Ibanez, 458 Mass. at 651 (emphasis added). None of the evidence thus far presented at trial indicated that the plaintiff’s mortgage was part of the Trust Fund, or how the Depositor acquired the Trust Fund.
In re: SIMA SCHWARTZ, Debtor.
SIMA SCHWARTZ, Plaintiff,
v.
HOMEQ SERVICING, AGENT FOR DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE and DEUTSCHE BANK NATIONAL COMPANY, AS TRUSTEE, Defendants.
Case No. 06-42476-MSH, Adv. Pro. No. 07-04098.
United States Bankruptcy Court, D. Massachusetts, Central Division.
April 7, 2011.
MEMORANDUM AND ORDER ON PLAINTIFF?S MOTION FOR A NEW TRIAL
Excerpt:
A central question at trial was whether defendant Deutsche was the owner of the mortgage on the plaintiff’s home during the foreclosure process which resulted in the foreclosure sale of the home on May 24, 2006.2 The plaintiff introduced into evidence a document entitled “Assignment of Mortgage” dated May 23, 2006, which reflected the assignment of the plaintiff’s mortgage from the original mortgagee, Mortgage Electronic Registration Systems, Inc., as nominee for First NCL Financial Services, LLC, to defendant Deutsche. During the plaintiff’s case, all parties agreed that this assignment was dated prior to the date of the foreclosure sale. No party disputed itsauthenticity or validity. Because the assignment was executed prior to the foreclosure sale and its validity was not questioned, I ruled at trial that the plaintiff had failed to carry her burden of proving that Deutsche was not the owner of the mortgage when it foreclosed.
In her motion for a new trial, the plaintiff argues that I misconstrued Massachusetts law, pointing out that the Massachusetts Supreme Judicial Court in U.S. Bank. Nat’l Ass’n v. Ibanez, 458 Mass. 673, 941 N.E.2d 40 (2011) recently held that in order for a foreclosure sale to be valid the mortgage must have been assigned to the foreclosing entity not merely before the sale, but prior to the first publication of notice of that sale required by Mass. Gen. Laws. ch. 244, § 14. Ibanez, 458 Mass. at 647-48. I agree with the plaintiff’s interpretation of Ibanez and since the May 23, 2006 assignment was executed after the foreclosure notices had been published, I could not rely on the assignment exclusively in granting the defendants judgment on partial findings. In light of the foregoing I must determine whether and to what extent to open the March 6, 2011 judgment for the defendants.
In Count I of the complaint, the plaintiff seeks a ruling that the foreclosure sale was invalid. Not only does the March 23, 2006 assignment fail to establish the validity of the foreclosure sale, it constitutes the only evidence presented that at the time Deutsche began publishing notice of the sale, Deutsche was not the holder of the mortgage. The defendants argue that the pooling and servicing agreement dated November 1, 2005 which is listed in the joint pretrial memorandum as a trial exhibit provides evidence that the mortgage on the plaintiff’s property was assigned to Deutsche well before the foreclosure process had begun. The excerpt of the pooling and servicing agreement that was admitted during the plaintiff’s case in chief, however, provides no such evidence. The excerpt indicates that an entity defined as the “Depositor” assigned the “TrustFund”, which I presume included mortgages listed on a mortgage loan schedule not provided, to Deutsche, as Trustee for the benefit of the certificateholders of the Morgan Stanley Home Equity Loan Trust 2005-4. In Ibanez, the Supreme Judicial Court held that where, as here, a recordable assignment was not executed prior to the first publication of a notice of a foreclosure sale, the foreclosing entity may nevertheless prove that it was the mortgagee at the relevant time. The Court observed:
[w]here a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However, there must be proof that the assignment was made by a party that itself held the mortgage.
Ibanez, 458 Mass. at 651 (emphasis added). None of the evidence thus far presented at trial indicated that the plaintiff’s mortgage was part of the Trust Fund, or how the Depositor acquired the Trust Fund.
I find that the plaintiff has presented sufficient evidence of the chain of title of the mortgage on her property to carry her burden of persuasion that the mortgage was not owned by Deutsche before the first publication of the notice of foreclosure sale. I must, therefore, vacate and open the judgment for the defendants on Count I of the complaint.
Deutsche Bank National Trust Company as Trustee under the Pooling and Servicing Agreement Dated as of February 1, 2007, GSAMP TRUST 2007-FM2, Plaintiff,
against
Walter Francis a/k/a Walter J. Francis, et. al., Defendants
Decided on March 25, 2011
Supreme Court, Kings County
10441/09Plaintiff
Jordan S. Katz, PC
Melville NY
schack, J.
In this residential mortgage foreclosure action, for the premises located at 2155 Troy Avenue, Brooklyn, New York (Block 7842, Lot 11, County of Kings) plaintiff, DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE UNDER THE POOLING AND SERVICING AGREEMENT DATED AS OF FEBRUARY 1, 2007, GSAMP TRUST 2007-FM2 [*2](DEUTSCHE BANK) moved for an order of reference alleging that defendant WALTER T. FRANCIS (FRANCIS) failed to file a timely answer. Plaintiff DEUTSCHE BANK and defendant FRANCIS appeared for oral argument on DEUTSCHE BANK’S motion on September 21, 2010. In a short form order issued that day I held that FRANCIS filed a timely answer and also denied plaintiff’s motion for an order of reference because plaintiff DEUTSCHE BANK failed to serve defendant FRANCIS with its motion for an order of reference. I ordered the parties to appear before me on October 29, 2010 for a preliminary conference.
The parties appeared on October 29, 2010. Plaintiff’s counsel agreed to try to work with defendant FRANCIS on a loan modification agreement if defendant FRANCIS provided DEUTSCHE BANK with numerous documents. Defendant FRANCIS provided plaintiff with the required documentation. The Court conducted several settlement conferences. The last settlement conference was scheduled for March 14, 2011. Plaintiff DEUTSCHE BANK defaulted in appearing, while defendant FRANCIS was present. Plaintiff’s counsel did not contact my Part or file an affirmation of actual engagement. I then checked the file for this case maintained by the Kings County Clerk and the Automated City Register Information System (ACRIS). I discovered that there is no record of plaintiff DEUTSCHE BANK ever owning the subject mortgage and note. Therefore, with plaintiff DEUTSCHE BANK lacking standing, the instant action is dismissed with prejudice and the notice of pendency cancelled.
BackgroundAccording to the verified complaint and confirmed by my ACRIS check, defendant FRANCIS borrowed $445,500.00 from FREMONT INVESTMENT AND LOAN (FREMONT) on October 20, 2006. The mortgage to secure the note was recorded by MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), “acting solely as a nominee for Lender [FREMONT]” and “FOR PURPOSES OF RECORDING THIS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD,” in the Office of the City Register of the City of New York, New York City Department of Finance, on November 21, 2006, at City Register File Number (CRFN) 2006000645448.
Plaintiff alleges in its verified complaint that FRANCIS executed a loan modification agreement on February 22, 2008 with FREMONT. This was never recorded with ACRIS. Further, the verified complaint alleges, in ¶ 6, that MERS, as nominee for FREMONT assigned the mortgage and note to plaintiff “by way of an assignment dated April 21, 2009 to be recorded in the Office of the Clerk of the County of Kings.” It is almost two years since April 21, 2009 and this alleged assignment has not been recorded in ACRIS. Plaintiff should learn that mortgage assignments are not recorded in the Office of the Clerk of the County of Kings, but with the City Register of the New York City Department of Finance.
Defendant FRANCIS allegedly defaulted in his mortgage loan payments with his January 1, 2009 payment. Subsequently, plaintiff DEUTSCHE BANK commenced the instant action, on April 29, 2009, alleging in ¶ 7 of the verified complaint, that “Plaintiff [DEUTSCHE BANK] is the holder and owner of the aforesaid NOTE and MORTGAGE.”
However, according to ACRIS, plaintiff DEUTSCHE BANK was not the holder of the note and mortgage on the day that the instant foreclosure action commenced. Thus, DEUTSCHE BANK lacks standing. The action is dismissed with prejudice. The notice of pendency [*3]cancelled. Plaintiff’s lack of standing is enough to dismiss this action. The Court does not need to address MERS’ probable lack of authority to assign the subject mortgage and note to DEUTSCHE BANK, if it was ever assigned.
Discussion
In the instant action, it is clear that plaintiff DEUTSCHE BANK lacks “standing.” Therefore, the Court lacks jurisdiction. “Standing to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress.” (Saratoga County Chamber of Commerce, Inc. v Pataki, 100 NY2d 801 812 [2003], cert denied 540 US 1017 [2003]). Professor Siegel (NY Prac, § 136, at 232 [4d ed]), instructs that:
[i]t is the law’s policy to allow only an aggrieved person to bring a
lawsuit . . . A want of “standing to sue,” in other words, is just another
way of saying that this particular plaintiff is not involved in a genuine
controversy, and a simple syllogism takes us from there to a “jurisdictional”
dismissal: (1) the courts have jurisdiction only over controversies; (2) a
plaintiff found to lack “standing” is not involved in a controversy; and
(3) the courts therefore have no jurisdiction of the case when such a
plaintiff purports to bring it.
“Standing to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.” (Caprer v Nussbaum (36 AD3d 176, 181 [2d Dept 2006]). If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. (Stark v Goldberg, 297 AD2d 203 [1st Dept 2002]).
Plaintiff DEUTSCHE BANK lacked standing to foreclose on the instant mortgage and note when this action commenced on April 29, 2009, the day that DEUTSCHE BANK filed the summons, verified complaint and notice of pendency with the Kings County Clerk, because it can not demonstrate that it owned the mortgage and note that day. Plaintiff alleges that the April 21, 2009 assignment from MERS, as nominee for FREMONT, to plaintiff DEUTSCHE BANK was to be recorded. As of today it has not been recorded. The Court, in Campaign v Barba (23 AD3d 327 [2d Dept 2005]), instructed that “[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and the mortgage note, ownership of the mortgage, and the defendant’s default in payment [Emphasis added].” (See Witelson v Jamaica Estates Holding Corp. I, 40 AD3d 284 [1st Dept 2007]; Household Finance Realty Corp. of New York v Wynn, 19 AD3d 545 [2d Dept 2005]; Sears Mortgage Corp. v Yahhobi, 19 AD3d 402 [2d Dept 2005]; Ocwen Federal Bank FSB v Miller, 18 AD3d 527 [2d Dept 2005]; U.S. Bank Trust Nat. Ass’n Trustee v Butti, 16 AD3d 408 [2d Dept 2005]; First Union Mortgage Corp. v Fern, 298 AD2d 490 [2d Dept 2002]; Village Bank v Wild Oaks, Holding, Inc., 196 AD2d 812 [2d Dept 1993]).
Assignments of mortgages and notes are made by either written instrument or the assignor physically delivering the mortgage and note to the assignee. “Our courts have repeatedly held that a bond and mortgage may be transferred by delivery without a written instrument of assignment.” (Flyer v Sullivan, 284 AD 697, 699 [1d Dept 1954]). Plaintiff DEUTSCHE BANK has no evidence that it had physical possession of the note and mortgage on [*4]April 29, 2009 and admitted, in ¶ 6 of the instant verified complaint complaint, that the April 21, 2009 assignment is “to be recorded.”
The Appellate Division, First Department, citing Kluge v Fugazy, in Katz v East-Ville Realty Co., (249 AD2d 243 [1d Dept 1998]), instructed that “[p]laintiff’s attempt to foreclose upon a mortgage in which he had no legal or equitable interest was without foundation in law or fact.” Therefore, plaintiff DEUTSCHE BANK lacks standing and the Court lacks jurisdiction in this foreclosure action. The instant action is dismissed with prejudice.
The dismissal with prejudice of the instant foreclosure action requires the
cancellation of the notice of pendency. CPLR § 6501 provides that the filing of a notice of pendency against a property is to give constructive notice to any purchaser of real property or encumbrancer against real property of an action that “would affect the title to, or the possession, use or enjoyment of real property, except in a summary proceeding brought to recover the possession of real property.” The Court of Appeals, in 5308 Realty Corp. v O & Y Equity Corp. (64 NY2d 313, 319 [1984]), commented that “[t]he purpose of the doctrine was to assure that a court retained its ability to effect justice by preserving its power over the property, regardless of whether a purchaser had any notice of the pending suit,” and, at 320, that “the statutory scheme permits a party to effectively retard the alienability of real property without any prior judicial review.”
CPLR § 6514 (a) provides for the mandatory cancellation of a notice of pendency by:
The Court, upon motion of any person aggrieved and upon such
notice as it may require, shall direct any county clerk to cancel
a notice of pendency, if service of a summons has not been completed
within the time limited by section 6512; or if the action has been
settled, discontinued or abated; or if the time to appeal from a final
judgment against the plaintiff has expired; or if enforcement of a
final judgment against the plaintiff has not been stayed pursuant
to section 551. [emphasis added]
The plain meaning of the word “abated,” as used in CPLR § 6514 (a) is the ending of an action. “Abatement” is defined as “the act of eliminating or nullifying.” (Black’s Law Dictionary 3 [7th ed 1999]). “An action which has been abated is dead, and any further enforcement of the cause of action requires the bringing of a new action, provided that a cause of action remains (2A Carmody-Wait 2d § 11.1).” (Nastasi v Natassi, 26 AD3d 32, 40 [2d Dept 2005]). Further, Nastasi at 36, held that the “[c]ancellation of a notice of pendency can be granted in the exercise of the inherent power of the court where its filing fails to comply with CPLR § 6501 (see 5303 Realty Corp. v O & Y Equity Corp., supra at 320-321; Rose v Montt Assets, 250 AD2d 451, 451-452 [1d Dept 1998]; Siegel, NY Prac § 336 [4th ed]).” Thus, the dismissal of the instant complaint must result in the mandatory cancellation of plaintiff DEUTSCHE BANKS’s notice of pendency against the property “in the exercise of the inherent power of the court.”
