract (as against BAC and BAC Servicing), and (3) promissory estoppel (as against BAC and BAC Servicing).

On September 30, 2011, defendants filed a Rule 12(b)(6) motion to dismiss for failure to state a claim,8 arguing that the complaint exceeded the authorization to amend. Although defendants assert that plaintiffs’ claim for preliminary injunction “is not a claim at all but rather a form of relief that cannot constitute an independent cause of action,”9 paragraphs 52-56 of the amended pleading adequately raise the question as to whether ReconTrust has authority to conduct nonjudicial foreclosures on real property in Utah.

The question is of continuing importance because Utah Code Ann. § 57-1-23.5(2) (Supp. 2011)10 provides a private cause of action to a trustor whose real property has been the subject of an unauthorized sale by an unauthorized person. Plaintiffs assert ReconTrust is unauthorized to “foreclose.”

Defendants may have a point that plaintiffs may have exceeded the scope of the court’s leave to amend,11 but the court need not address the promissory estoppel claim nor the breach of contract issue at this time. The immediate and substantive question before the court is whether ReconTrust has authority to sell real property at a nonjudicial foreclosure sale in Utah.

On November 10, 2011, defendants’ motion came on for hearing and was argued to the court, at which time the court reserved on the matter and requested supplemental briefing from both parties as to the legislative history of 12 U.S.C. § 92a. Curiously, at the hearing, defendants notified the court for the first time that on November 2, 2011, ReconTrust had been succeeded as trustee by an attorney named Armand J. Howell.12 Defendants then asserted that plaintiffs’ claim as to ReconTrust had become moot.13 In light of Mr. Howell’s recent appointment as successor trustee, the court also requested the parties to brief whether the ReconTrust issue was capable of repetition.14

II. DISCUSSION

At this point, the court need only determine whether to grant or deny defendants’ motion to dismiss.

“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”15 While “the pleading standard Rule 8 announces does not require detailed factual allegations, . . . it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”16

Prior to dealing with the substantive question, the court must first determine whether plaintiffs’ claim is now moot.

A. Plaintiffs’ claim against ReconTrust is not moot

This court’s jurisdiction and constitutional authority under Article III of the Constitution do not extend to moot cases, but only to actual cases or controversies.17 The mootness doctrine is grounded in the idea that “`federal courts only decide actual, ongoing cases or controversies,'”18 and that “a case or controversy no longer exists when it is impossible to grant any effectual relief.”19

However, a case is not moot if it “falls within a special category of disputes that are `capable of repetition’ while `evading review.'”20 Two elements must be present for a case to fall within this exception: “(1) the challenged action was in its duration too short to be fully litigated prior to its cessation or expiration, and (2) there was a reasonable expectation that the same complaining party would be subjected to the same action again.”21

The Supreme Court has stated that a federal court’s “concern in these cases, as in all others involving potentially moot claims, [is] whether the controversy [is] capable of repetition and not . . . whether the claimant ha[s] demonstrated that a recurrence of the dispute was more probable than not.”22 Indeed, the possibility of recurrence need not be “established with mathematical precision,” but rather the court need only find a “reasonable expectation” of repetition.23 Certainly, the bar is not high for a party to withstand a challenge for mootness.

When presented with a question of mootness the court also has an “interest in `preventing litigants from attempting to manipulate the Court’s jurisdiction.'”24 “The concern is that a party’s change in position may be temporary and thus abandoned once the litigation ends.”25 Therefore, it is “well settled that a defendant’s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.”26 In cases where the court is concerned with a party’s potential manipulation of the court’s jurisdiction, the Tenth Circuit looks at two additional factors: (1) whether “it is not `absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur[,]'”27 and (2) whether the litigant is attempting to seal a favorable decision from review.28

Additionally, there are certain matters that come before a court that are too important to be denied effective review; for example, when the nature of the issue is sufficiently compelling in relation to the enforcement of the laws and the private rights involved.29

Here, defendants assert that “Plaintiffs cannot allege a live case or controversy vis-à-vis ReconTrust and this Court cannot grant Plaintiffs any effectual relief as to the preliminary injunction claim”30 because ReconTrust is no longer the trustee on the plaintiffs’ deed of trust, and “in fact, ReconTrust ceased operations in Utah in October 2011.”31

This court disagrees. The question of mootness arose on November 2, 2011, when defendants substituted a licensed Utah attorney as trustee in the place of ReconTrust. However, plaintiffs and others are certainly capable of being subjected to ReconTrust’s actions once again. Plaintiffs correctly assert that the “beneficiary may appoint a successor trustee at any time,”32 meaning that there is nothing prohibiting defendants from again substituting ReconTrust as successor trustee at a later date.

Although defendants represent that ReconTrust ceased operations in Utah in October 2011, they have supplied this court with one order and one memorandum decision and order from cases in the District of Utah wherein ReconTrust continued to prosecute actions against Utah homeowners as late as December 2011 and February 2012.33 There was no specific representation that ReconTrust would comply with the Utah statutes in the future. It is of course curious that ReconTrust later provided to the court supplemental authority and further argued that ReconTrust did not have to comply with the Utah statutes. Thus, it is not absolutely clear to this court that ReconTrust’s future compliance with Utah statutes can reasonably be expected.

ReconTrust relies on two decisions which apply Texas law to a national bank’s fiduciary activities in Utah.34 The cases on this issue within the District of Utah are evenly split.35 One of them was appealed.36 The Tenth Circuit did not have opportunity to pass on the matter because the plaintiff voluntarily dismissed her complaint in the underlying action prior to the Tenth Circuit having opportunity to issue an opinion.37

The substitution of an attorney as successor trustee occurred on November 2, 2011. The hearing on the motion to dismiss was set for November 10, 2011. Despite having eight days (four days, not including weekends and the dates of substitution and hearing) to notify the court of the substitution—and possibly submit a supplemental brief as to the potential mootness issue—defendants did not notify the court of the substitution until the November 10, 2011 hearing was well underway and 24538 days after the case was commenced.39

The parties have raised a compelling question. Further, the private rights of many Utah citizens are potentially involved. The matter is too important to be denied effective review.

B. ReconTrust is not authorized to exercise a power of sale in a non-judicial foreclosure action within the State of Utah

Utah statutes require banks—including Utah-chartered banks—to foreclose trust deeds only through identified trustees. The question for decision is direct: Does ReconTrust, a Texas corporation, and by definition a “national bank”—although it neither takes deposits nor makes loans—have the power to conduct non-judicial foreclosures in Utah of trust deeds on real property located in Utah without complying with Utah statutes? The direct answer is no. It does not have such power.

A state bank which seeks to foreclose on real property in Utah must comply with Utah law. A federally chartered “bank” which seeks to foreclose on such property must comply with Utah law as well. The reason is found within the federal statutes, the history of federal legislation, as well as principles of Federalism.

Defendants—and the court decisions to which they cite40—rely heavily on 12 C.F.R. § 9.7(d) (2011), a final interpretive rule issued by the Office of the Comptroller of the Currency (“the Comptroller”) which interprets the governing federal statute, 12 U.S.C.A. § 92a (2001). However, none of the decisions to which defendants cite—nor any that this court has examined—have questioned whether the Comptroller’s interpretation deserves deference.41

In determining whether the court should give such deference to the Comptroller’s interpretation of § 92a of the National Bank Act the court applies the Chevron test, which states that

[w]hen a court reviews an agency’s construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute, as would be necessary in the absence of an administrative interpretation. Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.42

In a more recent case, the Supreme Court has stated that “[u]nder the familiar Chevron framework, we defer to an agency’s reasonable interpretation of a statute it is charged with administering.”43

Accordingly, in determining whether the Comptroller’s opinion deserves deference, the court first looks to whether Congress has addressed the precise question at issue, and if Congress has not, the court will then determine whether the Comptroller’s interpretation is based on a permissible construction of the statute, i.e., whether the interpretation is reasonable.

1. The interplay between 12 U.S.C. § 92a and 12 C.F.R. § 9.7(d)

ReconTrust is chartered as a “national bank,” and is governed by the National Bank Act, 12 U.S.C. § 1 et seq. As part of the National Bank Act, 12 U.S.C. § 92a specifically discusses a national bank’s power to act as trustee. Because the Comptroller’s final rule purports to interpret 12 U.S.C. § 92a, this court’s starting point is the plain language of the statute itself. Pertinent also is the intent of Congress as reflected in the language of the statute and its legislative history.

The statute states:

(a) Authority of Comptroller of the Currency

The Comptroller of the Currency shall be authorized and empowered to grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State in which the national bank is located.

(b) Grant and exercise of powers deemed not in contravention of State or local law

Whenever the laws of such State authorize or permit the exercise of any or all of the foregoing powers by State banks, trust companies, or other corporations which compete with national banks, the granting to and the exercise of such powers by national banks shall not be deemed to be in contravention of State or local law within the meaning of this section.44

Congress has spoken directly to this issue: the “State” referenced in § 92a refers, inter alia, to the State where the trust activity occurs—Utah in this case. The statute is clear. However, even if the statute is not clear and demands interpretation, this Court concludes that the Comptroller’s interpretation in 12 C.F.R. § 9.7(d) modifies the statute and is unreasonable—if not irrational—and therefore, does not deserve deference. ReconTrust must comply with Utah law when engaging in trust activities within the State of Utah, which includes trust deed foreclosures. This court further concludes that ReconTrust, by definition a national bank, competes with banks, not title insurance companies. Rather, the Utah Legislature intended that title insurance companies and national or state-chartered banks work in concert with each other when conducting non-judicial foreclosures within the State of Utah.

Defendants argue that § 92a must be read in conjunction with 12 C.F.R. § 9.7(d) (2011), which states that

[f]or each fiduciary relationship, the state referred to in section 92a is the state in which the bank acts in a fiduciary capacity for that relationship. A national bank acts in a fiduciary capacity in the state in which it accepts the fiduciary appointment, executes the documents that create the fiduciary relationship, and makes discretionary decisions regarding the investment or distribution of fiduciary assets. If these activities take place in more than one state, then the state in which the bank acts in a fiduciary capacity for section 92a purposes is the state that the bank designates from among those states.45

Defendants assert that when read in conjunction with 12 C.F.R. § 9.7(d), the “State or local law” referred to in 12 U.S.C. § 92a(a) is clearly Texas law—as opposed to Utah law—because ReconTrust accepts fiduciary appointment, executes the documents that create the fiduciary relationship, and makes discretionary decisions regarding the investment or distribution of fiduciary assets in Texas. Defendants have called the court’s attention to two recent decisions—both within the District of Utah—which arrive at this conclusion, relying on 12 C.F.R. § 9.7(d).46 Although aware of these decisions, this court sees the issue differently.

