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Title Issues? Defective Paperwork? Banks Pay Homeowners to Avoid Foreclosures

Title Issues? Defective Paperwork? Banks Pay Homeowners to Avoid Foreclosures


Cecala of Inside Mortgage Finance said he wonders whether lenders are making big payments on properties with underlying title problems. Evan Berlin, managing partner of Berlin Patten, a real estate law firm in Sarasota, Florida, said representatives of a large bank told him the incentives are primarily given to borrowers when it doesn’t have the proper paperwork needed to win its foreclosure case. He declined to name the bank for publication.

Prashant Gopal-

Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.

Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.

Losses for lenders are about 15 percent lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody’s. The deals accounted for 33 percent of financially distressed transactions in November, up from 24 percent a year earlier, said CoreLogic Inc., a Santa Ana, California-based real estate information company.

Karen Farley hadn’t made a mortgage payment in a year when she got what looked like a form letter from her lender.

“You could sell your home, owe nothing more on your mortgage and get $30,000,” JPMorgan Chase & Co. (JPM) said in the Aug. 17 letter obtained by Bloomberg News.

[BLOOMBERG]

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AG Coakley Issues Statement on the SJC Decision in Bevilacqua v. Rodriguez – “This case is just one example of a much larger problem”

AG Coakley Issues Statement on the SJC Decision in Bevilacqua v. Rodriguez – “This case is just one example of a much larger problem”


Contact:

Melissa Karpinsky
Amie Breton
(617) 727-2543

MARTHA COAKLEY
ATTORNEY GENERAL

October 18, 2011 – For immediate release:
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AG Coakley Issues Statement on the SJC Decision in Bevilacqua v. Rodriguez

 

BOSTON – A decision by the Massachusetts Supreme Judicial Court (SJC) today in Bevilacqua v. Rodriguez, reaffirmed that a mortgage holder must have both “jurisdiction and authority” –a valid assignment of mortgage – in order to foreclose on a property.Attorney General Martha Coakley issued the following statement:

“This case is just one example of a much larger problem. In the rush to foreclose, the banks’ reckless origination and foreclosure practices have created a domino effect that has harmed Massachusetts homeowners as well as third-party purchasers who purchased properties after foreclosure. 

This is yet another clear demonstration that the only way we are going to restore a healthy economy is to address the foreclosure crisis and hold the banks accountable for their actions.”

BACKGROUND:

This case determined that because U.S. Bank did not hold a valid assignment of the mortgage at the time it initiated foreclosure proceedings, it failed to acquire title.  As a result, not only did U.S. Bank foreclose without legal authority to do so, but its failure means that it was unable to transfer clear title to Mr. Bevilacqua.

As the SJC recently observed in U.S. Bank, N.A. v. Ibanez, many investors in the secondary mortgage market ignored longstanding requirements of Massachusetts law concerning when and how a mortgage holder may exercise its right to foreclose, resulting in numerous invalid foreclosures.

Mr. Bevilacqua was a third-party purchaser of property that was foreclosed upon by U.S. Bank prior to the Land Court’s initial decision in Ibanez.  Mr. Rodriguez is the prior mortgagor.  Because U.S. Bank did not hold a valid assignment prior to commencing foreclosure proceedings the foreclosure was deemed invalid. U.S. Bank foreclosed without legal authority and was unable to transfer clean title to Mr. Bevilacqua.  

Bevilacqua brought an action under the so-called “try title” statute because the Ibanez decision had clouded Bevilaqua’s claim to the property.  It allows the holder of a clouded title to initiate an action to clear title without waiting for adverse claimants to sue first.  The try title process provides that if adequate notice is issued and an adverse claimant fails to respond then the petitioner may obtain an order barring that claimant from ever challenging the petitioner’s right to title. 

The Land Court denied Bevilacqua’s petition, ruling that one seeking to use the try title process must have at least a plausible claim to the title.  The Court ruled that Bevilacqua has no such claim to title where he acquired a deed following an invalid foreclosure.  The Land Court held that Bevilacqua acquired whatever it was that U.S. Bank had to sell as of the foreclosure.  Because, per Ibanez, at the time of the foreclosure, the bank held nothing, Bevilacqua acquired nothing and had no standing as a result. 

Today, the SJC affirmed the Land Court decision and reaffirmed the essential holdings of Ibanez: that the mortgage holder must have a valid assignment of mortgage in order to foreclose on a property. The Court also held that one cannot use the try title process to extinguish the right of redemption – a mortgagee can only foreclose by strict adherence to the statutory processes for foreclosure by exercising the power of sale or foreclosure by entry.

The Attorney General’s Office filed an amicus brief in this case in April 2011 and presented oral arguments before the SJC on May 2, 2011.

 

 

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Guest Post: Houston, we’ve got a problem – Bevilacqua

Guest Post: Houston, we’ve got a problem – Bevilacqua


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On Oct. 18th, 2011 the Massachusetts Supreme Judicial Court handed down their decision in the FRANCIS J. BEVILACQUA, THIRD vs. PABLO RODRIGUEZ – and in a moment, essentially made foreclosure sales in the commonwealth over the last five years wholly void. However, some of the more polite headlines, undoubtedly in the interest of not causing wide spread panic simply put it “SJC puts foreclosure sales in doubt” or “Buyer Can’t Sue After Bad Foreclosure Sale

In essence, the ruling upheld that those who had purchased foreclosure properties that had been illegally foreclosed upon (which is virtually all foreclosure sales in the last five years), did not in fact have title to those properties.

Given the fact that more than two-thirds of all real estate transactions in the last five years have also been foreclosed properties, this creates a small problem.

The Massachusetts SJC is one of the most respected high courts in the country, other supreme courts look to these decisions for guidance, and would find it difficult to rule any other way in their own states. It is a precedent. It’s an important precedent.

Here are the key components of the Bevilacqua case:

1. In holding that Bevilacqua could not make “something from nothing” (bring an action or even have standing to bring an action, when he had a title worth nothing) the lower land court applied and upheld long-standing principles of conveyance.

2. A foreclosure conducted by a non-mortgagee (which includes basically all of them over the last five years, including the landmark Ibanez case) is wholly void and passes no title to a subsequent transferee (purchasers of foreclosures will be especially pleased to learn of this)

3. Where (as in Bevilacqua) a non-mortgagee records a post-foreclosure assignment, any subsequent transferee has record notice that the foreclosure is simply void.

4. A wholly void foreclosure deed passes no title even to a supposed “bona fide purchaser”

5. The Grantee of an invalid (wholly void) foreclosure deed does not have record title, nor does any person claiming under a wholly void deed, and the decision of the lower land court properly dismissed Bevilacqua’s petition.

6. The land court correctly reasoned that the remedy available to Bevilacqua was not against the wrongly foreclosed homeowner but rather against the wrongly foreclosing bank and/or perhaps the servicer (depending on who actually conducted the foreclosure)

When thinking about the implications of Bevilacqua – the importance of point six cannot be overstated.

The re-foreclosure suggestion is not valid

Re-foreclosing on these properties in not likely as has been suggested by bank layers in light of the Bevilacqua ruling. We aren’t talking about Donald Trump here and we have a funny feeling he won’t be affected either. Mostly it’s guys like Bevilacqua who bought single or multi units, in the “hundreds of thousands” range. It seem unlikely that the majority of these folks would have the capital to eat their existing loses, re-foreclose at great expense, and on top of all of that come out as the highest bidder on the very property they formerly thought was their own. In many cases, as was the case in Bevilacqua, the original purchaser of the foreclosure may have already resold the property and moved on, thus leaving in their wake an even more serious problem; the likelihood of a property owner, who had nothing directly to do with a foreclosure, but is left with all the fallout of a post-Bevilacqua world.

Perhaps some enterprising young American will come up with some unscripted video series called “foreclosures gone wild”, that features foreclosure buyers spontaneously revealing the anatomy of their profane foreclosure deals in front of smart phones recording in HD video – some direct marketing firm could then make it available on some late night infomercial app where it will get billions of downloads on Ipads. We think this highly original (never before seen) business idea should be promptly explored.  Surely there will be high demand coming from iPad owners in small Scandinavian countries where connoisseurs of vintage 2000-2006 MBS products reside in high concentrations.

All fun aside, re-bidding on these properties in a post-re-foreclosure scenario would be done in what is soon to be a new inflationary environment (most originally bid in a deflationary environment for housing), thus making the “re-foreclosure” blank threat all the more unconvincing and unlikely.

However, it should be easy enough for investors similarly situated to Bevilacqua to simply hire fee contingent attorneys who can promptly sue the banks and servicers for conveying fraudulent deeds – that seems like a much easier and logical proposition. When the potentially millions of lawsuits are added to the complaints filed by investors in MBS, we think the banks will finally be revealed as wholly insolvent. The only other way it could happen faster, is if the average American home owner, realizing he may never obtain clear title to his home (short of an indemnity from his bank), finally stops making his monthly payments on his invalid note (which completely lacks a valid security instrument). In this way, the existing insolvency of banks would be recognized in a matter of days rather than months or years.

The act of denial does not actually alter reality

Ostriches are said to have discovered this the hard way. On November 12th, 2010 in our article “Tattoos, Pyramid Schemes and Social Justice” we advocated that home owners, with securitized mortgages, regardless of their ability to pay, consider suspending their mortgage payments, and place those funds into a private escrow account instead. We wrote:

“Radical though it may seem, we believe the only way to stop the chaos of fraud and the breakdown of the rule of law in our courts, and most importantly to ensure that we ourselves are not participants in the fraud, is for homeowners who can afford their mortgage to stop paying it…”

The article goes on to say:

“For example, what is easier; to scorn those who are being foreclosed on because they can no longer afford their mortgage or to accept the possibility that our entire financial, and maybe justice system might be badly corrupted? Across all spectrums of crime, victims are often blamed, just ask attorneys who represent rape victims. This phenomenon is by no means unique to mortgage fraud, or those who have been raped by the institutions who carry out this trade. It has been made to appear as if those who have fallen on hard times are a matter of “incidental” inequalities in an otherwise procedurally just system. However, it is precisely the opposite which is true. Our financial institutions have created deliberate inequalities, through the use of procedurally unjust systems.”

We pointed out that suspending such payment might be done for the following reasons, which in light of the recent Bevilacqua decision, and the pending Eaton Decision, are increasingly being proven correct:

“1. They are not sure where or if their payments are going to the true note holder.

2. They no longer know who the true note holder is.

3. They have a legitimate concern that they may not be able to ever obtain clear title and/or title insurance (in the event of a sale) given what we now know about improperly conveyed titles and the illegitimacy of “MERS”.

4. They do not want to be an unwitting or passive participant in fraud.

5. They care about America, want our culture to be healed and recognize the dignity of every human being.”

Long before the Ibanez decision was handed down we wrote the following (taken from the same article):

“If these legitimate reasons are the cause to suspend mortgage payments, then what attack on these “non-co-operators” character can be levelled? In these cases, Judge’s will have to allow for proper civil procedure to take place in order for the legitimate inquiries of concerned Americans to come to light. Since banks virtually never produce adequate documentation (which appears to be by design), chances are things will escalate.”

We went on to discuss the unique risks of apathy and denial in the following:

“…Americans have a duty to ask critical questions about the operations of their financial institutions, and if evidence has been presented that a deal was made, but not everyone was playing by the rules, than those deals need to be looked at again. It is not good enough any longer to say, if it doesn’t affect “me” than, I’m not getting involved. We have a duty to one another as Americans, and more importantly as human beings, to care about truth and justice. What’s more, apathy, so long as we are not affected, is a short lived consolation. Ultimately, this crisis will affect everyone sooner or later.”

Certainly when the SJC handed down their opinion affirming Bevilacqua, perhaps hundreds of thousands, and ultimately millions of people who previously thought they were not affected, were suddenly well, affected. That is because there has been about six million foreclosures since the current economic crisis began, and those foreclosures may have resulted in many more interested parties, as was the case in Bevilacqua, who sold the subject property to four new owners, thus multiplying the number of parties involved, and ultimately the number of legal actions which could be brought. It is not hard to see where six million voided foreclosures might well result in new lawsuits in excess of that number – and if the courts advice is taken, these complaints would be directed, and properly so, at banks and servicers.

We expanded greatly on the themes of fraud, denial, and the likely economic consequences in our articles “Ibanez – Denying the Antecedent, Suppressing the Evidence and one big fat Red Herring” and “Eaton – Dividing the Mortgage Loan and Affirming the Consequent” which covered the other two recent landmark SJC cases – these may be worth reading in tandem with the present article in order to understand the full breadth of the problem.

In the Ibanez article, which was written in January of this year we wrote the following:

“If you live in Massachusetts and your mortgage has been securitized, or if you have purchased a foreclosure property, we think it would be wise to consider suspending your mortgage payments if you haven’t already.”

We believe these particular words have become incredibly relevant given the implications of Bevilacqua.

Finally, In our article “On the ethics of mortgage loan default” we tried to cover any outstanding inhibitions homeowners might have about the advice we were giving.

A few phone calls opens a whole new world

We decided to call a few title insurance companies to get their “take” on it all. We made the mistake of identifying ourselves as “bloggers” in the first phone call – that call may well have set a new land speed record for the fastest time from answering to hanging up. Thinking there might be a smarter approach, we decided to identify ourselves as homeowners (equally true) on the next call – the results were a little better, but only slightly.

The underwriters and title examiners we spoke to kept asking if we were attorneys, or if we represented the home owner as “council”. We thought this was curious because we kept pointing out that we were ourselves just homeowners. Then it hit us, they have never actually spoken to a real, live, breathing customer on the policy origination side, they had only ever spoken to lawyer-brokers. We thought; what an interesting confluence of incentives this must create, and why is the buyer of the policy necessarily so far removed from the seller?

the_money_trailFollow the money trail – that’s what they say. Looking for answers, follow the money trail. What is the one piece of the equation upon which all else hinges? It’s not the lawyers, it’s not the judiciary, the answer lies in the investment banks – but they must first pass through the gatekeepers of real estate; title insurance companies. To understand the problem does require some understand of law, but really mostly it’s an understanding of finance and of business that is required above all else. Money in this case, cannot pass from bank depositor, to banker, to bank borrower in real estate transactions without the all-important “title insurance policy”.

So maybe there will be a happy ending after all, for once upon a time didn’t the likes of AIG insure a whole lot of CDS’s for Goldman Sachs who was then paid 100 cents on the dollar (in a 43 cents on the dollar world)? That worked out well – just think of the benefits of insurance – AIG is still around, Goldman’s stock price went on to quadruple in the following 18 months. The cost was relatively low, and mostly out of sight – voluntary shareholders in AIG were emancipated from their money-investment in AIG stock, and were swiftly replaced with involuntary shareholders – also known as; tax payers. It’s the bankrupt companies definition of “preferred” shareholder – although it veers slightly from the traditional one.

bridge_jumpingSo does it matter what lawyers, bankers, bloggers and judges think? This is America and America is all about business, and in this case, business cannot be transacted without title insurance companies, and the good thing about insurances companies is they have actuaries, and actuaries calculate risk, this is especially important since the banking community has proven that they either cannot calculate risk or are not interested in doing so. Actuaries are not exciting people, they are number crunchers, they don’t do bridge jumping and they would never take inordinate risk, right?

The insurance business is interesting, even if their actuaries aren’t’. That’s because it’s really not about making money off writing policies, anyone who knows the insurance business (or has read a 10Q, an annual report or listened to a conference call of one) knows that insurance companies make their money from investing the “float“, that is to say the funds held in trust between the time policy revenue is paid in, and the time claims are paid out. It’s a good business, in fact it is so good – almost everyone wants in. this business has become so robust that it even supports its own cottage industry in off-shore jurisdictions where the return on the “float” can even go untaxed – or did you think those insurance executives jets just happened to have Bermuda, The British Virgin Islands, and the Caymans stuck in their GPS just because those places have nice beaches? Although we concede they also have very nice beaches.

Needless to say it’s an even better business, when you almost never have to pay out on a policy. Title insurance is unique in that way. Even the SJC conceded in Bevilacqua that this sort of “Try Title” action had not been presented before the SJC in over a hundred years. In fact, business is so good, that there is really no entry on the Profit and Loss statement of these firms for marketing expense – when was the last time you saw a TV ad, or an AD on the Internet for a title insurance company which had a better product at a better price? There is no Geico Gecko for the title insurance business.  For that matter, don’t hold your breath on finding a deal on title insurance through Groupon either.

