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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.

Lenders Defend Title to Mortgages

Recent activity on litigation challenging loan title

Dec. 27, 2011


portrait of Sam Garcia

Title to residential loans continues to be challenged by borrowers, judges and other lienholders. Most often, the challenge is a delay tactic by delinquent borrowers looking to forestall foreclosure. Frequently at the center of activity is the Mortgage Electronic Registration Systems Inc.

The Court of Appeals of California unanimously decided in favor of Avelo Mortgage in the case Holland v. Avelo Mortgage. The complaint alleged that MERS was not a true beneficiary and could not assign its interest in the deed of trust to Avelo Mortgage. The plaintiff sought to eliminate Avelo's authority to foreclose.

MERS reported Friday that the court dismissed all counts against Avelo and found that MERS was a proper beneficiary and that it can assign the deed of trust.

Last week, Peirce v. Assurity Financial Services was dismissed by the U.S. District Court for the District of Oregon with prejudice, a news release from MERS said. U.S. District Judge Michael Mosman found that under Oregon law, MERS can serve as the beneficiary under the deed of trust. Mosman rejected the plaintiff's wrongful foreclosure claims.

On Dec. 13, the U.S. District Court for the Northern District of Georgia ruled in favor of co-defendants MERS and Ducat 2008 L.P. in Philip v. Ducat and MERS. MERS said that the court found that it can hold the security deed as nominee for the lender and assign the security deed to a third party.

U.S. District Judge Orinda Evans reportedly agreed with a prior ruling that Georgia law does not prohibit MERS from acting as grantee in security deeds as nominee for the lender. Evans found no merit to the plaintiff's allegation that MERS lacked the authority to assign the security deed.

Evans relied on an earlier decision by U.S. Magistrate Judge C. Christopher Hagy, who previously wrote, "Plaintiffs do not dispute that they are not a party to the assignment contract. Georgia law provides that 'an action in a contract ... shall be brought in the name of the party in whom the legal interest in the contract is vested, and against the party who made it in person or by agent.' Thus, plaintiffs 'are strangers to the assignment contract' and accordingly 'have no standing to challenge its validity.'"

The U.S. District Court for the District of Nevada ruled in favor of MERSCORP on Dec. 5 in Miller v. MERSCORP Inc., MERS announced. U.S. District Judge Gloria Navarro found that a deed of trust naming MERS as mortgagee is valid in Nevada. She found that the defendants followed proper non-judicial foreclosure procedures and determined that securitization of a loan does not invalidate the deed of trust or require a judicial foreclosure.

Navarro reportedly wrote that "District of Nevada Courts have repeatedly upheld MERS' authority to administer a validly executed deed of trust."

MERSCORP Inc. said there was no merit to allegations of deceptive practices in a complaint filed by the state of Delaware. MERS said it was surprised by the lawsuit, and it cooperated in good faith with the Delaware attorney general's office and complied with requests for information under a subpoena issued earlier this year.

A lawsuit filed by Dallas County, Texas, against Bank of America Corp. and MERS over unpaid filing fees was expanded on Oct. 31 to include surrounding counties, Dallas County District Attorney Craig Watkins announced. MERS has allegedly operated as a "shadow recording system," shorting Dallas County on fees for tens of thousands of registered loans. Watkins noted that shortly after Dallas County initiated its action, separate class actions were filed on behalf of Ohio, Oklahoma and Pennsylvania counties.

The Ohio class action was filed in Geauga County Court of Common Pleas by Plaintiff Geauga County, on behalf of itself and all other Ohio counties. The Pennsylvania class action was filed by Montgomery County's recorder of deeds who seeks nearly $16 million, an article published by indicated.

A final summary judgment of foreclosure in favor of U.S. Bank, N.A., as trustee of Mastr Adjustable Rate Mortgages Trust 2007-3, was reversed by the District Court of Appeal of Florida, Second District. The borrower, Julia Feltus, successfully argued that it wasn't clear which entity held the promissory note at the time the summary judgment was entered.

The problem was that U.S. Bank lost the promissory note and was forced to file an unverified complaint seeking to reestablish the lost note and foreclose on Feltus' property. The copies of the note and mortgage were in the name of Countrywide Bank, N.A.

First Horizon Loans forgot to record the mortgage of Robert A. and Donna L. Ong's Pennsylvania property. The Ongs filed Chapter 7 Bankruptcy, and the bankruptcy trustee commenced an adversary proceeding to avoid as preferential several payments that were made by the debtors to or on behalf of First Horizon within 90 days of the commencement of the instant bankruptcy case.