Texas law allows national banks to act as trustee under deeds of trust, and to exercise the power of sale with regard to such deeds of trust in Texas.47 Utah law does not.48 Because Texas law allows its own state-chartered banks to exercise the power of sale in foreclosure actions in Texas, pursuant to 12 U.S.C. § 92a, national banks are also allowed to exercise the power of sale within Texas. However, because Utah law does not allow Utah state-chartered banks to exercise the power of sale in foreclosure actions, plaintiffs argue that § 92a’s contravention clause (“when not in contravention of State or local law”) also prohibits national banks from exercising the power of sale in Utah.

The threshold issue is whether the court should give credence to 12 C.F.R. § 9.7(d)’s reading of 12 U.S.C. § 92a, as the defendants insist.

(a) Whether Congress has directly spoken to the precise question at issue

The precise question at issue is this: to which “State(s)” does 12 U.S.C. § 92a(a) refer? After carefully examining the statute’s plain meaning, together with the legislative history of the statute, the court has determined that Congress has directly addressed this precise question.

The court begins its analysis by looking to the plain meaning of the statute.49 “The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.”50 12 U.S.C. § 92a(a) sets forth the Comptroller’s authority to grant national banks the power to act as trustee “when not in contravention of State or local law.” The State law to which § 92a(a) refers is the law “of the State in which the national bank is located.”51 Subsection (b) further states that “whenever the laws of such State authorize” State banks to act as trustee, the granting of such trustee powers to national banks “shall not be deemed to be in contravention of State or local law.”52

The statute’s plain meaning indicates that the national bank is “located” in each state in which it carries on activities as trustee.

The Comptroller’s rule—without providing reasons therefor—limits its interpretation of the location where a national bank acts as trustee to the State in which the bank performs its “core fiduciary functions.”53 The Comptroller has interpreted “core fiduciary functions” to mean “accept[ing] the fiduciary appointment, execut[ing] the documents that create the fiduciary relationship, and mak[ing] discretionary decisions regarding the investment or distribution of fiduciary assets.”54 Notably, the Comptroller failed to include as a core fiduciary function engaging in an act which liquidates the trust assets, e.g., engaging in a non-judicial foreclosure of real property where the trust asset is located. This makes no sense

Such an artificial exclusion contravenes the plain meaning of the statute. When acting as a trustee of a trust deed, one necessarily acts in the capacity as trustee in the State where the real property is located, where notice of default is filed, and where the sale is conducted. In this case, ReconTrust is acting as trustee of a trust deed for real property in the State of Utah. ReconTrust, as trustee, filed a notice of default and election to foreclose on real property within the State of Utah.

The notice is filed in Utah. The sale is conducted in Utah, often on the steps of the local county courthouse. Those acts do not occur in Texas. Those acts may not be performed by Utah-chartered banks. Thus, those acts may not be performed by national banks in Utah. That dual system, it seems to me, is Federalism at its most elementary.

Other courts have also reached this conclusion. In Cox v. ReconTrust Co., N.A.,55 the court stated that it was not convinced by

ReconTrust’s argument that § 92a(b) dictates that the court look to some state law other than Utah state law to evaluate ReconTrust’s foreclosure activities in Utah. .. . Here, . . . ReconTrust is conducting foreclosure activities on behalf of Bank of America in several states, including Utah. . . .

Under a straight forward reading of § 92a(b), this court must look to Utah law in its analysis of whether ReconTrust’s activities in Utah exceed ReconTrust’s trustee powers. The powers granted to ReconTrust under federal law in this case are limited by the powers granted by Utah state law to ReconTrust’s competitors. Accordingly, the extent of ReconTrust’s federal powers must be determined by reference to the laws of Utah, not by reference to the laws of some other state. Under Utah law, the power to conduct non-judicial foreclosure is limited to attorneys and title companies. The scope of the powers granted by federal law is limited to the same power Utah statute confers on ReconTrust’s Utah competitors. . . .56

The legislative history of 12 U.S.C. § 92a demonstrates that Utah law should apply.

The phrase, “when not in contravention of State or local law” originated with § 11(k) of the Federal Reserve Act of 1913.57 Although legislative history does not exist as to the precise meaning of the phrase in § 11(k), a nearly identical phrase was used in § 8 of the same Act. Section 8 provided a means by which state banks could convert to national banks. However, the section placed a condition on state banks that desired to convert to national banks: “Provided, however, That said conversion shall not be in contravention of the State law.”58 When the bill which eventually became the Federal Reserve Act of 1913 was introduced on the floor of the Senate on December 1, 1913, § 8 also contained the word “local” so as to read, “Provided, however, That said acts are not in contravention of the State or local law.”59 That wording of § 8 is almost identical to the language found in § 11(k) that now exists as 12 U.S.C. § 92a(a).

Dialogue as to the purpose of this language that occurred on the floor of the Senate on December 15, 1913 proves instructive:

MR. BURTON: On page 28, lines 6 and 7, there is this proviso: Provided, however, That said acts are not in contravention of the State or local law.

Why should this reservation appear in the preceding section and not in section 9? The preceding section pertains to a change in the form of organization from a State bank to a national bank, while this section, as I have already said, relates to membership by a State bank in this new system. Why is not a reservation of that kind equally as necessary in this section as in the preceding section?

MR. OWEN: Mr. President, I will reply to the Senator that, in my judgment, it is not necessary in the preceding section.

MR. BURTON: That is, it goes without saying?

MR. OWEN: It is merely put in as a courteous observation. In reality I do not think it is actually necessary, because no State bank having its charter under a State law could violate the law of its own being. It was thought well, however, to put it in to show that there was no purpose on the part of Congress to disregard the local State law, but merely to give its assent provided the State law permitted it to be done.60

Senator Owen’s61 response is a clear indication that Congress did not intend to disregard or contravene local State law when giving state banks the opportunity to convert to national banks. That is to say, if State law prohibited a state bank from converting to a national bank, the Federal Reserve Act would not contravene that State’s law, and the state bank would not be able to convert to a national bank.

In light of the near-identical nature of the phrases in §§ 8 and 11(k), it seems clear that Congress intended to preclude any inference that a national bank may disregard local State law in performing its duties as trustee. A contrary interpretation draws precisely that inference and effectively preempts the laws of the local State (presumably the State where the foreclosed property is located and the trustee executes the power of sale) in favor of the laws of another State (the State where the national bank performs its “core fiduciary functions”); this is essentially the effect of the Comptroller’s final rule.

Shortly after the enactment of the Federal Reserve Act of 1913, the Supreme Court had opportunity to interpret § 11(k) when the Michigan Supreme Court upheld a state law that prohibited national banks from exercising trust powers within Michigan.62 Interestingly, the laws of Michigan allowed state banks to exercise trust powers;63 thus the effect of the Michigan law was to discriminate against national banks. The Supreme Court reversed the decision of the Michigan Supreme Court,64 holding that if State law allows a state bank to conduct certain business, the State must also allow a national bank to conduct that same business so long as the Federal Reserve Board grants the national bank permission to do so.65

The next year, Congress successfully codified the Supreme Court’s holding in Fellows by passing H.R. 11283,66 which in present-day form comprises the latter-half of subsection 92a(a) and the entirety of subsection (b). Prior to the passage of H.R. 11283, the House Committee on Banking and Currency’s report regarding the bill stated that

[u]nder a recent decision of the United States Supreme Court it is clearly settled that Congress has the power to confer authority upon national banks to act in these fiduciary capacities, where such powers are exercised by trust companies, State banks, or other competing corporations, even though the State law discriminates against national banks in this regard. The terms of section 11(k) are extended, therefore, to permit such powers to be granted to national banks in those States in which the State law discriminates against national banks in this respect.67

Congress thus intended to create an equal playing field for national banks, and was wary of any potential competitive advantage afforded to State institutions by State law.

Decades later, through the passage of the National Bank Act of 1962, Congress removed the power originally vested in the Federal Reserve Board under § 11(k) and transferred it to the Comptroller of the Currency.68 This Act of Congress effectively repealed69 the language of § 11(k) of the Federal Reserve Act and reenacted it as 12 U.S.C. § 92a(a)-(b). On September 13, 1962, the Senate Committee on Banking and Currency issued Senate Report No. 2039, urging the passage of the National Bank Act of 1962.70 Therein, the committee included a “General Statement” which made abundantly clear that

this bill will result in no change in the present distribution of power between Federal and State Governments, nor will it cause any weakening of the principles underlying the dual banking system. . . . It would not give authority to the Comptroller of the Currency to exercise any supervisory functions over State banks.71

The Office of the Comptroller of the Currency defines “dual banking system” as

parallel state and federal banking systems that co-exist in the United States. The federal system is based on a federal bank charter, powers defined under federal law, operation under federal standards, and oversight by a federal supervisor. The state system is characterized by state chartering, bank powers established under state law, and operation under state standards, including oversight by state supervisors.72

Therefore, when the plain language of § 92a is read in conjunction with the legislative history of the contravention clause, it is certain that Congress did not intend the laws of one State to pre-empt the laws of another State in dealing with a national bank. Rather, Congress made abundantly clear that “there was no purpose on the part of Congress to disregard the local State law, but merely to give its assent provided the State law permitted it to be done.”73 In light of the foregoing, this court determines that Congress has spoken to the precise question at issue, and has determined that the law that shall apply to a national bank acting as trustee under a trust deed is the local State law, which in this instance is Utah law.

(b) Whether the Comptroller’s interpretation is reasonable (in the event that the statute is silent or ambiguous)

Although the reasonableness of the Comptroller’s interpretation need only be addressed if Congress has not previously spoken as to the precise question at issue, which it has, for the sake of completeness, the court will also examine the reasonableness of the Comptroller’s interpretation found in 12 C.F.R. § 9.7(d).

The Comptroller is charged with interpreting the statute in a reasonable manner. It is not charged with amending the law. The Supreme Court has stated in regards to 12 U.S.C. § 92a(a) that “[n]ot surprisingly, this Court has interpreted those explicit provisions to mean what they say.”74 If § 92a is to mean what it says (i.e., the plain meaning), the reference to “State or local law”at a minimum should be construed to mean the State in which the trust activity occurs.