Conclusion
Accordingly, it is
ORDERED, that the instant action, Index Number 10441/09, is dismissed with
prejudice; and it is further [*5]
ORDERED that the Notice of Pendency in this action, filed with the Kings
County Clerk on April 29, 2009, by plaintiff, DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE UNDER THE POOLING AND SERVICING AGREEMENT DATED AS OF FEBRUARY 1, 2007, GSAMP TRUST 2007-FM2 , to foreclose on a mortgagefor real property located at 2155 Troy Avenue, Brooklyn, New York (Block 7842, Lot 11, County of Kings), is cancelled.
This constitutes the Decision and Order of the Court.
KRISTEN BAIN, Plaintiff,
v.
ONEWEST BANK, F.S.B; DEUTSCHE BANK NATIONAL TRUST COMPANY; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC; REGIONAL TRUSTEE SERVICES CORPORATION; Defendants.
Case No. C09-0149-JCC.
United States District Court, W.D. Washington, Seattle.
March 15, 2011.
Excerpt:
F. Consumer Protection Act
Finally, Plaintiff alleges that Defendants violated the Consumer Protection Act (“CPA”). To state a claim under the CPA, Plaintiff must show (1) an unfair or deceptive act or practice, (2) in trade or commerce, (3) that impacts the public interest, (4) which causes injury to the plaintiff in his or her business or property, and (5) which injury is causally linked to the unfair or deceptive act. Griffith v. Centex Real Estate Corp., 969 P.2d 486, 492 (Wash. Ct. App. 1998).
MERS asserts that Plaintiff has not shown an unfair or deceptive practice on its part, has not shown how any act of MERS impacts the public interest, and presents nothing showing injuries caused by an unfair or deceptive practice by MERS. The Court disagrees. Like her other claims arising under the Deed of Trust Act, Plaintiff’s CPA claims depend on whether MERS may be the beneficiary (or nominee of the beneficiary) under Washington state law. MERS’s attempt to serve as the beneficiary may have been improper under state law and it may have led to widespread confusion regarding home ownership, payment delivery, and negotiable positions. If MERS violated state law, its conduct may very well be classified as “unfair” under the CPA. There is no doubt that MERS’s conduct impacts the public interest.See Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 719 P.2d 531, 537-38 (Wash. 1986) (listing factors for determining public interest); Peterson, supra, at 1362 (“Although MERS is a young company, 60 million mortgage loans are registered on its system.”); R. K. Arnold, Yes, There Is Life on MERS, 11 Prob. & Prop. 32, 33 (1997) (“Some have called MERS the most significant event for the mortgage industry since the formation of Fannie Mae and Freddie Mac. Others have compared it to the creation of uniform mortgage instruments, which have become standard throughout the residential mortgage industry. This suggests that the journey to MERS will have a tremendous effect on the mortgage industry.”). And the harm Plaintiff may have suffered because of MERS’s conduct may include expending resources to avert an unlawful foreclosure and preventing Plaintiff from identifying the real beneficiary and negotiating a new arrangement to avoid foreclosure.
The same reasoning applies to Regional, who also argued that Plaintiff cannot show an unfair or deceptive practice or show an impact on the public interest. Regional asserts that it acted appropriately because it was candid and forthcoming about its identity and its authority to conduct the foreclosure. That Regional was candid about its role is not dispositive. See Carlile v. Harbour Homes, Inc., 194 P.3d 280, 289 (Wash. Ct. App. 2008) (“An unfair or deceptive act or practice need not be intended to deceive, it need only have the capacity to deceive a substantial portion of the public.”). Moreover, just as MERS has its hands in countless home loans affecting the general public, so too does Regional play a key role in numerous foreclosure actions affecting the general public. MERS and Regional ultimately may bear no liability under the CPA, but this Court will await the state-court analysis before ruling on the parties’ motions for summary judgment.[5]
III. CONCLUSION
Plaintiff admits that she has been delinquent in her mortgage payments. A ruling favorable to Plaintiff in this case and others like it cannot and should not create a windfall for all homeowners to avoid upholding their end of the mortgage bargain—paying for their homes. But a homeowner’s failure to make payments cannot grant lenders, trustees, and so-called beneficiaries like MERS license to ignore state law and foreclose using any means necessary. Whether these and similar defendants complied with Washington state law remains unclear.
In re: SIMA SCHWARTZ, Chapter 7, Debtor.
SIMA SCHWARTZ, Plaintiff,
v.
DEUTSCHE BANK NATIONAL TRUST HOMEQ SERVICING CORP., Defendants.
Case No. 06-42476-MSH, Adv. Pro. No. 07-4098.
United States Bankruptcy Court, D. Massachusetts, Central Division.
March 14, 2011.
ORDER DENYING MOTION TO DISMISS
MELVIN S. HOFFMAN, Bankruptcy Judge
Before me is the motion of the defendants to dismiss six of the seven counts of the adversary proceeding on the grounds that the plaintiff, who is a Chapter 7 debtor, lacks standing to prosecute the six counts at issue because these claims underlying them are property of the debtor’s estate and may be prosecuted only by the Chapter 7 trustee.[1] The adversary proceeding, which was commenced on July 7, 2007, is scheduled to be tried on March 16, 2011. While the deadline for filing dispositive motions has come and gone, the defendants justify their last minute motion alleging that they only recently became aware of the debtor’s lack of standing. This justification does not withstand scrutiny.
The defendants cite to the debtor’s schedule B of her schedules of assets and liabilities, both as originally filed on November 28, 2006 and as subsequently amended on January 26, 2007, as evidence that she failed to disclose the claims against them asserted in this adversary proceeding. Additionally they cite to her statement of intention in which she listed as property she intended to redeem a three family home in Worcester, Massachusetts upon which Deutsche Bank is listed as the secured creditor.[2] These matters entirely undercut the defendants’ justification for not raising the debtor’s standing sooner. The schedules and statement of intention clearly evidence that the defendants knew or should have known of the debtor’s failure to list the asserted claims as property from the moment this adversary proceeding was initiated. In fact, by the time the debtor filed her amended schedule B, HomEq as servicing agent for Deutsche Bank had already filed a motion for relief from stay in order to evict the debtor from the Worcester property. Its counsel received notice of the amended schedule B by the Court’s electronic filing system. Thus the motion to dismiss is untimely.
In the defendants’ view, the issue is straight-forward. The debtor did not list the claims on schedule B or amended schedule B and the Chapter 7 trustee has taken no steps to abandon these claims and thus they remain property of the estate.
The debtor filed her bankruptcy petition pro se. She was pro se at the time she filed her schedules of assets and liabilities, her statement of intention, her statement of financial affairs, and her amended schedules. Although she did not list any claims against the defendants as personal property, she listed HomEq on schedule D as a secured creditor for the two mortgages held on the Worcester property and listed HomEq again on schedule F as an unsecured creditor. On schedule C she claimed an exemption in the amount of either $340,000.00 or $390,000.00 in a “3 family house in Worcester, MA.”[5] In response to question 4(b) of the statement of financial affairs the debtor identified the eviction action that Deutsche Bank had commenced against her and wrote “Deutsche Bank has purchased my house and evicting me from my apartment.” [sic] At the time the statement of financial affairs was filed, the debtor resided in the Worcester property. She also disclosed the foreclosure in response to question 5 of the statement of financial affairs. Therefore the Chapter 7 trustee and parties in interest knew that the debtor was claiming an exemption in property which had been foreclosed prepetition. No objection to the exemption was filed. I find that the debtor’s claimed exemption in the Worcester property constitutes an exemption in her claims in this adversary proceeding to recover that property. Bottcher v. Emigrant Mortgage Co. (In re Bottcher), 441 B.R. 1, 3-4 (Bankr. D. Mass. 2011).
Further I find that the debtor’s failure to disclose with more specificity her claims against the defendants was inadvertent. “[T]here are two circumstances under which a debtor’s failure to disclose a cause of action in a bankruptcy proceeding might be deemed inadvertent. One is where the debtor lacks knowledge of the factual basis of the undisclosed claims, and the other is where the debtor has no motive for concealment.” Ullom v. Robbins (In re Robbins), 398 B.R. 442, 446 (Bankr. W.D.Ky. 2008). The debtor lacks the expertise or experience that would equip her to know how to articulate her claims against the defendants for damages. Moreover, she was not trying to hide the property she is seeking to recover. The schedules of assets and liabilities and statement of financial affairs are replete with references to the foreclosure. Furthermore, she exempted the Worcester property so anyone reading the schedules of assets and liabilities, the statement of intention and the statement of financial affairs knew or should have known that the Worcester property had been foreclosed upon but that the debtor thought she could nevertheless continue to own and redeem that property.
Moreover, the Chapter 7 trustee conducted the debtor’s meeting of creditors under 11 U.S.C. § 341[6] and on April 10, 2007 filed a report that there were no assets available for distribution. On July 7, 2007, the debtor, now, represented by counsel, filed the instant adversary proceeding. The Chapter 7 trustee received notice of the filing through the Court’s electronic filing system. To date, the Chapter 7 trustee has taken no action with respect to the adversary proceeding and, although on March 2, 2011 the defendants called the Chapter 7 trustee to bring the issue of standing to her attention, she has taken no position on this matter. See Motion to Dismiss.
Finally, courts have permitted creditor committees, individual creditors, or even debtors to pursue claims belonging to bankruptcy estates. Official Committee of Unsecured Creditors v. Marathon Financial Insurance Co. (In re Automotive Professionals, Inc.), 389 B.R. 630, 634 (Bankr. N.D. Ill. 2008) (collecting cases).
As the Chapter 7 trustee has shown no inclination to prosecute these claims, I will permit the debtor to prosecute them, either in her own name or as a representative of the estate, and defer determining whether the estate has an interest in any monetary award if the debtor should prevail on those counts for which monetary damages are appropriate.
The motion to dismiss is therefore denied.
[1] The complaint requests damages for an allegedly wrongful prepetition foreclosure and a declaration that the defendants’ mortgage is void. Although not expressly using the word “recission,” it also appears to request rescission of the foreclosure sale. The defendants are moving to dismiss counts I (wrongful foreclosure), II (fraud, deceit and misrepresentation), IV (violation of Mass. Gen. Laws ch. 93A), V (unfair servicing practices), VI (intentional infliction of emotional distress), and VII( violation of Fair Debt Collection Practices Act). The defendants are not challenging the debtor’s standing to prosecute count III, titled “void lien” by which the debtor seeks a declaration that the defendants’ alleged mortgage lien is void.
[2] I note that the defendants argue that the debtor stated her intention to redeem the property “even though no reaffirmation agreement was ever filed with the Court.” Motion to Dismiss at ¶ 10. Redemption does not require the execution and filing of a reaffirmation agreement.
[3] The inquiry into whether a party has standing has two levels of inquiry: first, whether the Constitutional requirements are satisfied and second, whether a party should be denied standing based on what are known as prudential limitations.
These prudential limitations are self-imposed rules of judicial restraint . . . principally concern whether the litigant (1) asserts the rights and interests of a third party and not his or her own, (2) presents a claim arguably falling outside the zone of interests protected by the specific law invoked, or (3) advances abstract questions of wide public significance essentially amounting to generalized grievances more appropriately addressed to the representative branches.
[5] The schedules are handwritten and the amount of the exemption is difficult to discern. It is either $340,000 or $390,000. The amount is not relevant to my decision.
[6] The § 341 meeting was scheduled for December 11, 2006 but there is no indication on the docket if the meeting was held that day.
ELLIE STEWART, Plaintiff,
v.
BAC HOME LOANS SERVICING, LP, DEUTSCHE BANK NATIONAL TRUST CO., and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants.
Case No. 10 C 2033.
United States District Court, N.D. Illinois, Eastern Division.
March 10, 2011.
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL, District Judge.
On April 1, 2010, plaintiff Ellie Stewart (“Stewart”) filed the current complaint against Defendants BAC Home Loans Servicing (“BAC”), Deutsche Bank National Trust Company (“Deutsche Bank”) and Mortgage Electronic Registration Systems (“MERS”) (together, “Defendants”) alleging violations of the Truth In Lending Act (“TILA”) (15 U.S.C. §§ 1601-1667f) and its implementing regulation, 12 C.F.R. § 226 (“Regulation Z”), and demanded rescission of the mortgage on her residence.
Defendants moved to dismiss the Complaint, asserting BAC and MERS are improper defendants under TILA, the Complaint is time-barred and the Complaint fails to state a claim. For the reasons stated below, Defendants’ motion is granted in part and denied in part. The Court dismisses Stewart’s failure to disclose claim because it is untimely, but denies dismissal of Stewart’s rescission claim. The motion to dismiss is denied with regard to the failure to honor rescission claim against defendants Deutsche Bank and BAC.