This piqued our interest. We were so drawn to the prospect that the answers to a multi-trillion dollar question may lie in this little known, little observed, obscure industry that we decided to pick up the phone and call a few title examiners, underwriters and brokers. What we learned was nothing short of fascinating. First they all clammed up and didn’t want to talk SJC cases. Second, they affirmed, after a bit of cajoling, that they will write a policy if any servicer gives them a “pay off” letter – we’re talking a one page letter from one perfect stranger to another – insuring ownership in hundreds of thousands if not millions of dollars in real property (per transaction), and of course trillions at the nation level. This one pager could then be recorded at any local registry with precisely zero oversight.

In a world where you can’t take hair conditioner on to a flight (even in all your barefoot glory), it turns out anybody can record title to a property worth large sums with absolutely no oversight or security checks. Frankly, we’re beginning to feel like we’ve been in the wrong business all these years.

the_matrix_3When pressed on the Eaton case, and the fact, that servicers cannot actually discharge anything (as Green Tree Servicing, LLC admitted in the uber-important Eaton case), certainly not the debt, most hung up the phone quickly – although we were exceedingly polite, professional and even gentle in our approach. These conversations, where something like being in the twilight zone. Just when we thought we had contemplated the last layer of the onion, we couldn’t believe it, with just a few phone calls, the matrix of lies came streaming down before our face yet again, like vertical lines of green computer code – apparently the underwrites took the wrong pill.

How hard would it be for the title examiners and underwriters to simply go deeper than one page, or contemplate the importance of the decisions coming out of the land court and the SJC?

The failure to perform risk assessment in the insurance underwriting business really means a lapse in fiduciary responsibility. The Absence of fiduciary responsibility means the possibility of shareholder class action lawsuits.

Conflict of Interest? You think?

So if the insurance business isn’t about making money on writing policies (predicated on sound actuarial work), and if an insurance company can even lose money on underwriting as many often do, and still make a profit by investing “the float”, then there may be an incentive to write policies, that reflect less than prudent risk management – that is to say losses on the underwriting side of the business would be made up on the investment side. As long as this is successful, shares in these companies can be sold to investors. The best investors are large funds like mutual funds because they buy in large junks of shares, are run by investment managers who are generally not very shrewd, and they hold long enough for insiders to sell. Large mutual funds are also the ideal investors because they have a steady stream of cash from IRA’s and 401k’s. IRA’s and 401k’s are steady sources of cash to mutual funds because most of those folks who were wise enough to envision saving, were also determined to buy and own a home (rather than rent one), thinking (perhaps wrongly), that it represented a sound investment. In this way, the loop from policy purchaser, to indirect title insurance company shareholder is complete. It’s almost like a double tax on the unsuspecting home purchaser, which is subtle and goes almost entirely undetected. That’s is why most homeowners have no clue who their title insurance company is, but can tell you in half a second who insures their car, their health care, or their home.

So what sort of investments are the investment managers at insurance companies making? Well, we know the insurance culture isn’t fond of extreme sports, and as it turns out their not very enterprising when it comes to their investments either – let’s just say their passive, they like fixed income, you know, a few muni’s, maybe some treasuries, but above all, they like commercial bonds for their fixed income (and perceived safety), especially those which are derived from Residential Mortgage Backed Securities, or RMBS’s. The feeders of these funds – the mortgage origination and securitization industry, is none other than their very own customers – think of it as one big happy love triangle, or if you happen to live in Utah and prefer their par lance “plural marriage”. The title insurance companies, the mortgage origination and securitization industry and policy purchasers are like sister wives. Of course the husbands in these relationships of Asymmetrical Power, are the alchemists of the modern era, they are the engineers of derivatives, and they hide behind curtains in tall shiny buildings in an emerald city called wall street, turning their Copper into Gold.  For more on this activity, it might be worth reading the article “Three Card Monte and other efficient ways of parting with your money

Historically, title insurance companies almost never pay out. When was the last time you heard of a title insurance policy actually being used? Over the decades, it was nothing more than a simple entry on the closing HUD statement when real estate was bought or sold. Homeowners didn’t’ “shop” the policy, and they had no idea that when it showed up on their closing statement, that their lawyer was also a broker for the title insurance company, collecting some 70% of the premium – if they knew that, than they would know that their attorney might also have a conflict of interest when he oversaw / received the title exam, and the selection of the policy. Finding a defect or cloud on title in this circumstance meant no policy and therefore no commission – so the closing attorney’s themselves were incentivized not to scrutinize too much – and why was this agency relationship never revealed? Isn’t that in direct opposition to consumer protection laws?

So why were those underwriters so quick to get off the phone, as soon as we “dug a little deeper” into their criteria? Well, it’s because their options don’t look too good – in fact there are only two:

a) Acknowledge that the titles to 60 mln. plus homes are badly clouded and not insurable. In which case the entire operation of writing policies, taking in premiums, investing the float in MBS’s, so that mutual funds can take in funds from various and sundry retirement accounts of home owners and buy your stock suddenly stops.

b) Pretend like your not aware of the problem and deny or use the more complex version “deny, deny, deny”.  In this operation, business can continue, at least for a while – although when the final reckoning comes, the problems will be many orders of magnitude larger.

We believe plan “B” has been the modus operandi of the industry for sometime now. However, like all parties, and indeed everything which has a beginning, this too must come to an end.

Title insurance underwriters and drug addicts; just likes peas in a pod

enabler2Why is the role of insurance companies in all of this not more closely examined? If it was an addiction we were speaking of (and maybe it is), we could think of the insurers as the “enablers”, and as any good interventionist, support group, or sponsor will tell you, the enabler is as much of an addict as the addict themselves.

But what is the addiction? In a way it’s money, but in another way it’s something more than that. It’s really power. Money of course, is power, because at the end of the day, its really a redemption slip on society, and when you possess many of these tiny slips of paper, you effectively have much you can ask of the society around you – and that is power. The Alchemist-Engineers know this, so the jig in title insurance is really no different than the funny business that took place during the “Golden Age” of loan origination – they both follow what we might call the “the Mozilo principle”.

How could we look at the addicts without looking at the enablers? Where are the insurance regulators? We marveled at the discovery that there may well exist an entire insurance industry that is predicated upon the complete lack of any sort of actuary role in it’s calculation of risk, or oversight in it’s conduct of business, an entire sub-species of the insurance animal where policy payouts are unheard of. In such an industry it’s easy to imagine that there would be total lethargy, apathy, and greed and accordingly there is.

Further to this point, it’s important to note that Bevilacqua did not just turn up yesterday, he turned up five years ago – his case was never really a true legal question, it was always a business question.  It seems more business is conducted inside a court room than in marketplaces nowadays – we wonder what the chinese must be thinking of the efficiency of this model.

It could all come tumbling down suddenly

The banks settlement negotiations with the 50 states AG has focused on refinancing as a solution; why? Because refinancing ratifies, and puts good paper over bad fraudulent paper. As pointed out in “On the ethics of mortgage loan default” – that’s a bad deal for homeowners. Taking an asset with bad pricing, and which had a commensurate and corrupt security interest, and improving and perfecting the security through “refinancing”, but leaving the bad pricing in place (which is a direct derivative of fraud) is not a good deal for the homeowner. For a modest decrease in the monthly mortgage payment, the homeowner pays the price of somebody else’s fraud (although he may not know it).

Further it may be a mistake to speak of buyers of these foreclosure properties as “innocent third parties” as the banks suddenly (at least since Bevilacqua emerged) are fond of doing. Is this characterization really accurate? We know that about two-thirds of real estate transactions over the years have been foreclosure properties; we also know that a good deal of those transactions were cash deals. Does that sound like “the Joneses” to you?

The buyer of a foreclosure is somewhat more enterprising than his average home buying family man cousin who buys a home because he happens to like it. The buyer of a foreclosure is by definition more of an investor than someone merely looking for shelter. This is especially true in the case at hand – Bevilacqua – who was a developer, and who turned the subject property into four separate units with four separate buyers – probably at a profit to himself, but at great harm to the buyers. In this way, the banks fraud is magnified, through the buyers of foreclosures who are more often than not, enterprising, investment minded persons, with the ability to move at greater speed than the average homesteader.

Of course nearly all home buyers are functioning in some way as investors, in so far as the overwhelming majority are purchasing the largest investment of their life. So the buyer must do proper due diligence, regardless of their place on the investor spectrum. Where there is a failure to do even basic due diligence, there is at least some accountability. However, it is not as great as the accountability of the title insurers, or the bank-sellers, who maintain superior knowledge about the “back-room dealings” of these transactions.

We only point this out so that prospective buyers of foreclosures (and also all homeowners) will pause for a moment and consider the possibilities that Bevilacqua gives rise to. The buyers of foreclosures at least are not entirely innocent as has been suggested by an industry which seeks to persuade a panel of judges and deflect away from itself the possibility of legal reprisals. Why else would the American Land title Association, and the Mortgage Bankers Associations along with their TBL’s (Tall Building Lawyers), spend the time, energy and resources to file lengthy Amici Curiae briefs in Bevilacqua? It was a like a free legal defense for a small-potatoes property developer that no one had ever heard of.

It’s worth contemplating before making out that next mortgage payment. Maybe “home ownership” in the very near future simply means staying right where your at – or in the spirit of the protesters which has gripped our world – “occupying” the house your already in.

Can a valid policy be written on securitized mortgage loans in light of Bevilacqua? Without the enablers, no transactions would or could ever get done. Without policies getting written, no real estate would be transacted, and yet another Pyramid would come tumbling down.
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About Gregory M. Lemelson

Author – Amvona.com blog. Entrepreneur. Find joy in teaching and writing. Founded companies in retail, real estate and Internet technology.

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Mass. SJC: Buyer Can’t Sue After Bad Foreclosure Sale “MERS’ ASSIGNMENT” – In Re: Bevilacqua v. Rodriguez

Mass. SJC: Buyer Can’t Sue After Bad Foreclosure Sale “MERS’ ASSIGNMENT” – In Re: Bevilacqua v. Rodriguez


This goes to show not only does MERS assign after the Complaint/ Lis Pendens is filed, but also after the sale. BS!

The mortgage was assigned to it after the foreclosure sale by Merscorp Inc.’s Mortgage Electronic Registration Systems, a national database of mortgages.

 

Bloomberg-

A Massachusetts man who bought property in a faulty foreclosure sale didn’t have the right to bring a court case over the property because he isn’t the owner, the state’s high court ruled.

The Supreme Judicial Court, which in January found that banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the court ruled.

The high court upheld a lower-court decision that said Francis J. Bevilacqua III, the buyer of residential property in Haverhill, Massachusetts, never owned it because U.S. Bancorp foreclosed before it got the mortgage. Today’s ruling could have implications in the foreclosure crisis in which banks are accused of clouding home titles through sloppy transferring of mortgages.

[BLOOMBERG]

[ipaper docId=69314938 access_key=key-18ddqfod2ifbasotvc52 height=600 width=600 /]

NOTICE: The slip opinions and orders posted on this Web site are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. This preliminary material will be removed from the Web site once the advance sheets of the Official Reports are published. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

Francis J. BEVILACQUA, Third vs. Pablo RODRIGUEZ.
 

SJC-10880.
 

May 2, 2011. – October 18, 2011.

Jurisdiction, Land Court. Land Court, Jurisdiction. Practice, Civil, Parties, Standing, Dismissal. Real Property, Ownership, Record title, Mortgage, Bona fide purchaser. Mortgage, Real estate, Foreclosure, Assignment, Equity of redemption.

CIVIL ACTION commenced in the Land Court Department on April 12, 2010.

The case was heard by Keith C. Long, J.

The Supreme Judicial Court granted an application for direct appellate review.

Jeffrey B. Loeb (David Glod with him) for the plaintiff.

Richard A. Oetheimer (Natalie F. Langlois with him) for Mortgage Bankers Association.

Max Weinstein for WilmerHale Legal Services Center of Harvard Law School.

John M. Stephan & Amber Anderson Villa, Assistant Attorneys General, for the Commonwealth.

The following submitted briefs for amici curiae:

Mark B. Johnson for American Land Title Association.

Adam J. Levitin, of the District of Columbia, Christopher L. Peterson, of Utah, John A.E. Pottow, of Michigan, & Katherine Porter, pro se.

Edward Rainen, Carrie B. Rainen, & Ward P. Graham for Massachusetts Association of Bank Counsel, Inc.

Present: Ireland, C.J., Spina, Cordy, Botsford, Gants, & Duffly, JJ.

SPINA, J.

In this case we must determine whether a plaintiff has standing to maintain a try title action under G.L. c. 240, §§ 1-5, where he is in physical possession of real property but his chain of title rests on a foreclosure sale conducted by someone other than “the mortgagee or his executors, administrators, successors or assigns.” G.L. c. 183, § 21 (statutory power of sale). See G.L. c. 244, § 14 (procedure for foreclosure under power of sale). On his own motion, a Land Court judge determined that the plaintiff, Francis J. Bevilacqua, III, “holds no title to the property at 126-128 Summer Street in Haverhill,” and thus lacks standing to bring a try title action. The judge dismissed the complaint with prejudice and Bevilacqua appealed. We granted Bevilacqua’s application for direct appellate review and now affirm the dismissal of his complaint but conclude that such dismissal should have been entered without prejudice. [FN1]

1. Procedural background. This case comes before us on a highly unusual procedural footing. The respondent, Pablo Rodriguez, has not been located and accordingly has not entered an appearance. As a result, it fell to the Land Court judge to raise the issue of Bevilacqua’s standing under G.L. c. 240, § 1. See Mass. R. Civ. P. 12(h)(3), 365 Mass. 754 (1974) (“Whenever it appears by suggestion of a party or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action”); Maxwell v. AIG Domestic Claims, Inc., ante 91, 99-100 (2011); Sullivan v. Chief Justice for Admin. & Mgt. of the Trial Court, 448 Mass. 15, 21 (2006); Litton Business Sys., Inc. v. Commissioner of Revenue, 383 Mass. 619, 622 (1981). The procedures applicable to such a sua sponte motion in a try title action are unclear and the judge did not specify the rule under which the dismissal was ordered. We have received no briefing on the issue from Bevilacqua, and those amici addressing the point note that the absence of precedent leads them to “presume[ ]” the applicable standard.

In considering the appropriate procedure, we note that a court’s sua sponte motion to dismiss for lack of subject matter jurisdiction is analogous to a party’s motion to dismiss under either Mass. R. Civ. P. 12(b)(1) or (6), 365 Mass. 754 (1974). Ordinarily, “[i]n reviewing a dismissal under rule 12(b)(1) or (6), we accept the factual allegations in the plaintiffs’ complaint, as well as any favorable inferences reasonably drawn from them, as true.” Ginther v. Commissioner of Ins., 427 Mass. 319, 322 (1998). Cf. Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007) (clarifying standards for dismissal under rule 12[b] [6] ). The unusual mechanics of G.L. c. 240, §§ 1-5, however, suggest that the analogy may not be perfect and that a different standard may be appropriate.

[FN2] We need not resolve the issue today, however, because we conclude that Bevilacqua’s complaint must be dismissed even if we apply the most favorable of the possible standards of review. See Ginther v. Commissioner of Ins., supra (standards for motion to dismiss for lack of subject matter jurisdiction). We thus “accept the factual allegations in [Bevilacqua’s petition], as well as any favorable inferences reasonably drawn from them, as true.” Id. Those facts are as follows.

On March 18, 2005, Pablo Rodriguez granted a mortgage on the property to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Finance America, LLC. The mortgage was recorded at the Southern Essex registry of deeds (registry). As of June 29, 2006, MERS had not assigned the mortgage to U.S. Bank National Association (U.S.Bank) but, on that date, U.S. Bank executed a foreclosure deed referencing the mortgage and purporting to transfer the property pursuant to a foreclosure sale from U.S. Bank (as trustee under a trust that is not further described) to U.S. Bank “as Trustee under the securitization Servicing Agreement dated as of July 1, 2005 Structured Asset Securities Corporation Structure Asset Investment Loan Trust Mortgage Pass Through Certificates, Series 2005-HEI.” Nearly one month later, on July 21, 2006, MERS assigned the mortgage to U.S. Bank in an assignment of mortgage recorded at the registry. A “confirmatory foreclosure deed” was then granted on October 9, 2006, by U.S. Bank to U.S. Bank as trustee under the servicing agreement. Eight days later, on October 17, 2006, U.S. Bank “as Trustee” granted a quitclaim deed to Bevilacqua.

