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MERS an obvious problem

Wells Fargo, Bank of America sued over mortgage databases

New Mexico Business Weekly

Date: Monday, February 6, 2012, 9:17am MST – Last Modified: Monday, February 6, 2012, 10:13am MST

New York Attorney General Eric Schneiderman sued banking’s Big Three — J.P. Morgan Chase , Bank of America and Wells Fargo — on Friday over their use of an electronic mortgage database that played a key role in financing the nation’s historic housing bubble.

Wells Fargo is the largest bank by deposits in New Mexico; Bank of America is the second-largest.

Schneiderman, who gained additional clout last month when President Obama named him co-chairman of a new federal mortgage-crisis unit, filed suit against Bank of America, (NYSE: BAC) Wells Fargo (NYSE: WFC) and J.P. Morgan Chase (NYSE: JPM) in New York State Supreme Court.

The New York Times reported Friday that the lawsuit claims the database, called the Mortgage Electronic Registration System or MERS, resulted in deceptive and illegal practices, including false documents used in foreclosure proceedings.

“The mortgage industry created MERS to allow financial institutions to evade county recording fees, avoid the need to publicly record mortgage transfers and facilitate the rapid sale and securitization of mortgages en masse,” Schneiderman said of the database created in the 1990s. “By creating this bizarre and complex end-around of the traditional public recording system,” the banks saved themselves $2 billion in recording fees.


The San Francisco Business Times, an affiliated publication, compiled this report

Top forcloser locations for US city and states

66.1 percent to 3,378 over the past year, the number of foreclosures in April

via Top forcloser locations for US city and states.

Top forcloser locations for US city and states

Cities with the most homes in foreclosure
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Isaac Brekken / AP file

Home prices in Las Vegas, the poster child of the housing crisis, plunged by 61.8 percent from their peak in early 2006 through 2011.

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According to data released last week, the worst effects of the housing crisis are beginning to wind down. RealtyTrac’s latest report shows the number of foreclosures in the U.S. in April is down 13 percent to 188,780 from 219,258 a year ago. However, some of the largest cities in the U.S. continue to lag behind the rest of the country and still have long to go before the housing crash has fully run its course.

24/7 Wall St.: Cities where home prices are collapsing

RealtyTrac published the number of new home foreclosures in April in the 50 largest metropolitan statistical areas in the U.S. Of those 50 areas, 10 had more than double the national foreclosure rate, which is one out of every 698 new homes. In California’s Inland Empire metropolitan area, the rate was more than triple that. Using RealtyTrac’s foreclosure rates and home price data from Fiserv Case-Shiller, 24/7 Wall St. reviewed the 10 metropolitan areas with the highest foreclosure rates.

The continuing high rates of foreclosures in some areas is a disturbing trend, said RealtyTrac’s vice president, Daren Blomquist. Although the national foreclosure rate appears to have peaked, the massive number of remaining properties yet to be foreclosed may continue to hurt the U.S. market in the long term, he added. The large number of new foreclosures “means that distressed property sales will continue to represent a large portion of overall sales for at least the remainder of this year, which in turn will keep a lid on any robust home price recovery,” Blomquist said.

After reviewing the markets with the highest foreclosure rates, it is clear that regions with the most foreclosures to date are the ones worst affected by the housing crisis. Seven of the 10 metro areas on this list had among the top 10 largest declines in home value from their pre-recession peaks. In six of the 10 regions, houses lost more than half their value in less than six years. In Las Vegas, home prices plummeted 61.8 percent between the beginning of 2006 and the end of last year.

While all 10 metropolitan areas on this list have a high foreclosure rate compared to the national average, in some cities foreclosures have begun to decline, while in others they continue to increase. For example, of these regions with the highest foreclosure rates, the number of new foreclosures fell by 44 percent in Phoenix and by 66 percent in Las Vegas in one year. Meanwhile, foreclosures rose 38 percent in Miami and 59 percent in Tampa.

24/7 Wall St.: America’s most (and least) peaceful states

24/7 Wall St. spoke with Trulia’s chief economist Jed Kolko. According to Kolko, while the overall decline in home prices is the major underlying force behind these areas’ high foreclosure rates, it is the legal systems of the regions’ respective states that are affecting whether foreclosures are still rising or declining. Florida has a long foreclosure process, which involves the courts on many occasions, while Nevada’s process is much shorter and non-judicial. Florida is therefore far behind in liquidating its foreclosure inventory, while Nevada is far along the process.

24/7 Wall St. examined RealtyTrac’s latest foreclosure figures of new homes for April 2012, as well as the changes in the number of new foreclosures from a month prior and a year prior. In addition, we reviewed historical, current and projected home price changes, provided by Fiserv-Case Shiller.

These are the 10 cities with the most homes in foreclosure:

10. Orlando-Kissimmee, Fla.

Foreclosure rate: One in 347 homes
Number of homes: 942,312 (24th most)
Foreclosures (April 2012): 2,717 (16th most)
Home price decline from peak: 54.2 percent (sixth largest decline)

Median home prices in the Orlando area fell by 54.2 percent from their peak in the second quarter of 2006 through the end of 2011. Of the 50 most populous metro regions in the U.S., the Orlando-Kissimmee area has the 10th-highest foreclosure rate in April of one in every 347 homes. Orlando had 2,717 new homes in foreclosure this past April, up 12.9 percent from the 2,406 in April 2011. The forecast for the future is similarly bleak. Fiserv projects Orlando homes will continue to lose value between the fourth quarter of this year and the fourth quarter of 2013, predicting a 1 percent decline in prices over that time period.

9. Chicago-Naperville-Joliet, Ill.-Ind.-Wis.

Foreclosure rate: One in 321 homes
Number of homes: 3,797,247 (third most)
Foreclosures: (April 2012): 11,840 (the most)
Home price decline from peak: 36.8 percent (12th largest decline)

From their peak in early 2007, home prices in Chicago fell 36.8 percent through the end of 2011. In April, the Chicago-Naperville-Joliet metro area had the largest number of new homes in foreclosure among the 50 largest MSAs, at 11,840. This represented an increase of 25.5 percent from April 2011 when 9,433 homes entered foreclosure. However, the number of foreclosures represents a 7.63 percent decline from March, when the Chicago area also led all metropolitan areas with 12,818 foreclosures. Another positive sign for Chicagoans: Home prices are projected to rise 6.3 percent annually through 2016, according to Fiserv.

24/7 Wall St.: America’s fastest growing housing markets

8. Tampa-St. Petersburg-Clearwater, Fla.

Foreclosure rate: One in 315 homes
Number of homes: 1,353,158 (17th most)
Foreclosures: (April 2012): 4,295 (eighth most)
Home price decline from peak: 48 percent (eighth largest decline)

Residents of the Tampa, Fla., metro area watched the median home price in the region fall to $137,000 in the fourth quarter of 2011 — a 48 percent drop from its peak. The region recorded 4,295 foreclosures in April 2012. To make matters worse, that number is up from the April 2011 figure. Last April, only 2,701 new area homes were in foreclosure, meaning that foreclosures increased by 59 percent the past year. One in every 315 homes in this MSA had a foreclosure start this past April.

7. Phoenix-Mesa-Scottsdale, Ariz.

Foreclosure rate: One in 313 homes
Number of homes: 1,798,501 (12th most)
Foreclosures: (April 2012): 5,755 (sixth most)
Home price decline from peak: 56 percent (third largest decline)

Home prices in the Phoenix region — the country’s twelfth-largest metropolitan area by housing units — declined by 56 percent from their 2006 peaks through the end of 2011. Although this accounted for the third-largest decline in home prices among all metropolitan areas, the Phoenix region posted a 22.64 percent decline in foreclosures from March, as the number of new foreclosed homes fell from 7,439 to 5,755. Likewise, in the last year, the number of foreclosure starts in the area fell by 44.44 percent, from 10,358 in April 2011 to 5,755 this past April.

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6. Salt Lake City, Utah

Foreclosure rate: One in 309 homes
Number of homes: 410,031 (first least)
Foreclosures (April, 2012): 1,326 (23rd least)
Home price decline from peak: 19.3 percent (25th largest decline)

Home prices in the Salt Lake City area declined by roughly 20 percent from their peak in 2007 to the fourth quarter in 2011, which is a modest decline compared to other regions on this list. Nevertheless, foreclosure rates were higher than all but five of the largest metros in the country. Compared to the 1,406 foreclosures in April 2011, April 2012’s foreclosures declined by 5.7 percent. This metro area is one of the few on the list that analysts are bullish about; home prices are projected to increase by 9.5 percent from this year’s fourth quarter to the fourth quarter in 2013.