I. BACKGROUND
A. Complaint Allegations.
Stewart owns her residence in Chicago, Illinois. (Compl., Doc. 1, ¶ 4.) On October 24, 2006, Stewart refinanced her mortgage on this residence through Home 123 Corporation (“Home 123”). (Compl. ¶¶ 5-8, 10.) Home 123 filed for Chapter 11 bankruptcy in April 2007 and Deutsche Bank is the current assignee of this loan. (Compl. ¶¶ 5, 8, 21.) BAC services this loan and MERS is the nominee. (Compl. ¶¶ 7-9; Ex. C.)
This case stems from a dispute concerning the documentation provided at the closing of Stewart’s refinance back in 2006. Stewart alleges that Home 123 violated TILA twice in regards to these documents. First, she claims that Home 123 did not provide her with a copy of the Notice of Right to Cancel (“NORTC”). (Compl. ¶¶ 19-20.) Second, she claims that Home 123 provided a Truth in Lending Disclosure Statement (“TILDS”) that was incomplete because it did not include the timing of the required loan payments. (Compl. ¶¶ 17-18.)
Due to these deficiencies, on October 14, 2009, Stewart’s attorneys sent a letter entitled “Notice of Rescission and Lien” to Home 123 and BAC. (Compl. ¶ 23.) The letter stated that “Ms. Stewart hereby elects to cancel the loan of October 24, 2006 for failure to comply with the Truth In Lending Act,” and specified that Home 123 failed to provide the NORTC and a complete TILDS. (See Doc. 23-1.) The letter also demanded the identity of the owner of the mortgage. (Id.) On January 26, 2010, BAC sent a letter to Stewart which denied her rescission claim. (See Doc. 23-2.) BAC asserted that Stewart’s right to rescind had expired and attached copies of the NORTC and TILDS purportedly signed by Stewart and dated October 24, 2006. (Id.)
B. Procedural History.
On April 1, 2010, Stewart filed this suit and it was assigned to Judge Harry Leinenweber. Defendants filed the present motion to dismiss on August 11 and briefing was completed on October 5. On October 28, Judge Leinenweber requested that the parties provide a copy of Stewart’s rescission letter and submit a supplemental brief addressing whether Stewart’s election to rescind constituted proper notice to Deutsche Bank as assignee of Home 123. Supplemental briefing was completed on November 8. The case was transferred to this Court on December 8.
II. LEGAL STANDARD
A motion to dismiss should be granted if the complaint fails to satisfy Rule 8’s pleading requirement of “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Tamayo v. Blagojevich, 536 F.3d 1074, 1081 (7th Cir. 2008) (holding well-leaded allegation of the complaint must be accepted as true).
Although a complaint does not need detailed factual allegations, it must provide the grounds of the claimant’s entitlement to relief, contain more than labels, conclusions, or formulaic recitations of the elements of a cause of action, and allege enough to raise a right to relief above the speculative level. Twombly, 550 U.S. at 555. Legal conclusions can provide a complaint’s framework, but unless well-pleaded factual allegations move the claims from conceivable to plausible, they are insufficient to state a claim. Iqbal, 129 S. Ct. at 1950-51.
III. DISCUSSION
The complaint has three core claims. First, Stewart claims that Home 123 violated TILA by failing to provide her with the NORTC and a complete TILDS. For this “failure to disclose” claim, Stewart seeks statutory damages of $4,000 from Deutsche Bank as Home 123’s assignee. (Doc. 1, Prayer for Relief.) Second, Stewart seeks recession of the loan based on this disclosure violation. For this “loan rescission” claim, Stewart seeks a judgment forcing Defendants to void the loan and return her to the position she occupied before entering into the mortgage. (Id.) Third, Stewart alleges that Defendants failed to honor her election to rescind, which is itself a violation of TILA. For this “failure to honor rescission” claim, Stewart seeks actual damages and statutory damages of $4,000 from Defendants. As an additional remedy for all three claims, Stewart seeks an order requiring Defendants to delete all adverse credit information relating to the loan. (Id.)
The present motion presents four legal issues that need to be resolved to determine which, if any, of these three claims may stand. First, Defendants seek to dismiss BAC and MERS, asserting that servicers and nominees are improper defendants in a TILA action. Turning to Stewart’s individual claims, Defendants argue that the failure to disclose claim is barred by a one year statute of limitations because the alleged violation occurred over three years ago. Next, Defendants assert that the rescission claim is barred by a three-year statute of repose because the loan closed on October 24, 2006 but this suit was not filed until April 1, 2010. Finally, Defendants argue that the failure to honor rescission claim fails because assignees are not liable for TILA violations which are not apparent on the face of the loan disclosures.
A. Liability of MERS and BAC Under TILA.
Only creditors and assignees are subject to liability under TILA. See 15 U.S.C. §§ 1640, 1641(a). Stewart acknowledges that MERS is not a creditor or assignee. (See Doc. 15 at 4).[1] Therefore, MERS is not subject to damages under TILA and Stewarts’ failure to disclose and failure to honor rescission damages claims against MERS are dismissed. See 15 U.S.C. §§ 1640, 1641(a); see also Horton v. Country Mortg. Servs., Inc., No. 07 C 6530, 2010 U.S. Dist. LEXIS 67, at *3 (N.D. Ill. Jan 4, 2010) (granting summary judgment to MERS because the plaintiff provided no evidence that MERS was a creditor or assignee). Stewart claims MERS is still a proper party based on the non-monetary relief requested in connection with the rescission. Stewart seeks an order “voiding” her mortgage, (see Doc. 1 at Prayer) and, according to her, “this Court may directly order MERS to record a release or take other actions in connection with the mortgage document that was recorded.” (Doc. 15 at 4.)
The Court notes that courts in this District are split on whether such a party, usually a servicer, may be kept in a case based on such contingent, or future, relief. Compare Miranda v. Universal Fin. Grp., Inc., 459 F. Supp. 2d 760, 765-66 (N.D. Ill. 2006) (denying dismissal of loan servicer as an indispensable party under Rule 19 because a rescission would require return of payments made on the loan and “could impair the borrower’s ability to fully protect his or her interest in rescinding the loan because the servicer could improperly report to credit bureaus”) with Bills v. BNC Mort., Inc., 502 F. Supp. 2d 773, 776 (N.D. Ill. 2007) (finding “a concern that [the servicer] might thereafter engage in improper reporting to the credit agencies or attempt to foreclose on a rescinded loan is purely speculative and does not warrant retaining [the servicer] as a defendant”). The Court agrees with Miranda and the cases it cites because they appear more consistent with the Seventh Circuit’s holding in Handy v. Anchor Mortgage Corporation, 464 F.3d 760, 765-66 (7th Cir. 2006). There, the Seventh Circuit held “more generally . . . the right to rescission `encompasses a right to return to the status quo that existed before the loan.'” Id. (internal citation omitted). Handy makes clear that rescission under TILA entirely unwinds the transaction. Because Stewart alleges, albeit generally, that MERS may be necessary to get her back to that status quo if her rescission is enforced by the Court, MERS cannot be dismissed entirely at this time. Rather, Stewart’s rescission claim stands as to MERS.
As to defendant BAC, TILA expressly disclaims liability for servicers “unless the servicer is or was the owner of the obligation.” 15 U.S.C. § 1641(f)(1). Stewart alleges that BAC “has an interest” in the loan and, as a result, is subject to liability. (Compl. ¶ 7.) While Stewart does not provide any specifics on how a loan servicer gained an interest in the loan, on a motion to dismiss, the Court must accept this allegation as true. See Tamayo, 526 F.3d at 1081. Even if the Court could ignore this allegation, BAC must remain a defendant in any event. The pleadings reveal that the January 26 letter refusing Stewart’s rescission was sent by BAC, not Deutsche Bank. BAC is a necessary defendant on the failure to honor rescission claim because it is not clear whether BAC independently refused rescission, refused as an agent of Deutsche Bank, or merely communicated Deutsche Bank’s refusal. As such, BAC cannot be dismissed outright as it may be liable on this claim.
B. Failure to Disclose Claims.
Stewart asserts that Home 123 committed two disclosure violations during the refinance closing: (1) it failed to provide two copies of the NORTC and (2) it failed to provide a complete TILDS. Although this claim alleges violations by Home 123, the claim is currently against Deutsche Bank based on its status as the assignee of Home 123. TILA permits an individual to assert a claim against a creditor for disclosure violations so long as such action is brought within one year from the occurrence of the violation. See 15 U.S.C. §§ 1640(a), 1640(e); see also Garcia v. HSBC Bank USA, N.A., No. 09 C 1369, 2009 U.S. Dist. LEXIS 114299, at *9-10 (N.D. Ill. Dec. 7, 2009) (finding the § 1635’s three year period for rescission does not extend the one-year period available under § 1640(e) to assert damages claims for disclosure violations and noting that the majority of courts in this District have found “affirmative damage claims for disclosure violations must be brought within one year of the closing of any credit transaction”). Stewart filed this claim on April 1, 2010, over three years after the October 24, 2006 loan closing and well past the one year statute of limitations. Stewart’s failure to disclose claim is time-barred and dismissed with prejudice against all defendants.
C. Loan Rescission Claim.
The next issue in this case is whether Stewart is time-barred from seeking rescission in court. “Under the Truth in Lending Act, [] 15 U.S.C. § 1601 et seq., when a loan made in a consumer credit transaction is secured by the borrower’s principal dwelling, the borrower may rescind the loan agreement” under certain conditions. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411 (1998). A borrower typically has three days to rescind following execution of the transaction or delivery of the required disclosures. See 15 U.S.C. § 1635(a). However, under § 1635(f) of TILA, the right of rescission is extended to “three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first,” if any of the required disclosures are not delivered to the borrower. See 15 U.S.C. § 1635(f). Stewart alleges that she did not receive the required disclosures, so this case involves the extended three year period. Here, the loan transaction occurred on October 24, 2006; Stewart sent a letter electing to rescind the transaction on October 14, 2009, and then filed her complaint in court on April 1, 2010. This time line presents the legal question of whether a claim for rescission filed after the three-year time period is timely if a rescission letter is sent within the three-year time period.
Stewart argues that she exercised her right to rescind within the three years, as required by § 1635(f), because her letter actually rescinded the loan. According to Stewart, this suit is just the legal remedy to force Defendants to accept her rescission. Stewart argues that she is entitled to an additional year after Defendants’ failure to accept the rescission to file suit under § 1640(e). Defendants argue that the language of § 1635(f) creates a statute of repose that completely extinguishes the right to rescind after the three year-time period. As Stewart filed suit over three years after the closing, Defendants assert that Stewart’s recession claim under TILA is barred.
Both parties cite authority for their respective positions from many different jurisdictions. E.g., compare Falcocchia v. Saxon Mortg., Inc., 709 F. Supp. 2d 860, 868 (E.D. Cal. 2010),with Sherzer v. Homestar Mortg. Servs., No. 07-5040, 2010 WL 1947042, at *11 (E.D. Pa. July 1, 2010); see also Obi v. Chase Home Fin., LLC, No. 10-C-5747, 2011 WL 529481, *4 (N.D. Ill. Feb. 8, 2011) (Kendall, J.) (noting “[t]here is a split of authority as to whether § 1635(f) requires a borrower to file a rescission claim within three years after the consummation of a transaction or whether the borrower need only assert his right to rescind to a creditor within that three year period” and collecting cases.) Stewart’s authority concludes that a borrower exercises her right of rescission when she mails a notice of rescission to the creditor, so rescission occurs at the time of the letter. See 12 C.F.R. § 226.23(a)(2). Defendants’ authority, on the other hand, holds that a borrower cannot unilaterally rescind a loan, and therefore can only preserve her rights by filing a suit for rescission within the three-year time period. The Seventh Circuit has not yet addressed this issue so this Court has no binding guidance.
As the Court indicated in Obi (albeit in dicta), the Court is persuaded by the authority finding that a borrower may assert his rescission rights under § 1635(f) through notice to the creditor. See Obi, 2011 WL 529481 at *4; see also In re Hunter, 400 B.R. 651, 661-62 (N.D. Ill. 2009) (finding “[t]he three-year period limits only the consumer’s right to rescind, not the consumer’s right to seek judicial enforcement of the rescission” (internal citation omitted)). The approach in Hunter is more consistent with the language of § 1635 and Regulation Z than the approach advocated by Defendants. Section (a)(2) of Regulation Z provides explicit instructions to the consumer as to how to exercise her right to rescind: “[t]o exercise the right to rescind, the consumer shall notify the creditor of rescission by mail, telegram, or other means of written communication.” See 12 C.F.R. § 226.23(a)(2). The next provision of Regulation Z, § (a)(3), describes when a consumer may exercise that right: either within the three-day “cool off” period, if all proper disclosures are made, or within the three-year period, if they are not. See 12 C.F.R. § 226.23(a)(3). The more reasonable interpretation of Regulation Z is that § (2)(a)’s method of exercising the right to rescission applies to both scenarios under § (3)(a). Indeed, this approach is consistent with the wording of the statute. Even if a consumer received all necessary disclosures, § 1635(a) allows a consumer to rescind within the three-day “cool off” period after closing “by notifying the creditor, in accordance with regulations of the [Federal Reserve Board (“FSB”)], of his intention to do so.” 15 U.S.C. § 1635(a). Though § 1635(f) has no comparable reference to the FSB regulations, it seems incongruous for the FSB to allow rescission via letter during the “cool off” period—in accordance with Regulation Z—but require a consumer to bring a suit to exercise that same right to rescind under § 1635(f).
