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Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.


Courts Decide Disputed Loan Titles

Recent activity in litigation involving challenges to loan title

March 17, 2012

By SAM GARCIA Mortgage Daily


portrait of Sam Garcia

Lost notes have created problems for several mortgage firms that have been trying to foreclose. Courts around the country have been ruling in favor of mortgage lenders in cases involving the Mortgage Electronic Registration Systems Inc. -- especially in Oregon. Other lawsuits involving disputed title have emerged from criminal actions tied to mortgage fraud and fraudulent or botched lien releases.

Connecticut real estate developer Andrew Kissel was indicted in July 2005 for $6.4 billion in mortgage fraud. Kissel whose brother Robert was allegedly murdered by his wife in 2003, was himself found murdered in April 2006.

Among Kissel's alleged crimes was the fraudulent release of a lien on a $1,620,800 mortgage made in July 2004 by Washington Mutual Bank in order to obtain a new $4.5 million first mortgage on his Greenwich, Conn., home from Hudson Valley Bank in March 2005. Kissel then forged a release on the Hudson Valley Bank loan and secured a $1.0 million mortgage from Independence Community Bank in May 2005, and then forged another lien release for the Independence loan to obtain a $4,525,000 mortgage in June 2005 from Fairfield County Bank Corp.

Following a loan default, Hudson Valley foreclosed on the property, and the house sold at auction for $2.3 million in March 2007. There were $404,000 in excess proceeds, and First American Title battled in court with Stewart Title over the funds -- which were ultimately awarded to First American. Stewart appealed the decision, and the Supreme Court of Connecticut affirmed the judgment on Feb. 7.

Denis Kelliher was convicted of using mortgage fraud to obtain loans from Keybank, which sued him and obtained a $27.5 million judgment in September 2008. But before the judgment was entered and recorded, Kelliher closed on a $1.3 million construction loan from 1st Constitution Bank for a Toms River, N.J., residential property in January 2008. He refinanced the loan with Investors Mortgage Co. on Oct. 3, 2008 -- just after the judgment was entered -- but hid the lawsuit from Investors. The refinance loan was recorded on Oct. 21, 2008.

A Keybank attorney notified Investors Mortgage about the judgment and that it had priority over the refinance mortgage. So Investors Mortgage sued, and the trial court ruled that Investors Mortgage maintained the lien priority of the original loan. Keybank appealed the trial court judgment with the Superior Court of New Jersey, Appellate Division, but the appeals court affirmed the judgment.

"We conclude that such a refinancing mortgagee is ordinarily entitled to the same priority as the original mortgagee even though it negligently failed to discover the lien of the intervening judgment creditor before closing," the decision stated.

Wells Fargo Bank, N.A., mistakenly filed a lien release on an Ohio property owned by Abraham and Sally Schwartz in March 2003. The couple then obtained another loan on the property from Reuven Dessler and Robert Klein in 2007. Wells subsequently discovered the error and filed an affidavit as to inadvertent satisfaction and proceeded with a foreclosure action. A magistrate determined that Wells maintained its lien priority over the Dessler and Klein lien because a thorough search of public records would have turned up the bank's lien.

The Court of Appeals of Ohio, Eighth District, Cuyahoga County, agreed, and affirmed the ruling on March 8.

A $15,443 second mortgage on a Massachusetts property was made by home seller Kevin Crosby to Mary Odoms-Harris and subsequently assigned to Ford Realty Trust with Carlo Casrano as trustee. But the note was lost and, 18 years later when the first mortgage holder Wells Fargo Bank, N.A., filed a complaint for declaratory judgment in the land court seeking to quiet title and establish the primacy of the first mortgage in its entirety, the second lienholder attempted to convince the court that the second lien mortgage itself was an enforceable contract.

But the judge ruled that while there was evidence as to monthly payments and interest rate, other important loan terms contained in the note could not be ascertained and the mortgage was unenforceable. An appeal was filed on Dec. 6, 2011, and the Appeals Court of Massachusetts affirmed the lower court's decision on Feb. 28.

After an original note was lost, Bank of New York Trust Company, N.A.'s, lawsuit to foreclose on George and Caroline Rodgers' Florida property was dismissed because it couldn't establish a lost note. But the District Court of Appeal of Florida, Third District, disagreed and found on Jan. 18 that the legal prerequisites of establishing a lost note were fully met. The judgment was reversed and a new trial was ordered.

A complaint filed against MERS on March 13 by the Guilford County Register of Deeds in North Carolina is filled with political rhetoric, according to a statement from a MERS communications executive. The lawsuit misconstrues the role of the MERS System and repeats common but inaccurate allegations.