5. Atlanta-Sandy Springs-Marietta, Ga.

Foreclosure rate: One in 298 homes
Number of homes: 2,165,495 (ninth most)
Foreclosures: (April 2012): 7,271 (fourth most)
Home price decline from peak: 35 percent (14th largest decline)

As of the fourth quarter of 2011, home values in Atlanta fell by 35 percent from their peak. The Atlanta area has the ninth highest number of housing units of any region on the list, at 2,165,495, and the median price of these homes was just $110,000 in the fourth quarter of 2011. To make matters worse, the area’s April 2012 foreclosure figure was a staggering 7,271 homes — the fourth most among the nation’s largest cities. Things may be on the upswing though as the number of homes in foreclosure fell by 11 percent from the prior month.

4. Sacramento-Arden-Arcade-Roseville, Calif.

Foreclosure rate: One in 277 homes
Number of homes: 871,793 (23rd fewest)
Foreclosures: (April 2012): 3,147 (12th most)
Home price decline from peak: 54.7 percent (fifth largest decline)

The first California metro area on this list, the Sacramento-Arden-Arcade Roseville area, had one in 277 homes in foreclosure in April. With home prices down 54.7 percent from their high at the end of 2005, the Sacramento area registered the fifth-largest decline in home prices. The area had the 12th-most foreclosures in the U.S. However, foreclosures are down by 39.01 percent from last year, when April 2011 had 5,160 homes in foreclosure. Additionally, the number of foreclosures also decreased by 26.7 percent from the previous month, from 4,294 to 3,147. Fiserv expects home prices in the area to rise 6.3 percent annually through the fourth quarter of 2016.

3. Miami-Ft. Lauderdale-Pompano Beach, Fla.

Foreclosure rate: One in 273 homes
Number of homes: 2,464,417 (fifth most)
Foreclosures: (April 2012): 9,031 (3rd most)
Home price decline from peak: 54.2 percent (seventh largest decline)

The Miami metro region topped all Florida regions in the number of new foreclosures. It also ranks third in new foreclosure rates among the 50 largest metros with 9,031 foreclosures in April, 2012 — a rate of one in 273. While foreclosures in the area decreased between March 2012, and April 2012, to the tune of 9.2 percent, the future appears gloomy. Prices in this region are forecast to fall another 3.8 percent between the fourth quarters of 2012 and 2013.

2. Las Vegas-Paradise, Nev.

Foreclosure rate: One in 249 homes
Number of homes: 840,343 (22nd fewest)
Foreclosures: (April, 2012): 3,378 (10th most)
Home price decline from peak: 61.8 percent (the largest decline)

Home prices in Las Vegas, the poster child of the housing crisis, plunged by 61.8 percent from their peak in early 2006 through 2011 — the greatest decline of any of the nation’s 50 largest metros. Although new foreclosures in the Las Vegas-Paradise region declined by 66.1 percent to 3,378 over the past year, the number of foreclosures in April represents a slight increase over March, when 3,301 new homes were in foreclosure. Making matters worse, prices are expected to fall by another 3.3 percent between the fourth quarter of 2012 and the fourth quarter 2013, according to Fiserv.

1. Riverside-San Bernardino-Ontario, Calif.

Foreclosure rate: One in 213 homes
Number of homes: 1,500,344 (14th most)
Foreclosures: (April, 2012): 7,049 (fifth most)
Home price decline from peak: 56.6 percent (second largest decline)

As of the fourth quarter of 2011, prices in the Riverside metro area fell by 56.6 percent from their peak, the second largest drop among top-50 metros. In addition, this region is first in terms of the current foreclosure rate, at one in 213. While the number of homes (1.5 million) ranks 14th of the 50 largest regions, the area’s new foreclosure count for April 2012, reached 7,049 — fifth highest overall. It appears, however, that the situation is improving; between March 2012 and April 2012, foreclosures dropped 10.8 percent.

24/7 Wall St.: America’s most miserable states

This is a Florida Forcloser case to pay attention to

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Roman Pino (R) stands with his attorney Thomas Ice in front of his home that was deeded back to him by the bank after facing foreclosure in Greenacres, Florida, May 3, 2012. REUTERS/Doug Murray

By Michelle Conlin

NEW YORK | Thu May 10, 2012 1:39pm EDT

(Reuters) – The Florida Supreme Court is set to hear oral arguments Thursday in a lawsuit that could undo hundreds of thousands of foreclosures and open up banks to severe financial liabilities in the state where they face the bulk of their foreclosure-fraud litigation.

The court is deciding whether banks who used fraudulent documents to file foreclosure lawsuits can dismiss the cases and refile them later with different paperwork.

The decision, which may take up to eight months to render, could affect hundreds of thousands of homeowners in Florida, and could also influence judges in the other 26 states that require lawsuits in foreclosures.

Of all the foreclosure filings in those states, sixty three percent, a total of 138,288, are concentrated in five states, according to RealtyTrac, an online foreclosure marketplace. Of those, nearly half are in Florida. In Congressional testimony last year, Bank of America (BAC.N), the U.S.’s largest mortgage servicer, said that 70 percent of its foreclosure-related lawsuits were in Florida.

The case at issue, known as Roman Pino v. Bank of New York Mellon, stems from the so-called robo-signing scandal that emerged in 2010 when it was revealed that banks and their law firms had hired low-wage workers to sign legal documents without checking their accuracy as is required by law.

“This was a case of an intentionally fraudulent document fabricated to use in a court proceeding,” says former U.S. Attorney Kendall Coffey, author of the book Foreclosures in Florida.

If the Supreme Court rules against the banks, “a broad universe of mortgages could be rendered unenforceable,” Coffey says. “The cost to the financial industry is difficult to estimate, but it could be substantial.”

For comparison, some legal experts point to the Massachusetts Supreme Court’s decision in January 2011 that ruled a foreclosure invalid because at the time of the foreclosure the bank couldn’t prove it had a valid assignment of mortgage – a similar issue to the one in the Pino case.

In the wake of the decision, hundreds of house titles in Massachusetts became void, says foreclosure attorney Tom Cox, who brought what was one of the first foreclosure fraud suits in the country.

“If the Florida court takes a strong stand, it sends a strong signal to the mortgage servicing industry in the rest of the country,” says Cox. Judges in other states could start penalizing banks with sanctions and overturning foreclosure suits, he says.

PINO’S STORY

The Florida case provides a startling example of abuses that allegedly take place in the foreclosure process – and the strategies lenders use to overcome them.

Roman Pino, a shy, 35-year-old drywall hanger, bought his home in 2006 during the housing boom. He put 20 percent down on half of a two-bedroom duplex near Palm Beach, Fla., and financed the rest with a $162,400 loan from Countrywide Financial, now owned by Bank of America.

In 2008, when Florida’s economy weakened, Pino couldn’t find construction jobs and fell behind on his mortgage payments. In October, Bank of New York Mellon, the trustee for the security that owns Pino’s loan, filed a suit to foreclose.

Bank of America was Pino’s mortgage servicer. It didn’t respond to a request for comment.

To help him hang on to his home, Pino sought the help of Thomas Ice, a homeowner-defense attorney. Ice quickly discovered that the documents in the bank’s foreclosure lawsuit were fudged.

Pino’s mortgage assignment — the document that legally binds a loan to a lender – had been executed by Cheryl Samons, an alleged robo-signer who signed as many as 1,000 foreclosure affidavits a day, according to court depositions.

According to court documents, Samons worked for one of the banking industry’s biggest foreclosure mills, the law firm of David Stern. The firm consistently created false documents, according to a report by investigators in the Florida Attorney General’s office.

Ice dug up depositions where a Stern employee testified that Samons’s hand got so cramped that she told three underlings to forge her signature. Two Stern workers also testified that they forged signatures, backdated documents, swapped Social Security numbers, inflated billings and passed around notary stamps as casually as if they were salt, according to court papers.

Samons, who could not be located for comment, denied the robo signing allegations in an April 2011 deposition. She also testified that Stern lied to her and ignored her concerns.

Stern’s firm is now shuttered and under investigation by the Florida Attorney General. Stern’s lawyer, Jeffrey Tew, said, “No one ever testified that David ever knew of any misconduct by any of his employees.”

To Ice, it was immediately obvious that the Stern firm had backdated Pino’s mortgage assignment because the notarization stamp was not valid at the time denoted on the document.

The only way the notarization stamp used on Pino’s assignment could have been valid, Ice alleged, was if the notary had been “capable of time travel.”

He filed a motion to dismiss, arguing that since the bank’s documents were illegal, so was the foreclosure.

VOLUNTARY DISMISSAL

Then, in May 2009, the day before Ice was about to take his first deposition of one of Stern’s employees, Bank of New York Mellon voluntarily dismissed the case.

Three months later, Stern’s firm filed a second foreclosure lawsuit against Pino – this time with different documents.

The same month, Ice filed a motion to vacate the voluntary dismissal, asking the judge both for his attorney’s fees, since Pino wasn’t paying him, and for a hearing.

Ice argued that a bank shouldn’t be allowed to use a voluntary dismissal to dispose of a case in which it filed fraudulent documents, only to turn around and refile the same case with different paperwork later on.