On April 12, 2010, Bevilacqua filed a petition to compel Rodriguez to try title to the property. In his complaint Bevilacqua claimed to reside at the property and to hold record title. Because of the fact that MERS had not assigned the mortgage to U.S. Bank at the time of the foreclosure, Bevilacqua alleged that there is a cloud on his title in the form of “the possibility of an adverse claim by Rodriguez against Bevilacqua’s title to the [p]roperty.”

2. Statutory background. Bevilacqua seeks an order that either compels Rodriguez to bring an action to try his title or forever bars him from enforcing his adverse claims to the property. Try title actions under G.L. c. 240, §§ 1-5, are within the exclusive original jurisdiction of the Land Court. G.L. c. 185, § 1 (d ). If Bevilacqua cannot satisfy the jurisdictional requirements of the statute, then the Land Court is without subject matter jurisdiction and the petition must be dismissed. See Boston Edison Co. v. Boston Redevelopment Auth., 374 Mass. 37, 46 (1977); Riverbank Improvement Co. v. Chapman, 224 Mass. 424, 425 (1916) (“The Land Court is a statutory court, not of general but of strictly limited jurisdiction”).

The statute states, in relevant part:

“If the record title of land is clouded by an adverse claim, or by the possibility thereof, a person in possession of such land claiming an estate of freehold therein … may file a petition in the land court stating his interest, describing the land, the claims and the possible adverse claimants so far as known to him, and praying that such claimants may be summoned to show cause why they should not bring an action to try such claim.”

G.L. c. 240, § 1. There are thus two steps to a try title action: the first, which requires the plaintiff to establish jurisdictional facts such that the adverse claimant might be “summoned to show cause why [he] should not bring an action to try [his] claim,” and the second, which requires the adverse claimant either to disclaim the relevant interest in the property or to bring an action to assert the claim in question. [FN3] Id. See Blanchard v. Lowell, 177 Mass. 501, 504-505 (1901). The establishment of jurisdictional facts, although essential in all cases, is thus a matter of particular salience in the initial stage of a try title action.

There appear to be two jurisdictional facts that must be shown to establish standing under G.L. c. 240, § 1. First, it is clear on the face of the statute that only “a person in possession” of the disputed property may maintain a try title action. Id. Second, although less obviously clear, a plaintiff must hold a “record title” to the land in question. Blanchard v. Lowell, supra at 504. Arnold v. Reed, 162 Mass. 438, 440-441 (1894). Here, Bevilacqua has alleged that he resides on the property, a factual assertion that we accept as true and from which we draw the favorable inference that he is “a person in possession” as required by G.L. c. 240, § 1. [FN4] Bevilacqua also claims to hold record title to the property as required to support standing. See Blanchard v. Lowell, supra. In dismissing the petition the judge concluded that the facts alleged by Bevilacqua did not support his claim of record title and that, as a result, Bevilacqua lacked standing. This is the controversy presented on appeal.

Before analyzing whether Bevilacqua has demonstrated the existence of record title, and in light of the fact that it has been more than a century since this court last examined standing under G.L. c. 240, §§ 1-5, we first consider the history and purposes of the statute. [FN5] The initial try title statute was enacted in 1851 and provided:

“Any person in possession of real property, claiming an estate of freehold … may file a petition in the supreme judicial court, setting forth his estate … and averring that he is credibly informed and believes, that the respondent makes some claim adverse to the estate of the petitioner, and praying that he may be summoned to show cause, why he should not bring an action to try the alleged title, if any.” St. 1851, c. 233, § 66.

Prior to enactment of this statute, the principal means of trying title to land was the writ of entry, which permitted a plaintiff to “obtain possession of real estate from a disseisor who is in possession and holds the demandant out.” Mead v. Cutler, 208 Mass. 391, 392 (1911). See Black’s Law Dictionary 472 (6th ed. 1990) (disseisor is “[o]ne who puts another out of the possession of his lands wrongfully. A settled trespasser on the land of another”). See also Black’s Law Dictionary 541 (9th ed. 2009). The writ was limited, however, by the fact that it could only be brought where the plaintiff was “held out.” See Mead v. Cutler, supra. As a result, there were “cases where a party in possession of real estate would be obliged to abandon his accustomed possession and use, in order to [bring a writ of entry and] try the right of an adverse claimant.” Munroe v. Ward, 4 Allen 150, 151 (1862). In recognition of the fact that such abandonment “would be unreasonable and contrary to sound policy,” the try title statute was enacted so that property owners might remain in possession while requiring that adverse claims be either asserted or disavowed rather than lingering indefinitely. Id.

Under the early versions of the try title statute the sole jurisdictional requirement was “actual possession and taking of profits” from the land. Id. at 152. See St. 1873, c. 178; St. 1852, c. 312, § 52; St. 1851, c. 233, § 66. Pursuant to these statutes, record or legal title to the property was irrelevant. See Orthodox Congregational Soc’y v. Greenwich, 145 Mass. 112, 113 (1887) (“[M]ost of the facts … bear only upon the question of title. These we need not consider”); Leary v. Duff, 137 Mass. 147, 149- 150 (1884) (“not of importance that the title asserted by the petitioner rests upon an alleged … adverse possession,” rather than on legal title).

These early enactments were repealed in 1893, however, and the modern form of the statute was adopted. St. 1893, c. 340. One of the principal amendments was the addition of an opening clause, referring to “the record title of real property.” St. 1893, c. 340, § 1. Contrast Pub. Sts. (1882), c. 176, §§ 1, 2. Almost immediately following the 1893 amendment, this court was required to consider the meaning of the new statutory language. In the case of Arnold v. Reed, 162 Mass. 438 (1894), a putative property owner filed a try title action alleging possession and relying on a recorded deed purporting to convey good title to the property. Id. at 439-440. The court held that mere possession was no longer sufficient and that, under the new statute, title appearing on “the record” was also necessary. [FN6] Id. at 440. The court thus read the new introductory clause as limiting the types of disputes– i.e., only claims based on record title–that might be resolved in a try title action. See St. 1893, c. 340, § 1 (“When the record title of real property is clouded by an adverse claim”). The limitation added by the Legislature in 1893 remains operative in the present statute and the jurisdictional requirement of “record title” is thus applicable to Bevilacqua’s claim. Compare G.L. c. 240, § 1 (“If the record title of land is clouded by an adverse claim …”), with St. 1893, c. 340, § 1. We turn, then, to consider Bevilacqua’s various claims to record title.

3. Standing as owner of the property. [FN7] Bevilacqua alleges that he has record title to the property because he is the owner by virtue of a quitclaim deed granted to him by U.S. Bank. There appear to be two theories that underpin this argument. First, the quitclaim deed may be sufficient by itself to support record title to the property. Second, if the quitclaim deed itself does not constitute record title, then that instrument coupled with the chain of grants on which it relies is sufficient as a whole to demonstrate record title. The first theory is incorrect as a matter of law. The second theory is unpersuasive in light of the facts alleged by Bevilacqua.

In addressing the first theory, that a single recorded deed purporting to transfer title is sufficient to establish record title, the Land Court judge made the trenchant observation that such a doctrine would render the “Brooklyn Bridge” problem insoluble. Specifically, the judge wrote that “in the classic example, a litigant could go to the registry, record a deed to the Brooklyn Bridge, commence suit, hope that the true owners ignored the suit or … could not be readily located and [would thus] be defaulted, and secure a judgment.” Leaving aside the fact that public property cannot be the subject of a try title action, see G.L. c. 240, § 5, an interpretation of the try title statute permitting such a result cannot be the law.

We are not persuaded by this “single deed” theory for a number of reasons, not least of which is the fact that there is nothing magical in the act of recording an instrument with the registry that invests an otherwise meaningless document with legal effect. See S & H Petroleum Corp. v. Register of Deeds for the County of Bristol, 46 Mass.App.Ct. 535, 537 (1999) (“The function of a registry of deeds is to record documents. It is essentially a ministerial function …”). Recording may be necessary to place the world on notice of certain transactions. See, e.g., G.L. c. 183, § 4 (leases and deed); G.L. c. 203, §§ 2-3 (trust documents). Recording is not sufficient in and of itself, however, to render an invalid document legally significant. See Arnold v. Reed, 162 Mass. 438, 440 (1894); Nickerson v. Loud, 115 Mass. 94, 97-98 (1874) (“mere assertions … whether recorded or unrecorded, do not constitute a cloud upon title, against which equity will grant relief”). As a result, it is the effectiveness of a document that is controlling rather than its mere existence. See Bongaards v. Millen, 440 Mass. 10, 15 (2003) (where grantor lacks title “a mutual intent to convey and receive title to the property is beside the point”). The effectiveness of the quitclaim deed to Bevilacqua thus turns, in part, on the validity of his grantor’s title. Accordingly, a single deed considered without reference to its chain of title is insufficient to show “record title” as required by G.L. c. 240, § 1.

The second theory supporting Bevilacqua’s ownership claim addresses this point by asserting that the chain of deeds recorded at the registry is sufficient to demonstrate record title. Under this theory Bevilacqua may trace his chain of title back from the quitclaim deed, through the foreclosure deed, and ultimately to the mortgage granted by Rodriguez to MERS as nominee for Finance America. Bevilacqua has alleged, however, that U.S. Bank was not the assignee of the mortgage at the time that it purported to foreclose on the property and conduct a sale pursuant to the power of sale contained in the mortgage.

[FN8]

As we recently held in the Ibanez case, Massachusetts “adhere[s] to the familiar rule that ‘one who sells under a power [of sale] must follow strictly its terms’ ” so, where a foreclosure sale occurs in the absence of authority, “there is no valid execution of the power, and the sale is wholly void.” U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 646 (2011), quoting Moore v. Dick, 187 Mass. 207, 211 (1905). “One of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose.” U.S. Bank Nat’l Ass’n v. Ibanez, supra at 647. See Bongaards v. Millen, supra. By alleging that U.S. Bank was not the assignee of the mortgage at the time of the purported foreclosure, Bevilacqua is necessarily asserting that the power of sale was not complied with, that the purported sale was invalid, and that his grantor’s title was defective. See U.S. Bank Nat’l Ass’n v. Ibanez, supra. In light of its defective title, the intention of U.S. Bank to transfer the property to Bevilacqua is irrelevant and he cannot have become the owner of the property pursuant to the quitclaim deed. See Bongaards v. Millen, supra. Bevilacqua’s theory based on the chain of title is thus unpersuasive.

In this regard we note that Bevilacqua’s try title action based on ownership of the property faces an insurmountable obstacle. A try title action may be brought only where record title is “clouded by an adverse claim, or by the possibility thereof.” G.L. c. 240, § 1. However, the very fact that raises the possibility of an adverse claim–U.S. Bank’s lack of authority to foreclose at the time it purported to foreclose–is fatal to Bevilacqua’s claim to “own” the property. The basic problem is that, instead of presenting a potentially viable claim and seeking to test it against the claims of a rival, Bevilacqua effectively admits that he does not presently have record title and seeks a declaration, if Rodriguez were to default, that the defect is cured. In light of the pleaded facts it is thus impossible for us to conclude that Bevilacqua’s ownership theory demonstrates the jurisdictional facts necessary to maintain a try title action. See G.L. c. 240, § 1.

4. Standing as assignee of the mortgage. As an alternative to the claim that he owns the property in fee simple, Bevilacqua argues that he holds record title because he is the assignee of the mortgage granted by Rodriguez to MERS as nominee for Finance America. Bevilacqua does not develop the argument at length but it is an intriguing one given that Massachusetts is a “title theory” State in which “a mortgage is a transfer of legal title in a property to secure a debt.” U.S. Bank Nat’l Ass’n v. Ibanez, supra at 649. If a mortgagee’s legal title suffices to establish “record title” under G.L. c. 240, § 1, then Bevilacqua may be able to demonstrate standing to proceed with this try title action. We conclude, however, that Bevilacqua’s claim to record title as mortgagee is inconsistent with the relief he seeks, namely, that Rodriguez be compelled either to “show cause why he should not be required to bring an action to try title” or to “be forever barred from having or enforcing any claim in the property.” Accordingly, we conclude that Bevilacqua’s theory of record title as mortgagee is untenable and cannot support standing under G.L. c. 240, § 1.

We begin our analysis of this question by noting that Bevilacqua’s claim to be holder of the mortgage has at least a plausible basis despite the fact that he has never taken an express assignment. This court has held that it is possible for a foreclosure deed, ineffective due to noncompliance with the power of sale, to nevertheless operate as an assignment of the mortgage itself. See Holmes v. Turner’s Falls Co., 142 Mass. 590, 591 (1886); Dearnaley v. Chase, 136 Mass. 288, 290 (1884); Brown v. Smith, 116 Mass. 108 (1874). The theory is that “where a deed of real estate shows by its language that it was intended to pass title by one form of conveyance, by which however title could not pass, courts have made the deed effective by construing it as a deed of some other form, notwithstanding the inappropriateness of the language.” Kaufman v. Federal Nat’l Bank, 287 Mass. 97, 100-101 (1934). Bevilacqua argues in his brief that “the foreclosure deed constituted an assignment of the mortgage on the [p]roperty to Bevilacqua.” As stated, this proposition cannot be correct because Bevilacqua was not a party to the foreclosure deed. Further, Bevilacqua has alleged that U.S. Bank was not the assignee of the mortgage at the time it executed the foreclosure deed so it is impossible for that instrument to be construed as an assignment of mortgage. See U.S. Bank Nat’l Ass’n v. Ibanez, supra at 654 (“Because an assignment of a mortgage is a transfer of legal title, it becomes effective … only on the transfer; it cannot become effective before the transfer”). We assume without deciding, however, that Bevilacqua might be able to establish a chain of assignments passing from his quitclaim deed, through the “Confirmatory Foreclosure Deed,” through the recorded assignment from MERS, and thus ultimately back to Rodriguez’s original deed of mortgage. See supra at [2-3] (regarding drawing of favorable inferences). We may thus assume, without deciding, that there is a factual basis on which Bevilacqua may claim to be the assignee of the mortgage.

The title that Bevilacqua might claim as mortgagee, however, would be inconsistent with the relief that might be provided under G.L. c. 240, §§ 1-5. The problem, from Bevilacqua’s perspective, arises from the nature of a mortgage. In Massachusetts, a “mortgage splits the title in two parts: the legal title, which becomes the mortgagee’s, and the equitable title, which the mortgagor retains.” Maglione v. BancBoston Mtge. Corp., 29 Mass.App.Ct. 88, 90 (1990). The purpose of the split is “to give to the mortgagee an effectual security for the payment of a debt [while] leav[ing] to the mortgagor … the full control, disposition and ownership of the estate.” Santiago v. Alba Mgt., Inc., 77 Mass.App.Ct. 46, 49 (2010), quoting Charlestown Five Cents Sav. Bank v. White, 30 F.Supp. 416, 418-419 (D.Mass.1939). The title held by a mortgagee is defeasible and “upon payment of the note by the mortgagor … the mortgagee’s interest in the real property comes to an end.” Maglione v. BancBoston Mtge. Corp., supra.

Inherent in this concept of the mortgagee’s defeasible title is the mortgagor’s equity of redemption:

“[T]he mortgagor’s equity of redemption [is] the basic and historic right of a debtor to redeem the mortgage obligation after its due date, and ultimately to insist on foreclosure as the means of terminating the mortgagor’s interest in the mortgaged real estate.”

Restatement (Third) of Property (Mortgages) c. 3, Introductory Note at 97 (1996) (addressing common law applicable in both title theory and lien theory States). “[A]n equity of redemption is inseparably connected with a mortgage,” Peugh v. Davis, 96 U.S. 332, 337 (1877), and endures so long as the mortgage continues in existence:

“When the right of redemption is foreclosed, the mortgage has done its work and the property is no longer mortgaged land. Instead, the former mortgagee owns the legal and equitable interests in the property and the mortgage no longer exists.”