With the legislative history of § 92a in mind, it is important to note that the Comptroller was not always a proponent of the interpretation found in 12 C.F.R. § 9.7(d). Indeed, in large part, the Comptroller based 12 C.F.R. § 9.7(d) on two interpretive letters issued in October 1999.75 But rarely mentioned in this rulemaking is the Comptroller’s Interpretive Letter No. 695, which issued in December 1995.76

The Comptroller issued Interpretive Letter No. 695 in response to a national bank’s inquiry as to whether the national bank had authority to conduct fiduciary activities on a nationwide basis through trust offices in various states.77 Therein, the Comptroller stated that the effect of section 92a is that in any specific state, the availability of fiduciary powers is the same for out-of-state national banks or for in-state national banks and is dependent upon what the state permits for its own state institutions. A state may limit national banks from exercising any or all fiduciary powers in that state, but only if it also bars its own institutions from exercising the same powers. Therefore, a national bank with its main office in one state (such as the proposed trust bank) may conduct fiduciary business in that state and other states, depending upon — with respect to each state — whether each state allows its own institutions to engage in fiduciary business.78

This interpretation is certainly reasonable as it—consistent with Congress’ intent—precludes a competitive advantage as between state-chartered banks and national banks. Such an interpretation also precludes a competitive advantage between in-state national banks and out-of-state national banks. This principle was further emphasized by the Comptroller in Letter No. 695:

This interpretation of the statute also fosters desirable public policies. First, every national bank offering fiduciary services in a given state will have the same authority to conduct fiduciary business. A national bank conducting fiduciary business and administering trust assets at a trust office will be subject to the same standards irrespective of whether the office is part of an in-state national bank or an out-of-state national bank. Second, there will be a level playing field for enhanced competition in the provision of fiduciary services within each state, because more potential providers will be able to compete on similar terms.79

This means that a national bank based in Texas which performs fiduciary functions in Utah cannot have a competitive advantage over a Utah-based national bank that performs its fiduciary functions in Utah. However, under the Comptroller’s final rule, a national bank based in Texas does have a competitive advantage over a national bank based in Utah as well as Utah-chartered banks. Such a result is simply contrary to Congress’ clear intent in enacting § 92a. The Comptroller further stated that

section 92a authorizes national banks to offer fiduciary services in multiple states, but then conditions the exercise of that power within each state on a state-by-state basis under the same test: is the exercise of fiduciary powers by national banks prohibited by state law, and even if it is, does that state permit its state institutions to exercise these powers or not. This result is consistent with other banking statutes that treat a single national bank as present in different states for the purposes of that statute.80

The Comptroller cited various cases to support its position that “for the purposes of these statutes, a national bank is not located only in the place of its main office but can be `located,’ `situated’ or `existing’ in, or be a `citizen’ of, multiple cities, counties, or states.”81 Therefore, in light of Interpretive Letter No. 695, it seems unreasonable, if not irrational, for the Comptroller to now posit that a national bank is only “located” in the place where it conducts “core fiduciary activities.”82

ReconTrust relies on two other interpretive letters83 issued by the Comptroller. Those letters were issued nearly four years after Interpretive Letter No. 695 and ostensibly provide the foundation for the Comptroller’s issuance of 12 C.F.R. § 9.7.84 Seemingly contradicting the plain meaning of § 92a’s contravention clause as well as Interpretive Letter No. 695, the Comptroller in Interpretive Letter No. 866, stated that the location of a national bank is not determined by the location where the trust assets are located,85 but rather, where the bank acts in a fiduciary capacity.86 The Comptroller determined that a bank “acts in a fiduciary capacity” where it reviews proposed trust appointments, executes trust agreements, and makes discretionary decisions about the investment or distribution of trust assets.87 To then say that a bank does not “act in a fiduciary capacity” when it exercises the trustee’s power of sale and does so in Utah is fantasy.

Indeed, how the Comptroller decided to limit the above-listed activities as a trustee’s core fiduciary functions, excluding the liquidation or disposal of trust assets, is nowhere explained.

The Comptroller, after issuing an interpretive letter (No. 695) true to the statute’s plain meaning and Congress’ apparent intent as evinced by Senator Owens’ statement in 1913, and Congress’ subsequent acts (and corresponding statements) in 1918 and 1962, reversed its interpretation of the statute to now posit that the State law referred to in § 92a is solely that of the State where the trustee accepts the fiduciary appointment, executes the documents that create the fiduciary relationship, and makes discretionary decisions regarding the investment or distribution of fiduciary assets.

Interestingly, Letter Nos. 866 and 872 also contradict the view expressed in an article88 co-authored by John D. Hawke, Jr.,89 which was written prior to Mr. Hawke’s appointment as the Comptroller. Mr. Hawke wrote in pertinent part:

Section 92a specifically provides for deference to state law in defining the powers of a national bank to act as a fiduciary, and does not operate as a grant of authority to create federal common law. Section 92a authorizes the Comptroller to grant to national banks the right to act as trustee and “in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State in which the national bank is located.” On its face, section 92a is geared to principles of state law. Congress has specifically designated the scope of a national bank’s trust powers to be coextensive with the trust powers of state banks in the state where the bank is located. Because the trust powers of state banks vary from state to state, so too do the trust powers of national banks.

The statutory objective is to attain competitive equality between national banks and their state-chartered counterparts in the exercise of trust powers. Congress clearly intended national banks acting as trustees in a given state to have the same rights and duties as local state banks.90

Mr. Hawke authored this passage prior to his appointment as Comptroller, and therefore, the above-excerpt was not written while serving in his official capacity. However, Mr. Hawke’s analysis strikes the court as reasonable and in line with § 92a’s plain meaning and Congress’ intent, whereas the final rule promulgated by the Comptroller does not. Moreover, nothing in the final rule explains why the final rule is preferable—let alone reasonable—to the interpretive approach taken in the above-quoted passage and in Interpretive Letter No. 695.

The Comptroller has conceded that “national banks are [not] divorced from the standards of state law in all respects.”91 Indeed, the Comptroller, in quoting the Supreme Court,92 stated that

national banks are “subject to the laws of the State, and are governed in their daily course of business far more by the laws of the State than of the Nation. All their contracts are governed and construed by state laws. Their acquisition and transfer of property, their right to collect their debts, and their liability to be sued for debts, are all based on state law.”93

Certainly a national bank concerns itself with the acquisition and transfer of property, and its right to collect debts—which are both governed and construed by State law94—when it acts as successor trustee on a deed of real property, and attempts to foreclose the same through a nonjudicial foreclosure sale.

In sum, the national statutes which created a dual banking system operate to deny out-of-state national banks any competitive advantage over local, state-chartered banks or in-state national banks. Such was and is the will of Congress as expressed in statutory language and legislative history, both consistent with the principles of Federalism, as reflected in the Tenth Amendment of the Constitution.

The Comptroller’s interpretation of § 92a, as set forth in 12 C.F.R. § 9.7(d), modifies the statute and gives out-of-state national banks a sizeable competitive advantage over their state-chartered counterparts and in-state national banks in states—such as Utah—where state-chartered banks and in-state national banks are not allowed to perform certain fiduciary functions, namely exercising the power of sale in non-judicial trust deed foreclosures.

Thus, 12 C.F.R. § 9.7(d) does not justify the deference contemplated in Chevron for agency construction of pertinent statutes.

There are fifty States. Each has its own legislature and each its own set of laws relating to state-chartered banks. Texas does not pass Utah banking laws. Utah does not pass Texas banking laws. Utah banks are limited by Utah laws as to the manner of conducting non-judicial foreclosures of real property. National statutes have recognized that local laws have a role to play in a dual banking system and have done so from at least 1913, when the Federal Reserve Act was passed and predecessor language was first installed in that Act.

2. The competition clause of 12 U.S.C. § 92a

12 U.S.C. § 92a(a) permits the Comptroller to grant a national bank the power to act in any fiduciary capacity that a state bank, corporation or organization “which come[s] into competition with national banks are permitted to act under the laws of the State in which the national bank is located.”

Driving the point home, Congress also enacted subsection (b), which provides that

[w]henever the laws of such State authorize or permit the exercise of any or all of the foregoing powers by State banks, trust companies, or other corporations which compete with national banks, the granting to and the exercise of such powers by national banks shall not be deemed to be in contravention of State or local law within the meaning of this section.95

The Supreme Court had an opportunity to examine the statute in Burnes Nat’l Bank v. Duncan,96 wherein Justice Holmes opined that the foregoing passages state “in a roundabout and polite but unmistakable way that whatever may be the State law, national banks having the permit of the Federal Reserve Board may act as executors if trust companies competing with them have that power.”97 The holding in Burnes Nat’l Bank also applies to national banks who wish to act as trustees so long as competing State institutions also act as trustees.

This is of no help to ReconTrust, a subsidiary of a national bank. It is not in competition with a bar member. It is not in competition with a title insurance company. Indeed, the statutes prohibit a bank from engaging in title insurance activity.98

Utah Code Ann. §§ 57-1-21, 57-1-23.5 were both drafted so that the fiduciaries contemplated in 12 U.S.C. § 92a (including both state banks and national banks acting as trustees) would have to work in concert with—not in competition with—title insurance companies and active members of the State bar. Indeed, a state or national bank, acting as trustee, must procure the services of either an active member of the State bar or title insurance company in order to comply with the Utah law.

Banks compete with banks. Indeed, ReconTrust’s status is by definition that of a national bank, and in this specialized and limited area of trust activity, it, like all banks must comply with local law.

III. CONCLUSION
In light of the foregoing, plaintiffs’ claim for declaratory relief under Utah Code Ann. § 57-1-23.5 satisfies the standards set forth in Twombly and Iqbal.

Because of ReconTrust’s lack of authority to exercise the power of sale in a non-judicial foreclosure action within Utah,

IT IS ORDERED that defendants’ motion to dismiss is hereby DENIED.