Last summer, Pino’s case was headed to the Florida Supreme Court, which said it was of “great public importance” because “many mortgage foreclosure cases appear to be tainted with suspect documents.”

But on July 22, just before the case was scheduled for oral argument, Bank of New York Mellon struck a confidential settlement with Pino.

The same day, Bank of New York Mellon, which declined comment for the story, filed a “satisfaction of mortgage” document with the Palm Beach County property recorder’s office.

Pino now owned the house, free and clear.

Even though Pino and the bank have settled, the Supreme Court decided to rule on the issue of voluntary dismissal anyway, settling a question that has vexed Florida’s lower courts for nearly five years. Its decision won’t affect Pino’s case.

Voluntary dismissal is the banks’ main strategy in judicial states for dealing with homeowners who challenge foreclosures, says Georgetown University consumer and housing finance professor Adam Levitin, who has served as special counsel to the Congressional Oversight Panel.

After a dismissal, the banks can then refile their case using different documents.

“If that fails, strategy number two is to buy them off,” says Levitin.

If the court rules against voluntary dismissal, the banks face the costly specter of not being able to simply refile cases and expect homeowners to not challenge the suits.

In Florida, that’s a lot of cases. In the year ending July 11, 2011, for example, more than 104,000 foreclosure cases were voluntarily dismissed from Florida’s courts, according to the Office of the State Courts Administrator.

Attorneys who work in the foreclosure field say that such dismissals usually occur because of the banks’ legal document issues.

To represent it before the Florida Supreme Court, Bank of New York Mellon has hired Bruce Rogow, an attorney who has argued civil rights cases and defended American Nazi Party members and Ku Klux Klan Grand Wizard David O. Duke. He also has represented consumers in the class action against banks for overdraft fees.

Rogow says the case is not about foreclosures or mortgage assignments or robo signing but about the sanctity of a plaintiff’s unfettered right to dismiss a case.

“Nobody is saying the bank did anything wrong, and if it was the law firm, there are alternative remedies for that that are far less disturbing than setting aside a law such as voluntary dismissal,” says Rogow.

Advocates say upholding the use of voluntary dismissal could empower the banks to do nothing to change their questionable foreclosure practices.

“The banks have a bully business model. You pick on the weak consumer, you demand his lunch money and he runs away,” says Levitin.

“But what if he pushes back — what if he’s Roman Pino?”

(Reporting By Michelle Conlin; Editing by Alwyn Scott)

Aurora Loan Servicing LLC case dismissed

STOP FORECLOSURE FRAUD
AURORA LOAN SERVS., LLC v. LOUIS | Ohio: Court of Appeals “No demonstration that Aurora is the note holder, Chain of Title Deficit – Theodore Schultz Affidavit”

Posted on09 February 2012. Tags: affidavit, appeals court, Aurora, foreclosure, note holder, ohio, theodore shultz
AURORA LOAN SERVS., LLC v. LOUIS | Ohio: Court of Appeals “No demonstration that Aurora is the note holder, Chain of Title Deficit – Theodore Schultz Affidavit”

2012 Ohio 384

Aurora Loan Services, LLC, Appellee,

v.

Dion T. Louis, et al., Appellant.

C.A. No. L-10-1289.

Court of Appeals of Ohio, Sixth District, Lucas County.

Decided: February 3, 2012.

Darryl E. Gormley, for appellee.

Brandon S. Cohen, for appellant.

DECISION AND JUDGMENT

YARBROUGH, J.

I. INTRODUCTION

{¶ 1} Appellant Dion T. Louis appeals from a judgment of the Lucas County Court of Common Pleas, which granted summary judgment in favor of appellee, Aurora Loan Services, LLC (“Aurora”), and denied appellant’s cross-motion for summary judgment. Thereafter, the trial court entered a judgment and decree of foreclosure and ordered the property sold. For the reasons that follow, we reverse.

A. Facts and Procedural History

{¶ 2} On April 16, 1999, appellant entered into a contract with Mayflower d.b.a. Republic Bancorp Mortgage, Inc. to purchase a property located in Toledo, Ohio. Appellant signed a note that contained a promise to pay $33,750 plus interest at the rate of 10.825 percent per annum. In exchange, Mayflower received a mortgage against the property as security for repayment of the note. The mortgage was later assigned to Mayflower d.b.a. Union Mortgage Services, and the assignment was recorded on October 13, 1999. Sometime after 1999, Aurora began to service the loan and appellant made his monthly payments to it.

{¶ 3} In early 2009, appellant stopped making payments on the loan. Aurora contends that appellant’s default enabled them to exercise an “option” clause contained in the note and mortgage to accelerate the debt. On July 6, 2009, Aurora filed an action for repayment of the note and foreclosure on the mortgage. Aurora attached copies of the note and mortgage to its complaint. Both the note and mortgage were endorsed by and made payable to Mayflower. There was no mention of Aurora on either document. In addition, Aurora requested that the trial court declare it a real party in interest as the holder of the note and mortgage. Aurora also submitted a preliminary judicial report which revealed that the assignment of the mortgage from Mayflower to Aurora was not recorded, and an attempted recording on January 13, 2006, revealed that the chain of title was defective.

{¶ 4} On September 22, 2009, appellant answered the complaint and raised six affirmative defenses, including that Aurora failed to state a claim upon which relief could be granted.

{¶ 5} On December 7, 2009, Aurora filed a motion for summary judgment in which it included an affidavit submitted by Cheryl Marchant, the vice president of Aurora. The affidavit states that Aurora exercised the “option” contained in the mortgage and note which were attached to the pleadings and had accelerated and called due the entire principal balance. The affidavit also declares that Marchant was authorized to make the affidavit and that she possessed personal knowledge of all of the facts therein.

{¶ 6} On December 28, 2009, appellant moved for summary judgment and filed a memorandum in opposition to Aurora’s motion for summary judgment based on the contention that Aurora lacked standing as a real party in interest. Appellant argued that Aurora’s first affidavit omitted the chain of title issues and did not address the issue of an assignment from Mayflower to Aurora. In response, on January 29, 2010, Aurora filed a brief in opposition to appellant’s motion for summary judgment, stating that Mayflower had intended to assign the mortgage to Aurora but the assignment was lost or unrecorded.

{¶ 7} Attached to its brief in opposition to appellant’s motion for summary judgment is an affidavit by Theodore Schultz, the assistant vice president of Aurora, as to the lost assignment of the mortgage. This second affidavit states that “[t]he Original Lender assigned its right, title and interest in the note to Mayflower * * * [w]hereas Mayflower assigned its right, title and interest in the note to Aurora.” The affidavit goes on to state that “[t]he original assignment of the Open-end Mortgage between Mayflower DBA Union Mortgage Services and Aurora Loan Services has been lost and or was not recorded.” The affidavit does not assert that Schultz had personal knowledge of the matters stated in the affidavit, nor does it provide the circumstances by which Schultz may have gained personal knowledge of the assignment. Since Mayflower is now out of business, Schultz asserts that a replacement assignment to confirm that it is the proper holder of the mortgage is unattainable. Schultz further asserts that Aurora is the holder of the promissory note in question.

{¶ 8} After considering the motions and affidavits, the trial court granted summary judgment in favor of Aurora on August 30, 2010, in the amount of $30,472.27 plus interest on the principal amount at the rate of 10.825 percent per annum from January 1, 2009. In addition, the court found that Aurora had a valid lien and ordered the foreclosure of the property. The trial court reasoned that Aurora established its prima facie case when it submitted the affidavits as evidence. In so determining this, the trial court found that the burden shifted to appellant to show the existence of a genuine issue of material fact pursuant to Civ.R. 56(C). The trial court concluded that appellant “fail[ed] to bring any [additional] evidence under Civ.R. 56(C) to show a genuine issue of material fact” and denied appellant’s cross-motion for summary judgment.

B. Assignments of Error

{¶ 9} Appellant now appeals, asserting the following assignment of error:

The trial court erred in granting plaintiff-appellee’s motion for summary judgment because it failed to demonstrate that it is entitled to judgment as a matter of law; the unrefuted Civ.R. 56 Evidence demonstrates, at the least, that a genuine issue of material fact exists as to whether plaintiff appellee is the equitable party in interest.

II. ANALYSIS

A. Standard of Review

{¶ 10} When reviewing a trial court’s summary judgment decision, the appellate court conducts a de novo review. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). Summary judgment will be granted when there are no genuine issues of material fact, and when construing the evidence most strongly in favor of the nonmoving party, reasonable minds can only conclude that the moving party is entitled to judgment as a matter of law. Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 66-67, 375 N.E.2d 46 (1978).