Santiago v. Alba Mgt., Inc., supra at 50. See G.L. c. 244, § 18 (mortgagor holds equity of redemption until mortgagor forecloses); Maglione v. BancBoston Mtge. Corp., supra (“upon payment of the note by the mortgagor … the mortgagee’s interest in the real property comes to an end”). Following default, therefore, a mortgagee may enter and possess the property but his or her title remains subject to the mortgagor’s equity of redemption. See G.L. c. 244, §§ 1, 2; Joyner v. Lenox Sav. Bank, 322 Mass. 46, 52-53 & n. 1 (1947); Maglione v. BancBoston Mtge. Corp., supra at 91 (this right of entry and possession distinguishes title and lien theory States). This state of affairs persists until either the mortgagee brings a proceeding to foreclose on the equity of redemption, see Negron v. Gordon, 373 Mass. 199, 205 n. 4 (1977) (listing four methods of foreclosing equity of redemption), or until the mortgagor redeems the property and brings the mortgagee’s interests in the property to an end. See Maglione v. BancBoston Mtge. Corp., supra at 90. See also G.L. c. 260, § 33 (limitations period for foreclosure proceedings). The crucial point is that a mortgage, by its nature, necessarily implies the simultaneous existence of two separate but complementary claims to the property that do not survive the mortgage or each other.

This point controls the present case because a litigant who asserts that he or she is the holder of a mortgage necessarily asserts that the mortgage continues to exist and that the mortgagor’s claims to the property remain valid. For this reason, a plaintiff in a try title action may be heard to claim that a mortgage no longer exists, that claims to the contrary are adverse, and that the putative mortgagee should be required to bring an action trying the claim. See, e.g., Brewster v. Seeger, 173 Mass. 281 (1899). For a plaintiff to both claim record title as holder of a mortgage and to dispute the respondent’s continuing equitable title or equity of redemption would be oxymoronic, however, because the only circumstances in which the respondent’s rights would not be upheld are circumstances in which there is no mortgage for the plaintiff to hold. This is the circumstance in which Bevilacqua finds himself.

To assert that he holds legal title as mortgagee, Bevilacqua must necessarily accept that Rodriguez has a complementary claim to either equitable title (if there has been no default) or an equity of redemption (if default has occurred). In either case, and although their economic interests may diverge, Bevilacqua cannot be heard to argue that Rodriguez’s claim is adverse to his own. This fact necessarily precluded Bevilacqua from establishing a necessary element of his try title action–the existence of an adverse claim. [FN9] See G.L. c. 240, § 1 (action may be brought “[i]f the record title of land is clouded by an adverse claim …”). The legal title possessed by a mortgagee is not, therefore, a basis of standing that would be consistent with maintenance of Bevilacqua’s action against Rodriguez. Accordingly, we conclude that it is not open to Bevilacqua to rely on such title in attempting to demonstrate the necessary jurisdictional facts. [FN10]

5. Standing as bona fide purchaser for value. In concluding his arguments, Bevilacqua asserts that he “could not have known, when he purchased the [p]roperty, that this title problem existed” and that as a result he must be permitted to proceed under the try title statute or be left without an adequate remedy. Certain of the amici expand on this point, arguing that Bevilacqua is a bona fide purchaser for value and without notice such that he holds good title to the property. Under this theory, Bevilacqua’s quitclaim deed transferred good title to the property that, in addition to his possession, satisfies the standing requirements of the try title statute. [FN11] G.L. c. 240, § 1. We need not address the legal merits of the argument because Bevilacqua is not a bona fide purchaser without notice of the defects in his grantor’s title.

We begin analysis of this bona fide purchaser theory by noting that “[t]he law goes a great way in protecting the title of a purchaser for value without notice or knowledge of any defect in the power of the vendor to sell….” Rogers v. Barnes, 169 Mass. 179, 183 (1897). For that reason, the purchaser’s “title is not to be affected by mere irregularities in executing a power of sale contained in a mortgage, of which irregularities he has no knowledge, actual or constructive.” Id. at 183-184. There are limits to the protections provided to bona fide purchasers, however, and “[t]he purchaser of an apparently perfect record title is not protected against all adverse claims.” Brewster v. Weston, 235 Mass. 14, 17 (1920). Where the bona fide purchaser is not protected against an adverse claim the purchaser “must rely upon the covenants of his deed” rather than dispossession of the true owner– that is, there are situations in which it is the purchaser rather than the original owner who must seek recovery from a third person rather than being awarded possession of the property itself. Id. See 3 J. Palomar, Land Titles § 677, at 374-375 (3d ed. 2003) (listing circumstances in which actual facts may rebut presumption of record title and true owner will prevail over innocent purchaser).

Generally, the key question in this regard is whether the transaction is void, in which case it is a nullity such that title never left possession of the original owner, or merely voidable in which case a bona fide purchaser may take good title. See Brewster v. Webster, supra. Cf. Restatement (Second) of Contracts § 7 comment a (1981). Here, the dispute as to title revolves around the validity of the unauthorized foreclosure sale conducted by U.S. Bank. Certain of the amici argue that the category in which such a transaction belongs, void or merely voidable, has not been addressed definitively in Massachusetts. Our recent decision in the case of U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 647 (2011), however, concluded that “[a]ny effort to foreclose by a party lacking ‘jurisdiction and authority’ to carry out a foreclosure under [the relevant] statutes is void.” We decline the invitation to revisit this issue. In any event, a factual prerequisite–purchase by Bevilacqua without notice of the defects in U.S. Bank’s title–does not exist.

Bevilacqua’s petition alleges that a number of documents were recorded with the registry, provides the book and page number applicable to each document, but fails to provide the dates on which recording occurred. We take judicial notice, however, of the fact that the registry assigns book and page numbers to recorded instruments in a sequential manner. See Mass. G. Evid. § 201(b) (2011). We therefore may conclude that instruments with lower book and page numbers were recorded prior to instruments with higher book and page numbers. [FN12] Here, the book and page numbers demonstrate recording of documents in the following order: (i) the mortgage from Rodriguez to MERS (executed on March 18, 2005); (ii) the assignment of mortgage from MERS to U.S. Bank (executed on July 21, 2006); (iii) the purported foreclosure deed from U.S. Bank “as Trustee” to U.S. Bank as trustee under the servicing agreement (executed on June 29, 2006); (iv) the “Confirmatory Foreclosure Deed” from U.S. Bank “as Trustee” to U.S. Bank as trustee under the servicing agreement (executed on October 9, 2006); and (v) the quitclaim deed from U.S. Bank to Bevilacqua (executed on October 17, 2006). We cannot be sure of the precise date on which the foreclosure deed became a matter of public record, but we do know that this occurred after the assignment of mortgage had been recorded. As a result, Bevilacqua must have attempted to purchase the property from U.S. Bank (in some capacity) either when the registry’s records showed the bank to be a complete stranger to title, when the registry’s records showed the bank to be no more than an assignee of the mortgage, or when the registry’s records showed that the bank conducted the foreclosure sale before receiving assignment of the mortgage. In none of these circumstances could we conclude that Bevilacqua is a bona fide purchaser for value and without notice that U.S. Bank’s title was doubtful. See Demoulas v. Demoulas, 428 Mass. 555, 577 (1998) (parties may not “establish themselves as bona fide purchasers simply by claiming that they were ‘blissfully unaware’ of” facts to which they closed their eyes). We therefore are unconvinced by Bevilacqua’s claim to record title based on the theory that he is a bona fide purchaser for value and without notice.

6. Dismissal with prejudice. As a final matter we consider whether the Land Court judge properly specified that Bevilacqua’s complaint be dismissed with prejudice. As discussed above, the precise procedural mechanism under which the judge decided the sua sponte motion to dismiss is unclear. What is clear, however, is that the judge’s dismissal was based on lack of standing and thus want of subject matter jurisdiction. See Mass. R. Civ. P. 12(h)(3) (“Whenever it appears by suggestion of a party or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action”); Sullivan v. Chief Justice for Admin. & Mgt. of the Trial Court, 448 Mass. 15, 21 (2006), and cases cited (“The issue of standing is one of subject matter jurisdiction”).

A complaint that is dismissed for lack of jurisdiction is not an adjudication on the merits. See Mass. R. Civ. P. 41(b)(3), as amended, 454 Mass. 1403 (2009) (involuntary dismissal or “any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction … operates as an adjudication upon the merits”). It is thus inappropriate to attach preclusive effects to the dismissal beyond the matter actually decided–the absence of subject matter jurisdiction. See Restatement (Second) of Judgments § 11, at 108 (1982) (“A judgment may properly be rendered against a party only if the court has authority to adjudicate the type of controversy involved in the action”). The obvious rationale for this rule is that a court without subject matter jurisdiction over a controversy is without authority to issue a binding judgment regarding that controversy. See id. at comment a. The conclusion that Bevilacqua lacks standing to bring a try title action is thus binding on him in future actions but dismissal of this action for want of subject matter jurisdiction does not bar him from bringing other actions regarding title to the property.

7. Conclusion. The Land Court judge properly raised the question whether Bevilacqua has record title to the property such that he has standing to bring a try title action. Bevilacqua has identified no basis on which it might be concluded that he has record title to the property such that a try title action may be sustained. As a result, the Land Court was without jurisdiction to hear the try title action. Dismissal of the petition was therefore proper. The dismissal should have been entered without prejudice, however, and we therefore remand to the Land Court for entry of judgment consistent with this opinion.

So ordered.

 

FN1. We gratefully acknowledge the amicus briefs submitted by the American Land Title Association; the Attorney General of the Commonwealth; the Massachusetts Association of Bank Counsel, Inc.; the Mortgage Bankers Association; Professors Adam J. Levitin, Christopher L. Peterson, Katherine Porter, and John A.E. Pottow; and the WilmerHale Legal Services Center of Harvard Law School.

 

 

FN2. It may not be desirable merely to assume the accuracy of a plaintiffs’s

factual assertions. If a plaintiff brings a try title action and the respondent defaults, “the court shall enter a decree that [the respondent] be forever barred from having or enforcing any such claim adversely to the petitioner.” G.L. c. 240, § 2. As a result, a property owner whose whereabouts are unknown and who is not reached through publication notice might be divested by a plaintiff who is put to no greater evidentiary test than having pleaded facts that the court is obliged to accept as true. See Ginther v. Commissioner of Ins., 427 Mass. 319, 322 (1998). But see G.L. c. 240, § 4 (remedies for those dispossessed by default judgment). Here, for instance, there are no recorded instruments in evidence and Bevilacqua merely has alleged their existence and contents.


A better approach, consistent with the procedure followed in the case of a motion to dismiss due to lack of subject matter jurisdiction, may be to place the burden of proof on the nonmoving party (here, Bevilacqua) to prove jurisdictional facts. See, e.g., Caffyn v. Caffyn, 441 Mass. 487, 491 (2004). As discussed further, infra at–, the existence of record title is a requirement for standing under G.L. c. 240, § 1, and thus a jurisdictional fact. That said, application of a preponderance of the evidence standard may be inappropriate at this stage of a try title proceeding if it is indistinguishable from “the question whether [the plaintiff] has a better title [than the respondent]”–a matter that “is not to be determined in these

proceedings, but in the actions which the respondents may be ordered to bring” as a result of the try title action. Blanchard v. Lowell, 177 Mass. 501, 504-505 (1901). Given these difficulties, it may be necessary to adopt a unique standard of review in future try title actions.

 

 

FN3. As discussed further, infra, the structure of the try title statute is a direct reflection of the limitations inherent in the common-law writ of entry. The try title statute may now be something of an anachronism when it is considered that modern statutes are far more flexible than the common-law writ, see G.L. c. 237; that Massachusetts courts are now vested with equity jurisdiction, see, e.g., G.L. c. 185, § 1 (k ); and that declaratory judgment is now available to litigants in this Commonwealth, see G.L. c. 231A inserted by St.1945, c. 582, § 1.

 

 

FN4. One of the amici has appended to its brief a number of deeds referring to the property at 126-128 Summer Street in Haverhill that were recorded between the time Bevilacqua purchased the property and the date on which he filed his petition. Specifically, Bevilacqua recorded a master deed establishing a condominium that consists of four units. Bevilacqua also recorded three deeds transferring units to various third-party purchasers. These deeds and the conveyances they represent are not matters properly before

the court and do not factor into our analysis. Although nonevidentiary, the deeds are nevertheless noteworthy in that they explain why Bevilacqua’s complaint is drafted to imply possession rather than pleading the matter directly, see Connolley, petitioner, 168 Mass. 201, 203 (1897) (“the only question … is whether the petitioner has a record title to the whole estate”), and in that they highlight the concerns addressed, see note 2, supra, regarding the proper standards of review and evidentiary burdens in a try title action.

 

 

FN5. In determining that a plaintiff under G.L. c. 240, §§ 1-5, must possess both record title and possession, the motion judge quoted Daley v. Daley, 300 Mass. 17, 21 (1938), to the effect that “[a] petition to remove a cloud from the title to land affected cannot be maintained unless both actual possession and the legal title are united in the petitioner.” The Daley case is inapposite, however, because it involves a bill to quiet title pursuant to G.L. c. 240, §§ 6-10, rather than an action to try title pursuant to G.L. c. 240, §§ 1-5. See generally R.W. Bishop, Prima Facie Case § 48.5, at 601-602 (5th ed.2005) (intermingling discussion of both try title and quiet title cases in section entitled “Actions to Try Title”).


An action to quiet title is an in rem action, G.L. c. 240, § 10, brought under the court’s equity jurisdiction. See G.L. c. 185, § 1 (k ); First

Baptist Church of Sharon v. Harper, 191 Mass. 196, 209 (1906) (“in equity the general doctrine is well settled, that a bill to remove a cloud from the land … [requires that] both actual possession and the legal title are united in the plaintiff”). In contrast, an action to try title is an action at law brought against the respondent as an individual. See G.L. c. 240, § 2 (“the court shall enter a decree that [specified adverse claimants] be forever barred from having or enforcing any such claim adversely to the petitioner”); Clouston v. Shearer, 99 Mass. 209, 211, 212-213 (1868) (at time try title statute was enacted in 1851, Massachusetts courts did not yet possess general equity jurisdiction that would permit actions to remove cloud from title [not until 1852] ).


The distinction is critical because the plaintiff in a try title action may defeat the specified adverse claims through a default or by showing title that is merely superior to that of the respondent. See G.L. c. 240, §§ 2-3; Blanchard v. Lowell, 177 Mass. 501, 504-505 (1901). In contrast, a quiet title action requires the plaintiff “not merely to demonstrate better title to the locus than the defendants possess, but requires the plaintiff to prove sufficient title to succeed in its action.” Sheriff’s Meadow Found., Inc. v. Bay-Courte Edgartown, Inc., 401 Mass. 267, 269 (1987). See U.S. Bank, Nat’l Ass’n v. Ibanez, 458 Mass. 637, 645 (2011); Loring v. Hildreth, 170 Mass. 328 (1898). Precedent applicable to one statute, although potentially

persuasive, does not control cases brought under the other statute.

 

 

FN6. Interestingly for purposes of this proceeding, in Arnold v. Reed, 162 Mass. 438 (1894), the court was presented with a try title action where the plaintiff relied on a recorded deed reciting that the grantor possessed good title. Id. at 440. “[T]he recitals [were] not true [however], and this would appear by an examination of the records of the Probate Court.” Id. Accordingly, the mere recording of an instrument with the registry of deeds that purports to transfer ownership was insufficient to create standing under the try title statute. Id. But see Connolley, petitioner, 168 Mass. 201, 203-204 (1897) (petitioner had sufficient record title where his grantor had only 255/264th ownership according to registry records, 246/264th ownership according to wills and registry records, and complete but unrecorded ownership due to adverse possession).

 

 

FN7. We refer in Part 3 to Bevilacqua as the owner of the property, using the term “owner” in a colloquial sense, to distinguish this analysis from our later consideration of Bevilacqua’s claim to hold record title as assignee of the mortgage or as a bona fide purchaser without notice.

 

 

FN8. One amicus appended to its brief a copy of the foreclosure deed and the

legal notice announcing the foreclosure sale. That foreclosure deed recites that “U.S. Bank National Association [U.S. Bank] as Trustee [is the] holder of a mortgage from Pablo Rodriguez” while the notice, recorded with the foreclosure deed, states that “[U.S. Bank as trustee] is the present holder” of the mortgage. Neither of these documents is in evidence and, whether he relied on such representations or not, Bevilacqua’s petition directly contradicts the accuracy of the quoted statements. We rely on the facts pleaded in the petition for purposes of this appeal. See supra at–.