The Court’s approach is not inconsistent with Beach. In that case, the Supreme Court found a defendant could not assert rescission as an affirmative defense under TILA beyond the three-year period. See Beach, 523 U.S. at 418. The Court noted that § 1635(f) “says nothing in terms of bringing an action but instead provides that the `right of rescission [under TILA] shall expire’ at the end of the time period . . . it talks not of a suit’s commencement but of a right’s duration . . . .” Id. at 417. Beach addresses when the right to rescind expires and whether it can be tolled. It leaves unresolved the question of how a consumer must exercise that right to rescind — suit, or notice via letter.
The Court turns to the question of when a consumer, having exercised her right to rescind by sending a letter to her creditor, must bring suit to enforce that exercise. In Hunter, the debtor, like Stewart, sent notice to the creditor before the three-year period expired, but his trustee filed suit after expiration. Hunter, 400 B.R. at 659. As Stewart did here, the trustee brought suit within a year after the creditor allegedly failed to respond to the rescission notice. Id. Hunter,Id.; seeHunter approach. Under this approach, the last day a borrower may send notice to rescind is the three-year anniversary of the transaction. If the borrower has not sent notice by that time, her right to rescind expires under § 1636(f). If the borrower sends timely notice, the creditor then would have 20 days to respond after receipt of that notice. See 15 U.S.C. § 1635(b). The borrower then has one year from the end of that 20-day period to bring a suit to enforce the rescission under § 1640(e)’s limitations period. citing the one-year limitations period in § 1640(e), found that the trustee’s action for rescission was timely, as it was brought within a year of the alleged violation of TILA, namely the refusal to respond to the rescission request. 15 U.S.C. 1635(b) (requiring a creditor to “take any action necessary or appropriate to reflect the termination of any security interest created under the transaction”). The Court adopts theHunter, 400 B.R. at 660-61,see alsoJohnson v. Long Beach Mort. Loan Trust 2001-4, 451 F. Supp. 2d 16, 39-41 (D.D.C. 2006) (applying § 1640(e)’s one year period to enforce rescission claim after notice); Sherzer, 2010 WL 1947042, at *11 (followingHunter). This approach balances the creditor’s need for certainty (the borrower cannot indefinitely fail to bring suit to enforce the right to rescind she exercised) with the express language of Regulation Z (which states that a borrower may exercise the right to rescind through notice by mail). Because Stewart brought suit within five months of her recession notice, Stewart’s claim for recession is timely.
D. Failure to Honor Rescission Claim.
A claim for damages for failure to honor rescission is based on § 1635(b) of TILA, which requires a creditor to respond to a notice of rescission within twenty days of receipt. If a creditor does not respond within the statutorily-mandated period, TILA permits an individual to bring a claim for damages against the creditor. 15 U.S.C. § 1640(a). An action for damages must be brought “within one year from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e). An assignee’s failure to honor a valid rescission notice made pursuant to § 1635 may subject the assignee to actual and statutory damages. 15 U.S.C. § 1640(a).
Stewart asserts that she did not receive a NORTC or a complete TILDS as required by TILA, so she had a right to rescind her loan. Specifically, the TILDS does not state the timing of payments, as Regulation Z requires. See 12 C.F.R. § 226.18. Defendants respond that they were not the original creditor, and as assignees (at best), they are only required to rescind if the violations were apparent on the face of the documentation and that they were not in this case. See 15 U.S.C. § 1641(a) (assignee is only liable if the violation “is apparent on the face of the disclosure statement”).
The Seventh Circuit has specifically addressed the requirements for the payment schedule in the TILDS. In Hamm, the TILDS listed the payment schedule as 359 payments of $541.92 beginning on March 1, 2002 and one payment of $536.01 on February 1, 2032. Hamm v. Ameriquest Mortg. Co., 506 F.3d 525, 527 (7th Cir. 2007). The court found that this violated TILA because it did not list all payment dates or state that payments were to be made monthly, and TILA requires such specificity in the TILDS even though “many (or most) borrowers would understand that a mortgage with 360 payments due over approximately 30 years contemplates a payment by the borrower each month during those 30 years.” Id. This case is no different. Stewart alleges that her TILDS listed 359 payments at $3,103.53 but failed to mention that these payments would be made monthly. Exhibit A of Stewart’s complaint, her TILDS, shows the incomplete payment schedule on the face of the document. That schedule is almost exactly the same as the one the Seventh Circuit found insufficient in Hamm. Id. at 527. Consequently, Stewart alleges a disclosure violation apparent on the face of the documents which would grant Stewart the right to rescind against Defendants as assignees. Stewart’s NORTC claim does not need to be evaluated at this time because her failure to honor rescission claim could be based on either a NORTC or TILDS violation, and the TILDS allegations stand.
The final issue is whether Defendants are responsible for refusing to respond and for rejecting rescission. This turns on whether Stewart’s notice of rescission was properly sent to Defendants. In response to a request from Judge Leinenweber prior to reassignment of this case to this Court, the parties addressed whether Stewart properly noticed defendant Deutsche Bank of her election to rescind when she sent letters to only BAC and Home 123, which filed for Chapter 11 bankruptcy in 2007. Courts within the District have reached different conclusions under similar factual scenarios. Compare Harris v. OSI Fin. Servs. Inc., 595 F. Supp. 2d 885, 897-98 (N.D. Ill. 2009) (finding that notice of election to rescind sent to the original creditor did not suffice as notice to the assignee), with Hubbard v. Ameriquest Mortg. Co., 624 F. Supp. 2d 913, 921-22 (N.D. Ill. 2008) (concluding that an election to rescind sent to the original creditor is sufficient to seek rescission against an assignee) and Schmit v. Bank United FSB et al., No. 08 C 4575, 2009 WL 320490, at *3 (N.D. Ill. Feb. 6, 2009) (acknowledging disagreement between Harris and Hubbard and following Hubbard).
Stewart acknowledges that she did not send a notice of rescission to defendant Deutsche Bank. (See Doc. 23-1.) She alleges that she, like many borrowers, was unaware who owned her mortgage note. She did not know that Deutsche Bank was the assignee of her loan, and so she requested notice of the “identity of the owner of this note” from Home 123 and BAC in her rescission letter. (Id.) Stewart argues that she complied with TILA and Regulation Z by mailing notice to the original creditor, Home 123, and the loan servicer, BAC. Stewart distinguishes Harris from the current case because “there is no mention of whether the consumer in Harris mailed a notice to the loan servicer or another party who may be the agent of the holder of the note.” (Doc. 23 at 4). Deutsche Bank concurs that mortgage ownership changes make communication difficult, but suggests that this actually supports the approach of the Harris court. Harris noted that “adopting Stewart’s interpretation of the notice requirement . . . would have the absurd effect of subjecting to rescission and damages assignees that, in some case, have absolutely no means of discovering that a rescission demand has been made.” (Doc. 22 at 2 (quoting Harris).)
The split between Harris and Hubbard does not need to be resolved at this stage of litigation due to the particular facts of this case. Stewart alleges that she sent BAC the rescission notice on October 14, 2009, ten days before the three-year deadline. BAC denied the rescission in a letter sent to Stewart on January 26, 2010. While Harris was concerned that an innocent party with no notice could be subject to damages, this case involves clear notice to at least one party that Stewart seeks to hold responsible. BAC received notice, did not respond within 20 days, and then refused to rescind the transaction. Deutsche Bank’s involvement is less clear, but Stewart alleged sufficient facts to proceed with her case under the theory that BAC either forwarded the notice to Deutsche Bank or acted as its agent in the transaction. This is a reasonable inference given that BAC, the loan servicer, actually responded to the rescission notice and refused it without referring to whether the assignee, Deutsche Bank, assented to the decision. BAC, Deutsche Bank, or both refused to rescind the transaction and discovery is necessary to sort out who is responsible for the decision to deny the rescission.
IV. CONCLUSION
For the reasons stated herein, Defendants’ motion to dismiss (Doc. 10) is:
1. Granted as to Stewart’s failure to disclose claim against all Defendants;
2. Denied as to Stewart’s rescission claim against all Defendants; and
3. Denied as to Stewart’s failure to honor rescission claim against defendants Deutsche Bank and BAC, but granted as to defendant MERS.
SO ORDERED.
[1] The Court also notes that the mortgage instrument attached to the complaint identifies MERS as “a separate corporation that is acting solely as a nominee for Lender and Lender’s assigns.” (See Doc. 1, Ex. C at 1.) Though Stewart alleges MERS has an interest in the loan (see Compl. ¶ 7), the exhibits contradict that pleading and the exhibits control. See N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 454 (7th Cir. 1998).
In this case, DBNTC clearly had no standing to bring the motion. Debtors never consented to MERS to act as Nominee under the terms of the DOT. Even if one assumes that MERS had authority to assign IndyMac Bank’s beneficial interest to DBNTC, IndyMac Bank ceased to exist at the time MERS purportedly made an assignment to DBTNC. DBNTC received nothing by virtue of the assignment; the assignment constitutes a fraudulent conveyance.
For the foregoing reasons, Debtors respectfully request the Court to make findings of fact and to deny DBNTC’s second Motion for Relief from the Automatic Stay with prejudice. Debtors further request this Court to award attorney fees incurred by Debtors against DBNTC and its attorney for bringing this frivolous motion.
The Justice Department is investigating allegations that a mortgage subsidiary of Morgan Stanley foreclosed on almost two dozen military families from 2006 to 2008 in violation of a longstanding law aimed at preventing such action.
A department spokeswoman confirmed on Friday that the Morgan Stanley unit, Saxon Mortgage Services, is one of several mortgage and lending companies being investigated by its civil rights division. The inquiry is focused on possible violations of a federal law that bars lenders from foreclosing on active-duty service members without a court hearing.
UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
SANTA ANA DIVISION
In Re:
THUAN X. NGUYEN AND TAMMY H. NGUYEN
excerpt:
The deception and fraud committed by Deutsche Bank National Trust Company and its known foreclosure mill counsels, Barrett Daffin Frappier Treder & Weiss, LLP, upon the Court and harassment upon Debtors with unwarranted motion to cause delay and to increase litigation costs by Debtors must be stopped.
DEUTSCHE BANK NATIONAL
TRUST COMPANY, AS TRUSTEE
FOR THE CERTIFICATEHOLDERS
OF SOUNDVIEW HOME LOAN TRUST
2005-OPT4, ASSET BACKED
CERTIFICATES, SERIES 2005-OPT4;
PAMELA FOREE; AND
DONALD T. PRATHER
In light of our analysis, we vacate the entry of summary judgment because Deutsche Bank did not have standing to commence this action when it did.
This matter is therefore remanded to the circuit court for the purpose of entering an order consistent with this opinion removing this case from its docket.
Deutsche Bank National Trust Co. Plaintiff-Appellee,
v.
Chanel Triplett, et al., Defendants-Appellants.
No. 94924.
Court of Appeals of Ohio, Eighth District, Cuyahoga County.RELEASED AND JOURNALIZED: February 3, 2011.
Appellant
Chanel Triplett, Pro Se, 2982 East 59th Street, Cleveland, Ohio 44127
Attorneys for Appellees
Mathew P. Curry, Manley DEAS Kochalski, LLC, P. O. Box 165028, Columbus, Ohio 43216-5028, Ted A. Humbert, Jason A. Whitacre, Kathryn M. Eyster, The Law Offices of John D. Clunk, Co., L.P.A., 4500 Courthouse Blvd., Suite 400, Stow, Ohio 44224, Nova Star Mortgage, Inc., 6200 Oak Tree Blvd., Third Floor, Independence, Ohio 44131, Stewart Lender Services, 9700 Bissonet Suite 1500, Mail Stop 27, Houston, Texas 77036,
——
Before: Blackmon, P.J., Sweeney, J., and Gallagher, J.
excerpt:
{¶ 7} Deutsche Bank also attached an affidavit from Renee Hertzler, an officer of Countrywide Home Loans, its loan servicing agent. Hertzler averred that Triplett’s loan account was under her supervision and that there was a principal balance due in the amount of $80,504.77 with interest thereon at 9.1% per year from August 1, 2007. Hertzler also averred that Triplett’s loan remained in default.
<SNIP>
{¶ 17} In U.S. Bank Natl. Assn. v. Duvall, Cuyahoga App. No. 94714, 2010-Ohio-6478, this Court’s recent decision affirming the trial court’s dismissal of a foreclosure complaint involving facts substantially similar to the present case, we rejected an affidavit that stated the plaintiff acquired the note and mortgage prior to the filing of the complaint. Likewise, Deutsche Bank’s affidavit of ownership, sworn out more than a year after the foreclosure complaint was filed, is insufficient to vest the bank with standing to file and maintain the action. Thus, if Deutsche Bank had offered no evidence that it owned the note and mortgage when the complaint was filed, it would not be entitled to judgment as a matter of law. Jordan, ¶¶ 22-23. Accordingly, we reverse the trial court’s decision because Deutsche Bank lacks standing.