Footnotes


1. (See Pls.’ Third Am. Compl., filed Sept. 15, 2011 (dkt. no. 68) (“Pls.’ Compl.”), at Ex. C.)
2. (Transcript of Hearing, dated Aug. 30, 2011 (dkt. no. 77) (“Mot. Amend Hr’g Tr.”), at 5:7-9; see also id. at 6:11-13.)
3. (Id. at 5:19-22.)
4. (Id. at 5:23-24.)
5. (Id. at 22:19-20.)
6. (See id. at 23:17-24:9; Order, filed September 21, 2011 (dkt no. 69).)
7. (See Pls.’ Compl.) Plaintiffs titled the amended complaint as “Third Amended Complaint” when in fact it should have been titled “Second Amended Complaint.” Although on May 31, 2011 plaintiffs filed a motion to amend/correct their first amended complaint (dkt. no. 36),—and filed concurrently therewith a proposed second amended complaint (dkt. no. 38)—the court never granted that motion to amend. Accordingly, the proposed second amended complaint was never operative, and what plaintiffs have titled as the “Third Amended Complaint” is actually the “Second Amended Complaint.”
8. (See Defs.’ Mot. Dismiss Pls.’ Third Am. Compl., filed Sept. 30, 2011 (dkt. no. 70) (“Defs.’ Mot. Dismiss”).)
9. (See Defs.’ Mem. Supp. Mot. Dismiss Pls.’ Third Am. Compl. (dkt. no. 71) (“Defs.’ Mem.”), at 2.)
10. Subsection (2)(a) states that “[a]n authorized person who conducts an unauthorized sale is liable to the trustor for the actual damages suffered by the trustor as a result of the unauthorized sale or $2,000, whichever is greater.”
11. (See Defs.’ Mem. at 5-6.)
12. (Transcript of Hearing, dated Nov. 10, 2011 (dkt. no. 80) (“Mot. Dismiss Hr’g Tr.”), at 7:16-8:5, 33:17-19.)
13. (Id. at 33:12-16.)
14. (Id. at 72:22-73:3.)
15. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and quotations omitted).
16. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (internal quotations omitted).
17. Iron Arrow Honor Soc’y v. Heckler, 464 U.S. 67, 70 (1983).
18. Lucero v. Bureau of Collection Recovery, Inc., 639 F.3d 1239, 1242 (10th Cir. 2011) (quoting Building & Constr. Dep’t v. Rockwell Int’l Corp., 7 F.3d 1487, 1491 (10th Cir. 1993)); see also Matthew I. Hall, The Partially Prudential Doctrine of Mootness, 77 Geo. Wash. L. Rev. 562, 571 (2009).
19. Chihuahuan Grasslands Alliance v. Kempthorne, 545 F.3d 884, 891 (10th Cir. 2008).
20. Turner v. Rogers, 131 S.Ct. 2507, 2514-15 (2011) (quoting S. Pac. Terminal Co. v. ICC, 219 U.S. 498, 515 (1911)).
21. Weinstein v. Bradford, 423 U.S. 147, 149 (1975) (per curiam).
22. Honig v. Doe, 484 U.S. 305, 319 n.6 (1988) (emphasis in original).
23. Id.
24. Wyoming v. U.S. Dep’t of Agric., 414 F.3d 1207, 1212 (10th Cir. 2005) (quoting City of Erie v. PAP’S A.M., 529 U.S. 277, 288 (2000)).
25. Id.
26. City of Mesquite v. Alladin’s Castle, Inc., 455 U.S. 283, 289 (1982). In Alladin’s Castle, a city exempted a business from a city ordinance in response to the business’ challenge that the ordinance was unconstitutional. However, after a state court decision was issued regarding the matter, the city adopted a new ordinance which repealed the business exemption. See id. at 286-87, 289.
27. Seneca-Cayuga Tribe of Okla. v. Nat’l Indian Gaming Comm’n, 327 F.3d 1019, 1028 (10th Cir. 2003) (quoting S. Utah Wilderness Alliance v. Norton, 301 F.3d 1217, 1236 n.17 (10th Cir. 2002)).
28. See Seneca-Cayuga Tribe, 327 F.3d at 1029 (“We, however, read City of Erie as expressing a generalized concern about manipulation of an appellate court’s jurisdiction to seal a favorable decision from review. Here, appellees’ conduct, while presumably not in bad faith, nonetheless implicates the concern over post-trial manipulation.”).
29. Cf. In re Carlson, 580 F.2d 1365, 1372 (10th Cir. 1978) (deciding to entertain the issue as to whether the district court’s judgment denying the IRS application was a final decision even though the petitioner’s business successor-in-interest had already voluntarily paid all the taxes, penalties, and interest of taxpayer Carlson).
30. (Defs.’ Supplemental Mem. Supp. Mot. Dismiss, filed Dec. 1, 2011 (“Defs.’ Supplemental Mem.”) (dkt. no. 83), at 8.)
31. (Id.)
32. Utah Code Ann. § 57-1-22(1)(a) (2010) (emphasis added).
33. Dutcher v. Matheson, 2:11-CV-666-TS (D. Utah Feb. 8, 2012) (Mem. Opinion & Order, dkt. no. 48); see also Garrett v. ReconTrust Co., N.A., 2:11-CV-00763-DS (D. Utah Dec. 21, 2011) (Order, dkt. no. 9).
34. Dutcher v. Matheson, 2:11-CV-666-TS (D. Utah Feb. 8, 2012) (Mem. Opinion & Order, dkt. no. 48); see also Garrett v. ReconTrust Co., N.A., 2:11-CV-00763-DS (D. Utah Dec. 21, 2011) (Order, dkt. no. 9).
35. Just as there are two District of Utah cases that apply Texas law to ReconTrust’s foreclosure operations in Utah, see cases cited supra note 34, there are also two District of Utah cases that apply Utah law on the same issue. See Cox v. ReconTrust Co., No. 2:10-CV-492-CW, 2011 WL 835893, at *6 (D. Utah March 3, 2011) (holding that Utah law applies to ReconTrust’s foreclosure activities within the State of Utah); see also Coleman v. ReconTrust Co., No. 2:10-CV-1099 (D. Utah Oct. 3, 2011) (Order Granting in Part and Denying in Part Motion to Dismiss, dkt. no. 87, at 2) (same).
36. See Cox v. ReconTrust Co., No. 2:10-CV-492-CW (D. Utah June 25, 2010) (Notice of Appeal of Interlocutory Decision, dkt. no. 47).
37. See Cox v. ReconTrust Co., N.A., No. 10-4117, Order at 2 (10th Cir. Aug. 18, 2011).
38. Plaintiffs filed their complaint in Third District Court, Salt Lake County, Utah on March 11, 2011.
39. (SeeMot. Dismiss Hr’g Tr. at 7:16-24, 33:12-23):MS. MILLER: In any event, a new substitution of trustee has been made since that time identifying another trustee. . . .

THE COURT: When was that done?

MS. MILLER: That was done in November of 2011.

THE COURT: Just a day or two ago.

MS. MILLER: A week or two ago, yes.

. . . .

MS. MILLER: We’d also like to point out that there is no immediate or irreparable injury in this case. ReconTrust is not even the appointed substitute trustee anymore, as we pointed out earlier, so the issue is moot—

THE COURT: Why so fast? I notice that you did that on the 2d of November.

MS. MILLER: Yes.

THE COURT: Okay.

MS. MILLER: Yes. The old notice was stale. We would not have been able to act on the old notice. And so a new notice was issued.

40. Dutcher v. Matheson, 2:11-CV-666-TS (D. Utah Feb. 8, 2012) (Mem. Opinion & Order, dkt. no. 48); see also Garrett v. ReconTrust Co., N.A., 2:11-CV-00763-DS (D. Utah Dec. 21, 2011) (Order, dkt. no. 9). Both the preceding cases held that Texas law applies to ReconTrust’s foreclosure activities in Utah. But see Cox v. ReconTrust Co., No. 2:10-CV-492-CW, 2011 WL 835893, at *6 (D. Utah March 3, 2011) (holding that Utah law applies to ReconTrust’s foreclosure activities within the State of Utah); see also Coleman v. ReconTrust Co., No. 2:10-CV-1099 (D. Utah Oct. 3, 2011) (Order Granting in Part and Denying in Part Motion to Dismiss, dkt. no. 87, at 2) (same).
41. See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842 (1984).
42. Id. at 842-43.
43. Cuomo v. Clearing House Ass’n, 129 S.Ct. 2710, 2715 (2009) (emphasis added).
44. 12 U.S.C.A. § 92a(a)-(b) (2001) (emphasis added).
45. 12 C.F.R. § 9.7(d) (2011).
46. Dutcher v. Matheson, 2:11-CV-666-TS (D. Utah Feb. 8, 2012) (Mem. Decision & Order, dkt. no. 48, at 11 n.25); see also Garrett v. ReconTrust Co., N.A., 2:11-CV-00763-DS (D. Utah Dec. 21, 2011) (Order, dkt. no. 9, at 3).
47. See Tex. Fin. Code Ann. §§ 32.001, 182.001; see also Tex. Prop. Code Ann. §§ 51.0001, 51.0074.
48. See Utah Code Ann. §§ 57-1-23, 57-1-21 (2010) (allowing only an active member of the Utah State Bar or a title insurance company to exercise the power of sale).
49. Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997) (“Our first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case. Our inquiry must cease if the statutory language is unambiguous and `the statutory scheme is coherent and consistent.'” (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 240 (1989))).
50. Robinson, 519 U.S. at 341.
51. 12 U.S.C.A. § 92a(a) (2001).
52. Id. § 92a(b).
53. See Interpretive Letter No. 866, 1999 WL 983923, at Part II.B. (October 8, 1999).
54. 12 C.F.R. § 9.7(d) (2011); see also Interpretive Letter No. 866, 1999 WL 983923, at Part II.B. (adopted in substance by 12 C.F.R. § 9.7(d)).
55. No. 2:10-CV-492 CW, 2011 WL 835893, at *6 (D. Utah March 3, 2011). Plaintiff voluntarily dismissed the underlying district court action while the foregoing case was on appeal before the Tenth Circuit. Thus, the Tenth Circuit found that the appeal was rendered moot. Cox v. ReconTrust Co., N.A., No. 10-4117, Order at 2 (10th Cir. Aug. 18, 2011). Currently, this case and the companion Utah cases all are a form of repetition.
56. Id.; see also Coleman v. ReconTrust Co., No. 2:10-CV-1099 (D. Utah Oct. 3, 2011) (Order Granting in Part and Denying in Part Motion to Dismiss, dkt. no. 87, at 2) (“[T]he court agrees with the reasoning applied in Cox v. ReconTrust Company, N.A., 2011 WL 835893 (March 3, 2011 D. Utah).”).
57. Federal Reserve Act of 1913, Dec. 23, 1913, ch. 6 § 11(k), 38 Stat. 262. At the time of its passage, section 11(k) stated that “[t]he Federal Reserve Board shall be authorized and empowered To grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, or registrar of stocks and bonds under such rules and regulations as the said board may prescribe.”
58. Id. § 8, 38 Stat. 258.
59. 51 Cong. Rec. S23 (December 1, 1913) (statement of Sen. Owen).
60. 51 Cong. Rec. S879 (December 15, 1913) (statements of Sens. Owen & Burton) (emphasis added).
61. Senator Owen was the Senate’s principal sponsor of the Federal Reserve Act of 1913.
62. First Nat’l Bank of Bay City v. Fellows, 244 U.S. 416, 421-22 (1917).
63. Id. at 421.
64. Id. at 423-24.
65. Id. at 426.
66. Act of Sept. 26, 1918, ch. 177, 40 Stat. 967, 968-69 (1918).
67. H.R. Rep. No. 65-479, reprinted in U.S. Serial Set vol. 7307 (1918).
68. National Bank Act of 1962, Pub. L. No. 87-722, 76 Stat. 668 (enacting H.R.12577).
69. “Subsection (k) of section 11 of the Federal Reserve Act . . . is repealed by [H.R. 12577] in a purely technical sense only. In effect, the provisions of that subsection become the first section of the bill, with the Comptroller of the Currency being substituted for the Board of Governors of the Federal Reserve System as the responsible administrative agency.” H.R. Rep. No. 87-2255, at 4, reprinted in U.S. Serial Set vol. 12433 (1962).
70. S. Rep. No. 87-2039, reprinted in 1962 U.S.C.C.A.N. 2735-36; see also H.R. Rep. No. 87-2255, reprinted in U.S. Serial Set vol. 12433 (1962) (adopted in substance by S. Rep. No. 87-2039 and referenced in 1962 U.S.C.C.A.N. 2735-36).
71. Id. at 2736.
72. Office of the Comptroller of the Currency, National Banks and the Dual Banking System 1 (September 2003), at http://www.occ.gov/static/publications/DualBanking.pdf.
73. 51 Cong. Rec. S879 (December 15, 1913) (statement of Sen. Owen).
74. Barnett Bank of Marion County, N.A. v. Nelson, 517 U.S. 25, 34 (1996).
75. Interpretive Letter No. 866, 1999 WL 983923 (October 8, 1999); Interpretive Letter No. 872, 1999 WL 1251391 (October 28, 1999).
76. Interpretive Letter No. 695, 1996 WL 187825 (December 8, 1995).
77. Id. at *1.
78. Id. at *4 (emphasis added).
79. Id. at *14 (emphasis added).
80. Id. at *12 (emphasis added).
81. Id. at *13 (citing Citizens & S. Nat’l Bank v. Bougas, 434 U.S. 35, 44 (1977); Fisher v. First Nat’l Bank of Omaha, 548 F.2d 255 (8th Cir.1977); Fisher v. First Nat’l Bank of Chicago, 538 F.2d 1284 (7th Cir. 1976), cert. denied, 429 U.S. 1062 (1977); Seattle Trust & Sav. Bank v. Bank of Cal. N.A., 492 F.2d 48 (9th Cir. 1974), cert. denied, 419 U.S. 844 (1974); Bank of N.Y. v. Bank of Am., 853 F.Supp. 736 (S.D.N.Y. 1994); Conn. Nat’l Bank v. Iacono, 785 F.Supp. 30 (D.R.I. 1992)).
82. The Supreme Court in Cuomo v. Clearing House Ass’n, 129 S.Ct. 2710 (2009), held that the Comptroller’s interpretation of another portion of the National Bank Act—12 U.S.C. § 484(a)—was unreasonable. See id.at 2719 (“The Comptroller’s regulation, therefore, does not comport with the statute. Neither does the Comptroller’s interpretation of its regulation . . . .”).12 U.S.C. § 484(a) provides that “[n]o national bank shall be subject to any visitorial powers except as authorized by Federal law, vested in the courts of justice or such as shall be, or have been exercised or directed by Congress or by either House thereof or by any committee of Congress or of either House duly authorized.”