 

 

FN9. In addition, it is difficult, if not impossible, to imagine what kind of action Rodriguez might bring to try his title as mortgagor. Presumably Rodriguez would assert that the purported foreclosure sale was ineffective, that no foreclosure has occurred, and that he thus retains an equity of redemption. Bevilacqua necessarily would agree with these claims, having asserted that he is the mortgage holder, so judgment could enter on the pleadings declaring that Rodriguez enjoys an equity of redemption. Such an action would be nonsensical.

 

 

FN10. Bevilacqua asserts that foreclosure is not an adequate remedy in these circumstances because, he argues with emphasis, if he “is required to foreclose on the mortgage … to clean up his title, this will delay his sale or

refinance for a minimum of about seven to nine months.” Foreclosure, however, is the appropriate remedy for a mortgagee seeking to resolve an outstanding equity of redemption. See Negron v. Gordon, 373 Mass. 199, 205 n. 4 (1977) (listing four methods of foreclosing equity of redemption). Nothing contained herein is intended to limit Bevilacqua’s right, if he can show himself to be mortgagee of the property, to pursue foreclosure under the appropriate statutes. The record does not disclose if Bevilacqua presently holds the promissory note secured by Rodriguez’s mortgage. Whether the holder of a mortgage may foreclose the equity of redemption without also holding the note is a question that is not before us.

 

 

FN11. Bevilacqua’s chain of title as a bona fide purchaser necessarily begins with his quitclaim deed from U.S. Bank. In some States, “[i]t is well settled … that one who has only a quitclaim deed to land cannot claim protection as a bona fide purchaser without notice.” Polhemus v. Cobb, 653 So.2d 964, 967-968 (Ala.1995), quoting Gordon v. Ward, 221 Ala. 173, 174 (1930). “In this Commonwealth, [however,] such a deed is as effectual to transfer whatever title the grantor has in the premises, as a deed with full covenants of warranty. The conveyance in either form is voidable, and not void, if fraudulent as to creditors; and, until defeated by a creditor, the title of the grantor passes.” Mansfield v. Dyer, 131 Mass. 200, 201

(1881). See Boynton v. Haggart, 120 F. 819, 822-823 (8th Cir.1903) (history and evolution of decisions regarding quitclaim deeds, recording statutes, and bona fide purchasers). If a grantor has voidable title to a Massachusetts property, therefore, that title may pass through a quitclaim deed to a bona fide purchaser in whose hands the title is no longer voidable.

 

 

FN12. A registry of deeds may employ several assistant registers who process documents. It is thus possible, although irrelevant for purposes of this decision, that documents presented to different assistant registers at nearly the same time may have book and page numbers that do not reflect the precise order of such overlapping presentations.


END OF DOCUMENT

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Mass. high court wades back into foreclosure mess

Mass. high court wades back into foreclosure mess


(Reuters) –

Top Massachusetts judges grilled attorneys on both sides of a widely watched foreclosure case that could impact thousands of property owners across the state, and beyond.

The Supreme Judicial Court of Massachusetts on Monday wrestled over whether faulty mortgages and land records should be left in place as the basis for further property sales.


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[VIDEO] Oral Arguments of BEVILACQUA v. RODRIGUEZ

[VIDEO] Oral Arguments of BEVILACQUA v. RODRIGUEZ


Excellent video…

Question that came up a few times, Why not go after Grantor?

Caveat Emptor ya’ll! Seriously.

Docket # SJC-10880
Date May 2, 2011
Video Link
View oral argument with Windows Media Player
Summary
(prepared by Suffolk University Law School)
Real Property– Whether the plaintiff, who acquired title by a deed after an invalid mortgage foreclosure, has standing to bring a claim in the Land Court to “try title” to the real estate.
Appealed From Land Court
Briefs See selection available in PDF format at Supreme Judicial Court website
Counsel for Appellant
(Appearing)
Bevilacqua: Jeffrey B. Loeb, David Glod
Counsel for Appellee
(Appearing)
Rodriguez:
Amici Curiae The American Land Title Association; Wilmerhale Legal Services Center; Mortgage Bankers Association; Attorney General; Adam J. Levitin; Christopher L. Peterson; Katherine Porter; John A.E. Pottow; The Massachusetts Association of Bank Counsel, Inc.
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S.J.C. AMICUS CURIAE BRIEF OF MA ATTORNEY GENERAL MARTHA COAKLEY | BEVILACQUA v. RODRIGUEZ

S.J.C. AMICUS CURIAE BRIEF OF MA ATTORNEY GENERAL MARTHA COAKLEY | BEVILACQUA v. RODRIGUEZ


SUPREME JUDICIAL COURT
for the Commonwealth
Case Docket
FRANCIS J. BEVILACQUA, III vs. PABLO RODRIGUEZ
SJC-10880

BRIEF OF THE ATTORNEY GENERAL ON BEHALF OF THE
COMMONWEALTH OF MASSACHUSETTS, AMICUS CURIAE

.

EXCERPT:

Statement of the Relevant Facts

The relevant facts are set Forth in the Land Court’s Memorandum and Order dismissing plaintiff’s petition [A24-28] and in the plaintiff’s Petition to Compel Adverse Claimant to Try Title [A3-51.

On March 18, 2005, respondent Pablo Rodriguez granted a mortgage securing 126-128 Summer Street, Haverhill, Massachusetts (the “Property”) to Mortgage Electronic Registration Systems, Inc. (”MERS”) , as nominee for Finance America, LLC. [A41 In or around April 2006, U.S. Bank, N.A. (“U.S. Bank”) initiated foreclosure proceedings without first obtaining a valid, written assignment of the mortgage from Finance America, LLC or its nominee, MERS. [A41 Indeed it was not until after the foreclosure sale, on July 21, 2006 that MERS assigned the mortgage to U . S . Bank. -Id. On October 17, 2006, Mr. Bevilacqua acquired a quitclaim deed from U.S. Bank. [A3-A41]

Argument

This case exemplifies the continuing harms caused by the securitization of mortgage loans and a secondary mortgage market that ignored state law in an effort to sell and resell mortgages and securities backed by mortgages. As this Court so recently observed in U.S. Bank, N.A. v. Ibanez, 458 Mass. 637 (2011), some participants in the secondary mortgage market ignored Long standing requirements of Massachusetts law concerning when and how a mortgage holder may exercise its right to foreclose, resulting in numerous invalid foreclosures. In this case, because U.S. Bank did not hold a valid assignment of the mortgage at the time it initiated foreclosure proceedings, it failed to acquire title through the foreclosure deed. Thus, U.S. Bank’s subsequent conveyance of the Property by quitclaim deed in favor of Mr. Bevilacqua failed to transfer title to the Property to Mr. Bevilacqua. Accordingly, Mr. Bevilacqua has no claim to title to the Property.

Continue below…

[ipaper docId=54493024 access_key=key-x5qlmak0td8qjx7ribb height=600 width=600 /]

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S.J.C. AMICUS CURIAE BRIEF OF PROFESSORS ADAM J. LEVITIN, CHRISTOPHER L. PETERSON, KATHERINE PORTER, JOHN A.E. POTTOW | BEVILACQUA v. RODRIGUEZ

S.J.C. AMICUS CURIAE BRIEF OF PROFESSORS ADAM J. LEVITIN, CHRISTOPHER L. PETERSON, KATHERINE PORTER, JOHN A.E. POTTOW | BEVILACQUA v. RODRIGUEZ


MUST READ…

EXPLOSIVE

SUPREME JUDICIAL COURT
for the Commonwealth
Case Docket
FRANCIS J. BEVILACQUA, III vs. PABLO RODRIGUEZ
SJC-10880

Excerpt:

There is no contention in this case that U.S. Bank, N.A., the trustee of the securitization trust that claimed to hold the Rodriguez note and associated security instrument did not properly foreclose on the Rodriguez property. U . S . Bank, N,A. failed to show that it was the mortgagee, just as it did in United States Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637 (MaSS. 2011). Accordingly, U.S. Bank, N.A., was no more capable of passing on good title to the Rodriguez property than a common thief.2

Continue below…

[ipaper docId=54450542 access_key=key-tqh3q9cadzv0y8ag2v5 height=600 width=600 /]

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Massachusetts Court Hears Pivotal Mortgage-Transfer Case in Foreclosure BEVILACQUA v. RODRIGUEZ

Massachusetts Court Hears Pivotal Mortgage-Transfer Case in Foreclosure BEVILACQUA v. RODRIGUEZ


Knowing what the world knows now on the way they conduct business. If this was a baby stroller or an air bag, do you think they would even question this at all? Selling defective merchandise usually has a mandatory recall.

Now read this carefully and ask yourself this, was this even sound to begin with?

RULES are RULES…

BLOOMBERG-

A Massachusetts man should be allowed to keep property he bought from U.S. Bancorp even though the bank didn’t have the right to foreclose on the previous owner, a lawyer argued before the state’s highest court.

[…]

“If the decision is upheld, and generally applied, it likely will have adverse implications for hundreds or even thousands of Massachusetts property owners if they find themselves in Bevilacqua’s shoes,” the Mortgage Bankers Association wrote in a friend-of-the-court brief.

Read the case below…

Next in the Massachusetts Pipeline: Francis J. Bevilacqua vs. Pablo Rodriguez

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MA BK COURT | MERS Purported Note “assignments” All Invalid.  MERS Cannot Assign Mortgage AND Note IN RE: THOMAS

MA BK COURT | MERS Purported Note “assignments” All Invalid. MERS Cannot Assign Mortgage AND Note IN RE: THOMAS


In re: KATHLEEN THOMAS, Chapter 7, Debtor.
KATHLEEN THOMAS, Plaintiff
v.
CITIMORTGAGE, INC., FLAGSTAR BANK, FSB and ALLIED HOME MORTGAGE CAPITAL CORPORATION, Defendants.

Case No. 10-40549-MSH, Adv. Pro. No. 10-04086.

United States Bankruptcy Court, D. Massachusetts, Central Division.

February 9, 2011.

MEMORANDUM OF DECISION ON THE MOTION TO COMPEL ARBITRATION OF ALLIED HOME MORTGAGE CAPITAL CORPORATION, THE MOTION TO DISMISS OF FLAGSTAR BANK, FSB AND THE MOTION FOR JUDGMENT ON THE PLEADINGS OF FLAGSTAR BANK, FSB AND CITIMORTGAGE, INC.

MELVIN S. HOFFMAN, Bankruptcy Judge.

Before me is a motion of defendant Allied Home Mortgage Capital Corporation (“Allied”) to compel arbitration, a motion of defendant Flagstar Bank, FSB (“Flagstar”) to dismiss this adversary proceeding pursuant to Fed. R. Civ. P. 12(b)(6), made applicable to this proceeding by Fed. R. Bankr. P 7012 and a motion of Flagstar and CitiMortgage, Inc. (“CitiMortgage”) for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(c), made applicable by Fed. R. Bankr. P. 7012. Because the motions involve the same facts and underlying transaction, I will address them together.

Background

In 2006, the plaintiff, who is the debtor in the main bankruptcy case, engaged Allied to assist her in refinancing the mortgage on her home. On April 26, 2006, the plaintiff signed an arbitration agreement in which she agreed that any disputes with Allied would be resolved through arbitration. The refinancing transaction occurred on May 8, 2006, at which time the plaintiff executed a promissory note payable to Allied in the amount of $153,000, and a mortgage to secure her obligations under the note. Mortgage Electronic Registration Systems, Inc. (“MERS”), acting solely as a nominee for Allied and its successors and assigns, was named as mortgagee. The note was subsequently indorsed to defendant Flagstar. Flagstar and CitiMortgage claim that Flagstar indorsed the note in blank by way of an allonge and sold the plaintiff’s loan to CitiMortgage. CitiMortgage attached a copy of the note to its motion for judgment on the pleadings to support this claim.[1] The last page of the note is blank except for the following legend:

PAY TO THE ORDER OF WITHOUT RECOURSE FLAGSTAR BANK, FSB

There are two entirely illegible signatures under this legend. On August 3, 2009, MERS executed an instrument entitled “Assignment of Mortgage” which purported, inter alia, to assign to CitiMortgage the “mortgage and the note and claim secured thereby.”

The plaintiff eventually fell behind in her mortgage payments and CitiMortgage began foreclosure proceedings. On February 2, 2010, the plaintiff filed a petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. §§ 101-1532, in this court. On February 12, 2010, CitiMortgage filed a motion for relief from the automatic stay provisions of the Bankruptcy Code in order to proceed to foreclose its mortgage on the plaintiff’s property. At a hearing on the motion for relief, I ordered the plaintiff to make adequate protection payments of $925 per month to CitiMortgage and upon the plaintiff’s filing of her complaint, consolidated the motion for relief with this adversary proceeding.

The plaintiff alleges that the May 8, 2006 loan transaction violated the Massachusetts Predatory Home Loan Practices Act, Mass. Gen. Laws. ch. 183C (“Chapter 183C”). The plaintiff also alleges that the promissory note was never properly negotiated to CitiMortgage and that CitiMortgage may not assert a secured claim in her bankruptcy case.

On July 1, 2010, Flagstar filed a motion to dismiss the adversary proceeding. On July 2, 2010, Allied filed a motion to compel arbitration and to dismiss, arguing that pursuant to the arbitration agreement signed by the plaintiff, she is required to submit to arbitration with respect to her claims against Allied. On October 4, 2010, CitiMortgage filed a motion for judgment on the pleadings. On October 7, 2010, I held a hearing on Flagstar’s motion to dismiss and Allied’s motion to compel arbitration. On December 1, 2010, I held a hearing on CitiMortgage’s motion for judgment on the pleadings. Flagstar subsequently moved to join CitiMortgage’s motion and on December 23, 2010, I entered an order allowing Flagstar to do so.

Analysis

Allied’s Motion to Compel Arbitration

Allied argues that the arbitration agreement of April 20, 2006 obligates the plaintiff to submit her claims against Allied to binding arbitration and, therefore, seeks dismissal and an order compelling arbitration. Through the affidavit of Joseph James, Allied’s senior counsel, Allied submitted a copy of the agreement on which it relies. The plaintiff has contested the enforceability of the agreement. The agreement is signed by the plaintiff only and not by Allied. In fact, there is no reference to Allied by name anywhere in the agreement. Rather than identifying Allied by name, the agreement consistently refers to the plaintiff’s counterparty obscurely using the pronouns “we”, “our” and “us.” The second paragraph of the agreement states that “[t]his Agreement is effective and binding on both you and your heirs, successors and assigns and us when it is signed by both parties.”

Allied correctly observes that in Massachusetts a contract may be enforceable if signed by only one party if the other party manifests acceptance. Haufler v. Zotos, 446 Mass. 489, 498-99, 845 N.E.2d 322, 331(2006). Allied also notes specific cases in which courts enforced arbitration agreements lacking one party’s signature. Samincorp South American Minerals & Merchandise Corp. v. Lewis, 337 Mass. 298, 302-03, 149 N.E.2d 385, 388 (1958); Gvonzdenovic v. United Airlines, Inc., 933 F.2d 1100, 1105 (2d Cir. 1991).

While the law in Massachusetts may permit the enforcement of an arbitration agreement that is not signed by both parties, such would not be the case when the express language of the agreement requires the signature of both parties. In All State Home Mortgage, Inc. v. Daniel, 187 Md. App. 166, 977 A.2d 438 (2009), the Court of Special Appeals of Maryland addressed this issue with respect to a form of agreement nearly identical to the one in the present case. The court held that while a signature may not always be required for an arbitration agreement to be enforceable, an arbitration agreement that specifically provided for it to be “effective and binding to [sic] you and your heirs, successors and assigns and us when both parties sign it” established that execution by both parties was a condition precedent to enforcement of the contract. Id. at 171. Because the language of the arbitration agreement was unambiguous and because it was not signed by the lender, the court refused to enforce it. Id. at 183. Massachusetts contract law appears to be no different than Maryland’s in this regard. See Tilo Roofing Co. v. Pellerin, 331 Mass. 743, 7456, 122 N.E.2d 460, 462 (1954) (holding that if a condition precedent to the enforcement of a contract is “shown not to have been performed, the writing does not become a binding obligation.”). The arbitration agreement between the plaintiff and Allied is explicit—both parties must sign before the agreement is “effective and binding.” Because Allied did not sign the agreement, it never became binding on the parties and is unenforceable.