"After considering the positions of both parties, the court, for the reasons set forth below, shall convert both of the trustee's motions for judgment on the pleadings into motions for summary judgment, and will then grant such motions unless First Horizon timely produces evidence sufficient to withstand them," the decision stated.

Charles and Pamela Giacosa obtained a $165,600 first mortgage in 2002 from First Residential Mortgage for the purchase of a Shelby County, Tenn., property. The loan was subsequently assigned to ABN AMRO Mortgage Group Inc. Within a month of closing on their first mortgage, the Giacosas closed on a $41,400 home-equity line of credit from Southern Security Federal Credit Union.

When the Giacosas defaulted on their first mortgage, Southern Security successfully bid $197,165 at the foreclosure sale. A cashiers check was tendered by Southern Security, but a stop payment was made on the check because the second lien holder determined that a valid first lien was not in place and Southern Security was in a priority position. It held its own foreclosure in April 2006.

ABN AMRO sued Southern Security, and by February of this year a final hearing was held where the trial court determined that ABN AMRO's lien was superior despite an error with the lot number on the trust deed. Southern Security was ordered to issue a $197,165 payment to ABN AMRO.

Southern Security filed an appeal with the Court of Appeals of Tennessee, but the lower court's decision was upheld on Nov. 17.

The dismissal of a complaint filed by River City Mortgage & Financial LLC in a Minnesota district court against New Millennium Title Group LLC, Frank Griebenow and Debra Stark was reversed and remanded by the Court of Appeals of Minnesota.

"Despite the inordinate length of appellant's complaint, its theory of the case can be summarized succinctly: appellant alleges that respondents acted in a joint capacity with defendants Real Source Title (Real Source), John Povejsil, and Jason Fischer, to defraud or mislead appellant into sending money to Real Source, rather than to respondents, thus permitting Fischer to embezzle the funds and denying appellant its sought-after title insurance policy," the decision says.

The Arizona Supreme Court decided on Nov. 18 in Vasquez v. Saxon Mortgage Inc. that mortgage lenders are not required to record an assignment before publishing a notice of trustee's sale, JDSupra reported. Securitization trustee Deutsche Bank National Trust Co. moved for stay relief after Vasquez filed for bankruptcy protection, but Vasquez opposed the stay and argued that Deutsche was not the named beneficiary under the deed of trust when the trustee's sale was initiated.

Wells Fargo Bank, N.A., was sent a certified letter by Allen County, Ind., indicating a notice of the right of redemption, prior to a tax deed issuance, Forbes reported. Wells Fargo missed the tax sale and filed an objection -- which was rejected.

A settlement has been reached in a lawsuit filed by JPMorgan Chase & Co. in U.S. District Court in San Antonio, Texas, against Ramiro and Delia Guerrero Jr., the San Antonio Express-News reported. Chase erroneously recorded a lien release in February 2002 on their $86,750 note.

Holland v. Avelo Mortgage.
(Court of Appeals of California, First District, Division One).

Peirce v. Assurity Financial Services.
(U.S. District Court for the District of Oregon).

Philip v. Ducat and MERS.
(U.S. District Court for the Northern District of Georgia).

River City Mortgage & Financial, LLC, Appellant, v. Old Republic National Title Insurance Company, et al., Defendants, New Millennium Title Group, LLC, et al., Respondents.
No. A11-681, Dec. 12, 2011 (Court of Appeals of Minnesota).

Vasquez v. Saxon Mortgage Inc.
Case No. CV-11-0091-CQ, Nov. 18, 2011(Arizona Supreme Court).

Case No. W2011-00693-COA-R3-CV
(Court of Appeals of Tennessee, at Jackson).

In re: ROBERT A. ONG and DONNA L. ONG, Chapter 7, Debtors. Charles O. Zebley, Jr., Trustee/Plaintiff, v. First Horizon Loans, a division of First Tennessee Bank, N.A. and Mortgage Electronic Registration Systems, Inc., Defendants.
Bankruptcy No. 11-20954-BM, Adversary No. 11-2266-BM., 11-2267-BM, Oct. 28, 2011 (U.S. Bankruptcy Court, W.D. Pennsylvania).

State of Ohio, ex rel. David P. Joyce Prosecuting Attorney of Geauga County, Ohio v. MERSCORP, Inc., et al.
Case No. 11-M-001087 (Geauga County Court of Common Pleas).

Sam Garcia founded Mortgage Daily in 1998 and became its full-time publisher in 2000. Before that, he worked in mortgage lending for two decades.

[email protected]

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