In Cuomo, the Comptroller interpreted the statute in a way that would have prohibited the New York Attorney General from obtaining records from national banks to determine if the national banks were complying with state fair-lending laws. See Cuomo, 129 S. Ct. at 2714.

83. See supra note 75. Twenty days subsequent to the issuance of Letter No. 866, the Comptroller issued Letter No. 872. The pertinent portion of the Comptroller’s analysis in Letter No. 872 is taken verbatim from Letter No. 866, and as such, the court need not separately discuss the substance of Letter No. 872.
84. See 66 Fed. Reg. 34,792-01, 2001 WL 731641, at *34795 (July 2, 2001) (“These conclusions are consistent with the conclusions set out in IL 866 and IL 872.”).
85. See 1999 WL 983923, at Part II.B.
86. See id.
87. See id. at Part II.C.
88. John D. Hawke, Jr., Melanie L. Fein & David F. Freeman, Jr., The Authority of National Banks to Invest Trust Assets in Bank-advised Mutual Funds, 10 Ann. Rev. Banking L. 131 (1991).
89. According to the Comptroller’s website, Mr. Hawke served as the Comptroller of the Currency from 1998 to 2004, which encompasses the October 1999 publication of Letter Nos. 866 and 872, see http://www.occ.treas.gov/about/who-we-are/leadership/past-comptrollers/comptroller-john-hawk e.html (last visited Mar. 13, 2012).
90. Hawke, Fein & Freeman, supra note 88, at 140 (internal citations omitted) (emphasis added).
91. Office of the Comptroller of the Currency, National Banks and the Dual Banking System 26 (September 2003), at http://www.occ.gov/static/publications/DualBanking.pdf.
92. Nat’l Bank v. Commonwealth, 76 U.S. 353 (1869) (emphasis added).
93. Id. at 362; see also Office of the Comptroller of the Currency, National Banks and the Dual Banking System 27 (September 2003), at http://www.occ.gov/static/publications/DualBanking.pdf (quoting Bank of Am. v. City & County of San Francisco, 309 F.3d 551, 559 (9th Cir. 2002)).
94. See Nat’l Bank v. Commonwealth, 76 U.S. at 362.
95. 12 U.S.C. § 92a(b) (emphasis added).
96. 265 U.S. 17 (1924).
97. Id. at 23.
98. 15 U.S.C.A. § 6713(a) (2009) (“No national bank may engage in any activity involving the under-writing or sale of title insurance.”).

[ipaper docId=86413064 access_key=key-rb7u6ttpx3uei3b3sx9 height=600 width=600 /]

 

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AGs to consider investor protections in foreclosure settlement

AGs to consider investor protections in foreclosure settlement


LOL…according to Tom Miller.

Good Luck!

HW-

If the top five mortgage servicers begin to abuse bond investors under the foreclosure settlement write-downs, the attorneys general would consider some protections, according to Iowa AG Tom Miller.

Miller faced down banking executives and analysts during a panel at the REthink Symposium Thursday. The $25 billion settlement signed in March forces servicers to meet roughly $10 billion in principal reductions, which could swell higher because in some instances the full dollar written down will not be credited.

Servicers will get full credit for reducing principal on loans they hold on their own portfolio but receive 45 cents for every dollar written down on mortgages held in private securities.

“To try principal reduction in a targeted way and find out if it works is good for the housing market,” Miller said. “We know what (the banks’) plans are. Two have said they wouldn’t do write-downs on private securities. But we could have some discussions about something to reassure investors.”

[HOUSING WIRE]

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Alternative to Foreclosure? Bank of America Program Allows Owners to Stay in Homes and Rent From the Bank

Alternative to Foreclosure? Bank of America Program Allows Owners to Stay in Homes and Rent From the Bank


WSJ-

Bank of America Corp. is launching a pilot program that will allow homeowners at risk of foreclosure to hand over deeds to their houses and sign leases that will let them rent the houses back from the bank at a market rate.

While the initial scope of the “Mortgage to Lease” program is small—the bank began sending letters Thursday offering leases to 1,000 homeowners in Arizona, Nevada and New York—it represents a big change in the way banks deal with borrowers who can’t afford their mortgages.

Until now, banks have focused the bulk of their borrower outreach on modifying mortgages, usually by reducing the monthly payments. When that doesn’t work, most foreclosure alternatives require homeowners to leave their house, typically through a short sale, in which the bank approves the sale for less than the amount owed. Banks often insert clauses forbidding the new owner from renting the property back to the former owner.

[WALL STREET JOURNAL]

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Where are the Indictments?

Where are the Indictments?


Abigail C. Field-

Let’s be clear why there’s a mortgage deal: the banks broke the law. Several laws in fact, in ways that appear criminal as well as civil. Limiting their liability is the only reason the banks did a deal.

In this post I’m going to look at what the banks could be held liable for; how much liability “their” money persuaded law enforcers to ignore will be the next post. But one important kind of peace has not been bought: criminal. So as I detail the wrong doing exposed by the deal, I highlight the crimes our law enforcers seem to allege the bankers committed. After all, a liability release isn’t simply what it says, it’s what law enforcers do with their remaining freedom to act. If crimes were committed, and indictments don’t follow, the release is much broader than its text.

A close read of the complaint and the related language that precedes the releases (see Exhibits F and G) reveals:

continue reading [REALITY CHECK]

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Abigail Caplovitz Field: The Mortgage Settlement Allows Banks to Steal Without Penalty

Abigail Caplovitz Field: The Mortgage Settlement Allows Banks to Steal Without Penalty


HuffPO-

The consent agreements the bailed-out bankers (B.O.B.s), the feds and the states are largely as had been promised. One big surprise, however, is that the B.O.B.s would now be allowed to systematically overcharge borrowers and steal their homes. Seriously. Who cares about $1 million or $5 million penalties if horrible damage can be inflicted without punishment?

To see what I’m talking about, you need to look at Exhibit E-1. (It’s in all the consent agreements; here’s Chase‘s.) Exhibit E-1 is a 14 page table titled “Servicing Standards Quarterly Compliance Metrics.” That is, it’s a table that details what, precisely, law enforcers will check to make sure that the B.O.B.s are meeting the very pretty servicing standards in the deal. (See Exhibit A)

(Note: You may want to print out table E-1 while reading this, or at least keep it open in another browser window; what I have to say may be hard to believe and you’ll want to be able to double check that I’m telling you the truth.)

Now, the table doesn’t come right out and say, ‘we, the federal and state governments of the United States of America do hereby bless the institutionalization of servicer abuse,’ but it should. To understand why, you need to keep your eye on how the table’s columns are defined. For most issues, the critical columns are C “Loan Level Tolerance for Error” and D “Threshold Error Rate.” Later I’ll talk about the problems in Column F, the “Test Questions.”

When Error Isn’t Error…

[HUFFINGTON POST]

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Alison Frankel: Can MBS investors block national mortgage deal via litigation?

Alison Frankel: Can MBS investors block national mortgage deal via litigation?


The never ending settlement… because those in DC are doing their best to make sure their bankers are A-OK.