Flagstar’s Motion to Dismiss

In deciding a motion to dismiss under Fed. R. Civ. P. 12(b)(6), made applicable here by Fed. R. Bankr. P. 7012, a court must review the complaint and the documents attached to it to determine if the complaint contains sufficient facts, accepted as true, to state a claim to relief that is plausible on its face. Bell Atlantic v. Twombley, 550 U.S. 544, 570, 127 S. Ct. 1955, 1966, 167, L. Ed. 2d 929 (2007); Rederford v. U.S. Airways, Inc., 589 F.3d 30, 35 (1st Cir. 2009). A court must accept as true the factual allegations of the complaint but not the legal conclusions, even if couched as facts. Ashcroft v. Iqbal, — U.S. –, 129 S. Ct. 1937, 1947, 173 L. Ed.2d 868 (2009). Recitations of the elements of a cause of action supported only by legal conclusions are insufficient to withstand a motion to dismiss. Id.

In its motion, Flagstar seeks dismissal of Count I (violation of Chapter 183C) and Count II (determination of extent of mortgage lien due to Chapter 183C violation) of the plaintiff’s complaint on the grounds that Chapter 183C is preempted by federal law because Flagstar is a federal savings bank. Flagstar notes that the Home Owners’ Loan Act, 12 U.S.C. §§ 1461-70 (2009) (“HOLA”), authorized the Office of Thrift Supervision (“OTS”) (formerly the Federal Home Loan Bank Board) to promulgate regulations providing “for the organization, incorporation, examination, operation, and regulation” of federal savings associations and federal savings banks (collectively referred to as “federal thrifts”) such as Flagstar. Id. § 1464(a).

The OTS received broad rulemaking authority to preempt state laws that would otherwise govern the banking activities of federal thrifts. Id. § 1465; Fidelity Fed. Say. & Loan Ass’n v. de la Cuesta, 458 U.S. 141 (1982). Accordingly the OTS promulgated a regulation, 12 C.F.R. § 560.2, occupying the field in connection with the lending operations of federal thrifts. This regulation expressly preempts state laws like Chapter 183C which regulate loan-related fees.[2] The OTS has issued interpretive letters concluding that the anti-predatory lending laws of New York, New Mexico, New Jersey, and Georgia are preempted by the federal scheme,[3] and courts have generally adopted the preemption approach. See, e.g., Jarbo v. BAC Home Loan Servicing, 2010 WL 5173825, (E.D. Mich.); Coppes v. Wachovia Mortg. Corp., 2010 WL 4483817 (E.D. Cal.). It is clear, therefore, that federal thrifts are not subject to Chapter 183C with respect to loans they originate.

The calculus changes, however, when a federal thrift does not originate a loan but merely acquires it from a non-federal thrift lender. If a non-federal thrift lender could “cleanse” a predatory loan by selling it to a federal thrift, a vital component of many states’ consumer protection regimes would be undermined. The OTS could not have intended this result when it promulgated its preemption regulation. See, e.g. Viereck v. Peoples Sav. & Loan Ass’n., 343 N.W.2d 30 (Minn. 1984) (preemption does not apply when a federal thrift purchases a loan from an institution not subject to preemption); Garrison v. First Fed. Sav. & Loan Ass’n of S.C., 402 S.E.2d 25 (Va. 1991) (a federal thrift, as assignee of mortgage company which originated loan, is not entitled to preemption even though loan was one of large pool sold to it).

So if Flagstar were the originator of the plaintiff’s loan, then federal preemption would dispossess the plaintiff from her Chapter 183C claims against it, but if Flagstar were an assignee who purchased the loan, then the plaintiff’s state law claims against Flagstar survive preemption.

The loan documents attached to the plaintiff’s complaint indicate that Allied, not Flagstar, was the lender in this transaction. In its motion to dismiss Flagstar supports this characterization stating that there “are no allegations that Flagstar originated the loan.” Mot. to Dismiss at 4. Surprisingly, however, at one of the hearings on defendants’ motions, Flagstar’s counsel seemed to take a contrary position. He indicated that the loan had been “table-funded,” meaning that Allied was the lender in name only, but really acted as the broker in the transaction on behalf of Flagstar, who actually funded the loan. Loans which are table-funded by federal thrifts would be subject to the federal preemption scheme of HOLA. See, e.g., Comptroller of the Currency, Interpretive Letter # 1002 (May 13, 2004) (finding that a national bank would be considered the lender, and not subject to state anti-predatory lending laws, in a loan transaction table-funded by the national bank with a non-national bank broker listed as the lender).[4] Flagstar’s curious inconsistencies notwithstanding, my field of vision with respect to a motion to dismiss is confined to the pleadings and the attachments thereto. Reviewing these in the light most favorable to the plaintiff, I conclude that the plaintiff has stated a claim that Flagstar was an assignee of the plaintiff’s lender, Allied. Therefore, Chapter 183C is not preempted with respect to this transaction and I must deny Flagstar’s motion to dismiss Counts I and II of the complaint.

CitiMortgage and Flagstar’s Motion for Judgment on the Pleadings

Having declined to grant Flagstar’s motion to dismiss on preemption grounds, I turn to the motion for judgment on the pleadings.[5] The standard in deciding a motion for judgment on the pleadings under Rule 12(c) is similar to that applied to a motion to dismiss under Rule 12(b)(6). Gray v. Evercore Restructuring L.L.C., 544 F.3d 320, 324 (1st Cir. 2008) (noting that the standard is the same for Rule 12(b)(6) and 12(c) motions).

Counts I and II of the Complaint

Chapter 183C, §§ 2 and 3 categorize certain consumer home mortgage loans as high cost home mortgage loans (“high cost loans”) and render them unenforceable unless an approved housing agency certifies to the lender or broker that the borrower received pre-closing counseling on the advisability of the transaction. The plaintiff alleges that her loan is unenforceable because it is a high cost loan made in the absence of the required counseling.

The defendants do not dispute the fact that the plaintiff received no counseling. Rather, the dispute is over whether the loan is a high cost loan. The plaintiff argues that her mortgage loan meets the definition of a high cost loan because the “points and fees” associated with the loan, as defined by Chapter 183C, § 2,[6] net of up to two bona fide discount points, exceeded five percent of the total loan amount. To support this allegation, the plaintiff included in her complaint a list of charges from the loan settlement statement that she argues qualify as points and fees. The total of these charges is $10,446.44, which exceeds five percent of the $153,000 loan. CitiMortgage and Flagstar argue that many of these charges do not qualify as points and fees, and the ones that do total significantly less than $7650, which is five percent of the loan amount.[7]

There is no dispute that $4879 of charges constitute points and fees under the statute. If the pleadings support a minimum of $2772 in additional points and fees then the plaintiff will have stated a claim which survives the defendants’ motion.

Line 802 of the settlement statement reflects a charge in the amount of $2255.22 described as “Loan Discount to Allied Home Mortgage Capital Corp.” All compensation to a lender or mortgage broker, “including a broker that originates a home loan in its own name in a table funded transaction,” is included in the definition of points and fees under the statute, with the exception of up to two “bona fide discount points.” Chapter 183C, § 2. The defendants argue that the $2255.22 loan discount charge, which amounts to 1.474% of the loan, or 1.474 discount points, falls within the exception. The plaintiff argues that whether these discount points are bona fide is a question of fact that may not be decided as part of a motion for judgment on the pleadings.

To be a bona fide discount point, a charge must be “(1) knowingly paid by the borrower; (2) paid for the express purpose of lowering the benchmark [interest] rate; and (3) in fact reduc[es] the interest rate or time-price differential applicable to the loan from an interest rate which does not exceed the benchmark rate.” Chapter 183C, § 2. Nothing in the record indicates whether the plaintiff was aware of the loan discount charge, whether she knowingly paid the fee for the purpose of getting a discounted interest rate, or, most significantly, whether the interest rate reflected in the note was in fact discounted from the benchmark rate in effect at the time. For the purpose of the motion for judgment on the pleadings, therefore, I must find that the loan discount fee is not excluded from the points and fees used in determining whether the loan is a high cost loan.

Line 1107 reflects a $460 charge described as “Attorney’s fees to Viera & DiGianfilippo, Ltd.” While Chapter 183C, § 2 provides that certain fees commonly charged by closing attorneys, defined as “real-estate related fees” by 12 C.F.R. § 226.4(c)(7) and 209 Mass. Code Regs. § 32.04(3)(g), are not counted as points and fees, legal fees generally are included in the definition of points and fees. Cf. Official Staff Interpretations to 12 C.F.R. § 226.4(c)(7), 12 C.F.R. Pt. 226, Supp. I (explaining that for the purpose of calculating a loan’s finance charge under the federal Truth in Lending Act, if a settlement statement includes a single line item representing attorney’s fees where only a portion of the services rendered were real-estate related fees as defined by § 226.4(c)(7), the portion of the fees not covered by § 226.4(c)(7) must be included in the finance charge.). In addition to the $460 attorney’s fee, the settlement statement includes charges for “Document preparation” and “Title examination,” both of which are clearly real-estate related fees that are excluded from the points and fees calculation. The fact that these charges have been listed separately on the settlement statement is evidence that the generic attorney’s fee charge is not a real-estate related fee. The defendants argue unconvincingly that because attorneys are officers of the court, their fees fall under the statutory exclusion for “fees paid to or to be paid to a public official for determining the existence of or for perfecting, releasing or satisfying a security interest.” 12 C.F.R. § 226.4(e)(1). While attorneys are officers of the court, they are not public officials nor are the fees paid to them for legal services merely for perfecting, releasing or satisfying a security interest. Thus I find that the entire $460 charge for attorney’s fees constitutes points and fees.

Line 1205 of the settlement statement includes a $65 charge to “Record Municipal Lien Certif[icate] to Commonwealth of MA.” The complaint alleges that no municipal lien certificate was ever recorded with respect to this transaction. Thus, at this stage of the proceeding, this charge too must be included in points and fees.

The sum of the loan discount charge, the attorney’s fees and lien certificate recording fee is $2780.22. Adding this to the undisputed charges of $4879 brings the total points and fees to $7659.22, which is more than five percent of the total loan amount. Thus, I need not determine whether any of the remaining charges alleged by the plaintiff qualify as points and fees. The plaintiff has stated a prima facie claim that her loan is a high cost loan made in violation of Chapter 183C, and, therefore, I must deny the motion for judgment on the pleadings with respect to Counts I and II of the complaint.

Count III of the Complaint

In Count III of the complaint, the plaintiff alleges that her promissory note payable to Allied was never properly transferred to CitiMortgage, and as a result, CitiMortgage has no valid secured claim against her bankruptcy estate. The allegation is based on the fact that the copy of the note attached to CitiMortgage’s motion for relief from stay in the main bankruptcy case includes no indorsement transferring the note CitiMortgage. CitiMortgage attached a different version of the note to its motion for judgment on the pleadings, which includes an additional page containing the “pay to the order” language quoted at the outset of this memorandum. CitiMortgage and Flagstar claim that the last page is an “allonge” by which Flagstar indorsed the note in blank and then transferred the note to CitiMortgage, giving CitiMortgage the right to enforce it. The Plaintiff argues that the existence of this second copy of the note raises the question as to whether the allonge effectively transferred Flagstar’s rights in the note to CitiMortgage.

Under Mass. Gen. Laws ch. 106, the Massachusetts version of the Uniform Commercial Code (the “UCC”), for a negotiable instrument to be transferred by indorsement, the indorsement must be on the instrument itself. UCC § 3-204(a). A “paper affixed to the instrument” is considered to be part of the instrument for purposes of § 3-204(a). Id.affixed to a promissory note. See, e.g., In re Shapoval, 2010 WL 4811786, *2 (Bankr. D. Mass. 2010). If the purported allonge signed by Flagstar is not affixed to the note, then despite having possession of the note, CitiMortgage lacks the status of “holder” as defined by UCC § 1-201(20).[8] Given that CitiMortgage has produced two different copies of the note—one with and one without the purported allonge—the plaintiff argues that there is a question of fact as to whether the allonge is affixed to the note, and therefore whether CitiMortgage has a valid claim in her bankruptcy case. To be effective, therefore, an allonge must be

Even if it is not the “holder” of the note, however, CitiMortgage may be entitled to enforce the note. UCC § 3-203(2) provides that the transfer of a negotiable instrument, “whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument.” The official commentary to this section explains that while the transferee of an instrument may enforce the instrument without being its holder, the transferee, unlike a holder, is not entitled to the presumption of the right of enforcement, and must prove the transaction through which the instrument was acquired. UCC § 3-203, § 2, cmt. 1 (1999).[9]

In its answer, CitiMortgage asserts that it has physical possession of the note indorsed in blank by Flagstar. If the allonge is not effective because it was not affixed to the note, CitiMortgage must then prove the transaction through which it acquired the note from Flagstar. It did not plead any facts about this transaction in its answer, however. With no allegation in the pleadings to support how CitiMortgage acquired the note, I must rely on the plaintiff’s well-pleaded allegations that the note was not properly transferred to CitiMortgage.[10]

Furthermore, CitiMortgage may not rely on the recorded assignment of the plaintiff’s mortgage from MERS to CitiMortgage as evidence that the note was transferred to it. While the assignment purports to assign both the mortgage and the note, MERS, which is a registry system that tracks the beneficial ownership and servicing of mortgages, was never the holder of the note, and therefore lacked the right to assign it. While MERS was the mortgagee of record, it was acting only as nominee for Allied, its successors and assigns. MERS is never the owner of the obligation secured by the mortgage for which it is the mortgagee of record. See, e.g., Landmark Nat. Bank v. Kesler, 289 Kan. 528, 536, 216 P.3d 158, 164 (2009) (providing a profile of MERS).

The plaintiff’s claim that CitiMortgage lacks a valid secured claim, therefore, survives the motion for judgment on the pleadings.

Conclusion

Based on the foregoing, I will deny the motion to compel arbitration, the motion to dismiss and the motion for judgment on the pleadings. Separate orders shall enter.

[1] This copy differs from the copy attached to CitiMortgage’s motion for relief from stay. See discussion below.

[2] The Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. 111-203 (2010) considerably reduced the degree to which HOLA and its regulations may preempt state consumer financial protection laws. See Dodd-Frank §§ 1044, 1046 (providing that HOLA preemption no longer occupies the field of banking regulation, and limiting preemption to specific conflicts between state and federal law). Because the plaintiff’s loan was consummated before Dodd-Frank was enacted, the new preemption standard is inapplicable to this case.

[3] See generally Legal Opinions, Office of Thrift Supervision, available at http://www.ots.treas.gov/?p=LegalOpinions.

[4] National banks are established by the National Bank Act, 12 U.S.C. §§ 21-216d (2009), which has a similar preemption regime to that of HOLA, which applies to federal thrifts. See, e.g., Aguayo v. U.S. Bank, 658 F.Supp.2d 1226, 1234 (S.D. Cal. 2009) (quoting the Office of the Comptroller of the Currency’s view that the similarity between the preemption regimes of the National Bank Act and HOLA “warrants similar conclusions about the applicability of state laws to the conduct of the Federally authorized activities of both types of entities.” 69 Fed. Reg. at 1912 n. 62). In light of the OTS’ policy of maximizing the preemptive effect of its regulations, it follows that the OTS, like the Comptroller of the Currency, would conclude that a federal thrift in a table-funded transaction is considered to be the lender for purposes of preemption analysis.

[5] In doing so, I will address Flagstar’s arguments from its motion to dismiss with respect to Count III of the complaint together with those of CitiMortgage.