"MERS does not eliminate or replace county land records," according to the Reston, Va.-based registry service. "Mortgages where borrowers appoint MERS as the mortgagee are recorded in the local land records and the fees are paid. MERS' role is disclosed in plain language in the mortgage or deed of trust document signed by the borrower at closing."

MERSCORP Holdings Inc. reported that U.S. District Court Judge Anna J. Brown on March 3 dismissed with prejudice an amended complaint of wrongful foreclosure filed by Rick and Amy Sovereign against MERS. The judge cited prior opinions that MERS does meet the definition of beneficiary under Oregon's Deed of Trust Act.

"The court reiterates its conclusion that plaintiffs have not stated a claim based on the involvement of MERS or on a lack of authority of MERS to act as beneficiary of the deed and to transfer the mortgage in accordance with the express provisions of the deed," Brown reportedly wrote.

A similar decision was reached by an Oregon state judge in DeGregorio v. Mortgage Electronic Registration Systems Inc. on March 2, MERS said.

The decisions followed a Jan. 13 decision in an Oregon federal court on Stolz v. OneWest finding that MERS is a valid trust deed beneficiary according to Oregon law, with the power and authority to assign its interest in the trust deed to the foreclosing lender.

In another Oregon case, Horsewood v. LSI Title, the same federal court affirmed on Dec. 29 the validity of MERS as the beneficiary of the deed of trust and dismissed the plaintiff's wrongful foreclosure complaint.

MERS said that Judge Robert Boutin of the Fifth Judicial District dismissed with prejudice on Jan. 9 an amended wrongful foreclosure complaint in Somers v. Deutsche Bank after previously dismissed the original complaint with leave to amend. The amended complaint included allegations of robo-signing by the MERS signing officer who executed the MERS deed of trust assignment to Deutsche Bank and a claim that the assignment was void because MERS was created to avoid paying county recording fees.

A federal judge in Washington dismissed with prejudice all claims against MERS related to alleged violations of the State of Washington's Deed of Trust Act. The decision in the case, Myers v. Mortgage Electronic Registration Systems Inc., was filed on Feb. 24.

In Nevada, MERS said that the Nevada Supreme Court rejected challenges to the MERS system in assigning deeds of trust and affirmed lower court rulings in Volkes v. BAC Home Loans Servicing and U.S. Bank v. Davis.

The New Hampshire Superior Court affirmed MERS' role as mortgagee and ruled that MERS has the authority to both hold and assign its interest in mortgages under New Hampshire law in Dow v. Bank of New York Mellon Trust. The judge found the borrower's claim to the contrary to be meritless.

Two federal judges in Hawaii during January and February dismissed challenged to MERS' validity in Caraang v. Aurora Loan Services and Federal National Mortgage Association v. Kamakau.

A federal judge in Idaho ruled in favor of MERS in Hobson v. Wells Fargo on Feb. 15, MERS said.

The U.S. Court of Appeals for the 10th Circuit ruled in Scarborough v. LaSalle Bank, MERS, et al., that securitizing a promissory note does not invalidate a borrower's debt, MERS announced. Securitization also doesn't cancel the note holder and its agent's authority from enforcing the deed of trust. The decision reportedly impacts federal cases originating in Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming.

A Dec. 23, 2011, decision also from the 10th Circuit in Commonwealth Property Advocates v. MERS also affirmed the MERS system. The case was consolidated with two others that were on appeal involving MERS deeds of trust.

In Idaho, MERS said the state's supreme court affirmed the trial court's ruling in Trotter v. Bank of New York, MERS, et al, that ReconTrust, the trustee appointed by MERS assignee Bank of New York Mellon, was entitled to foreclose by non-judicial process and held that a trustee may foreclose on a deed of trust if the trustee complies with the requirements contained in Idaho's Deed of Trust Act.

On Nov. 8, 2011, The U.S. Court of Appeals for the 11th Judicial Circuit upheld a lower court ruling in Smith v. Saxon Mortgage by affirming MERS' rights to assign the security deed and to foreclose on a property. The decision impacts federal cases originating in the states of Alabama, Florida and Georgia.

MERS announced that the U.S. Court of Appeals for the First Circuit in Massachusetts ruled on Dec. 13, 2011, in favor of defendant Aurora Loan Services in Kiah v. Aurora Loan Services, MERS, et al, and upheld the lower court's decision that MERS could assign the mortgage without possessing a beneficial interest in, or holding, the promissory note.