Reuters-

Mortgage-backed securities investors who are convinced that banks intend to shift the cost of the $25 billion national mortgage settlement onto their shoulders are “evaluating their legal options,” according to Chris Katopis, executive director of the Association of Mortgage Investors (and a former clerk on the District of Columbia Circuit Court of Appeals). The private investors, as I’ve reported, are outraged at the terms of the settlement, which sets no limit on the percentage of securitized mortgages the settling banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — are permitted to modify to reach their $17 billion target for reducing the principal balance owed by struggling borrowers. Mortgage-backed noteholders believe the deal terms encourage banks to write down investor-owned first liens, rather than second lien mortgages in bank-owned portfolios. That incentive, they say, shifts the cost of the deal from the banks to mortgage-backed bondholders.

Their argument is gaining traction. The New York Times editorialized Sunday on the bank-friendly details of …

[REUTERS LEGAL]

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MUST READ: Who is REALLY paying in the $25bil TBTF mortgage settlement

MUST READ: Who is REALLY paying in the $25bil TBTF mortgage settlement


Economic Musings-

The surprising tale that I will attempt to pen in this blog entry has a very familiar cast of characters; the Obama Administration, the Housing Bubble, “Toxic Mortgages”, and Too Big To Fail “TBTF” Banks among others.  While the headline of TBTF banks in a $25bil mortgage settlement is known to many, the underlying details of the settlement are less known and quite appalling when you pull back the covers.

 The wounds on past and present homeowners are still fresh from the housing crisis.  As Jonathan Laing points out in this weekend’s Barron’s cover story, “five million of the country’s 76million mortgage holders have lost their homes to foreclosure or lender ordered short sales since 2006, and an estimated 14million more own more on their homes than their properties are currently worth.  In all, some $7.4 trillion in homeowners’ equity has been destroyed according to Mark Zandi…”  

 Cries for Accountability

While blame deserves to be cast upon numerous parties for the housing bubble, Americans have rightly called for accountability on the TBTF banks.  Accountability for what? Among other faults, robo-signing became prevalent among TBTF banks as they forged mortgage documents in order to ensure proper paperwork was done to foreclose on properties. 

 Details of the $25bil Settlement (in the words of HUD) & Public Lauding

“On February 9, the Department of Justice …

[ECONOMIC MUSINGS]

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US Rep. Marcy Kaptur: Let’s Address the Systemic Mortgage Fraud in Our Country

US Rep. Marcy Kaptur: Let’s Address the Systemic Mortgage Fraud in Our Country


by

www.kaptur.house.gov

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STUBBS v. Bank of America, BAC, Fannie Mae | GA Nothern District Court “BAC …was not the ‘SECURED CREDITOR’ entitled to foreclose”

STUBBS v. Bank of America, BAC, Fannie Mae | GA Nothern District Court “BAC …was not the ‘SECURED CREDITOR’ entitled to foreclose”


h/t NYE LAVALLE

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

GARY STUBBS,
Plaintiff,

v.

BANK OF AMERICA, BAC HOME
LOANS SERVICING, LP, and
FEDERAL NATIONAL MORTGAGE
ASSOCIATION,
Defendants.

EXCERPT:

Plaintiff has alleged facts making it plausible that Fannie Mae was in fact
the secured creditor at the time of the foreclosure and has alleged that no
assignment to Fannie Mae was filed prior to the time of sale as required by
O.C.G.A. § 44-14-162(b). Therefore, based on the allegations in the amended
complaint, BAC evaded the most substantive requirements of Georgia’s
foreclosure statute in that (1) it was not the secured creditor entitled to foreclose
despite providing a notice letter affirmatively representing it was the creditor;
and (2) it failed to file the assignment of the security deed to the secured creditor
in the county deed records prior to the foreclosure. See O.C.G.A. § 162(b);
Weems v. Coker, 70 Ga. 746, 749 (Ga. 1883); Cummings v. Anderson, 173 B.R.
959, 963 (Bankr. N.D. Ga. 1994).3 The Court accordingly DENIES the motion to
dismiss Plaintiff’s claim for wrongful foreclosure based on failure to comply with
Georgia foreclosure law.

For whatever reason scribd download is not permitting this to be downloaded.

Please use this link to download Stubbs_v._Bank_of_America

[ipaper docId=85835317 access_key=key-p289vkcj1anvmg11uxn height=600 width=600 /]

 

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NYT: The Banks Win, Again

NYT: The Banks Win, Again


Excellent view from this NYT’s editorial piece.

NYT-

Last week was a big one for the banks. On Monday, the foreclosure settlement between the big banks and federal and state officials was filed in federal court, and it is now awaiting a judge’s all-but-certain approval. On Tuesday, the Federal Reserve announced the much-anticipated results of the latest round of bank stress tests.

How did the banks do on both? Pretty well, thank you — and better than homeowners and American taxpayers.

That is not only unfair, given banks’ huge culpability in the mortgage bubble and financial meltdown. It also means that homeowners and the economy still need more relief, and that the banks, without more meaningful punishment, will not be deterred from the next round of misbehavior.

[NEW YORK TIMES]

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Abigail Field: Turns out the Mortgage Deal Is Still Not Done

Abigail Field: Turns out the Mortgage Deal Is Still Not Done


Abigail Field-

Q: When is a deal not a deal?

A: When the deal documents punt on contentious issues, merely agreeing to agree later. 

Sadly, that’s what this “deal” does. This “deal” is a hybrid contract and term sheet, with all the crucial, operational aspects of compliance unresolved. A smallish to-be-dealt-with-later item is the timing for implementing the servicing standards. The biggie is the Work Plans; those have not been negotiated at all.

Yes, part of compliance has been finalized; the metrics, and the basic enforcement structure. But it’s not enough to have metrics; you also need processes for gathering the metric data and computing the results. Similarly you need more than a structure for enforcement; you need how-to details. The not-yet-existing Work Plan will cover all that. Worse, the negotiations will happen while the clock is ticking on the deal.

Servicing Standards Take Effect On a Date TBD

When the deal is approved

[REALITY FIELD]

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BANK OF AMERICA, NA v. KABBA | OK Supreme Court: Only presented evidence of an indorsed-in-blank note and an ‘Assignment of Mortgage'” With nothing more

BANK OF AMERICA, NA v. KABBA | OK Supreme Court: Only presented evidence of an indorsed-in-blank note and an ‘Assignment of Mortgage'” With nothing more


BANK OF AMERICA, NA v. KABBA
2012 OK 23
Case Number: 109660
Decided: 03/06/2012

THE SUPREME COURT OF THE STATE OF OKLAHOMA

NOTICE: THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION IN THE PERMANENT LAW REPORTS. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.

 

BANK OF AMERICA, NA, Plaintiff/Appellee,

v.

MOMODU AHMED KABBA, Defendant/Appellant,
and
HUMU HAWAH KABBA, JOHN DOE and JANE DOE, Defendants.

ON APPEAL FROM THE DISTRICT COURT
OF CLEVELAND COUNTY
HONORABLE TOM A. LUCAS, DISTRICT JUDGE

¶0 Appeal of a June 13, 2011, summary judgment granted in favor of Bank of America, NA, against Momodu Ahmed Kabba (hereinafter Kabba) and his wife Humu Hawah Kabba (defendant below). This Court retained the matter on August 18, 2011. Kabba appeals the granting of Summary Judgment asserting Bank of America, NA, did not have standing to bring the action.

REVERSED AND REMANDED WITH INSTRUCTIONS

A. Grant Schwabe, KIVELL, RAYMENT AND FRANCIS, Tulsa, Oklahoma, for Plaintiff/Appellee.
James P. Cates, BAER TIMBERLAKE COULSON & CATES, PC, Oklahoma City, Oklahoma, for Plaintiff/Appellee.
J.R. Matthews, J R MATTHEWS LLC, Oklahoma City, Oklahoma, for Defendant/Appellants.

COMBS, J.

FACTUAL AND PROCURAL HISTORY

¶1 In a petition filed on March 11, 2010, Bank of America, NA, claiming to be the present holder of the note (hereinafter Bank of America) initiated a foreclosure action against Kabba and his wife. Bank of America claimed, at that time, to hold the note and mortgage as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2. A review of the note shows a blank indorsement. This blank indorsement was filed with the lower court for the first time in the motion for summary judgment. The blank indorsement was not mentioned or referenced in the original petition.

BNC Mortgage, Inc., was the original lender. Bank of America filed with the Court Clerk of Cleveland County, a document entitled “Assignment of Real Estate Mortgage” on January 17, 2011, therein claiming the assignment to be effective as of February 9, 2010. This was nine months after the filing of the petition to foreclose. Additionally, this “Assignment of Mortgage,” signed by Mortgage Electronic Registrations Systems, Inc. (hereinafter MERS), as nominee for BNC Mortgage, Inc., and its successors and assigns, merely named Bank of America as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2. There was no mention of the note in this “Assignment of Mortgage”. On June 13, 2011, Summary judgment was granted and memorialized by a Final Journal Entry of Judgment order in Bank of America’s favor, against Kabba and his wife. Kabba appeals this summary judgment asserting Bank of America failed to demonstrate standing.

STANDARD OF REVIEW

¶2 An appeal on summary judgment comes to this court as a de novo review. Carmichael v. Beller, 1996 OK 48, ¶2, 914 P.2d 1051, 1053. All inferences and conclusions are to be drawn from the underlying facts contained in the record and are to be considered in the light most favorable to the party opposing the summary judgment. Rose v. Sapulpa Rural Water Co., 1981 OK 85, 621 P.2d 752. Summary judgment is improper if, under the evidentiary materials, reasonable individuals could reach different factual conclusions. Gaines v. Comanche County Medical Hospital, 2006 OK 39, ¶4, 143 P.3d 203, 205.

ANALYSIS

¶3 Appellant argues Appellee does not have standing to bring this foreclosure action. Although Appellee has argued it holds the note, there is nothing in the record that shows when Appellee became the holder. The face of the note indicates it was indorsed in blank. However, this indorsement was not filed with the petition but with the motion for summary judgment. The purported “Assignment of Mortgage” was filed after the filing of the foreclosure proceedings and was signed by MERS, and not BNC Mortgage, Inc. The “Assignment of Mortgage” at no time mentioned the note.

¶4 The issue presented to this Court is standing. This Court has previously held:

Standing, as a jurisdictional question, may be correctly raised at any level of the judicial process or by the Court on its own motion. This Court has consistently held that standing to raise issues in a proceeding must be predicated on interest that is “direct, immediate and substantial.” Standing determines whether the person is the proper party to request adjudication of a certain issue and does not decide the issue itself. The key element is whether the party whose standing is challenged has sufficient interest or stake in the outcome.