[6] Section 2 provides as follows:

“Points and fees”, (i) items required to be disclosed pursuant to sections 226.4 (a) and 226.4 (b) of Title 12 of the Code of Federal Regulations or 209 CMR 32.04(1) and 209 CMR 32.04(2) of the Code of Massachusetts Regulations, as amended from time to time, except interest or the time-price differential; (ii) charges for items listed under sections 226.4 (c) (7) of Title 12 of the Code of Federal Regulations or 209 CMR 32.04(3)(g) of the Code of Massachusetts Regulations, as amended from time to time, but only if the lender receives direct or indirect compensation in connection with the charge, otherwise, the charges are not included within the meaning of the term “points and fees”; (iii) the maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents; (iv) all prepayment fees of [sic] penalties that are incurred by the borrower if the loan refinances a previous loan made or currently held by the same lender; (v) all compensation paid directly or indirectly to a mortgage broker, including a broker that originates a home loan in its own name in a table-funded transaction, not otherwise included in clauses (i) or (ii); (vi) the cost of all premiums financed by the creditor, directly or indirectly for any credit life, credit disability, credit unemployment or credit property insurance, or any other life or health insurance, or any payments financed by the creditor directly or indirectly for any debt cancellation or suspension agreement or contract, except that insurance premiums or debt cancellation or suspension fees calculated and paid on a monthly basis shall not be considered financed by the creditor. Points and fees shall not include the following: (1) taxes, filing fees, recording and other charges and fees paid to or to be paid to a public official for determining the existence of or for perfecting, releasing or satisfying a security interest; and, (2) fees paid to a person other than a lender or to the mortgage broker for the following: fees for flood certification; fees for pest infestation; fees for flood determination; appraisal fees; fees for inspections performed before closing; credit reports; surveys; notary fees; escrow charges so long as not otherwise included under clause (i); title insurance premiums; and fire insurance and flood insurance premiums, if the conditions in sections 226.4 (d) (2) of Title 12 of the Code of Federal Regulations or 209 CMR 32.04(4)(b) of the Code of Massachusetts Regulations, as amended from time to time, are met. For open-end loans, the points and fees shall be calculated by adding the total points and fees known at or before closing, including the maximum prepayment penalties that may be charged or collected under the terms of the loan documents, plus the minimum additional fees the borrower would be required to pay to draw down an amount equal to the total credit line.

[7] In her complaint, the plaintiff incorrectly calculated that five percent of the loan amount is $7950.

[8] The “holder” of a negotiable instrument is “the person in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession. UCC § 1-201(20).

[9] The commentary states:

Subsection (b) states that transfer vests in the transferee any right of the transferor to enforce the instrument “including any right as a holder in due course.” If the transferee is not a holder because the transferor did not indorse, the transferee is nevertheless a person entitled to enforce the instrument under Section 3-301 if the transferor was a holder at the time of transfer. Although the transferee is not a holder, under subsection (b) the transferee obtained the rights of the transferor as holder. Because the transferee’s rights are derivative of the transferor’s rights, those rights must be proved. Because the transferee is not a holder, there is no presumption under Section 3-308 that the transferee, by producing the instrument, is entitled to payment. The instrument, by its terms, is not payable to the transferee and the transferee must account for possession of the unindorsed instrument by proving the transaction through which the transferee acquired. it. Proof of a transfer to the transferee by a holder is proof that the transferee has acquired the rights of a holder. At that point the transferee is entitled to the presumption under Section 3-308.

[10] Flagstar filed the affidavit of Sharon Morgan, its assistant vice president, in support of its motion to dismiss. In the affidavit, Ms. Morgan claims that the plaintiff’s loan was sold to CitiMortgage on September 16, 2006. I note that Fed. R. Civ. P. 12(d), made applicable by Fed. R. Bankr. P. 7012, provides that when matters outside the pleadings are presented to the court, and not excluded, a motion for judgment on the pleadings is to be treated as a motion for summary judgment. CitiMortgage waived this right, however, at the hearing on the motion for judgment on the pleadings by declining my offer to treat the motion as one for summary judgment. Given that I am limited on a motion for judgment on the pleadings to reviewing the pleadings and documents attached thereto, I have not considered Ms. Morgan’s affidavit in this analysis.

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CLOUDED TITLES | You Can’t Sell Real Estate When You Can’t Establish You Own It!

CLOUDED TITLES | You Can’t Sell Real Estate When You Can’t Establish You Own It!


Abigail Field raises an excellent point in her latest article titled Why the Foreclosure Mess Settlement Proposal Can’t Fix the Damage. She states

You can’t sell real estate when you can’t establish that you own it — banks won’t loan money for purchasers to buy the property. That’s because the bank wants to be sure that if it forecloses, it will get good title to the property. (Yes, this issue practically oozes irony.) That’s why banks won’t approve a mortgage for a property if a title insurance company won’t insure its title. And title insurance companies won’t do that if they know the title is clouded.

A few months ago, the Massachusetts Supreme Judicial Court issued its Ibanez decision, which made it clear that the banks’ foreclosure practices — and indeed, the standard securitization deal — violated longstanding basic Massachusetts real estate law, and thus, many completed Massachusetts foreclosures were invalid. The foreclosing banks, which had either since sold the properties or still “owned” them, had no right to foreclose, and therefore had never owned those properties. So who owns them now? Well, the fact that it’s a question is the very definition of “clouded title.”

Naked Capitalism’s Eve directs the attention to the following

One thing that it is important to stress: that the abuses to established real estate transfer and recording processes were not inherent to the securitization model. I’m not a fan of securitization but the sad reality is that no one is prepared to go back to the more costly in terms of equity required, model of on-balance sheet banking (it would result in a shrinkage of credit that every respectable economist would recommend against and hence will never happen). But no one (except the FDIC, which keeps being ignored) is thinking seriously enough about what it would take to make securitization safer.

Everyone, from the bank originators to the investment bank packagers, got hooked on the easy profits, and kept pushing for ways to streamline the process, to both increase their profits and increase the size of the potential market. The biggest problems result from cutting corners, including the failure of the deal sponsors to adhere to their own agreements with investors, that led to this mess. Securitization had existed since the 1970s; MERS, one of the biggest culprits in the uncertainties over title, did not become a serious player until 1999. The widespread failure to convey notes (the borrower IOU) to securitization trusts appears not to have started until sometime between 2002 and 2004.

It’s not rocket science that the problems are clearly visible and this is not going to be easily thrown under the rug as they have done so well thus far.

You can’t sell real estate that doesn’t have a clean bill of health especially with fraudulent documentation.

An important question that should be considered is why hasn’t the National Association of Realtors not issued ANY warnings to their agents about the defects and consequences of selling properties that have been foreclosed and or in short sale? I know for a fact, the NAR’s former president Vickie Cox Golder was made well aware of this in 2010.


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NYT | MERS? It May Have Swallowed Your Loan

NYT | MERS? It May Have Swallowed Your Loan


Mortgage brokers hip deep in profits handed out no-doc mortgages to people with fictional incomes. Wall Street shopped bundles of those loans to investors, no matter how unappetizing the details. And federal regulators gave sleepy nods.

That world largely collapsed under the weight of its improbabilities in 2008.

But a piece of that world survives on Library Street in Reston, Va., where an obscure business, the MERS Corporation, claims to hold title to roughly half of all the home mortgages in the nation — an astonishing 60 million loans.

Continue reading … New York Times

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NC Reg. Of Deeds Jeff Thigpen Wants To Take On Mortgage Giants, Seeks MERS Investigation

NC Reg. Of Deeds Jeff Thigpen Wants To Take On Mortgage Giants, Seeks MERS Investigation


FOR IMMEDIATE RELEASE:
Greensboro, NC
March 2, 2011

Contact:
Jeff Thigpen, Guilford County Register of Deeds
Ph. 336-451-5300
Ph. 336-641-3239
jthigpe@co.guilford.nc.us

THIGPEN WANTS TO TAKE ON MORTGAGE GIANTS:

SEEKS INVESTIGATION OF “MERS” FOR REIMBURSEMENT OF $1.3 MILLION IN LOST REVENUE TO GUILFORD COUNTY

Guilford County Register of Deeds Jeff Thigpen announced today that he will be conferring with County Attorney Mark Payne, NC Attorney General and Secretary of State as to whether the Mortgage Electronic Registration Service (MERS) owes Guilford County fees estimated at $1.3 million in lost revenue from mortgage assignments. Thigpen also wants to review pending legal actions against MERS and consider options to protect the integrity of public land recordation offices.

“As Register of Deeds, I have two primary responsibilities in land records: a sworn duty to protect the chain of title and a fiduciary responsibility to collect recording fees. Quite frankly, MERS has undermined both. Through their own “private for-profit” Register of Deeds mortgage tracking office, MERS has created a dangerous centralization of power whose sole purpose is to protect and serve the interests of major banking conglomerates and undermine public recording offices,” said Thigpen.

“For me, the question is clear. Do we want land records in America to be governed by major banking conglomerates on Wall Street or the people and laws of the United States of America?”

MERS has an electronic registry and database system that tracks more than 65 million mortgages for its paid membership throughout the country and aides the mortgage backed securities trade in the secondary market. MERS is reportedly involved in 60% of US mortgage loans. It was established by some of the largest mortgage lenders in the United States including Wells Fargo, Chase Mortgage, Citi Mortgage, Countrywide Home Loans, Inc. and Bank of America among others in 1997. A number of class action lawsuits and civil racketeering suits have arisen against MERS recently, including a suit alleging its members owe California $60-120 billion for circumventing land recording fees.

MERS has also been at the center of recent foreclosure chaos.

Since the founding of America, counties in the United States have maintained public records of land, mortgages and deeds of trust, by maintaining indexes of grantors and grantees. Register of Deeds offices ensure transparency and an important check and balance in private property ownership. County recording practices have been in place for 300 years. “It is interesting that the first fundamental change in public land title recording systems was not initiated by publicly elected leaders, but a small group of mortgage industry insiders. Now it’s coming back to bite all of us- homeowners and taxpayers. MERS creates a system where only certain eyes see the data and what’s going on. I have a real problem with that as a Recorder.

Thigpen is asking for clarity on the California suit and others surrounding MERS business practices in packaging and repackages home owner loans through securitization. MERS has saved larger financial firms millions of dollars while avoiding recordation and payment of fees related to mortgage transfers.

Since 2005 there were 47,553 deeds of trust that list MERS as a beneficiary filed in the Guilford County Register of Deeds office. Experts have indicated that those kinds of loans are repackaged and sold two and four times on average under the MERS system. “One repackaging of MERS documents would have generated $665,742 if documentation had been filed in our office. Two repackaged loans would have generated $1,331,484. And that’s conservative estimate.”
Thigpen maintains the lost recording fees would help local elected officials reduce budget deficits and maintain core services such as public education and public safety in this time of fiscal crisis.

Thigpen’s primary concern relates to recent court rulings in Arkansas, Kansas, Maine and Missouri questioning MERS legal standing in home foreclosures and suits challenging that MERS filings may be fraudulent. “If MERS filings are false statements, there are laws that say if you decrease the money that you pay for a service through using those false statements then you can get damages. The legal term is “unjust enrichment”. Thigpen wants to explore unjust enrichment and other options related to recovery of lost revenue.

Thigpen acknowledges that NC General Statutes do not currently require assignments to be filed in local Register of Deeds offices which allow the public to know the rightful owner of a mortgage. “That may need to change among other things”, says Thigpen. Thigpen points to a major policy change from MERS in the past two weeks conceding that assignments should be filed in public registries across the country even if the state law does not require it and instructed members not to foreclose in MERS name. “It indicates to me that they know they need to fix this.”
“It used to be that if you bought a house, the mortgage would stay at a single bank until you paid it off. Times have changed. Through securitization, mortgages are all put in a blender and sold off to Wall Street investors and Fannie and Freddie among others. MERS has its finger on the spin button. At the end of the day with MERS, Susie Homeowner can’t keep track of who owns her loan and if she’s going to get hit with new fees or even foreclosure.

“This type of unregulated greed is giving charity to all the people who should be giving it and undermines good business practices.” says Thigpen. Thigpen points out those local credit unions like State Employees Credit Union who didn’t participate in sub-prime lending have avoided legal difficulties.

“This is a mess and the MERS system impacts millions of homeowners across the country in danger of having their homes foreclosed”, said Thigpen. He wants a review of the lawsuits and investigations into MERS by state attorney generals and others and believes it will take a coordinated at the local, state and federal level to resolve it. “To me these issues with MERS are simple. Are major banking conglomerates going to tell the truth or not; and are we going choose to have two standards of justice in America: one for Big Money and the other for the rest of us?

Thigpen will also join Southern Sussex Massachusetts Register of Deeds John O’Brian, Jr. in urging national organizations such as the International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT) to address MERS in the coming weeks.

###

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BLOOMBERG | Arizona Bill Would Void Foreclosures Without Full Title History

BLOOMBERG | Arizona Bill Would Void Foreclosures Without Full Title History


Arizona may become the first state to require lenders to prove they have the right to foreclose by providing a complete list of any previous owners of the mortgage, under a bill passed yesterday by its Senate.

The legislation, which is headed to the House after being approved 28-2 in the Republican-dominated Senate, would allow foreclosure sales to be voided if lenders that didn’t originate the loan can’t produce the full chain of title. Arizona permits nonjudicial foreclosures, meaning property can be seized from the homeowner without a court order.

Lawmakers in states including New York, Oregon and Virginia also have proposed legislation to address concerns among consumer advocates that lenders or mortgage servicers are using incomplete or false paperwork to repossess properties in default. The attorneys general of all 50 states are jointly investigating how the mortgage-servicing industry operates.

“If you foreclose on somebody you should have to tell them who owns the property,” Michele Reagan, who sponsored Senate Bill 1259, said in a telephone interview. “People have the right in this country to face their accusers.” The Republican lawmaker is in litigation with her mortgage servicer, which she said won’t identify the owner of the loan.

Continue reading HERE

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NO EXCUSE | Why MERS Should’ve Been Stopped Long Time Ago!

NO EXCUSE | Why MERS Should’ve Been Stopped Long Time Ago!


SFF took a challenge and wanted to see if there were any cases in past years identical to what is plaguing the court systems today. Sure enough the following cases below are ONLY a fraction of what was in store. Just imagine if someone was paying any attention to these cases, perhaps something could have changed the way the lending industry used an electronic device that without a doubt bifurcated the mortgage (deed of trust) from the note!

Same players, same tricks, years later…

Excerpt from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. v. DUVAL 2004

The moving papers reflect that the plaintiff is not the owner of the subject mortgage nor the note for which said mortgage was given as security. Nor is the plaintiff the lender named in the note and mortgage attached the moving papers. In addition, there is no evidence that the plaintiff was the owner of the note and mortgage at the time this action was commenced by reason of assignment or otherwise. The failure to establish the plaintiff’s ownership of the note and mortgage at the time of the commencement of this action precludes the granting of the instant motion since the plaintiff is unable to establish “the facts constituting the claim(s)” against the known defendants as required by CPLR 3215(f) (Kluge u Fugaqy, 145 AD2d 537,53 6 NYS2d 92; cJ, Federal National Mortgage Association v Yonkelsone, 303 AD2d 546,755 NYS2d 730).

2004

AURORA v. FITZGERALD 2004

MERS v. BAXTER 2004

MERS v. DUVAL 2004

MERS v. EDWARDS 2004

MERS v. PALERMO 2004

MERS v. PARKER 2004

MERS v. POBLETE 2004

MERS v. SCHOENSTER 2004

Excerpt from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. v. DELZATTO 2005

The moving papers reflect that the above named plaintiff, a/k/a MERS, is not the owner of the subject mortgage nor the note for which said mortgage was given as security. The plaintiff was not the named as the lender in either the note or mortgagee sought to be foreclosed herein. Instead, the plaintiff is identified in the mortgage indenture as a “separate corporation acting solely as nominee for the Lender and Lender’s successors and assigns” and “FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD”

Nor is there any proof that the plaintiff was the owner of the note and mortgage at the time this action was commenced by reason of assignment or otherwise. The failure to establish the plaintiffs ownership of the note and mortgage at the time of the commencement of this action precludes the granting of the instant motion since the plaintiff is unable to establish “the facts constituting the claim(s)” against the defaulting defendants as required by CPLR 3215(f) (Kluge v Fugazy, 145 AD2d 5 37,536 NYS2d 92; a:, Federal National MortgageAssociation v Youkelsone, 303 AD2d 546,755 NYS2d 730).

2005

Aurora v. Fitzgerald 2005

MERS v. DELZATTO 2005

MERS v. GARCIA 2005

MERS v. ROMERO 2005

MERS v. Trapani 2005

Excerpt from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. v. RAMDOOLAR 2006

As indicated in a prior order dated December 6, 2005 (Burke, J.), the plaintiff, Mortgage Electronic Registration Systems, Inc., was not the owner of the note and mortgage at the titme this action was commenced. The court thus found that the plaintiffs complaint failed to state cognizable claims against the defendants (Kluge v Fugazy, 145 AD2d 537, 536 NYS2d 92; see, also, Katz v East-Ville Realty Company, 249 AD2d 243, 672 NYS2d 308) and that the plaintiff was thus not entitled to the default judgment it demanded on is prior application (CPLR 3215[f1).