[1] The assignment was executed by an individual identified as Laura Hescott who signed the assignment as an assistant vice-president of Washington Mutual Bank. Ms. Hescott has been identified as an employee of Lender Processing Services, Inc. (“LPS”), a servicer of default mortgages. The bona fides of the practices of this service provider have been the subject of increased judicial scrutiny. See, e.g., In re Taylor, 407 B.R. 618, 623 (Bankr. E.D. Pa. 2009).
The Supreme Court has recognized that “[s]erious questions have surfaced about the accuracy of documents submitted to courts by lenders and service-providers in support of foreclosure requests.” Administrative order 01-2010, 202 N.J.L.J. 1110 (December 27, 2010). The practice of signing and filing documents without any personal knowledge of the information, also known as “robo-signing,” implicates the “overriding concern about the integrity of the judicial process.” Id. at 1111. The order provides that “lenders and service providers who have filed more than 200 residential foreclosure actions in 2010 are required, within 45 days, to demonstrate the reliability and accuracy of documents and other submissions to the court in foreclosure proceedings.” Ibid. On remand, to the extent the order is applicable to plaintiff, plaintiff shall comply with its terms.
DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for WaMu Series 2007-HEI Trust, Plaintiff-Respondent,
v.
TRACEY T. WILSON , his/her heirs, devisees and personal representatives, and his, her, their or any of their successors in right, title and interest and WILLIS J. WILSON, his/her heirs, devisees and personal representatives, and his, her, their or any of their successors in right, title and interest, Defendants-Appellants.
Docket No. A-1384-09T1.
Superior Court of New Jersey, Appellate Division.
Submitted November 3, 2010.
Decided January 19, 2011.
Tracey T. Wilson, appellant pro se.
Respondent has not filed a brief.
Before Judges Carchman and Messano.
Not for Publication without the Approval of the Appellate Division.
PER CURIAM.
Defendants Tracey T. Wilson and Willis J. Wilson appeal from a final judgment of foreclosure in favor of plaintiff Deutsche Bank National Trust Company, as Trustee for WaMu Series 2007-HE1 Trust. While plaintiff submitted a supplemental affidavit to the trial judge allegedly confirming the assignment of the original mortgage to the named plaintiff, it failed to comply with N.J.R.E. 803(c)(6), and the affidavit should not have been considered.
These are the relevant facts. Plaintiff filed a foreclosure action against defendants. Defendants filed a response, which was accepted as an answer and challenged, among other things, the bona fides of a later assignment of the mortgage. In response, plaintiff filed a motion for summary judgment, but the judge denied relief pending further information regarding the assignment. Thereafter, plaintiff filed a supplemental affidavit, executed by Janine Timmons, a manager of Washington Mutual Bank, attesting to the accuracy of facts “based on our computerized business records maintained in the ordinary course.” She claimed that the note and mortgage had been executed by defendants on December 14, 2006, and the note and mortgage had been sold to plaintiff on January 16, 2007; moreover, an assignment of mortgage was executed on October 31, 2007, two weeks after the filing of the foreclosure complaint on October 18, 2007.[1]
After receiving the supplemental affidavit, the motion judge struck defendants’ answer and permitted the foreclosure matter to proceed by default. Thereafter, a judgment was entered, and this appeal followed.[2]
On appeal, defendants assert that plaintiff’s affidavit regarding the assignment was hearsay and violates the Best Evidence Rule. In addition, defendants claim that they were denied discovery and finally, plaintiff was not a holder in due course.
Although defendants cite N.J.R.E. 803(c)(6), and claim that these were not valid business records, we have more fundamental concern about the substance of the Timmons affidavit. The affidavit makes reference to unidentified computerized business records supporting the verification of the facts attested to, but nothing more is set forth regarding the records other than that conclusory statement.
Recently, the Supreme Court reiterated the relevant factors that must be established by a proponent of documents pursuant to N.J.R.E. 803(c)(6). In New Jersey Div. of Youth and Fam. Servs. v. M.C. III, 201 N.J. 328 (2010), Justice Wallace, speaking for the Court, observed:
Under the business records exception to the hearsay rule, a party seeking to admit a hearsay statement pursuant to this rule must demonstrate that “the writing [was] made in the regular course of business,” the writing was “prepared within a short time of the act, condition or event being described,” and “the source of the information and the method and circumstances of the preparation of the writing must justify allowing it into evidence.” State v. Matulewicz, 101 N.J. 27, 29 (1985) (citation omitted).
[(Id. at 347).]
The affidavit submitted by Timmons falls far short of meeting this threshold showing. Nothing in her affidavit indicates any of the elements identified in either the rule or M.C.
Additional considerations are cause for concern. N.J.R.E. 1002 mandates that, “To prove the content of a writing or photograph, the original writing or photograph is required except as otherwise provided in these rules or by statute.”[3] Here, reference is made to computerized records, yet the record before the trial court or on appeal is devoid of any copies of such records to support the attestations of Timmons. See N.J.R.E. 1001(c) and Fed. Ev. Rule 1001(c) (requiring “original” computer data in the form of printouts or other readable output). Most important, no discovery was permitted to defendants. In such instance, plaintiff should not be allowed to “cut corners” to avoid meeting its burden.
We are satisfied that plaintiff failed to meet its burden to establish the bona fides of the alleged assignment to permit plaintiff to proceed on its foreclosure complaint. We take particular note of the fact that plaintiff has not responded to the appeal so that we are unable to have the benefit of its position on the issues raised by defendants.
We conclude that the appropriate course of action is a remand to the Chancery Division to resolve the issue of the bona fides of the assignment. Accordingly, we reverse and remand for further proceedings consistent with this opinion. We do not retain jurisdiction.
Reversed and remanded.
[1] The assignment was executed by an individual identified as Laura Hescott who signed the assignment as an assistant vice-president of Washington Mutual Bank. Ms. Hescott has been identified as an employee of Lender Processing Services, Inc. (“LPS”), a servicer of default mortgages. The bona fides of the practices of this service provider have been the subject of increased judicial scrutiny. See, e.g., In re Taylor, 407 B.R. 618, 623 (Bankr. E.D. Pa. 2009).
The Supreme Court has recognized that “[s]erious questions have surfaced about the accuracy of documents submitted to courts by lenders and service-providers in support of foreclosure requests.” Administrative order 01-2010, 202 N.J.L.J. 1110 (December 27, 2010). The practice of signing and filing documents without any personal knowledge of the information, also known as “robo-signing,” implicates the “overriding concern about the integrity of the judicial process.” Id. at 1111. The order provides that “lenders and service providers who have filed more than 200 residential foreclosure actions in 2010 are required, within 45 days, to demonstrate the reliability and accuracy of documents and other submissions to the court in foreclosure proceedings.” Ibid. On remand, to the extent the order is applicable to plaintiff, plaintiff shall comply with its terms.
[2] Subsequent to the filing of the appeal, a notice of sheriff’s sale was published. The notice is not part of the record on appeal, and we have no further information regarding the status of the property.
[3] In their brief, defendants refer to the Federal Rules of Evidence. Those rules are not applicable here.
IMPORTANT NOTICE:On January 24, 2011 the plaintiffs, on behalf of the potential Class applied for and received anotherTemporary Restraining OrderandOrder to Show Causeagainst the defendants in this action. If you are a potential class member, please call this office at 714-372-2264 NOW!
LAST WEEK’S Supreme Judicial Court decision, in which the court upended a pair of Springfield foreclosures and upbraided Wells Fargo and US Bank for maintaining sloppy records is great news for homeowners facing foreclosure. Mortgage-servicing banks, which were in the habit of trading mortgages around like cheap baseball cards, will be forced to slow the pace of foreclosures even more, and carefully verify that they actually own the mortgages on the properties they want to foreclose on. But the decision brings uncertainty to buyers of foreclosed properties — buyers who might not have clear title to their homes anymore.
The SJC decision in Ibanez vs. US Bancorpjustifiably beat up on a pair of banks that couldn’t prove they owned mortgages they foreclosed on. The reverberations should be especially strong for mortgage investors and big banks.
Investors who bought up bonds backed by huge pools of mortgages have already been pressuring banks to buy back pools of bad mortgages that they sold before the housing bubble collapsed. These cases only cover a relatively small universe of poorly underwritten loans, but billions of dollars are at stake. Investors burned by mortgage bets have been trying to line up a much more expansive set of lawsuits challenging not the mortgages themselves, but the way big banks handled them after they were sold. The Ibanez decision gives serious weight to those investors, who are eying massive potential payouts.
The Ibanezforeclosure decision by the Massachusetts Supreme Judicial Court has gotten a lot of attention since it came down on Friday. The case is, not surprisingly being taken to heart by both bulls and bears. While I don’t think Ibanez is a death blow to the securitization industry, at the very least it should make investors question the party line that’s been coming out of the American Securitization Forum. At the very least it shows that the ASF’s claims in its White Paper and Congressional testimony are wrong on some points, as I’ve argued elsewhere, including on this blog. I would argue that at the very least, Ibanez shows that there is previously undisclosed material risk in all private-label MBS.
The Ibanez case itself is actually very simple. The issue before the court was whether the two securitization trusts could prove a chain of title for the mortgages they were attempting to foreclose on.
There’s broad agreement that absent such a chain of title, they don’t have the right to foreclose–they’d have as much standing as I do relative to the homeowners. The trusts claimed three alternative bases for chain of title:
(1) that the mortgages were transferred via the pooling and servicing agreement (PSA)–basically a contract of sale of the mortgages
(2) that the mortgages were transferred via assignments in blank.
(3) that the mortgages follow the note and transferred via the transfers of the notes.
The Supreme Judicial Court (SJC) held that arguments #2 and #3 simply don’t work in Massachusetts. The reasoning here was heavily derived from Massachusetts being a title theory state, but I think a court in a lien theory state could easily reach the same result. It’s hard to predict if other states will adopt the SJC’s reasoning, but it is a unanimous verdict (with an even sharper concurrence) by one of the most highly regarded state courts in the country. The opinion is quite lucid and persuasive, particularly the point that if the wrong plaintiff is named is the foreclosure notice, the homeowner hasn’t received proper notice of the foreclosure.
Regarding #1, the SJC held that a PSA might suffice as a valid assignment of the mortgages, if the PSA is executed and contains a schedule that sufficiently identifies the mortgage in question, and if there is proof that the assignor in the PSA itself held the mortgage. (This last point is nothing more than the old rule of nemo dat–you can’t give what you don’t have. It shows that there has to be a complete chain of title going back to origination.)
On the facts, both mortgages in Ibanez failed these requirements. In one case, the PSA couldn’t even be located(!) and in the other, there was a non-executed copy and the purported loan schedule (not the actual schedule–see Marie McDonnell’s amicus brief to the SJC) didn’t sufficiently identify the loan. Moreover, there was no proof that the mortgage chain of title even got to the depositor (the assignor), without which the PSA is meaningless:
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. 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 (617) 557-1030
SJCReporter@sjc.state.ma.us
SJC-10694
U.S. BANK NATIONAL ASSOCIATION, trustee1 vs. ANTONIO IBANEZ (and a consolidated case2,3).
Real Property, Mortgage, Ownership, Record title. Mortgage, Real estate, Foreclosure, Assignment. Notice, Foreclosure of mortgage.
Civil actions commenced in the Land Court Department on September 16 and October 30, 2008.
Motions for entry of default judgment and to vacate judgment were heard by Keith C. Long, J.
The Supreme Judicial Court granted an application for direct appellate review.
R. Bruce Allensworth (Phoebe S. Winder & Robert W. Sparkes, III, with him) for U.S. Bank National Association & another.
Paul R. Collier, III (Max W. Weinstein with him) for Antonio Ibanez.
Glenn F. Russell, Jr., for Mark A. LaRace & another.
The following submitted briefs for amici curiae:
Martha Coakley, Attorney General, & John M. Stephan, Assistant Attorney General, for the Commonwealth.
Kevin Costello, Gary Klein, Shennan Kavanagh & Stuart Rossman for National Consumer Law Center & others.
Ward P. Graham & Robert J. Moriarty, Jr., for Real Estate Bar Association for Massachusetts, Inc.
Marie McDonnell, pro se.
GANTS, J. After foreclosing on two properties and purchasing the properties back at the foreclosure sales, U.S. Bank National Association (U.S. Bank), as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z; and Wells Fargo Bank, N.A. (Wells Fargo), as trustee for ABFC 2005-OPT 1 Trust, ABFC Asset Backed Certificates, Series 2005-OPT 1 (plaintiffs) filed separate complaints in the Land Court asking a judge to declare that they held clear title to the properties in fee simple. We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure. As a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties, and their requests for a declaration of clear title were properly denied.5
Procedural history. On July 5, 2007, U.S. Bank, as trustee, foreclosed on the mortgage of Antonio Ibanez, and purchased the Ibanez property at the foreclosure sale. On the same day, Wells Fargo, as trustee, foreclosed on the mortgage of Mark and Tammy LaRace, and purchased the LaRace property at that foreclosure sale.