Matter of the Estate of Doan, 1986 OK 15, ¶7, 727 P.2d 574, 576. In Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234, this Court also held:

Respondent challenges Petitioner’s standing to bring the tendered issue. Standing refers to a person’s legal right to seek relief in a judicial forum. It may be raised as an issue at any stage of the judicial process by any party or by the court sua sponte. (emphasis original)

Furthermore, in Fent v. Contingency Review Board, 2007 OK 27, footnote 19, 163 P.3d 512, 519, this Court stated “[s]tanding may be raised at any stage of the judicial process or by the court on its own motion.” Additionally in Fent, this Court stated:

Standing refers to a person’s legal right to seek relief in a judicial forum. The three threshold criteria of standing are (1) a legally protected interest which must have been injured in fact- i.e., suffered an injury which is actual, concrete and not conjectural in nature, (2) a causal nexus between the injury and the complained-of conduct, and (3) a likelihood, as opposed to mere speculation, that the injury is capable of being redressed by a favorable court decision. The doctrine of standing ensures a party has a personal stake in the outcome of a case and the parties are truly adverse.

Fent v. Contingency Review Board, 2007 OK 27, ¶7, 163 P.3d 512, 519-520. In essence, a plaintiff who has not suffered an injury attributable to the defendant lacks standing to bring a suit. And, thus, “standing [must] be determined as of the commencement of suit; . . .” Lujan v. Defenders of Wildlife, 504 U.S. 555, 570, n.5, 112 S.Ct. 2130, 2142, 119 L.Ed. 351 (1992).1

¶5 To commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note and, absent a showing of ownership, the plaintiff lacks standing. Gill v. First Nat. Bank & Trust Co. of Oklahoma City, 1945 OK 181, 159 P.2d 717.2 An assignment of the mortgage, however, is of no consequence because under Oklahoma law, “[p]roof of ownership of the note carried with it ownership of the mortgage security.” Engle v. Federal Nat. Mortg. Ass’n, 1956 OK 176, ¶7, 300 P.2d 997, 999. Therefore, in Oklahoma it is not possible to bifurcate the security interest from the note. BAC Home Loans Servicing, L.P. v. White, 2011 OK CIV APP 35, ¶ 10, 256 P.3d 1014, 1017. Because the note is a negotiable instrument, it is subject to the requirements of the UCC. A foreclosing entity has the burden of proving it is a “person entitled to enforce an instrument” by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 12A-3-309 or subsection (d) of Section 12A-3-418 of this title.” 12A O.S. 2001 §3-301.

¶6 To demonstrate you are the “holder” of the note you must establish you are in possession of the note and the note is either “payable to bearer” (blank indorsement) or to an identified person that is the person in possession (special indorsement).3 Therefore, both possession of the note and an indorsement on the note or attached allonge4 are required in order for one to be a “holder” of the note.

¶7 To be a “nonholder in possession who has the rights of a holder” you must be in possession of a note that has not been indorsed either by special indorsement or blank indorsement. Negotiation is the voluntary or involuntary transfer of an instrument by a person other than the issuer to a person who thereby becomes its holder. 12A O.S. 2001, § 3-201. Transfer occurs when the instrument is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument. 12A O.S. 2001, § 3-203. Delivery of the note would still have to occur even though there is no negotiation. Delivery is defined as the voluntary transfer of possession. 12A O.S. 2001, § 1-201(b)(15). The transferee would then be vested with any right of the transferor to enforce the note. 12A O.S. 2001, 3-203(b). Some jurisdictions have held, without holder status and therefore the presumption of a right to enforce, the possessor of the note must demonstrate both the fact of the delivery and the purpose of the delivery of the note to the transferee in order to qualify as the person entitled to enforce. In re Veal, 450 B.R. 897, 912 (B.A.P. 9th Cir. 2011). See also, 12A O.S. 2001, § 3-203.

¶8 In the present case, Appellee has only presented evidence of an indorsed-in-blank note and an “Assignment of Mortgage.” Appellee must prove that it is the holder of the note or the nonholder in possession who has the rights of a holder prior to the filing of the foreclosure proceeding. In the present matter the timeliness of the transfer is in question. Since Bank of America did not file the blank indorsement until it filed its motion for summary judgment it is impossible to determine from the record when Bank of America acquired its interest in the underlying note.

¶9 The assignment of a mortgage is not the same as an assignment of the note. If a person is trying to establish they are a nonholder in possession who has the rights of a holder they must bear the burden of establishing their status as a nonholder in possession with the rights of a holder. Appellee must establish delivery of the note as well as the purpose of that delivery. In the present case, it appears Appellee is trying to use the “Assignment of Mortgage” in order to establish the purpose of delivery. The “Assignment of Mortgage” purports to transfer “[f]or value received, the undersigned, Mortgage Electronic Registration Systems, Inc., as nominee for BNC Mortgage, Inc., and its successors and assigns does hereby assign, transfer and set over unto Bank of America, National Association as Successor by Merger to LaSalle Bank National Association, as Trustee under the Trust Agreement for the Structured Asset Investment Loan Trust Series 2004-BNC2, that certain real estate mortgage dated August 30, 2004, granted by Momodu Ahmed Kabba and Humu Hawah Kabba, husband and wife….” This language has been determined by other jurisdictions to not effect an assignment of a note but to be useful only in identifying the mortgage. Therefore, this language is neither proof of transfer of the note nor proof of the purpose of any alleged transfer. See, In re Veal, 450 B.R. 897, 905 (B.A.P. 9th Cir. 2011).

¶10 Appellee must show it became a “person entitled to enforce” prior to the filing of the foreclosure proceeding. In the present case, there is a question of fact as to when and if this occurred and summary judgment is not appropriate. Therefore, we reverse the granting of summary judgment by the trial court and remand back for further determinations. If it is determined Bank of America became a person entitled to enforce the note, as either a holder or nonholder in possession who has the rights of a holder after the foreclosure action was filed, then the case may be dismissed without prejudice and the action may be re-filed in the name of the proper party.

CONCLUSION

¶11 It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the note, and to have the proper supporting documentation in hand when filing suit, showing the history of the note, so that the defendant is duly apprised of the rights of the plaintiff. This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418. Likewise, for the homeowners, absent adjudication on the underlying indebtedness, the dismissal cannot cancel their obligation arising from an authenticated note, or insulate them from foreclosure proceedings based on proven delinquency and therefore, this Court’s decision in no way releases or exonerates the debt owed by the defendants on this home. See, U.S. Bank National Association v. Kimball 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

REVERSED AND REMANDED WITH INSTRUCTIONS

¶12 CONCUR: TAYLOR, C.J., KAUGER, WATT, EDMONDSON, REIF, COMBS, JJ.

¶13 DISSENT: WINCHESTER (JOINS GURICH, J.), GURICH (BY SEPARATE WRITING), JJ.

¶14 RECUSED: COLBERT, V.C.J.

FOOTNOTES

1 The dissenting opinion in this matter relies upon Justice Opala’s concurring opinion in Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906, for the proposition that standing is not a jurisdictional question. Justice Opala’s concurring opinion was not the majority opinion of this Court and as such “a minority opinion has no binding, precedential value.” 20 Am.Jur. 2d Courts §138.

2 This opinion was promulgated prior to the enactment of the UCC. It is, however, possible for the owner of the note not to be the person entitled to enforce the note if the owner is not in possession of the note. (See the REPORT OF THE PERMANENT EDITORIAL BOARD FOR THE UNIFORM COMMERCIAL CODE, APPLICATION OF THE UNIFORM COMMERCIAL CODE TO SELECTED ISSUES RELATING TO MORTGAGE NOTES (NOVEMBER 14, 2011)).

3 12A O.S. 2001, §§ 1-201(b)(21), 3-204 and 3-205.

4 According to Black’s Law Dictionary (9th ed. 2009) an allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.” See, 12A O.S. 2001, § 3-204(a).

 

GURICH, J., with whom WINCHESTER, J. joins dissenting:

¶1 I respectfully dissent. In this case, the record indicates that attached to Plaintiff’s Motion for Summary Judgment was an indorsed-in-blank note, an assignment of mortgage, and an affidavit verifying Plaintiff was the holder of the note and mortgage.1 Because the Plaintiff was the proper party to pursue the foreclosure and because the Plaintiff presented the proper documentation at summary judgment to prove such, I would affirm the trial court.

¶2 The majority states that “[t]o commence a foreclosure action in Oklahoma, a plaintiff must demonstrate it has a right to enforce the note, and absent a showing of ownership, the plaintiff lacks standing,” citing Gill v. First Nat. Bank & Trust Co., 1945 OK 181, 159 P.2d 717.2 See Majority Op. ¶ 5. I agree that in any foreclosure action a party must demonstrate it is the proper party to request adjudication of the issues. However, the issue of whether a party is the proper party to request adjudication of the issues is a real-party-in-interest issue, not an issue of “standing,” as the majority frames it. See Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906 (Opala, J., concurring). Justice Opala framed the issue correctly in Toxic Waste Impact Group:

Standing in the federal legal system is imbued with a constitutional/jurisdictional dimension, while in the body of state law it fits under the rubric of ordinary procedure. The U.S. Constitution, Article III, has long been held to require that a “case” or “controversy” is essential to invoke federal judicial jurisdiction and that a person’s competence to bring an action is a core component of standing in a case-or-controversy inquiry. It is for this reason that standing is an integral part of the mechanism for invoking the federal judiciary’s power.

Oklahoma’s fundamental law places no restraint on the judiciary’s power analogous to the federal case-or-controversy requirement. Under the earlier Code of Civil Procedure the suit had to be brought by the real party in interest. That requirement has always been non-jurisdictional. If a state court proceeded to adjudicate a claim pressed by one not in that status, its decision was not fraught with jurisdictional infirmity but rather regarded as erroneous for want of proof to establish an important element of the claim. An error in this category is waivable at the option of the defendant; and, if not asserted on appeal, the reviewing court may reach the merits of the case despite a plaintiff’s apparent lack of standing at nisi prius.

Toxic Waste Impact Group, Inc. v. Leavitt, 1994 OK 148, 890 P.2d 906 (Opala, J., concurring, ¶¶ 2-3) (emphasis added); see also Black Hawk Oil Co. v. Exxon, 1998 OK 70, ¶ 24, 969 P.2d 337, 344 (“Using the term ‘standing’ to designate real-party-in-interest issues tempts courts to apply standing principles outside the context in which they were developed. . . . A defendant is entitled to have the suit against him prosecuted by the ‘real party in interest’ but ‘his concern ends when a judgment for or against the nominal plaintiff would protect defendant from any action on same demand by another.”) (Watt, J., Majority Op.)