{¶ 11} On a motion for summary judgment, the moving party has the burden of demonstrating that no genuine issue of material fact exists. Dresher v. Burt, 75 Ohio St.3d 280, 292, 662 N.E.2d 264 (1996). The moving party must point to some evidence in the record of the type listed in Civ.R. 56(C). Id. at 292-293. The evidence permitted to be considered is limited to the “pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulations of fact, if any, timely filed in the action * * *.” Civ.R. 56(C). The burden then shifts to the nonmoving party to provide evidence showing that a genuine issue of material fact does exist. Dresher at 293. See also Civ.R. 56(E).

B. Summary judgment improper

1. No demonstration that Aurora is the note holder

{¶ 12} In foreclosure actions, the real party in interest is the current holder of the note and mortgage. See, e.g., Deutsche Bank Natl. Trust Co. v. Greene, 6th Dist. No. E-10-006, 2011-Ohio-1976, ¶ 13. Civ.R. 17(A) requires that “a civil action must be prosecuted by the real party in interest,” that is, by a party “who can discharge the claim upon which the action is brought * * * [or] is the party who, by substantive law, possesses the right to be enforced.” (Citations omitted.) Discover Bank v. Brockmeier, 12th Dist. No. CA2006-057-078, 2007-Ohio-1552, ¶ 7. If an individual or one in a representative capacity does not have a real interest in the subject matter of the action, that party lacks the standing to invoke the jurisdiction of the court. State ex rel. Dallman v. Court of Common Pleas, Franklin Cty., 35 Ohio St.2d 176, 179, 298 N.E.2d 515 (1973), syllabus.

{¶ 13} In its complaint, Aurora alleged that it is the current holder of the note and mortgage. Nevertheless, the mortgage was not recorded and the title search revealed that the chain of title is deficient. In fact, Aurora admitted this in its complaint and asked the trial court for a declaratory judgment to establish that it is the holder of the note and mortgage. The only evidence submitted in support of Aurora’s motion for summary judgment were the Marchant and Schultz affidavits.

{¶ 14} In determining the sufficiency of these affidavits, we turn to the requirements set forth by Civ.R. 56.

{¶ 15} Pursuant to Civ.R. 56(C),

Summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulations of fact, if any, timely filed in the action, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. No evidence or stipulation may be considered except as stated in this rule.

{¶ 16} Further, Civ.R. 56(E) provides:

Supporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated in the affidavit. Sworn or certified copies of all papers or parts of papers referred to in an affidavit shall be attached to or served with the affidavit. (Emphasis added.)

{¶ 17} Marchant does not assert or aver to any facts which support a finding that Aurora is the holder of the note or mortgage at issue. In fact, the note filed with her affidavit shows the following endorsement: “PAY WITHOUT RECOURSE TO THE ORDER OF: LIFE BANK BY: [ILLEGIBLE SIGNATURE] TIMOTHY A MERRITT, BRANCH MANAGER FOR MAYFLOWER D.B.A. UNION MORTGAGE SERVICES.” There is no explanation of any facts to illustrate how Aurora became the holder of the note. Rather, Marchant’s testimony is that “Aurora Loan Services, LLC has exercised the option contained in the note and mortgage and has accelerated and called due the entire principal balance due thereon.” This statement fails to establish Aurora as a real party in interest.

{¶ 18} Next, we turn to the Schultz affidavit and find that it is deficient in establishing Aurora’s status as a holder of the note and mortgage for three reasons.

{¶ 19} First, the Schultz affidavit states that: (1) “Aurora Loan Services LLC is the holder (`Holder’) of the following described promissory note (the `Note’): * * * Loan No: 0115933855 * * * Borrowers: Dion T. Louis, an unmarried man * * * Property address: 280 Knower St., Toledo, OH 43609 * * * Amount: $33,750.00;” and (2) “Mayflower DBA Union Mortgage Services assigned its right, title and interest in the note to Aurora.” A sworn or certified copy of the note was not attached or served with this affidavit as required by Civ.R. 56(E).

{¶ 20} Second, there is no explanation as to how Schultz came to know this information or whether he personally presided over appellant’s account. We note,

[t]he [affiant] need not have firsthand knowledge of the transaction, but must demonstrate [that] the [affiant] is sufficiently familiar with the operation of the business and with the circumstances of the record’s preparation, maintenance and retrieval, such that the witness can reasonably testify on the basis of this knowledge that the record is what it purports to be * * *. Wachovia Bank of Delaware, N.A. v. Jackson, 5th Dist. No. 2010-CA-00291, 2011-Ohio-3202, ¶ 36, citing State v. Patton, 3d Dist. No. 1-91-12, 1992 WL 42806 (Mar. 5, 1992).

{¶ 21} Moreover, Schultz’s position as assistant vice president of Aurora does not create a presumption that he had personal knowledge of the assignment from Mayflower to Aurora. For example, in TPI Asset Mgt. v. Conrad-Eiford, 193 Ohio App.3d 38, 2011-Ohio-1405, 950 N.E.2d 1018, ¶ 21, the affiant stated that “from my own personal knowledge the following facts are true as I verily believe, and * * * I am competent to testify to same.” The TPI court held that, regardless of the affiant’s position in the bank as team leader, the affidavits failed to demonstrate the particular basis on which the affiants gained their understanding of the facts. Id. at ¶ 23. Because the Schultz affidavit does not demonstrate that Schultz had personal knowledge of the assignment to Aurora, it does not meet the requirements for affidavits set forth in Civ.R. 56(E).

{¶ 22} Third, Schultz asserted that Aurora is the holder of the note, but failed to set forth any facts in support of this legal conclusion. Affidavits filed in support of summary judgment containing “inferences and bald assertions” rather than a “clear statement or documentation” proving that the original holder of the note and mortgage transferred its interest to Aurora are not sufficient to support a finding that Aurora is the holder of the note and mortgage. See First Union Natl. Bank v. Hufford, 146 Ohio App.3d 673, 678, 767 N.E.2d 1206 (2001) (inferences and bald assertions are insufficient evidence of a transfer of a note and mortgage). Furthermore, Schultz stated, “Mayflower DBA Union Mortgage Services assigned its right, title and interest in the note to Aurora Loan Services.” This statement is contradictory to the endorsement contained on the note which indicates that Mayflower d.b.a. Union Mortgage Services assigned the note to Life Bank.

{¶ 23} Ohio’s version of the Uniform Commercial Code governs who may enforce a note. R.C. 1301.01 et seq.[1] Article 3 of the UCC governs the creation, transfer and enforceability of negotiable instruments, including promissory notes secured by mortgages on real estate. Fed. Land Bank of Louisville v. Taggart, 31 Ohio St.3d 8, 10, 508 N.E.2d 152 (1987).

{¶ 24} Under the code, a “person entitled to enforce” an instrument means any of the following persons: (1) The holder of the instrument, (2) A non-holder in possession of the instrument who has the rights of the holder, (3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 1303.38 or division (D) of section 1303.58 of the Revised Code. R.C. 1301.31.

{¶ 25} More specifically, under former R.C. 1301.01, “holder” means either of the following:

{¶ 26} “(a) if the instrument is payable to bearer, a person who is in possession of the instrument;

{¶ 27} “(b) if the instrument is payable to an identified person, the identified person when in possession of the instrument.” (Emphasis added.)

{¶ 28} Schultz failed to assert any facts indicating that Aurora is entitled to enforce the instrument. On the face of the note, it is impossible for Aurora to be a “holder” as defined by former R.C. 1301.01. The instrument is not bearer paper, and Aurora is not an identified person on the instrument. Thus, Aurora has failed to meet its Dresher burden of establishing that it is the current note holder.

2. No demonstration that Aurora is the mortgage holder

{¶ 29} “`Holder of the mortgage’ means the holder of the mortgage as disclosed by the records of the recorder or recorders of the county or counties in which the mortgaged premises are situated.” R.C. 5301.232(E)(3).

{¶ 30} In support of Aurora’s motion for summary judgment, Schultz, in his affidavit, stated: “The Loan is secured by an Open-end Mortgage dated 4/16/1999 Book 99 1465 at Page B11 Instrument 24635 in the County of Lucas, State of Ohio.” We note that a certified copy of the mortgage assignment was not attached to the Schultz affidavit as required by Civ.R. 56(E). Furthermore, in regards to the mortgage assignments, the preliminary judicial report filed on July 6, 2009, indicates that the mortgage was initially given to Mayflower d.b.a. Republic Bancorp Mortgage Inc., filed April 21, 1999, in File No. 99 1465B11 of the Lucas County Records. Thereafter, the mortgage was assigned to Mayflower d.b.a. Union Mortgage Services, and filed October 13, 1999, in File No. 99 3915C12 of the Lucas County Records.

{¶ 31} The report goes on to state:

Attempted assignment of mortgage to First Union National Bank as Trustee of the Amortizing Residential Collateral Mortgage Trust 2000-BC1, (by Life Bank), by separate instrument dated April 18, 2001 and filed April 18, 2001 in File No. 01 4794 E01 of Lucas County Records. There is no assignment of mortgage to Life Bank.