In September and October of 2008, U.S. Bank and Wells Fargo brought separate actions in the Land Court under G. L. c. 240, § 6, which authorizes actions “to quiet or establish the title to land situated in the commonwealth or to remove a cloud from the title thereto.” The two complaints sought identical relief: (1) a judgment that the right, title, and interest of the mortgagor (Ibanez or the LaRaces) in the property was extinguished by the foreclosure; (2) a declaration that there was no cloud on title arising from publication of the notice of sale in the Boston Globe; and (3) a declaration that title was vested in the plaintiff trustee in fee simple. U.S. Bank and Wells Fargo each asserted in its complaint that it had become the holder of the respective mortgage through an assignment made after the foreclosure sale.
In both cases, the mortgagors — Ibanez and the LaRaces — did not initially answer the complaints, and the plaintiffs moved for entry of default judgment. In their motions for entry of default judgment, the plaintiffs addressed two issues: (1) whether the Boston Globe, in which the required notices of the foreclosure sales were published, is a newspaper of “general circulation” in Springfield, the town where the foreclosed properties lay. See G. L. c. 244, § 14 (requiring publication every week for three weeks in newspaper published in town where foreclosed property lies, or of general circulation in that town); and (2) whether the plaintiffs were legally entitled to foreclose on the properties where the assignments of the mortgages to the plaintiffs were neither executed nor recorded in the registry of deeds until after the foreclosure sales.6 The two cases were heard together by the Land Court, along with a third case that raised the same issues.
On March 26, 2009, judgment was entered against the plaintiffs. The judge ruled that the foreclosure sales were invalid because, in violation of G. L. c. 244, § 14, the notices of the foreclosure sales named U.S. Bank (in the Ibanez foreclosure) and Wells Fargo (in the LaRace foreclosure) as the mortgage holders where they had not yet been assigned the mortgages.7 The judge found, based on each plaintiff’s assertions in its complaint, that the plaintiffs acquired the mortgages by assignment only after the foreclosure sales and thus had no interest in the mortgages being foreclosed at the time of the publication of the notices of sale or at the time of the foreclosure sales.8
The plaintiffs then moved to vacate the judgments. At a hearing on the motions on April 17, 2009, the plaintiffs conceded that each complaint alleged a postnotice, postforeclosure sale assignment of the mortgage at issue, but they now represented to the judge that documents might exist that could show a prenotice, preforeclosure sale assignment of the mortgages. The judge granted the plaintiffs leave to produce such documents, provided they were produced in the form they existed in at the time the foreclosure sale was noticed and conducted. In response, the plaintiffs submitted hundreds of pages of documents to the judge, which they claimed established that the mortgages had been assigned to them before the foreclosures. Many of these documents related to the creation of the securitized mortgage pools in which the Ibanez and LaRace mortgages were purportedly included.9
The judge denied the plaintiffs’ motions to vacate judgment on October 14, 2009, concluding that the newly submitted documents did not alter the conclusion that the plaintiffs were not the holders of the respective mortgages at the time of foreclosure. We granted the parties’ applications for direct appellate review.
Factual background. We discuss each mortgage separately, describing when appropriate what the plaintiffs allege to have happened and what the documents in the record demonstrate.10
The Ibanez mortgage. On December 1, 2005, Antonio Ibanez took out a $103,500 loan for the purchase of property at 20 Crosby Street in Springfield, secured by a mortgage to the lender, Rose Mortgage, Inc. (Rose Mortgage). The mortgage was recorded the following day. Several days later, Rose Mortgage executed an assignment of this mortgage in blank, that is, an assignment that did not specify the name of the assignee.11 The blank space in the assignment was at some point stamped with the name of Option One Mortgage Corporation (Option One) as the assignee, and that assignment was recorded on June 7, 2006. Before the recording, on January 23, 2006, Option One executed an assignment of the Ibanez mortgage in blank.
According to U.S. Bank, Option One assigned the Ibanez mortgage to Lehman Brothers Bank, FSB, which assigned it to Lehman Brothers Holdings Inc., which then assigned it to the Structured Asset Securities Corporation,12 which then assigned the mortgage, pooled with approximately 1,220 other mortgage loans, to U.S. Bank, as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z. With this last assignment, the Ibanez and other loans were pooled into a trust and converted into mortgage-backed securities that can be bought and sold by investors — a process known as securitization.
For ease of reference, the chain of entities through which the Ibanez mortgage allegedly passed before the foreclosure sale is:
U.S. Bank National Association, as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z
According to U.S. Bank, the assignment of the Ibanez mortgage to U.S. Bank occurred pursuant to a December 1, 2006, trust agreement, which is not in the record. What is in the record is the private placement memorandum (PPM), dated December 26, 2006, a 273-page, unsigned offer of mortgage-backed securities to potential investors. The PPM describes the mortgage pools and the entities involved, and summarizes the provisions of the trust agreement, including the representation that mortgages “will be” assigned into the trust. According to the PPM, “[e]ach transfer of a Mortgage Loan from the Seller [Lehman Brothers Holdings Inc.] to the Depositor [Structured Asset Securities Corporation] and from the Depositor to the Trustee [U.S. Bank] will be intended to be a sale of that Mortgage Loan and will be reflected as such in the Sale and Assignment Agreement and the Trust Agreement, respectively.” The PPM also specifies that “[e]ach Mortgage Loan will be identified in a schedule appearing as an exhibit to the Trust Agreement.” However, U.S. Bank did not provide the judge with any mortgage schedule identifying the Ibanez loan as among the mortgages that were assigned in the trust agreement.
On April 17, 2007, U.S. Bank filed a complaint to foreclose on the Ibanez mortgage in the Land Court under the Servicemembers Civil Relief Act (Servicemembers Act), which restricts foreclosures against active duty members of the uniformed services. See 50 U.S.C. Appendix §§ 501, 511, 533 (2006 & Supp. II 2008).13 In the complaint, U.S. Bank represented that it was the “owner (or assignee) and holder” of the mortgage given by Ibanez for the property. A judgment issued on behalf of U.S. Bank on June 26, 2007, declaring that the mortgagor was not entitled to protection from foreclosure under the Servicemembers Act. In June, 2007, U.S. Bank also caused to be published in the Boston Globe the notice of the foreclosure sale required by G. L. c. 244, § 14. The notice identified U.S. Bank as the “present holder” of the mortgage.
At the foreclosure sale on July 5, 2007, the Ibanez property was purchased by U.S. Bank, as trustee for the securitization trust, for $94,350, a value significantly less than the outstanding debt and the estimated market value of the property. The foreclosure deed (from U.S. Bank, trustee, as the purported holder of the mortgage, to U.S. Bank, trustee, as the purchaser) and the statutory foreclosure affidavit were recorded on May 23, 2008. On September 2, 2008, more than one year after the sale, and more than five months after recording of the sale, American Home Mortgage Servicing, Inc., “as successor-in-interest” to Option One, which was until then the record holder of the Ibanez mortgage, executed a written assignment of that mortgage to U.S. Bank, as trustee for the securitization trust.14 This assignment was recorded on September 11, 2008.
The LaRace mortgage. On May 19, 2005, Mark and Tammy LaRace gave a mortgage for the property at 6 Brookburn Street in Springfield to Option One as security for a $103,200 loan; the mortgage was recorded that same day. On May 26, 2005, Option One executed an assignment of this mortgage in blank.
According to Wells Fargo, Option One later assigned the LaRace mortgage to Bank of America in a July 28, 2005, flow sale and servicing agreement. Bank of America then assigned it to Asset Backed Funding Corporation (ABFC) in an October 1, 2005, mortgage loan purchase agreement. Finally, ABFC pooled the mortgage with others and assigned it to Wells Fargo, as trustee for the ABFC 2005-OPT 1 Trust, ABFC Asset-Backed Certificates, Series 2005-OPT 1, pursuant to a pooling and servicing agreement (PSA).
For ease of reference, the chain of entities through which the LaRace mortgage allegedly passed before the foreclosure sale is:
Option One Mortgage Corporation (originator and record holder)
Bank of America
Asset Backed Funding Corporation (depositor)
Wells Fargo, as trustee for the ABFC 2005-OPT 1, ABFC Asset-Backed Certificates, Series 2005-OPT 1
Wells Fargo did not provide the judge with a copy of the flow sale and servicing agreement, so there is no document in the record reflecting an assignment of the LaRace mortgage by Option One to Bank of America. The plaintiff did produce an unexecuted copy of the mortgage loan purchase agreement, which was an exhibit to the PSA. The mortgage loan purchase agreement provides that Bank of America, as seller, “does hereby agree to and does hereby sell, assign, set over, and otherwise convey to the Purchaser [ABFC], without recourse, on the Closing Date . . . all of its right, title and interest in and to each Mortgage Loan.” The agreement makes reference to a schedule listing the assigned mortgage loans, but this schedule is not in the record, so there was no document before the judge showing that the LaRace mortgage was among the mortgage loans assigned to the ABFC.
Wells Fargo did provide the judge with a copy of the PSA, which is an agreement between the ABFC (as depositor), Option One (as servicer), and Wells Fargo (as trustee), but this copy was downloaded from the Securities and Exchange Commission website and was not signed. The PSA provides that the depositor “does hereby transfer, assign, set over and otherwise convey to the Trustee, on behalf of the Trust . . . all the right, title and interest of the Depositor . . . in and to . . . each Mortgage Loan identified on the Mortgage Loan Schedules,” and “does hereby deliver” to the trustee the original mortgage note, an original mortgage assignment “in form and substance acceptable for recording,” and other documents pertaining to each mortgage.
The copy of the PSA provided to the judge did not contain the loan schedules referenced in the agreement. Instead, Wells Fargo submitted a schedule that it represented identified the loans assigned in the PSA, which did not include property addresses, names of mortgagors, or any number that corresponds to the loan number or servicing number on the LaRace mortgage.Wells Fargo contends that a loan with the LaRace property’s zip code and city is the LaRace mortgage loan because the payment history and loan amount matches the LaRace loan.
On April 27, 2007, Wells Fargo filed a complaint under the Servicemembers Act in the Land Court to foreclose on the LaRace mortgage. The complaint represented Wells Fargo as the “owner (or assignee) and holder” of the mortgage given by the LaRaces for the property. A judgment issued on behalf of Wells Fargo on July 3, 2007, indicating that the LaRaces were not beneficiaries of the Servicemembers Act and that foreclosure could proceed in accordance with the terms of the power of sale. In June, 2007, Wells Fargo caused to be published in the Boston Globe the statutory notice of sale, identifying itself as the “present holder” of the mortgage.
At the foreclosure sale on July 5, 2007, Wells Fargo, as trustee, purchased the LaRace property for $120,397.03, a value significantly below its estimated market value. Wells Fargo did not execute a statutory foreclosure affidavit or foreclosure deed until May 7, 2008. That same day, Option One, which was still the record holder of the LaRace mortgage, executed an assignment of the mortgage to Wells Fargo as trustee; the assignment was recorded on May 12, 2008. Although executed ten months after the foreclosure sale, the assignment declared an effective date of April 18, 2007, a date that preceded the publication of the notice of sale and the foreclosure sale.
Discussion. The plaintiffs brought actions under G. L. c. 240, § 6, seeking declarations that the defendant mortgagors’ titles had been extinguished and that the plaintiffs were the fee simple owners of the foreclosed properties. As such, the plaintiffs bore the burden of establishing their entitlement to the relief sought. Sheriff’s Meadow Found., Inc. v. Bay-Courte Edgartown, Inc., 401 Mass. 267, 269 (1987). To meet this burden, they were required “not merely to demonstrate better title . . . than the defendants possess, but . . . to prove sufficient title to succeed in [the] action.” Id. See NationsBanc Mtge. Corp. v. Eisenhauer, 49 Mass. App. Ct. 727, 730 (2000). There is no question that the relief the plaintiffs sought required them to establish the validity of the foreclosure sales on which their claim to clear title rested.
Massachusetts does not require a mortgage holder to obtain judicial authorization to foreclose on a mortgaged property. See G. L. c. 183, § 21; G. L. c. 244, § 14. With the exception of the limited judicial procedure aimed at certifying that the mortgagor is not a beneficiary of the Servicemembers Act, a mortgage holder can foreclose on a property, as the plaintiffs did here, by exercise of the statutory power of sale, if such a power is granted by the mortgage itself. See Beaton v. Land Court, 367 Mass. 385, 390-391, 393, appeal dismissed, 423 U.S. 806 (1975).
Where a mortgage grants a mortgage holder the power of sale, as did both the Ibanez and LaRace mortgages, it includes by reference the power of sale set out in G. L. c. 183, § 21, and further regulated by G. L. c. 244, §§ 11-17C. Under G. L. c. 183, § 21, after a mortgagor defaults in the performance of the underlying note, the mortgage holder may sell the property at a public auction and convey the property to the purchaser in fee simple, “and such sale shall forever bar the mortgagor and all persons claiming under him from all right and interest in the mortgaged premises, whether at law or in equity.” Even where there is a dispute as to whether the mortgagor was in default or whether the party claiming to be the mortgage holder is the true mortgage holder, the foreclosure goes forward unless the mortgagor files an action and obtains a court order enjoining the foreclosure.15 See Beaton v. Land Court, supra at 393.
Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that “one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void.” Moore v. Dick, 187 Mass. 207, 211 (1905). See Roche v. Farnsworth, 106 Mass. 509, 513 (1871) (power of sale contained in mortgage “must be executed in strict compliance with its terms”). See also McGreevey v. Charlestown Five Cents Sav. Bank, 294 Mass. 480, 484 (1936).16
One of the terms of the power of sale that must be strictly adhered to is the restriction on who is entitled to foreclose. The “statutory power of sale” can be exercised by “the mortgagee or his executors, administrators, successors or assigns.” G. L. c. 183, § 21. Under G. L. c. 244, § 14, “[t]he mortgagee or person having his estate in the land mortgaged, or a person authorized by the power of sale, or the attorney duly authorized by a writing under seal, or the legal guardian or conservator of such mortgagee or person acting in the name of such mortgagee or person” is empowered to exercise the statutory power of sale. Any effort to foreclose by a party lacking “jurisdiction and authority” to carry out a foreclosure under these statutes is void. Chace v. Morse, 189 Mass. 559, 561 (1905), citing Moore v. Dick, supra. See Davenport v. HSBC Bank USA, 275 Mich. App. 344, 347-348 (2007) (attempt to foreclose by party that had not yet been assigned mortgage results in “structural defect that goes to the very heart of defendant’s ability to foreclose by advertisement,” and renders foreclosure sale void).
A related statutory requirement that must be strictly adhered to in a foreclosure by power of sale is the notice requirement articulated in G. L. c. 244, § 14. That statute provides that “no sale under such power shall be effectual to foreclose a mortgage, unless, previous to such sale,” advance notice of the foreclosure sale has been provided to the mortgagee, to other interested parties, and by publication in a newspaper published in the town where the mortgaged land lies or of general circulation in that town. Id. “The manner in which the notice of the proposed sale shall be given is one of the important terms of the power, and a strict compliance with it is essential to the valid exercise of the power.” Moore v. Dick, supra at 212. See Chace v. Morse, supra (“where a certain notice is prescribed, a sale without any notice, or upon a notice lacking the essential requirements of the written power, would be void as a proceeding for foreclosure”). See also McGreevey v. Charlestown Five Cents Sav. Bank, supra. Because only a present holder of the mortgage is authorized to foreclose on the mortgaged property, and because the mortgagor is entitled to know who is foreclosing and selling the property, the failure to identify the holder of the mortgage in the notice of sale may render the notice defective and the foreclosure sale void.17 See Roche v. Farnsworth, supra (mortgage sale void where notice of sale identified original mortgagee but not mortgage holder at time of notice and sale). See also Bottomly v. Kabachnick, 13 Mass. App. Ct. 480, 483-484 (1982) (foreclosure void where holder of mortgage not identified in notice of sale).
For the plaintiffs to obtain the judicial declaration of clear title that they seek, they had to prove their authority to foreclose under the power of sale and show their compliance with the requirements on which this authority rests. Here, the plaintiffs were not the original mortgagees to whom the power of sale was granted; rather, they claimed the authority to foreclose as the eventual assignees of the original mortgagees. Under the plain language of G. L. c. 183, § 21, and G. L. c. 244, § 14, the plaintiffs had the authority to exercise the power of sale contained in the Ibanez and LaRace mortgages only if they were the assignees of the mortgages at the time of the notice of sale and the subsequent foreclosure sale. See In re Schwartz, 366 B.R. 265, 269 (Bankr. D. Mass. 2007) (“Acquiring the mortgage after the entry and foreclosure sale does not satisfy the Massachusetts statute”).18 See also Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885, 886 (Fla. Dist. Ct. App. 1990) (per curiam) (foreclosure action could not be based on assignment of mortgage dated four months after commencement of foreclosure proceeding).
The plaintiffs claim that the securitization documents they submitted establish valid assignments that made them the holders of the Ibanez and LaRace mortgages before the notice of sale and the foreclosure sale. We turn, then, to the documentation submitted by the plaintiffs to determine whether it met the requirements of a valid assignment.
Like a sale of land itself, the assignment of a mortgage is a conveyance of an interest in land that requires a writing signed by the grantor. See G. L. c. 183, § 3; Saint Patrick’s Religious, Educ. & Charitable Ass’n v. Hale, 227 Mass. 175, 177 (1917). In a “title theory state” like Massachusetts, a mortgage is a transfer of legal title in a property to secure a debt. See Faneuil Investors Group, Ltd. Partnership v. Selectmen of Dennis, 458 Mass. 1, 6 (2010). Therefore, when a person borrows money to purchase a home and gives the lender a mortgage, the homeowner-mortgagor retains only equitable title in the home; the legal title is held by the mortgagee. See Vee Jay Realty Trust Co. v. DiCroce, 360 Mass. 751, 753 (1972), quoting Dolliver v. St. Joseph Fire & Marine Ins. Co., 128 Mass. 315, 316 (1880) (although “as to all the world except the mortgagee, a mortgagor is the owner of the mortgaged lands,” mortgagee has legal title to property); Maglione v. BancBoston Mtge. Corp., 29 Mass. App. Ct. 88, 90 (1990). Where, as here, mortgage loans are pooled together in a trust and converted into mortgage-backed securities, the underlying promissory notes serve as financial instruments generating a potential income stream for investors, but the mortgages securing these notes are still legal title to someone’s home or farm and must be treated as such.
Focusing first on the Ibanez mortgage, U.S. Bank argues that it was assigned the mortgage under the trust agreement described in the PPM, but it did not submit a copy of this trust agreement to the judge. The PPM, however, described the trust agreement as an agreement to be executed in the future, so it only furnished evidence of an intent to assign mortgages to U.S. Bank, not proof of their actual assignment. Even if there were an executed trust agreement with language of present assignment, U.S. Bank did not produce the schedule of loans and mortgages that was an exhibit to that agreement, so it failed to show that the Ibanez mortgage was among the mortgages to be assigned by that agreement. Finally, even if there were an executed trust agreement with the required schedule, U.S. Bank failed to furnish any evidence that the entity assigning the mortgage — Structured Asset Securities Corporation — ever held the mortgage to be assigned. The last assignment of the mortgage on record was from Rose Mortgage to Option One; nothing was submitted to the judge indicating that Option One ever assigned the mortgage to anyone before the foreclosure sale.19 Thus, based on the documents submitted to the judge, Option One, not U.S. Bank, was the mortgage holder at the time of the foreclosure, and U.S. Bank did not have the authority to foreclose the mortgage.
Turning to the LaRace mortgage, Wells Fargo claims that, before it issued the foreclosure notice, it was assigned the LaRace mortgage under the PSA. The PSA, in contrast with U.S. Bank’s PPM, uses the language of a present assignment (“does hereby . . . assign” and “does hereby deliver”) rather than an intent to assign in the future. But the mortgage loan schedule Wells Fargo submitted failed to identify with adequate specificity the LaRace mortgage as one of the mortgages assigned in the PSA. Moreover, Wells Fargo provided the judge with no document that reflected that the ABFC (depositor) held the LaRace mortgage that it was purportedly assigning in the PSA. As with the Ibanez loan, the record holder of the LaRace loan was Option One, and nothing was submitted to the judge which demonstrated that the LaRace loan was ever assigned by Option One to another entity before the publication of the notice and the sale.
Where a plaintiff files a complaint asking for a declaration of clear title after a mortgage foreclosure, a judge is entitled to ask for proof that the foreclosing entity was the mortgage holder at the time of the notice of sale and foreclosure, or was one of the parties authorized to foreclose under G. L. c. 183, § 21, and G. L. c. 244, § 14. A plaintiff that cannot make this modest showing cannot justly proclaim that it was unfairly denied a declaration of clear title. See In re Schwartz, supra at 266 (“When HomEq [Servicing Corporation] was required to prove its authority to conduct the sale, and despite having been given ample opportunity to do so, what it produced instead was a jumble of documents and conclusory statements, some of which are not supported by the documents and indeed even contradicted by them”). See also Bayview Loan Servicing, LLC v. Nelson, 382 Ill. App. 3d 1184, 1188 (2008) (reversing grant of summary judgment in favor of financial entity in foreclosure action, where there was “no evidence that [the entity] ever obtained any legal interest in the subject property”).
We do not suggest that an assignment must be in recordable form at the time of the notice of sale or the subsequent foreclosure sale, although recording is likely the better practice. Where a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However, there must be proof that the assignment was made by a party that itself held the mortgage. See In re Samuels, 415 B.R. 8, 20 (Bankr. D. Mass. 2009). A foreclosing entity may provide a complete chain of assignments linking it to the record holder of the mortgage, or a single assignment from the record holder of the mortgage. See In re Parrish, 326 B.R. 708, 720 (Bankr. N.D. Ohio 2005) (“If the claimant acquired the note and mortgage from the original lender or from another party who acquired it from the original lender, the claimant can meet its burden through evidence that traces the loan from the original lender to the claimant”). The key in either case is that the foreclosing entity must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have the authority to foreclose under the power of sale (or the foreclosing entity must be one of the parties authorized to foreclose under G. L. c. 183, § 21, and G. L. c. 244, § 14).
The judge did not err in concluding that the securitization documents submitted by the plaintiffs failed to demonstrate that they were the holders of the Ibanez and LaRace mortgages, respectively, at the time of the publication of the notices and the sales. The judge, therefore, did not err in rendering judgments against the plaintiffs and in denying the plaintiffs’ motions to vacate the judgments.20
We now turn briefly to three other arguments raised by the plaintiffs on appeal. First, the plaintiffs initially contended that the assignments in blank executed by Option One, identifying the assignor but not the assignee, not only “evidence[] and confirm[] the assignments that occurred by virtue of the securitization agreements,” but “are effective assignments in their own right.” But in their reply briefs they conceded that the assignments in blank did not constitute a lawful assignment of the mortgages. Their concession is appropriate. We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment. See Flavin v. Morrissey, 327 Mass. 217, 219 (1951); Macurda v. Fuller, 225 Mass. 341, 344 (1916). See also G. L. c. 183, § 3.
Second, the plaintiffs contend that, because they held the mortgage note, they had a sufficient financial interest in the mortgage to allow them to foreclose. In Massachusetts, where a note has been assigned but there is no written assignment of the mortgage underlying the note, the assignment of the note does not carry with it the assignment of the mortgage. Barnes v. Boardman, 149 Mass. 106, 114 (1889). Rather, the holder of the mortgage holds the mortgage in trust for the purchaser of the note, who has an equitable right to obtain an assignment of the mortgage, which may be accomplished by filing an action in court and obtaining an equitable order of assignment. Id. (“In some jurisdictions it is held that the mere transfer of the debt, without any assignment or even mention of the mortgage, carries the mortgage with it, so as to enable the assignee to assert his title in an action at law. . . . This doctrine has not prevailed in Massachusetts, and the tendency of the decisions here has been, that in such cases the mortgagee would hold the legal title in trust for the purchaser of the debt, and that the latter might obtain a conveyance by a bill in equity”). See Young v. Miller, 6 Gray 152, 154 (1856). In the absence of a valid written assignment of a mortgage or a court order of assignment, the mortgage holder remains unchanged. This common-law principle was later incorporated in the statute enacted in 1912 establishing the statutory power of sale, which grants such a power to “the mortgagee or his executors, administrators, successors or assigns,” but not to a party that is the equitable beneficiary of a mortgage held by another. G. L. c. 183, § 21, inserted by St. 1912, c. 502, § 6.
Third, the plaintiffs initially argued that postsale assignments were sufficient to establish their authority to foreclose, and now argue that these assignments are sufficient when taken in conjunction with the evidence of a presale assignment. They argue that the use of postsale assignments was customary in the industry, and point to Title Standard No. 58 (3) issued by the Real Estate Bar Association for Massachusetts, which declares: “A title is not defective by reason of . . . [t]he recording of an Assignment of Mortgage executed either prior, or subsequent, to foreclosure where said Mortgage has been foreclosed, of record, by the Assignee.”21 To the extent that the plaintiffs rely on this title standard for the proposition that an entity that does not hold a mortgage may foreclose on a property, and then cure the cloud on title by a later assignment of a mortgage, their reliance is misplaced because this proposition is contrary to G. L. c. 183, § 21, and G. L. c. 244, § 14. If the plaintiffs did not have their assignments to the Ibanez and LaRace mortgages at the time of the publication of the notices and the sales, they lacked authority to foreclose under G. L. c. 183, § 21, and G. L. c. 244, § 14, and their published claims to be the present holders of the mortgages were false. Nor may a postforeclosure assignment be treated as a pre-foreclosure assignment simply by declaring an “effective date” that precedes the notice of sale and foreclosure, as did Option One’s assignment of the LaRace mortgage to Wells Fargo. Because an assignment of a mortgage is a transfer of legal title, it becomes effective with respect to the power of sale only on the transfer; it cannot become effective before the transfer. See In re Schwartz, supra at 269.