The Virginia Supreme Court on Dec. 20, 2011, rejected the borrower's petition for appeal in Graves v. Mortgage Electronic Registration Systems Inc. and let stand the June 29 decision of the Fairfax County Circuit Court, MERS reported. The decision stated that under the terms of the deed of trust, MERS can exercise the rights of a lender, including appointing a substitute trustee.

As part of the national servicer settlement, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. each agreed to pay the state of New York $5.9 million, while Ally Financial Inc. agreed to pay $1.25 million. The $25 million settlement resolves allegations of deceiving borrowers through the MERS system. Citi and Ally signed on to the settlement even though they were not named as defendants in the lawsuit.



HUDSON VALLEY BANK, v. ANDREW M. KISSEL ET AL.
Case No. SC 18547, decision officially released Feb. 7, 2012 (Supreme Court of Connecticut).

INVESTORS SAVINGS BANK, Plaintiff-Respondent, v. KEYBANK NATIONAL ASSOCIATION, Defendant-Appellant, and DENIS KELLIHER, Defendant.
Case
No. A-0404-10T2, appeal filed on Oct. 31, 2011, case decided on March 12, 2012 (Superior Court of New Jersey, Appellate Division).

WELLS FARGO BANK, PLAINTIFF-APPELLEE, v. ABRAHAM SCHWARTZ, ET AL., DEFENDANTS-APPELLANTS.
Case No. 96641, decision released on March 8, 2012 (
Court of Appeals of Ohio, Eighth District, Cuyahoga County).

JPMORGAN CHASE & CO., INC., & another v. Carlo CASARANO, trustee.
Case No. 11-P-622, appeal filed on Dec. 6, 2011, decision dated Feb. 28, 2012 (Appeals Court of Massachusetts
).

The Bank of New York Trust Company, N.A., as successor to JPMorgan Chase Bank, N.A., as trustee, Appellant, v. George H. Rodgers and Caroline J. Rodgers, Appellees.
Case No. 3D10-1852, opinion filed Janu. 18, 2012 (District Court of Appeal of Florida, Third District).

RICK L. SOVEREIGN and AMY J. SOVEREIGN, Plaintiffs, v. DEUTSCHE BANK; MORTGAGEIT, INC.; MORTGAGE ELECTRONIC REGISTRATION SYSTEM, a foreign corporation; CITIMORTGAGE, INC., a foreign corporation; and CAL-WESTERN RECONVEYANCE CORPORATION, a foreign corporation, Defendants.
Case No. 3:11-CV-995-BR, complaint filed on Aug. 17, 2011, decision filed on March 5, 2012 (U.S. District Court for the District of Oregon).

KATHERINE STOLZ, an individual, EDWARD STOLZ, an individual, and TERREA STOLZ, and individual, Plaintiffs, vs. ONEWEST BANK, a California Corporation, MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., a Delaware Corporation, REGIONAL TRUSTEE SERVICES CORPORATION, a Washington Corporation, and FEDERAL NATIONAL MORTGAGE ASSOCIATION, a government sponsored Enterprise, Defendants.
Case 3:11-cv-00762-HU, decided Jan. 13, 2012 (U.S. District Court for the District of Oregon).

Donessa L. Horsewood, Plaintiff, v. LSI Title Company of Oregon LLC, et al., Defendants.
Case No. 3:11-cv-00335-MO, decision filed on Dec. 29, 2011 (U.S. District Court for the District of Oregon).

Chris and Lana Somers v. Deutsche Bank National Trust Company, et al.; Deutsche Bank National Trust Company, et al. v. Chris Somers, et al.
Case No. CV11020133, Case No. FE110027, decided on Jan. 9, 2012 (Fifth Judicial District, County of Clackamas, Oregon).

Jennifer L. DeGregorio and Joseph A. DeGregorio, Plaintiffs, vs. Mortgage Electronic Registration Systems Inc., Asset Securitization Corporation 2006-HEL and Recontrust Company, N.A., Also all other persons or parties unknown claiming any right, title, lien or interest in the property described in the complaint herein, Defendants.
Case No. 1108-11194, decision dated March 2, 2012 (Circuit Court of the State of Oregon for the County of Multnomah).

GREGORY A. MYERS, Plaintiff, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., JOAN H. ANDERSON, EVP, on behalf of FLAGSTAR BANK, FLAGSTAR BANK, FSB, and MTC FINANCIAL, d/b/a TRUSTEE CORPS, Defendants.
Case 3:11-cv-05582-RBL, decision filed on Feb. 24, 2012 (U.S. District Court for the Western District of Washington).

Robert Volkes; and Amber Volkes, Appellants, vs. BAC Home Loans Servicing, LP, F/K/A Countrywide Home Loans Servicing, LP, Respondent.
Case No. 57304, Decision filed on Feb. 24, 2012 (Supreme Court of the State of Nevada).