Attempted assignment of mortgage to Aurora Loan Services LLC FKA Aurora Loan Services Inc., (by Pacific Premier Bank, FSB, FKA Life Bank, FSB or Life Bank), by separate instrument dated January 13, 2006 and filed March 6, 2006 in file No. 20060306-0013641 of Lucas County Records. The chain of mortgage assignment is defective. (Emphasis added.)

{¶ 32} Thus, the record reflects that Aurora is unable to establish that there is no genuine issue of material fact as to whether it is the current holder of the mortgage, given the chain of assignments and transfers of the mortgage.

{¶ 33} Furthermore, courts have been reluctant to rely on affidavits as a basis for granting summary judgment in foreclosure actions where there is an absence of supporting evidence or circumstances. In DLJ Mtge. Capital, Inc. v. Parsons, 7th Dist. No. 07-MA-17, 2008-Ohio-1177, ¶ 17, the Seventh District Court of Appeals stated that summary judgment could not be granted for the mortgagee where there was no evidence of an assignment of the note and mortgage besides an affidavit by an employee. Although the employee presided over Parson’s account, the affidavit was deemed insufficient to support a motion for summary judgment because it failed to mention “how, when, or whether appellee was assigned the mortgage and note.” Id. Similarly, in First Union, 146 Ohio App.3d at 679, 767 N.E.2d 1206, the Third District Court of Appeals declined to grant summary judgment based exclusively on an affidavit where there was no evidence of an assignment to the mortgagee. The court stated that “though inferences could have been drawn from [the affidavit], inferences are inappropriate, insufficient support for summary judgment and are contradictory to the fundamental mandate that evidence be construed most strongly in favor of the nonmoving party.” Id. However, where other evidence of a transfer exists, such as a valid transfer of one instrument as evidence of the other, courts have relied on affidavits to confirm such facts. See, e.g., Greene, 6th Dist. No. E-10-006, 2011-Ohio-1976, at ¶ 15. In Greene, we held that the assignment of the mortgage, in conjunction with interlocking references in the mortgage and the note, transferred the note as well. We cannot find the same here. As in DLJ Mtge. and First Union, the affidavits in this case were the only evidence that a transfer of the note and mortgage occurred. As discussed, these affidavits fail to establish Aurora as the holder of either the note or the mortgage.

{¶ 34} We note that appellant also argues in his first assignment of error that, “[u]nder statute of frauds principles, Plaintiff-Appellee’s would have to show a signed `option’ or `assignment’ from Lender — Mortgage Holder — to be the real party in interest against Louis.” To support his argument, appellant claims that “without a signed document expressly granting Aurora an assignment in the mortgage to Louis’ property — the trial court cannot grant summary judgment based solely on Aurora’s (self-serving) affidavit.” However, it has been a longstanding rule in Ohio that whenever a promissory note is secured by a mortgage, the note constitutes the evidence of the debt and the mortgage is mere incident to the obligation. U.S. Bank Natl. Assn. v. Marcino, 181 Ohio App.3d 328, 2009-Ohio-1178, 908 N.E.2d 1032, ¶ 52, citing Edgar v. Haines, 109 Ohio St. 159, 164, 141 N.E. 837 (1923). Thus, a transfer of an obligation secured by a mortgage also acts as an equitable assignment of the mortgage, even though the mortgage is not assigned or delivered. Kuck v. Sommers, 59 Ohio Law Abs. 400, 100 N.E.2d 68, 75 (3d Dist.1950). Also, “`[s]ubsection (g) [of U.C.C. 9-203] codifies the common law rule that a transfer of an obligation secured by a security interest or other lien on personal or real property also transfers the security interest or lien.’” Marcino at ¶ 53, quoting Official Comment 9 to U.C.C. 9-203. Thus, there is no requirement that a signed assignment of a mortgage be contained in the record. Finally, both instruments that Aurora seeks to enforce were signed by appellant and an option in the mortgage enables the holder to accelerate the debt upon default. Therefore, we do not believe that the statute of frauds argument is pertinent to this appeal.

{¶ 35} In sum, Aurora submitted affidavits that fail to demonstrate that Aurora is the holder of the note or mortgage. Therefore, we hold that Aurora has failed to satisfy its initial burden of demonstrating that no genuine issue of material fact exists as to whether it is the real party in interest, and thus, summary judgment is inappropriate.

{¶ 36} Accordingly, appellant’s first assignment of error is well-taken.

III. CONCLUSION

{¶ 37} Because a genuine issue of material fact exists as to whether Aurora is a real party in interest, the judgment of the Lucas County Court of Common Pleas is reversed and this case is remanded to the trial court for further proceedings. Pursuant to App.R. 24, appellee is ordered to pay costs of this appeal.

Judgment reversed.

A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.Loc.App.R. 4.

Mark L. Pietrykowski, J., Arlene Singer, P.J. and Stephen A. Yarbrough, J., Concur.

[1] R.C. 1301.01 was repealed by Am.H.B. No. 9, 2011 Ohio Laws File 9, effective June 29, 2011. That act amended the provisions of R.C. 1301.01 and renumbered that section so that it now appears at R.C. 1301.201. Because R.C. 1301.201 only applies to transactions entered on or after June 29, 2011, we apply R.C. 1301.01 to this appeal.

HSBC, Big win against HSBC

BOA LOSES MTD ON EVERY COUNT!! BIG WIN FOR HOMEOWNER JOHNSON IN CA FED COURT-MARCH 2012
GREGORY JOHNSON, an individual, Plaintiff, v. HSBC BANK USA, NATIONAL ASSOCIATION AS TRUSTEE FOR THE ELLINGTON TRUST SERIES 2007-1; BANK OF AMERICA, N.A.; and Does 110, inclusive, Defendants. Case No. 3:11-cv-2091-JM-WVG. United States District Court, S.D. California. March 19, 2012. ORDER DENYING MOTION TO DISMISS Docket No. 12. JEFFREY T. MILLER, District Judge. On September 12, 2011, Plaintiff Gregory Johnson brought a complaint against HSBC Bank USA, National Association as Trustee for the Ellington Trust Series 2007-1 (“HSBC”) and Bank of America, N.A. (“BOA”). BOA has filed a motion to dismiss (“MTD” or “motion”). Plaintiff filed an opposition on February 17, 2012. HSBC originally failed to answer the complaint, but jointly moved with Plaintiff to set aside default. The court granted that motion, and HSBC now joins BOA’s motion to dismiss with no further argument. Neither Defendant has filed a reply brief. For the reasons stated below, the motion is DENIED. I. BACKGROUND In December of 2006, Plaintiff obtained a loan from Fremont Investment & Loan (“Fremont”) in order to purchase property located in Oceanside, California. Compl. ¶ 24. The Deed of Trust named Mortgage Electronic Registration Systems (“MERS”) as the nominee and beneficiary of the Deed of Trust. ¶ 24. The complaint alleges that Fremont “attempted to securitize and sell [the] loan to another entity or entities” that were “not HSBC Bank or the Ellington Trust.” ¶ 25. Consequently, HSBC “is merely a third-party stranger to the loan transaction.” ¶ 26. Plaintiff alleges that despite his requests, BOA (apparently his mortgage servicer), has failed to verify the debt and amount owed.[1] ¶ 26.

Specifically, Plaintiff alleges that the document purporting to assign the Deed of Trust from MERS to HSBC (Compl. Ex. A), dated May 29, 2008, was fraudulent, in part because the assignment was executed after the closing date of the trust, which violates the Pooling and Servicing Agreement (“PSA”).[2] ¶ 28-29. Plaintiff also alleges that Treva Moreland, “the purported signatory of the purported `Assignment’, was not the `Assistant Secretary’ for MERS and lacked the requisite corporate and legal authority to effect an actual `assignment’ of Plaintiff’s Note and Mortgage.” ¶ 38. The complaint states that Treva Moreland signs thousands of property record documents without any authority, and thus any amount Plaintiff owes is subject to equitable offset by damages owed by Defendants. The complaint further alleges that in October of 2010, HSBC “caused a document purporting to be a Substitution of Trustee (`Substitution’) to be recorded with the County of San Diego.” ¶ 57. The substitution purported to substitute Quality Loan Service Corporation (“Quality”) as trustee, but Plaintiff claims that no such transfer ever occurred. ¶ 57. The complaint states that under California law, the lender must be the party to appoint the successor trustee, and HSBC was not the lender. In the summer of 2009, Plaintiff sought a loan modification from Wilshire, the original servicer of Plaintiff’s loan. ¶ 66. At some point the loan “was sold or transferred to BOA.” ¶ 67. Plaintiff made nine payments under the modified plan, but BOA refused to honor the new plan. ¶ 68. After much confusion, Plaintiff obtained a loan modification from BOA to be effective February 1, 2011. ¶ 79. In March of 2011, Plaintiff sent a Qualified Written Request letter to verify the debt owed, but BOA did not provide a substantive response. ¶ 83. Plaintiff also alleges that Defendants have not properly credited payments he has made on the mortgage and have incorrectly calculated interest. ¶ 85. He claims that Defendants knew at all times that Plaintiff was paying incorrect amounts. ¶ 86. As a result of their actions, Plaintiff’s credit has been damaged and his home has been made unmarketable because “the title to Plaintiff’s home has been slandered [and] clouded.” ¶ 89. Finally, the complaint states that “Plaintiff has offered to and is ready, willing, and able to unconditionally tender his obligation.” ¶ 96. Based on these factual allegations, the complaint seeks relief under seven causes of action, each applied to both Defendants: (1) declaratory relief under 28 U.S.C. §§ 2201-2202; (2) negligence; (3) quasi-contract; (4) violation of 12 U.S.C. § 2605; (5) violation of 15 U.S.C. § 1692; (6) violation of Cal. Bus. & Prof. Code § 17200 et seq.; (7) accounting.