However, we do not disagree with Title Standard No. 58 (3) that, where an assignment is confirmatory of an earlier, valid assignment made prior to the publication of notice and execution of the sale, that confirmatory assignment may be executed and recorded after the foreclosure, and doing so will not make the title defective. A valid assignment of a mortgage gives the holder of that mortgage the statutory power to sell after a default regardless whether the assignment has been recorded. See G. L. c. 183, § 21; MacFarlane v. Thompson, 241 Mass. 486, 489 (1922). Where the earlier assignment is not in recordable form or bears some defect, a written assignment executed after foreclosure that confirms the earlier assignment may be properly recorded. See Bon v. Graves, 216 Mass. 440, 444-445 (1914). A confirmatory assignment, however, cannot confirm an assignment that was not validly made earlier or backdate an assignment being made for the first time. See Scaplen v. Blanchard, 187 Mass. 73, 76 (1904) (confirmatory deed “creates no title” but “takes the place of the original deed, and is evidence of the making of the former conveyance as of the time when it was made”). Where there is no prior valid assignment, a subsequent assignment by the mortgage holder to the note holder is not a confirmatory assignment because there is no earlier written assignment to confirm. In this case, based on the record before the judge, the plaintiffs failed to prove that they obtained valid written assignments of the Ibanez and LaRace mortgages before their foreclosures, so the postforeclosure assignments were not confirmatory of earlier valid assignments.
Finally, we reject the plaintiffs’ request that our ruling be prospective in its application. A prospective ruling is only appropriate, in limited circumstances, when we make a significant change in the common law. See Papadopoulos v. Target Corp., 457 Mass. 368, 384 (2010) (noting “normal rule of retroactivity”); Payton v. Abbott Labs, 386 Mass. 540, 565 (1982). We have not done so here. The legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the plaintiffs’ apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.
Conclusion. For the reasons stated, we agree with the judge that the plaintiffs did not demonstrate that they were the holders of the Ibanez and LaRace mortgages at the time that they foreclosed these properties, and therefore failed to demonstrate that they acquired fee simple title to these properties by purchasing them at the foreclosure sale.
Judgments affirmed.
CORDY, J. (concurring, with whom Botsford, J., joins). I concur fully in the opinion of the court, and write separately only to underscore that what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets. There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure. Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order. Although there was no apparent actual unfairness here to the mortgagors, that is not the point. Foreclosure is a powerful act with significant consequences, and Massachusetts law has always required that it proceed strictly in accord with the statutes that govern it. As the opinion of the court notes, such strict compliance is necessary because Massachusetts is both a title theory State and allows for extrajudicial foreclosure.
The type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and, ultimately the sale of mortgaged-backed securities, are not barred nor even burdened by the requirements of Massachusetts law. The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments. The court’s opinion clearly states that such assignments do not need to be in recordable form or recorded before the foreclosure, but they do have to have been effectuated.
What is more complicated, and not addressed in this opinion, because the issue was not before us, is the effect of the conduct of banks such as the plaintiffs here, on a bona fide third-party purchaser who may have relied on the foreclosure title of the bank and the confirmative assignment and affidavit of foreclosure recorded by the bank subsequent to that foreclosure but prior to the purchase by the third party, especially where the party whose property was foreclosed was in fact in violation of the mortgage covenants, had notice of the foreclosure, and took no action to contest it.
1 For the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z.
2 Wells Fargo Bank, N.A., trustee, vs. Mark A. LaRace
& another.
3 The Appeals Court granted the plaintiffs’ motion to consolidate these cases.
4 Chief Justice Marshall participated in the deliberation on this case prior to her retirement.
5 We acknowledge the amicus briefs filed by the Attorney General; the Real Estate Bar Association for Massachusetts, Inc.; Marie McDonnell; and the National Consumer Law Center, together with Darlene Manson, Germano DePina, Robert Lane, Ann Coiley, Roberto Szumik, and Geraldo Dosanjos.
6 The uncertainty surrounding the first issue was the reason the plaintiffs sought a declaration of clear title in order to obtain title insurance for these properties. The second issue was raised by the judge in the LaRace case at a January 5, 2009, case management conference.
7 The judge also concluded that the Boston Globe was a newspaper of general circulation in Springfield, so the foreclosures were not rendered invalid on that ground because notice was published in that newspaper.
8 In the third case, LaSalle Bank National Association, trustee for the certificate holders of Bear Stearns Asset Backed Securities I, LLC Asset-Backed Certificates, Series 2007-HE2 vs. Freddy Rosario, the judge concluded that the mortgage foreclosure “was not rendered invalid by its failure to record the assignment reflecting its status as holder of the mortgage prior to the foreclosure since it was, in fact, the holder by assignment at the time of the foreclosure, it truthfully claimed that status in the notice, and it could have produced proof of that status (the unrecorded assignment) if asked.”
9 On June 1, 2009, attorneys for the defendant mortgagors filed their appearance in the cases for the first time.
10 The LaRace defendants allege that the documents submitted to the judge following the plaintiffs’ motions to vacate judgment are not properly in the record before us. They also allege that several of these documents are not properly authenticated. Because we affirm the judgment on other grounds, we do not address these concerns, and assume that these documents are properly before us and were adequately authenticated.
11 This signed and notarized document states: “FOR VALUE RECEIVED, the undersigned hereby grants, assigns and transfers to _______ all beneficial interest under that certain Mortgage dated December 1, 2005 executed by Antonio Ibanez . . . .”
12 The Structured Asset Securities Corporation is a wholly owned direct subsidiary of Lehman Commercial Paper Inc., which is in turn a wholly owned, direct subsidiary of Lehman Brothers Holdings Inc.
13 As implemented in Massachusetts, a mortgage holder is required to go to court to obtain a judgment declaring that the mortgagor is not a beneficiary of the Servicemembers Act before proceeding to foreclosure. St. 1943, c. 57, as amended through St. 1998, c. 142.
14 The Land Court judge questioned whether American Home Mortgage Servicing, Inc., was in fact a successor in interest to Option One. Given our affirmance of the judgment on other grounds, we need not address this question.
15 An alternative to foreclosure through the right of statutory sale is foreclosure by entry, by which a mortgage holder who peaceably enters a property and remains for three years after recording a certificate or memorandum of entry forecloses the mortgagor’s right of redemption. See G. L. c. 244, §§ 1, 2; Joyner v. Lenox Sav. Bank, 322 Mass. 46, 52-53 (1947). A foreclosure by entry may provide a separate ground for a claim of clear title apart from the foreclosure by execution of the power of sale. See, e.g., Grabiel v. Michelson, 297 Mass. 227, 228-229 (1937). Because the plaintiffs do not claim clear title based on foreclosure by entry, we do not discuss it further.
16 We recognize that a mortgage holder must not only act in strict compliance with its power of sale but must also “act in good faith and . . . use reasonable diligence to protect the interests of the mortgagor,” and this responsibility is “more exacting” where the mortgage holder becomes the buyer at the foreclosure sale, as occurred here. See Williams v. Resolution GGF Oy, 417 Mass. 377, 382-383 (1994), quoting Seppala & Aho Constr. Co. v. Petersen, 373 Mass. 316, 320 (1977). Because the issue was not raised by the defendant mortgagors or the judge, we do not consider whether the plaintiffs breached this obligation.
17 The form of foreclosure notice provided in G. L. c. 244, § 14, calls for the present holder of the mortgage to identify itself and sign the notice. While the statute permits other forms to be used and allows the statutory form to be “altered as circumstances require,” G. L. c. 244, § 14, we do not interpret this flexibility to suggest that the present holder of the mortgage need not identify itself in the notice.
18 The plaintiffs were not authorized to foreclose by virtue of any of the other provisions of G. L. c. 244, § 14: they were not the guardian or conservator, or acting in the name of, a person so authorized; nor were they the attorney duly authorized by a writing under seal.
19 Ibanez challenges the validity of this assignment to Option One. Because of the failure of U.S. Bank to document any preforeclosure sale assignment or chain of assignments by which it obtained the Ibanez mortgage from Option One, it is unnecessary to address the validity of the assignment from Rose Mortgage to Option One.
20 The plaintiffs have not pressed the procedural question whether the judge exceeded his authority in rendering judgment against them on their motions for default judgment, and we do not address it here.
21 Title Standard No. 58 (3) issued by the Real Estate Bar Association for Massachusetts continues: “However, if the Assignment is not dated prior, or stated to be effective prior, to the commencement of a foreclosure, then a foreclosure sale after April 19, 2007 may be subject to challenge in the Bankruptcy Court,” citing In re Schwartz, 366 B.R. 265 (Bankr. D. Mass. 2007).
FULL FILED ADVERSARY AGAINST DEUTSCHE BANK NATIONAL TRUST COMPANY BY PAUL NGUYEN, FILED CONCURRENTLY WITH RJN 1 PROSPECTUS AND POOLING AND SERVICING AGREEMENT, RJN 2 LAND TITLE RECORDS
17 Q. Okay. And how is LPS paid? Are they paid by
18 the attorney? Are they paid by the servicer who’s
19 asked the attorney to perform that service?
20 A. It depends on the service. For many
21 services, they are — the model that we operate under
22 is a vendor supportive model, “vendor” meaning the
23 attorney office would pay for that service. There are
24 some support services that the servicer pays for
25 directly.
Page 22
1 Q. So in your scenario that you just gave me a
2 few minutes ago, a law firm drafts a document, and it’s
3 sent on to LPS to see whether or not it’s appropriate
4 for LPS to sign the document. The law firm then pays
5 LPS for that service? That’s considered a support
6 service?
7 A. That’s — that’s part of the — Yeah.
8 Correct. That would be one of the support services it
9 would provide, and part of what the fee they would pay
10 would include that activity.
11 Q. Okay. And are there also payments made for
12 using the software and the platform?
13 A. There are payments made. That’s part of the
14 technology agreement. There is a technology fee
15 assessed for each, we call it a referral, but it,
16 essentially, would be a legal action of some sort or an
17 action. It’s not always a legal action. But for every
18 referral type there is a fee, and that fee ranges
19 between $5 and $75, depending on the activity to be
20 performed and the technology in play or processes in
21 play to track it.
22 Q. Okay. So, for example, is LPS paid when a
23 servicer makes a referral to a law firm within the
24 network to do — perform some service?
25 A. Yes. LPS is paid upon referral.
In submitting any future orders of reference said application shall include an affidavit from plaintiff indicating whether this loan is subject to a H.A.M.P. review and whether plaintiff is or is not prevented from proceeding with the instant foreclosure by reason of any applicable federal H.A.M.P. directives.
Q. So this doesn’t necessarily mean
3 that someone physically picked up the file
4 from LPS; correct?
5 A. My understanding is that this is
6 a note that automates when the attorney
7 has confirmed receipt through new image.
8 Whether that’s manual or not, I couldn’t
9 say based on the notes. And then new
10 image stamps into the LPS Desktop
11 confirming that NIE ID number 0966 and on
12 was pulled in, those documents were
13 received by the attorney.
14 Q. Does LPS have any employees at
15 the Steven J. Baum law firm?
16 A. Not that I’m aware of.
<SNIP>
Q. This is from the Steven J. Baum
law firm; correct?
3 A. It appears to be.
4 Q. Would you have any reason to
5 doubt that?
6 A. No.
7 Q. And could you tell me what this
8 entry represents.
9 A. To the best of my understanding,
10 they have user has completed a POA
11 requisite data form, exactly what it says.
12 I guess I couldn’t give you a full answer.
13 I don’t manage this process, but it
14 appears they are requesting something.
15 Q. So just start me off, POA
16 underscore requisite, what does that stand
17 for?
18 A. I could guess.
19 Q. Is that a category or a type of
20 document?
21 A. Again, I could guess.
22 Q. I don’t want you to guess, but
23 can you make an educated guess?
24 A. Power of attorney.
25 Q. Who at LPS would have a better
understanding of this process? You said
3 it’s not really you.
4 A. I don’t know.
5 Q. Let’s go to entry two hundred
6 fifty-one dated 11/4/08. User has updated
7 the system for the following. Power of
8 attorney requested, completed on 11/4/08.
9 Do you see that?
10 A. Yes.
11 Q. Can you tell me what that entry
12 is.
13 A. I could give you an educated
14 guess.
15 Q. Go ahead.
16 A. My educated guess would be the
17 attorney has requested a power of
18 attorney.
19 Q. From whom?
20 A. From that note, I couldn’t say
21 for certain. But below the secondary
22 note, it seems to indicate JP Morgan to
23 Scott Walter.
24 Q. Who is asking for that? It’s
25 kind of written in the passive.
Who’s actually asking for the
3 power of attorney?
4 A. Appears to me from the notes
5 that Steven J. Baum’s office is making
6 this request.
<SNIP>
A. It appears to be Steven J. Baum
3 noting the file, memorializing that they
4 have prepared an assignment, they have
5 uploaded it into the LPS Desktop to be
6 reviewed and executed, and that it isn’t
7 back yet. 8 Q. What does it mean assignment was
9 received not signed, who’s receiving that?
10 A. I wouldn’t know.
11 Q. Well, do you read this as the
12 assignment is not signed?
13 A. I read it as an assignment is
14 not signed or, let me better state what I
15 meant to say, is that a signed assignment
16 hasn’t been received by Steven J. Baum. 17 Which assignment though I couldn’t tell
18 from this note.
19 Q. Would this assignment be signed
20 by LPS; is that what this is saying?
21 A. It appears that the attorney is
22 stating that.However, I can’t tell you
23 whether LPS would have signed this
24 document or not without seeing the
25 document that the note’s referencing.
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