On the instant application, the plaintiff purportedly assigned its interest in this subject note and mortgage to an entity known as HSBC Bank USA, National Association as Trustee for MLMI Series 2005-WMC. Since, however, the plaintiff, Mortgage Electronic Services, Inc. was not the owner of the note and mortgage at the time of the purported assignment, the named assignee, HSBC Bank USA, National Association as Trustee for MLMI Series 2005-WMC, acquired no title thereto. The plaintiffs demand for substitution of said entity as the plaintiff in this action is thus denied.

In addition, a substitution of a party plaintiff, such as that demanded here, may not be accomplished by a mere caption amendment. Rather, the substitution of a new party plaintiff would require its participation by its consent andor its formal joinder in this action as contemplated by CPLR 1003 and the filing of an amended complaint by the proposed new plaintiff wherein it alleges facts which constitute cognizable claims against the defendants. Since there was no joinder of the proposed new plaintiff, by consent or service, nor was that any demand by it for leave to serve an amended complaint, the substitution of HSBC Bank USA, National Association as Trustee for MLMI‘ Series 2005-WMC as a party plaintiff would have been precluded even if a valid and recorded assignment by the owner of the note and mortgage had been attached to the moving papers.

2006

MERS v. BIAS 2006

MERS v. Hatwood 2006

MERS v. LONG 2006

MERS v. MORRIS 2006

MERS v. RAMDOOLAR 2006

MERS v. SANFILIPPO 2006

MERS v. WELLS 2006

Excerpt from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. v. WILLIAMS 2007

The claimant, J.P. Morgan Chase Bank as Trustee for the Home Equity Trust Series 2004- 3, purports to be the assignee, pursuant to a corporate assignment of mortgage/deed of trust executld by Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee for Decision One Mortgage Company, LLC, of a certain mortgage executed by defendant-mortgagor JULIA WILLIAMS and delivered to MERS as nominee for Intervale Mortgage Corp., which mortgage is alleged to be a subordinate lien to the mortgage previously foreclosed in this action. The claimant’s submissions do not establish the chain of assignments from the original mortgagee, Intervale Mortgage Corp., and the proofs submitted by the claimant are insufficient to establish that it .s the current owner and holder of the note and mortgage that purportedly entitle it to the surplus monics deposited with the Suffolk County Treasurer. The Court notes that even if MERS has authority to assign the subject mortgage (which is not apparent from the submissions), there is no prod2fof its authority to assign the underlying note, which it apparently does not own. Since a mortgage may not be separated from the underlying debt (Merritt v. Bartholick, 36 N.Y. 44,45, 34 HOW. Pr. 129 (1 867), the issue of the claimant’s standing to claim the surplus monies is not established by the record before the Court.

2007

EMC v. WINK-THILMAN 2007

MERS v. WILLIAMS 2007

U.S. BANK v. MOSS 2007

WELLS FARGO v. GISONDA 2007

WELLS FARGO v. GOLDEN 2007

WHOA! Don’t stop here the image below will take you to 2008, 2009, 2010 and 2011 cases…

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NEVADA Dist. Court “QUIET TITLE VIABLE” SIFRE v. Wells Fargo Bank

NEVADA Dist. Court “QUIET TITLE VIABLE” SIFRE v. Wells Fargo Bank


PAUL SIFRE, Plaintiff,
v.
WELLS FARGO BANK, Defendant.

No. 3:10-cv-00572-RCJ-VPC. United States District Court, D. Nevada.

January 19, 2011.

ORDER

ROBERT C. JONES, District Judge.

This case arises out of the foreclosure of Plaintiffs mortgage. The Court previously entered a temporary restraining order and set a preliminary injunction hearing, but the order expired and the Court vacated the hearing when Plaintiff failed to serve Defendant with the notice of the hearing within the time ordered by the Court. Plaintiff has now served “Wells Fargo Bank C/O Trustees Corps,” in Sacramento, California, and the Clerk has entered default against Defendant based on this service. The Court denied a motion for preliminary injunction, and Defendant has now moved to dismiss,

I. FACTS AND PROCEDURAL HISTORY

Plaintiff Paul Sifre owns real property located at 3660 Hawking Ct., Sparks, NV 89436 (the “Property”). (Mot. 1:16-17, Sept. 15, 2010, ECF No. 2).[1] The gravamen of the Complaint is that Plaintiff was fraudulently induced into signing a mortgage, although most of the Complaint is a generalized grievance against the mortgage industry. Plaintiff does not allege he is not in default but rather that Defendant does not have standing to foreclose and fraudulently induced him into entering into the mortgage contract. He also appears to plead claims for unjust enrichment, quiet title, breach of fiduciary duty, negligence, breach of the implied covenant of good faith and fair dealing, intentional infliction of emotional distress, TILA, HOEPA, and RESPA.

Continue below…

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WRAY | Requiem for MERS (and the Banks That Created the Frankenstein Monster)

WRAY | Requiem for MERS (and the Banks That Created the Frankenstein Monster)


L. Randall Wray

Professor of Economics and Research Director of the Center for Full Employment and Price Stability, University of Missouri–Kansas City
Posted: January 24, 2011 09:01 AM

It is now widely recognized that MERS facilitated fraud by lenders, servicers, foreclosers and securitizers. Even on the most charitable interpretation it is very difficult to believe that MERS was not fraudulent by design. So much of the story has already been told that we do not need to rehash all of it here. Let me first concisely summarize the two main problems, and then move on to the most recent developments that put the final nails in MERS’s coffin. I’ll conclude with my argument that there really was some “not so intelligent” design behind all of this. But it is coming back to bite the hand that feeds. The big banks will not survive the monster they created.

Whenever those who are critical of MERS and the banksters post blogs about the multiple frauds, we are attacked by commentators — presumably industry hacks — who try to obfuscate the issues. But recent court cases as well as testimonies before elected representatives confirm our two main claims. First, many or most foreclosures that are taking place are illegal because those doing the foreclosing do not have legal standing. And, second, the practices that created the foreclosure problems also mean that the mortgage backed securities are actually unsecured debt. That means banks must take them back, so they are toast. It all comes back to MERS’s business model: it destroyed the chain of title.

Much of the rest of the fraud and scandal we are witnessing follows on from that because the banks want to foreclose the properties before the securities holders put back the fraudulent securities. The problem is that the destruction of the clear chain of title makes it impossible to foreclose, so the banks used robo-signers to forge documents in the hope they could paper over their home thefts. But homeowners, courts, legislators, securities investors, and title insurers have caught on to the scam. In addition to the forgeries, MERS and bank officials and lawyers are committing perjury in court in the hope that they can confuse the issues sufficiently that they can complete the home thefts.

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Next in the Massachusetts Pipeline: Francis J. Bevilacqua vs. Pablo Rodriguez

Next in the Massachusetts Pipeline: Francis J. Bevilacqua vs. Pablo Rodriguez


Via: William Alexander Roper, JR.

COMMONWEALTH OF MASSACHUSETTS
THE TRIAL COURT
LAND COURT DEPARTMENT

FRANCIS BEVILACQUA, III v. PABLO RODRIGUEZ

MISC 10-427157
ESSEX, ss.
August 26, 2010

Long, J.

MEMORANDUM AND ORDER DISMISSING PLAINTIFF’S COMPLAINT

Introduction

Plaintiff Francis Bevilaqua holds no title to the property at 126-128 Summer Street in Haverhill. That title is held by defendant Pablo Rodriguez. What Mr. Bevilaqua has is a quitclaim deed from US Bank, N.A., which conducted an invalid foreclosure sale on the property (it was not the holder of the mortgage at the time the sale was noticed and conducted as required by G.L. c. 244, § 14) [Note 1] and thus acquired nothing from that sale. See US Bank v. Ibanez, 17 LCR 202 (Mar. 26, 2009) & 17 LCR 679 (Oct. 14, 2009) and cases cited therein. US Bank therefore had nothing to convey, and its purported conveyance to Mr. Bevilaqua was a nullity. See Bongaards v. Millen, 440 Mass. 10 , 15 (2003).

Despite this, Mr. Bevilaqua now seeks to create a full, fee simple title in himself — quite literally, something from nothing — through the “try title” procedure of G.L. c. 240, §§ 1-5. He cannot do so, for the reasons set forth below. Accordingly, his complaint is DISMISSED in its entirety, with prejudice.

Continue belowCourtesy of Lawlib
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BLOOMBERG | Faulty Foreclosure Case in Massachusetts High Court May Hurt Home Buyers

BLOOMBERG | Faulty Foreclosure Case in Massachusetts High Court May Hurt Home Buyers


Massachusetts’ highest court will consider whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner.

The state’s Supreme Judicial Court, which agreed last month to take the appeal, already ruled Jan. 7 that banks can’t foreclose on a house if they don’t own the mortgage. The lower- court decision now under review said the buyer of residential property in Haverhill, Massachusetts, never really owned it because U.S. Bancorp foreclosed before it got the mortgage.

“It appears to be the next step in the conversation,” Paul R. Collier III, who represented the borrower in the earlier case, U.S. Bank v. Ibanez, said in a phone interview.

Like the Ibanez case, the court’s decision may resonate with other states as they grapple with the rights of new homebuyers who may be hesitant to complete a purchase for fear of uncertain title, and with how such a trend may hobble the broader housing market.

Claims of wrongdoing by banks and loan servicers triggered a 50-state investigation last year into whether thousands of U.S. foreclosures were properly documented during the housing collapse. Last year, completed foreclosures in Massachusetts rose 32 percent to 12,233 from 9,269 in 2009, according to Boston-based Warren Group, which tracks local real estate.

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Why Mortgage-Backed Securities Aren’t (Backed by Securities): How MERS Toasted the Banks

Why Mortgage-Backed Securities Aren’t (Backed by Securities): How MERS Toasted the Banks


L. Randall Wray

Professor of Economics and Research Director of the Center for Full Employment and Price Stability, University of Missouri–Kansas City
Posted: December 30, 2010 08:35 AM

In a series of pieces I have argued that MERS, a creation of the mortgage banking industry, has effectively destroyed the institution of private property in America. Ironically, MERS was created to facilitate quick and easy and cheap securitization of mortgages — what are called mortgage-backed securities. In fact, what it did was to eliminate any backing of the securities by mortgages. Of the total securitized asset universe, something like $7 trillion are (supposedly) backed by residential mortgages. However, MERS helped to delink the securities from the mortgages. At best, they are unsecured debt — there is no property backing the securities. What this means is that foreclosure is not permitted. As I have said before, it is likely that most or even all foreclosures occurring in the US are illegal seizures of property — home thefts. We are talking about 100,000 completed home thefts per month, with another 250,000 new foreclosures started to steal homes every month. Projections are that 13 million homes will have been “foreclosed” (read: stolen) by 2012.

Worse, from the perspective of the banks, they’ve got to take back all the fraudulent MBSs, most of which are toxic.

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WaPO: First, the electronic mortgage superhighway. Then, the pileup.

WaPO: First, the electronic mortgage superhighway. Then, the pileup.


Washington Post Staff Writers
Sunday, January 2, 2011

In the early 1990s, the biggest names in the mortgage industry hatched a plan for a new electronic clearinghouse that would transform the home loan business – and unlock billions of dollars of new investments and profits.

At the time, mortgage documents were moved almost exclusively by hand and mail, a throwback to an era in which people kept stock certificates, too. That made it hard for banks to bundle home loans and sell them to investors. By contrast, a central electronic clearinghouse would allow the companies to transfer thousands of mortgages instantaneously, greasing the wheels of a system in which loans could be bought and sold repeatedly and quickly.

“Assignments are creatures of 17th-century real property law; they do not coexist easily with high-volume, late 20th-century secondary mortgage market transactions,” Phyllis K. Slesinger, then senior director of investor relations for the Mortgage Bankers Association, wrote in paper explaining the system.

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IA APPEALS COURT |”MORTGAGE NULL & VOID” DEUTSCHE BANK NATIONAL TRUST COMPANY v. GAUPPS

IA APPEALS COURT |”MORTGAGE NULL & VOID” DEUTSCHE BANK NATIONAL TRUST COMPANY v. GAUPPS


Back by popular demand…first posted this back on July 1, 2010.

DEUTSCHE BANK NATIONAL TRUST COMPANY, As Trustee of Ameriquest Mortgage Securities, Inc., Asset-Backed Pass Through Certificates, Series 2004-X3, Under the Pooling and Servicing Agreement Dated as of September 1, 2004, Without Recourse, Plaintiff-Appellant,
v.
DAVID J. GAUPP, ALEXANDRA C. GAUPP, NATHAN PARTON and SPOUSE OF NATHAN PARTON, REBEKAH J. BARTON and SPOUSE OF REBEKAH J. BARTON, WELLS FARGO BANK, N.A., and PARTIES IN POSSESSION,, Defendants-Appellees.

No. 0-272/09-0700.

Court of Appeals of Iowa.

Filed June 30, 2010.

Excerpt:

On October 21, 2008, the Partons and Wells Fargo filed a motion for summary judgment asserting that (1) the mortgage held by Deutsche Bank was invalid; and (2) the mortgage held by Deutsche Bank could not be foreclosed because the Partons were bona fide purchasers for value. On February 12, 2009, the district court issued its ruling finding that the Gaupps and Granger conveyed their interest in the property to G & G Properties on July 3, 2002, and when G & G Properties recorded the deed on September 24, 2002, it became the record titleholder. Gaupp did not have any interest in the property when he executed the mortgage in favor of Ameriquest/Deutsche Bank and after the mortgage was executed, Gaupp never obtained title to the property. G & G Properties did not convey the property to anyone prior to May 19, 2006, when the Partons purchased the property. As a result, the mortgage held by Deutsche Bank was “null and void.” The district court granted the Partons and Wells Fargo’s motion for summary judgment and dismissed the petition for foreclosure. Deutsche Bank appeals.

<SNIP>

Deutsche Bank asserts that the district court erred in granting the defendants’ motion for summary judgment. The parties do not dispute that at the time Gaupp executed the promissory note and mortgage, he did not hold title to the property and that G & G Properties was the record titleholder. Deutsche Bank cannot avoid the fundamental principal that a party that has no interest in a particular piece of real property cannot validly mortgage that property. See, e.g., Lee v. Lee, 207 Iowa 882, 885, 223 N.W. 888, 890 (Iowa 1929) (holding a mortgage invalid because the mortgagor had no interest in the property at the time the mortgage was given); 59 C.J.S. Mortgages § 111, at 102-03 (2009) (discussing that “[o]ne who has no ownership interest in property has no right to mortgage it” and if one does so, the mortgage creates no interest in the property). At the time Gaupp obtained the loan from Ameriquest, he did not have any interest in the property and therefore, the mortgage instrument attempting to secure the promissory note was invalid.

Deutsche Bank argues that Gaupp acquired title to the property on December 31, 2003, when the Gaupps and Granger executed the “Corrected Warranty Deed,” which Deutsche Bank further argues resulted in the mortgage becoming valid.[ 3 ] However, this argument fails because Gaupp did not acquire an interest in the property when the “Corrected Warranty Deed” was executed on December 31, 2003. On July 3, 2002, the Gaupps and Granger conveyed the property to G & G Properties. After this conveyance, Gaupp had no interest in the property and could not convey the property to anyone. See Iowa Code § 557.3 (2007) (“Every conveyance of real estate passes all the interest of the grantor therein, unless a contrary intent can be reasonably inferred from the terms used.”). After the July 3, 2002 conveyance, only G & G Properties was able to convey title to the property. Any such attempt by Gaupp to do so would be and was invalid as he was no longer the titleholder. Therefore, the attempts by the Gaupps and Granger to convey the property on December 31, 2003, and February 2, 2005, were not valid conveyances.[ 4 ] Additionally, because the invalid conveyances were outside the chain of title, they were stray deeds when recorded. See William Stoebuck and Dale Whitman, The Law of Property § 11.11 (3rd ed. 2000) (“The term `chain of title’ is a shorthand way of describing the collection of documents which one can find by the use of the ordinary techniques of title search.”); 1 C.J.S. Abstracts of Title § 15, at 320 n.8 (2009) (“Instrument executed by owner [that] is recorded before acquisition or after relinquishment of title by owner is outside chain of title . . . .”).[ 5 ] Title remained with G & G Properties from July 3, 2002 until May 5, 2006, when G & G Properties conveyed its solely held interest in the property to the Partons. Therefore the chain of title went from G & G Properties to the Partons. Gaupp did not have title to the property when he executed the mortgage instrument now held by Deutsche Bank nor did he subsequently obtain title. We affirm the district court’s findings and ruling.

Continue reading below…

deutsche bank v. gaupp

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