II. LEGAL STANDARD AND DISCUSSION A motion to dismiss under Fed. R. Civ. P. 12(b)(6) challenges the legal sufficiency of the pleadings. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). In evaluating the motion, the court must construe the pleadings in the light most favorable to the non-moving party, accepting as true all material allegations in the complaint and any reasonable inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003). The Supreme Court has held that in order to survive a 12(b)(6) motion, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court should grant 12(b)(6) relief only if the complaint lacks either a “cognizable legal theory” or facts sufficient to support a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A. Viability of Attack on Loan Securitization 1. Ability to Challenge Loan Securitization The threshold issue of whether Plaintiff can make any claim related to the loan’s securitization affects the viability of many of the individual claims discussed below. BOA cites Rodenhurst v. Bank of America, 773 F.Supp.2d 886, 899 (D. Haw. 2011) for its statement that “[t]he overwhelming authority does not support a cause of action based upon improper securitization.” However, the discussion cited in that case centers on plaintiffs who claim that securitization itself violates the agreement between the mortgagor and mortgagee. Here, Plaintiff does not dispute the right to securitize the mortgage, but alleges that as a result of improper procedures, the true owner of his mortgage is unclear. As a result, he has allegedly been paying improper entities an excess amount. Ninth Circuit district courts have come to different conclusions when analyzing a plaintiff’s right to challenge the securitization process as Plaintiff has here. See Schafer v. CitiMortgage, Inc., 2011 WL 2437267 (C.D. Cal. 2011) (denying defendants’ motion to dismiss declaratory relief claim, which was based on alleged improper transfer due to alleged fraud in signing of documents); Vogan v. Wells Fargo Bank, N.A., 2011 WL 5826016 (E.D. Cal. 2011) (allowing § 17200 claim when plaintiffs alleged that assignment was executed after the closing date of securities pool, “giving rise to a plausible inference that at least some part of the recorded assignment was fabricated”). But see Armeni v. America’s Wholesale Lender, 2012 WL 603242 (C.D. Cal. 2012) (dismissing declaratory relief, quasi-contract, UCL, and accounting claims because “plaintiff lack[ed] standing to challenge the process by which his mortgage was (or was not) securitized because he is

not a party to the PSA”); Junger v. Bank of America, N.A., 2012 WL 603262 at *3 (C.D.Cal. 2012). Here, the court finds that Plaintiff is not categorically excluded from making claims based on allegations surrounding the loan’s securitization.[3] As in Vogan, and unlike Armeni, Plaintiff here alleges both violations of the PSA and relevant law. BOA has not sufficiently demonstrated that violations of law associated with the loan’s securitization can go unchecked because Plaintiff is not a party to the PSA. Other cases cited by BOA on this issue are irrelevant or inapplicable here. 2. Sufficiency of Allegations of Improper Assignment BOA also argues that Plaintiff makes no showing that the assignment was improper. It claims that Treva Moreland was authorized to assign the Deed of Trust, and there was no violation of the statute, asserting that “[n]owhere in [the complaint] does [Plaintiff] allege facts showing the Assignment was defective, invalid, or somehow voidable.” MTD at 4. However, the complaint states that MERS had no knowledge of the assignment, that Treva Moreland was never appointed to “assistant secretary” by the MERS board of directors, and thus there was no authority to make the assignment. While BOA cites no case law on this point, Plaintiff provides persuasive authority to demonstrate that courts have accepted allegations such as his. In Kingman Holdings, LLC v. CitiMortgage, Inc., 2011 WL 1883829 (E.D. Tex. 2011), the court assessed a fraud claim against CitiMortgage in which the plaintiff alleged that MERS’ appointment of an assistant secretary (“Blackstun,” who later made the assignment) was invalid because it was not approved by the board of directors. The court upheld the fraud claim under the 9(b) standard, finding that Plaintiff’s allegations were plausible and that if Blackstun had no authority to bind MERS, then MERS filed a fraudulent document after he executed the assignment. Similarly, in Vogan, the court denied defendants’ motion to dismiss a § 17200 claim because, as here, the plaintiff pleaded that Wells Fargo recorded a fabricated assignment of the loan because the assignment was executed after the closing date of the mortgage-backed security pool, “giving rise to a plausible inference” of fabrication. Id. at *7. Here, in addition to attacking Treva Moreland’s authority, Plaintiff has alleged that the assignment was made after the closing date of the trust, as required by Section 2.1 of the PSA. B. Tender Requirement

BOA also argues that a plaintiff “must tender the entire unpaid balance of the loan to maintain an action challenging foreclosure.” MTD at 4. However, as BOA separately points out, Plaintiff is not currently in foreclosure—BOA rescinded its Notice of Default in March of 2011. BOA fails to acknowledge this fact in its argument, merely citing cases supporting the existence of the tender rule in actions for wrongful foreclosure. Even if the fact of foreclosure were at issue, BOA has not sufficiently demonstrated that the tender rule should apply here. Plaintiff is not challenging Defendants’ compliance with the foreclosure law, but is claiming that defendants did not properly receive the assignment of their loan. The “tender requirement does not apply to this case because” Plaintiff challenges “the beneficial interest held by [Defendants] in the deed of trust, not the procedural sufficiency of the foreclosure itself.” Vogan at *8.

C. Declaratory Relief BOA seeks dismissal of the declaratory relief claim because the issues “will be resolved by the other claims for relief.” MTD at 5. It also argues that the California foreclosure statute does not recognize a judicial action to determine whether a party foreclosing is authorized to do so. The Ninth Circuit has explained that while there is no bar to declaratory relief if legal remedies exist, a court’s discretion should lead it to refuse to grant declaratory relief unless it would clarify the parties’ interests or relieve the uncertainty giving rise to the proceeding. U.S. v. Washington, 759 F.2d 1353, 1356-57 (9th Cir. 1985). The Schafer court upheld a declaratory relief claim in a similar action to this one, noting that there was a controversy over whether the assignment of a deed of trust was fraudulent, and the cause of action was not duplicative. 2011 WL 2437267 at *4. While it is possible that declaratory relief will be unnecessary, it would be premature to dismiss the cause of action at this point. BOA has failed to show how resolution of each of the other claims will necessarily provide all of the requested relief if they are granted. Further, it remains possible that some or all of Plaintiff’s other claims will not survive to trial—if that occurs, declaratory judgment could serve to clarify the parties’ interests. D. Negligence The complaint alleges that HSBC and BOA were negligent because they demanded mortgage payments when they did not have the right to enforce

that obligation. This allegedly caused Johnson to overpay in interest, among other things. As a result of the “reckless negligence, utter carelessness, and blatant fraud of the Defendants,” Plaintiff’s chain of title has been “rendered unmarketable and fatally defective.” Compl. ¶ 110. Defendants’ motion to dismiss argues that they had no duty of care here, because Plaintiff “does not plead facts supporting a finding that Defendant’s conduct exceeded the scope of its conventional role as a lender.”[4] MTD at 6. Plaintiff states that his relationship with BOA is not conventional because the loan has been securitized, so “Defendants hold Plaintiff’s payments for the benefit of the certificate holders.” Pl. Opp. at 20. Further, Plaintiff argues that a lender that offers a loan modification has gone beyond its conventional role. The rule that a lender does not have a duty to a borrower is only a “general rule,” and only applies to situations where a lender plays its conventional role. E.g., Taheny v. Wells Fargo Bank, N.A., 2010 WL 5394315 (E.D. Cal. 2010). Accepting the allegations of the complaint as true, BOA has gone beyond the typical lender’s role. As in Ansanelli v. JP Morgan Chase Bank, N.A., 2011 WL 1134451 at *7 (N.D. Cal. 2011), BOA established a loan modification plan with Plaintiff, made excessive interest charges and made “derogatory credit reports to credit bureaus.” Compl. ¶ 109. More generally, Plaintiff alleges that BOA did not have the legal authority to demand payments from Plaintiff because of the assignment’s invalidity. If BOA was not a lender legally authorized to collect payments from Plaintiff, the general rule shielding actual lenders from liability would not apply. More generally, the court finds that the allegations Plaintiff has put forth meet the federal pleading standard under Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). While yet to be proven, Plaintiff presents plausible allegations of misconduct that, if true, would entitle him to relief. E. Quasi-Contract Based upon the same factual allegations, Plaintiff seeks to recover on a quasi-contract cause of action. BOA maintains that in California a quasicontract claim is the same as a claim for unjust enrichment, and such an action does not lie if an express agreement governs the parties’ rights. Further, BOA argues that the rule of tender applies under Cal. Civ. Code § 1691(b), which governs rescission of a contract. BOA is correct that a plaintiff may not recover on a quasi-contract action if an express agreement exists. E.g., Cal. Med. Ass’n, Inc. v. Aetna U.S. Healthcare of Cal., 94 Cal. App. 4th 151, 172 (2001). However, as Plaintiff