Andrew Davis and Lauretta Davis, Appellants, vs. US Bank, National Association as Trustee, Respondent.
Case No. 56306, Decision filed on Feb. 24, 2012 (Supreme Court of the State of Nevada).

Joshua R. Dow V. Bank of New York Mellon Trust Co.
Case No. 218-2011-CV-1297, petition filed on Oct. 18, 2011, decision dated Feb. 7, 2012 (State of New Hampshire Superior Court).

EDWIN PASCUA CARAANG and EDNA GOROSPE CARAANG, Plaintiffs, vs. AURORA LOAN SERVICES LLC; LEHMAN BROTHERS BANK, FSH; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC.; CAL-WESTERN RECONVEYANCE CORPORATION; and DOES 1-50 inclusive, Defendants.
Case No. 11-00319 LEK-RLP, motion to dismiss filed on Oct. 12, 2011, decision dated Jan. 27, 2012 (U.S. District Court for the District of Hawaii).

FEDERAL NATIONAL MORTGAGE ASSOCIATION, Plaintiff/Counterclaim Defendant vs. DANIEL K. KAMAKAU; JOHN DOES 1-50; JANE DOES 1-50; DOE PARTNERSHIPS 1-50; DOE CORPORATIONS 1-50; AND DOE GOVERNMENTAL UNITS 1-50, Defendant, Counterclaim Plaintiff.
Case No. 11-00475 JMS/BMK, complaint filed on Aug. 2, 2011, decision filed Feb. 23, 2012 (U.S. District Court for the District of Hawaii).

LAURIE HOBSON, Plaintiff, v. WELLS FARGO BANK, N.A., a South Dakota corporation; FEDERAL HOME LOAN MORTGAGE CORPORATION, a federally chartered corporation, dba FREDDIE MAC; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., a Delaware corporation; AND DOES 1-10 as individuals or entities with an interest in the property commonly known as: 3945 S. Oak Brook Way, Boise, Idaho 83706 Defendant.
Case No. 1:11-cv-00196-BLW, decision filed Feb. 15, 2012 (U.S. District Court for the District of Idaho).

CHAD D. SCARBOROUGH, Plaintiff-Appellant, v. LASALLE BANK NATIONAL ASSOCIATION, as Trustee for First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates Series 2007 FF2; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS; FIRST FRANKLIN FINANCIAL, Defendants-Appellees.
Case No. 11-4092, District Court Case No. 2:10-CV-00624-CW, (U.S. Court of Appeals for the 10th Circuit, U.S. District Court for the District of Utah).

COMMONWEALTH PROPERTY ADVOCATES, LLC, Plaintiff-Appellant, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendant-Appellee.
Case No. 10-4182, decided on Dec. 23, 2011 (U.S. Court of Appeals for the 10th Circuit, U.S. District Court for the District of Utah).

VERMONT TROTTER, Plaintiff-Appellant, v. BANK OF NEW YORK MELLON, f/k/a BANK OF NEW YORK AS TRUSTEES FOR THE CERTIFICATE HOLDERS OF CWALT, INC., ALTERNATIVE LOAN TRUST 2005-28CB MORTGAGE PASSTHROUGH CERTIFICATES 2005-28CB; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; RECONTRUST COMPANY, N.A., Defendants-Respondents.
Docket No. 38022, opinion filed Jan. 25, 2012 (Supreme Court of the State of Idaho).

Callie Smith, Plaintiff-Appellant, versus Saxon Mortgage, Deutsche Bank National Trust Co., Defendants-Appellees.
D.C. Docket No. 1:09-cv-03375-WCO, decided Nov. 8, 2011 (U.S. Court of Appeals for the 11th Judicial Circuit).

David Kiah, Plaintiff, Appellant, v. Aurora Loan Services LLC, et al, Defendants, Appellees.
Case: 11-1010, decision filed Dec. 14, 2011 (U.S. Court of Appeals for the First Circuit).

Sandra Graves, Appellant, against Mortgage Electronic Registration Systems, Inc., Appellee.
Circuit Court No. CL-2010-17101, decided on Dec. 20, 3011 (Supreme Court of Virginia).

The People of the State of New York v. JP Morgan Chase Bank et al.
Case No. 2768-2012, Feb. 3, 2012 (Supreme Court of the State of New York, County of Kings).


Sam Garcia founded Mortgage Daily in 1998 and became its full-time publisher in 2000. Prior to his news career he worked in mortgage lending for two decades.

e-mail:
[email protected]




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