¶3 The majority in this case cites Hendrick v. Walters, 1993 OK 162, ¶ 4, 865 P.2d 1232, 1234 and Fent v. Contingency Review Board, 2007 OK 27, n.19, 163 P.3d 512, 519 for the proposition that “standing may be raised at any stage of the judicial process or by the court on its own motion.” See Majority Op. ¶ 4. Those cases cite Matter of the Estate of Doan, 1986 OK 15, ¶ 7, 7272 P.2d 574, as authority for this proposition. Arguably, however, Doan misstates the law:

Ever since the Code of Civil Procedure was replaced in 1984 by the Pleading Code, our nomenclature for identifying the party entitled to sue, which began to follow that of federal jurisprudence, has used “standing” as if it were a functional equivalent of the earlier procedural terms of art–real party in interest, one with appealable interest, one occupying the aggrieved-party or pecuniary-interest status. It was during this transition that one of our opinions inadvertently referred to “standing” in terms of a jurisdictional requirement, thus creating the misimpression that the term has a jurisdictional dimension. Oklahoma’s constitution has no case-or-controversy clause. Standing is hence to be viewed as an adjective-law concept. The inadvertent reference to the contrary should be treated as ineffective to alter standing’s true character in the body of our procedural law.

. . . .

I concur in today’s opinion and in the disposition of the cause. If I were writing for the court, I would additionally declare that Doan’s inadvertent reference to federal law is to be viewed as withdrawn. Lujan’s tripartite standing test, which we adopt today, must be treated as having been received sans its federal jurisdictional baggage.

See Toxic Waste Impact Group, 1994 OK 148 (Opala, J., concurring ¶ 4).

¶4 Additionally, both Hendrick and Fent were original actions in this Court. As such, “standing” could have been raised at any point by this Court sua sponte. However, in a proceeding in District Court, because it is a non-jurisdictional issue, failure to assert that the Plaintiff is not the real party in interest may be waived. See Liddell v. Heavner, 2008 OK 6, n.5, 180 P.3d 1191 (Opala, J., Majority Op.); see also 12 O.S. 2012 § 2008(D).

¶5 In this case, the facts demonstrate that the Defendant argued below that Plaintiff did not have a stake in the foreclosure and was not the real party in interest. As such, the issue was properly appealed. However, the facts also demonstrate that the Plaintiff was in fact the real party in interest and was the proper party to pursue the foreclosure. 12 O.S. 2012 § 2017. As such, I would affirm the trial court.

¶6 The majority also holds that a foreclosing party must have the “proper supporting documentation in hand when filing suit.” See Majority Op. ¶ 10 (emphasis added). Oklahoma pleading procedure does not require a plaintiff to have all evidence necessary to prevail on its claim at the time of the filing. Rather, what is required is a “short and plain statement of the claim showing that the pleader is entitled to relief.” 12 O.S. 2012 § 2008(A)(1). Additionally, 12 O.S.2012 § 2011(B)(3) provides that an attorney filing anything with the court certifies that to “the best of the person’s knowledge, information and belief, formed after an inquiry reasonable under the circumstances . . . the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery.” 12 O.S. 2012 § 2011(B)(3) (emphasis added).3

¶7 Mortgage foreclosures, like other civil actions, allow the parties to continue to investigate and discover evidence up until the time of judgment. In this case, the Plaintiff continued to investigate its claim up until the time of summary judgment. At the time of summary judgment it offered sufficient proof to the trial court that it had the right to foreclose on the mortgage.4

¶8 Plaintiff satisfied its burden of proof, and the trial court was correct in sustaining the motion and granting judgment to the Plaintiff. On appeal where no evidence indicates otherwise, there is a presumption that the judgment of the trial court conforms to the proof present at the trial. Gilkes v. Gilkes, 1964 OK 28, 389 P.2d 503. I cannot agree with the majority’s holding that the plaintiff must have the “proper supporting documentation in hand when filing suit” because no authority states such and the Oklahoma pleading code requires otherwise. The procedure imposed by the majority in this case will result in delay, will not affect the inevitable outcome of foreclosure, and will increase the homeowner’s debt. 5

FOOTNOTES

1 The record also indicates that the Defendant filed an answer and counterclaim pro se, but was later represented by counsel who filed a Combined Response and Objections to Plaintiff’s Motion for Summary Judgment and a Counter-Motion for Summary Judgment. At the hearing on the motions, the trial judge considered arguments of Counsel for the parties and reviewed the evidentiary materials offered, including the original note, the original mortgage, the assignment of the mortgage, and the affidavit.

2 In Gill, the plaintiff brought an action to foreclose a mortgage on real property. There was no discussion in the case of whether the plaintiff had standing to bring the action or whether the plaintiff was the real party in interest. In fact, the case was tried to the Court, and the appeal turned on the sufficiency of evidence presented at trial. The Gill decision stands for the proposition that the assignment of the note carries with it an assignment of the mortgage. It is not relevant to the standing analysis, nor does it stand for the proposition that the plaintiff must prove at the time of filing that it has a right to enforce the note.

3 Likewise, while I agree that the UCC applies in this case because the note is a negotiable instrument, the UCC does not require that a foreclosing entity prove at the time of filing that it is the person entitled to enforce the instrument.

4 Rule 13 of the Rules for District Courts permits a party to file evidentiary material with a motion for summary judgment. In this case, Plaintiff offered an indorsed-in-blank note, an assignment of mortgage, and an affidavit verifying Plaintiff as the holder of the note and mortgage.

5 On remand, rather than dismiss the petition, the trial court may allow the Plaintiff to amend its petition. HSBC Bank USA v. Lyon, 2012 OK 10, ¶ 1, __ P.3d __.

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L. Randall Wray: Secret Deals, Foreclosure Settlements, Stress Tests and Vampire Squid Whistleblowers

L. Randall Wray: Secret Deals, Foreclosure Settlements, Stress Tests and Vampire Squid Whistleblowers


HuffPo-

No Hollywood scriptwriter could plot a more implausible story. Here is the plotline sequencing:

  1. Bankers make NINJA loans, securitize them, and sell on to government GSEs
  2. Bankers destroy all the loan documents and begin random and fraudulent foreclosures, throwing millions of innocent victims out on the street
  3. GSEs sue bankers and force them to take back bad mortgages
  4. Bankers sell servicing rights for the same bad mortgages back to GSEs, who overpay
  5. GSEs resell servicing rights to companies run by former GSE officials
  6. Bankers slapped on wrist with puny foreclosure settlement in return for government promise it will never sue them for past foreclosure fraud
  7. Government stress test claims banks are healthy
  8. Bankers get sweet deal, counting mortgage mods for best borrowers toward the settlement
  9. HUD report released demonstrating massive foreclosure fraud that reached to highest levels of banks
  10. Vampire Squid Executive Director fires off resignation letter decrying bankster culture
  11. Banksters walk away scott-free as statute of limitations runs out for criminal behavior

This would have to be a fantasy because no one would ever believe it could have been true...

[HUFFINGTON POST]

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Barofsky & Stoller: Don’t Believe Hype About $25B Mortgage Settlement

Barofsky & Stoller: Don’t Believe Hype About $25B Mortgage Settlement


by on Mar 15, 2012

March 15 (Bloomberg Law) — The $25 billion mortgage settlement between lenders and state attorneys general won’t help nearly as many people as its touted to, Neil Barofsky, the former Special US Treasury Department Inspector General for the Troubled Asset Relief Program (TARP), tells Bloomberg Law’s Lee Pacchia. He’s joined by Matthew Stoller, a fellow at the Roosevelt Insitute, who says the government and banks delayed filing details of the settlement to give investors less time to challenge the deal in court.

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Matt Stoller: Robosigning Still Going on at Wells Fargo, Reports HUD Inspector General

Matt Stoller: Robosigning Still Going on at Wells Fargo, Reports HUD Inspector General


Naked Capitalism-

I’ve been going over the mortgage settlement documents over the past few days – a lot has been released, with many implications.  There is plenty to criticize.  Subprime Shakeout has a great summary, and David Dayen has done a wonderful job going through the nitty gritty.  Abigail Field has a spectacular review of the problems with the servicing standards.  I’ll make a few criticisms of my own below.  But I think the most interesting parts of the document release were the HUD Inspector General reports on the five banks and the DOJ complaint.  What these prove is what we’ve always known – the law enforcement community knew exactly what these banks were doing.  DOJ simply chose not to prosecute.  There was intent to defraud, fraud, and frankly, according to HUD.

In fact, it’s not clear that the past tense is the correct tense to use.  The Wells Fargo report is particularly interesting on that last point.  Take it away, HUD OIG (italics are mine).

At the time of our review, affidavits continued to be processed by these same signers, who may not have been qualified, and these signers may not have adequately verified certain figures because they accessed a computer screen of data showing a compilation of figures instead of verifying the data against the information through review of the books and records kept in the regular course of business by the institution.

I’m sorry, but WHAT THE $&*@!?!?

[NAKED CAPITALISM]

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DE, MA & NY resolve some claims in MERS suits

DE, MA & NY resolve some claims in MERS suits


HW-

The nation’s five biggest banks will pay $25 million to the New York attorney general’s office to settle certain claims related to the use of Mortgage Electronic Registration Systems.

The agreement with New York Attorney General Eric Schneiderman releases Bank of America ($8.84 0.35), Citigroup ($35.21 -1.24), JPMorgan Chase ($43.58 0.19), Wells Fargo ($33.37 0.04) and Ally Financial from certain claims of robo-signing foreclosure documents.

Schneiderman sued Bank of America, JPMorgan and Wells Fargo, as well as MERS, in early February. The AG’s office said in the complaint the banks “created the MERS system as an end-run around the property-recording system.”

MERS is not involved in the agreement, and a company spokeswoman declined to comment.

Continue to read up on DE & MA … [HOUSING WIRE]

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HUD: Bank Of America Notary went from 60 Documents to 20,000 per day

HUD: Bank Of America Notary went from 60 Documents to 20,000 per day


HUD OIG Report | Bank of America Corporation Foreclosure and Claims Process Review


[ipaper docId=85365683 access_key=key-1fsf4lmx3b4vkbct4k9u height=600 width=600 /]

 

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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HUD: CitiMortgage Notaries did not witness signatures, Attorneys may have improperly prepared documents

HUD: CitiMortgage Notaries did not witness signatures, Attorneys may have improperly prepared documents


HUD OIG Report | CitiMortgage, Inc. Foreclosure and Claims Process Review


[ipaper docId=85365712 access_key=key-csoceh86p97oisriqb8 height=600 width=600 /]

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