points out, the complaint alleges that there is no valid agreement governing the transaction between Plaintiff and BOA. Thus, if Plaintiff succeeds in showing that BOA was not authorized to collect payment, he may be able to recover based on quasi-contract. For the same reason, BOA’s § 1691 argument fails—it does not state why the tender rule should apply if no contract exists. F. Violation of 12 U.S.C. § 2605 — The Real Estate Settlement Procedures Act The complaint alleges that Plaintiff sent a Qualified Written Request (“QWR”) to BOA in March of 2011 asking for information to verify the validity of the debt at issue. However, BOA failed to provide the legally-required information, only providing a partial history of the account. BOA’s motion to dismiss states that instead of including information about why the account was in error, the QWR “includes a list of document demands which appear to be entirely irrelevant to a valid QWR under RESPA.” MTD at 9. Further, BOA maintains that Plaintiff’s damage claims are not sufficiently specific. 1. Whether Plaintiff Failed to Submit a Proper QWR Generally, Ninth Circuit courts have held that a QWR must relate to the servicing of a loan, rather than its creation or modification. Gates v. Wachovia Mortg. FSB, 2011 WL 2602511 at *3 (E.D. Cal. 2010). Further, the “borrower’s inquiry must include a statement of the reasons for the belief of the borrower . . . that the account is in error or provide sufficient detail to the servicer regarding other information sought by the borrower.” Id; 12 U.S.C. § 2605(e). BOA has not argued that the QWR was unrelated to servicing of the loan, but states that Plaintiff did not provide “a statement or supporting documentation of his reasons for believing the account was in error.” MTD at 9. While Plaintiff may not have stated the reasons he believed the account was in error, Defendant provides no argument on why it believes that the QWR failed to “provide sufficient detail to the servicer regarding other information sought by the borrower,” merely arguing that the list of document demands “appear to be entirely irrelevant to a valid QWR under RESPA.” MTD at 9. While some courts have found QWRs inadequate because they related to the creation or modification of a loan, the QWR here requested information that related to “making the payments of principal and interest with respect to the amounts received from the borrower.” 12 U.S.C. § 2605. For example, the QWR requested collection notes concerning the

loan, as well as the name and contact information of the entity to which BOA was purportedly making the payments received from Plaintiff. While all of the information requested by Plaintiff may not have been validly sought under the statute, the QWR provided sufficient information concerning several requests for information that should have garnered a response by BOA. See Tamburri v. Suntrust Mortg., Inc., 2011 WL 6294472 at *7 (N.D. Cal. 2011) (noting that QWR requesting documentation supporting collection and enforcement efforts, including documents in support of enforcement of promissory note and deed of trust and a list of assignments “arguably request[ed] information as to how the servicer has handled [plaintiff's] account”). While BOA states that it provided a complete response following its initial letter confirming receipt and promising to provide a response, it has not detailed or produced the alleged response. 2. Whether Plaintiff Adequately Pled Damages Plaintiff may recover for actual damages suffered under 12 U.S.C. § 2605(f)(1)(a). BOA asserts that Plaintiff has failed to plead damages adequately. Generally the requirement for damages has been interpreted liberally. Yulaeva v. Greenpoint Mortg. Funding, Inc., 2009 WL 2880393 at *15 (E.D. Cal. 2009). While Plaintiff does not provide substantial factual support, the allegations are sufficient to state a claim at the pleading stage— Plaintiff has specifically alleged that he sought certain information, BOA denied him his statutorily required information, and the failure to receive that information caused him to pay more than was necessary on his loan and to incur costs in repairing his credit. G. Violation of 15 U.S.C. § 1692 — Fair Debt Collection Practices Act The complaint states that BOA violated the FDCPA through making various false representations in its attempt to collect on the loan. The MTD asserts that the FDCPA’s definition of a “debt collector” does not include a mortgage servicer or an assignee of the debt, “where the `debt was not in default at the time it was obtained by [a servicing company].'” MTD at 10 (citing 15 U.S.C. §1692a(6)(F)). Further, it argues that a foreclosure on a property based on a deed of trust does not constitute collection of a debt within the meaning of the FDCPA. Plaintiff agrees that the statute’s definition of “debt collector” does not include an entity attempting to collect a debt that was not in default when the debt was obtained by that entity. However, he has alleged that BOA took over servicing the debt sometime after September 2009, Compl. ¶ 67, and

the debt went into default in May 2008. According to BOA, the default notice was not rescinded until 2011. BOA does not address this issue in its MTD. BOA also argues that “foreclosure on a property based on a deed of trust does not constitute collection of a debt within the meaning of the FDCPA,” citing Hulse v. Ocwen Federal Bank, FSB, 195 F.Supp.2d 1188, 1204 (D. Or. 2002). In that case, the judge decided that “[f]oreclosing on a trust deed is distinct from the collection of the obligation to pay money . . . . Payment of funds is not the object of the foreclosure action.” Id. First, many courts have registered disagreement with this decision. See, e.g., Albers v. Nationstar Mortg., LLC 2011 WL 43584 (E.D. Wash. 2011) (noting that Hulse’s reasoning has been rejected by the Fourth and Fifth circuits and limited in other circumstances). Second, as Plaintiff points out, he does not allege that foreclosure of the property constituted the violation; instead, he believes the demands of payment and threats were unlawful. Hulse held that “any actions taken by [defendant] in pursuit of the actual foreclosure may not be challenged as FDCPA violations,” but “plaintiffs may maintain any FDCPA claims based on alleged actions by [defendant] in collecting a debt.” Hulse at 1204. Based on this, even if the court were to accept Hulse’s reasoning, the FDCPA claim survives. H. Violation of Cal. Bus. & Prof. Code § 17200 Plaintiff alleges that BOA has engaged in unfair, unlawful, and fraudulent business practices by executing misleading documents, executing documents without proper authority to do so, and demanding payments for non-existent debt, among other things. BOA concedes that violation of another law serves as a predicate for stating a cause of action under § 17200, but states that “Plaintiff must plead facts to support the underlying statutory violation.” MTD at 11. Because the court has upheld Plaintiff’s other claims, the § 17200 claim must be upheld under the unlawful prong. See, e.g., Vogan v. Wells Fargo Bank, N.A., 2011 WL 5826016 at *6-7 (upholding § 17200 claim because court had also upheld claim under Truth in Lending Act, 15 U.S.C. §1641(g)). I. Accounting Plaintiff also requests an accounting for all payments made. BOA states that a request for accounting must be tied to another actionable claim, and Plaintiff has no viable claims. BOA also states that Plaintiff has not alleged he is owed a balance.

”A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” Tamburri v. Suntrust Mortg., Inc., 2011 WL 6294472 at *17 (N.D. Cal. 2011) (quoting Teselle v. McLoughlin, 173 Cal.App.4th 156, 179 (2009) (also noting that the purpose of requesting an accounting is “to discover what, if any, sums are owed to the plaintiff” and that “an accounting may be used as a discovery device”)). Further, “[a] request for a legal accounting must be tethered to relevant actionable claims.” Harvey G. Ottovich Revocable Living Trust Dated May 12, 2006 v. Washington Mutual, Inc., 2010 WL 3769459 (N.D. Cal. 2010). While the complaint does not specifically “tether” the request for accounting to another single cause of action, it is clearly based on the same set of circumstances that is the basis for most of the causes of action in this case— the collection of money that was not actually due to Defendants.

Because Plaintiff has pleaded viable claims that are related to the same facts under which he requests an accounting, the court declines to dismiss the accounting claim at this time. J. Motion to Strike Request for Punitive Damages and Fees Defendant has made a motion to strike the request for punitive damages, arguing the “complaint is patently insufficient to support” such a claim. Fed. R. Civ. P. 12(f) allows a court to strike an insufficient defense or “any redundant, immaterial, impertinent, or scandalous matter.” BOA cites to Bureerong v. Uvawas, 922 F.Supp.1450 (C.D. Cal. 1996), which holds that a motion to strike may be used when damages are not recoverable as a matter of law. However, a more recent Ninth Circuit case, Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970 (9th Cir. 2010), held that “Rule 12(f) does not authorize district courts to strike claims for damages on the ground that such claims are precluded as a matter of law.” Id. at 974-75. Thus, without any argument that the claim for punitive damages is redundant, immaterial, impertinent, or scandalous, BOA’s motion cannot succeed. BOA also asks the court to strike the request for attorney’s fees, claiming there is no contractual or statutory basis for the award. However, as Plaintiff points out, RESPA allows for attorney’s fees. 12 U.S.C. §2605(f)(3)

(providing that costs may be recovered “together with any attorneys [sic] fees incurred in connection with such action”). III. CONCLUSION For the reasons stated above, the motion to dismiss is DENIED. Defendants’ motion has failed to demonstrate that Plaintiff’s claims were implausible or precluded as a matter of law. IT IS SO ORDERED. [1] While Plaintiff does not dispute that he owes money on the loan, he disputes the amount owed and “seeks the Court’s assistance in determining who the holder in due course is of his Note and Deed of Trust.” ¶ 22. [2] Plaintiff admits he is not a party to or beneficiary of the PSA, but claims that the failure to securitize his note should prevent HSBC and BOA from claiming any interest in the mortgage. [3] BOA has failed to apply its argument concerning the loan’s securitization to any of Plaintiff’s specific claims, and the court declines to perform this task. [4] BOA also denies the existence of proximately-caused damages, but does not directly address the alleged damages from derogatory credit reports and excessive interest charges.

M&T Bank, Offices of Marshal Watson

M & T BANK – A CASE OF SPECIAL INTEREST
TO FLORIDA FORECLOSURE DEFENSE LAWYERS

BYLYNN E. SZYMONIAK, ESQ., ED., FRAUD DIGEST
JUNE 13, 2010

M & T Bank v. Lisa D. Smith, et al., St. Johns County, FL, Case No. CA09-0418

June 10, 2010

Order Granting DefendantÕs Motion to Dismiss Second Amended Complaint with Prejudice, Circuit Court Judge J. Michael Traynor

This foreclosure action was filed by the Law Offices of Marshall C. Watson on February 10, 2009. Defendants moved to dismiss because the plaintiff’s allegations that it owned the note as bearer paper based on an Allonge attached to the Note conveying possession of the note in blank was inconsistent with the plaintiff’s allegations that the note was lost. On September 22, 2009, this motion to dismiss was granted. Plaintiff filed an amended Complaint on September 22, 2009, alleging that it owned the Note by virtue of an Assignment. On October 6, 2009, plaintiff again moved to dismiss, because a foreclosure action cannot be based on an assignment of a mortgage that did not exist at the time the foreclosure was filed. On February 19, 2010, the Court granted the second motion to dismiss. On March 3, 2010, plaintiff filed a Second Amended Complaint, alleging that it is now the servicer of the loan, and that Wells Fargo owns the note pursuant to the Allonge. The defendants moved to dismiss the second amended complaint on March 9, 2010 for fraud upon the court because 1) the previously blank Allonge was submitted with a stamp indicating Wells Fargo, N.A. as Trustee was the owner of the Note; and First National Bank of Nevada could not have added the stamp since the FDIC closed the Frist National Bank of Nevada in 2008; and 3) Plaintiff’s allegations that it owns the note contradicts all of its previous claims.

Upon review of Defendants’ motion, the Court finds the plaintiff lacks standing and is not a proper party to the suit. The Court has been misled by the Plaintiff from the beginning. In its initial Complaint, the Plaintiff alleged it owned the note that was lost. Then Plaintiff alleged that not only was the lost Note found, but the Plaintiff actually owned the Note by Assignment. After both of these Complaints were dismissed, Plaintiff then alleged that

 

Wells Fargo owned the Note, while the Plainitff was merely a servicer of the loan. Moreover, the Assignment on which Plainitff relied in its First Amended Complaint postdates the filing of this foreclosure action and is inconsistent with the Mortgage, Note, stamps allegedly affixed to the Note, and the Allonge. The blank stamp affixed to the Note and to the Allonge indicate a transfer from Fist Bank Mortgage, a division of First Bank of Georgia, to First National Bank of Nevada, and then to an unidentified bearer. In contrast, the Assignment indicates a transfer from First Bank Mortgage, by and through Mortgage electronic Recording Systems, directly to the Plaintiff. However, First Bank Mortgage had transferred possession of the Note to First National Bank of Nevada prior to the date of Assignment from First Bank Mortgage to Plaintiff, and the Assignment postdates the filing of the foreclosure action. Accordingly, this action will be dismissed with prejudice as to M & T Bank, since M & T Bank has been unable to clarify how it owns the Note, but Wells Fargo may commence a new action, on its own, if it is in fact the owner of the Note.

Additionally, the Court is concerned with the authenticity of the documents filed. Plaintiff is asking the Court to ignore the documents filed in the first two Complaints, and to rule solely on the most recent Complaint. However, all three of these documents appear to be inconsistent with one another and have changed as needed to benefit the Plaintiff. For instance, the blank Allonge as filed on both February 10, 2009, and September 22, 2009, remarkably turned into a stamped Allonge on March 3, 2010, with Wells FargoÕs information in the previously blank area. This transformation is most interesting, given that it was argued that the Office of the Comptroller of the Currency closed the Fist National Bank of Nevada on July 25, 2008, and the stamp did not appear in either of the February or September 2009 filings. Similarly, Assignments appeared and vanished as needed, and the Allonge changed to fit the Plaintiff’s particular purpose at that moment. Accordingly, an evidentiary hearing will be held to determine the authenticity of the Allonge and the appearance of the Assignment.

 

Regarding the first assignment, recorded August 14, 2009, the Assignment is TO M & T Bank, by “Mortgage Electronic Registration Systems, as nominee for First Bank Mortgage, a Division of First Bank of Georgia.” It is signed by Daryle J. Deveso who is identified as “Assistant Vice President, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INCORPORATED AS NOMINEE FOR FIRST BANK MORTGAGE, A DIVISION OF FIRST BANK OF GEORGIA.”

The Deveso signature is witnessed by Natasha Hyman and Patricia Sneck and notarized in Erie County, New York by Katherine M. Kraus. The question that comes to mind is why an officer of First Bank of Georgia traveled to Erie County, New York to sign this document.

Because Daryle Deveso has an unusual name, it is possible to find an answer in the age of Google. A search of this name indicates that Daryle Deveso was a member of the Conference Planning Committee for the 6th Annual Property Preservation Conference, held November 4- 6, 2009. Mr. Deveso is identified as being employed by “M & T.”

This would mean that when Deveso signed the Mortgage Assignment as an officer of MERS as nominee for First Bank Mortgage, the GRANTOR, he was actually employed by the GRANTEE, M & T Bank.

Regarding the second Assignment, recorded September 30, 2009, it should first be noted that the word “Corrective” appears under the words “Assignment of Mortgage.” A note to explain this is typed along the side of the document: “This Corrective Assignment is being recorded to correct the Effective Date in that certain Assignment of Mortgage recorded 8/14/2009 in Official Record Book 3229 at Page 1748 of the Public Records of St. Johns County.”

And what is the new effective date of this Assignment signed and notarized on September 21, 2009? According to Assignment #2, the Assignment is effective October 16, 2004. If taken at face value, this would certainly solve the problem of the Assignment post-dating the filing of the foreclosure action, February 10, 2009.

This Second Assignment is also TO M & T Bank, by “Mortgage Electronic Registration Systems, as nominee for First Bank Mortgage, a Division of First Bank of Georgia.” In this regard, it is identical to the first. The Second Assignment is signed by Christopher M. Zeis who is identified as “Vice President, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INCORPORATED AS NOMINEE FOR FIRST BANK MORTGAGE,

 

A DIVISION OF FIRST BANK OF GEORGIA.Ó Christopher Zeis was NOT part of a conference planning committee where he is readily identified as an officer of M & T Bank. His signature, however, is witnessed by Natasha Hyman and Patricia Sneck and notarized in Erie County, New York by Katherine M. Kraus. These are the same witnesses and notary used by Daryle Deveso on the First Assignment when employees of

M & T Bank, the GRANTEE, were signing on behalf of the GRANTOR.

This is NOT the first time a defendant has accused The Law Offices of Marshal Watson of fabricating an Allonge. It is also NOT the first time a defendant has accused The Law Offices of Marshall Watson of filing and recording a fraudulent mortgage assignment. It is certainly NOT the first time that The Law Offices of Marshall Watson have filed an action on behalf of a plaintiff who lacks standing to sue. This is NOT even the first time the Law Offices of Marshall Watson are accused of all three offenses in the same lawsuit. This may be the FIRST TIME, however, that these offenses are appropriately sanctioned.

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