Default Judgment Is Not Available In Actions To Quiet Title
Harbour owned a ground lease under a condo complex. Julie Nugent purchased a condo and paid her mortgage to Fieldstone Mortgage Company. She also subleased from and paid rent to Harbour. Both the mortgage and the sub-lease were secured by the condo. Nugent eventually defaulted on both her rent and mortgage. After HSBC purchased the condo from Fieldstone at a foreclosure sale, Harbour filed a complaint to quiet title. HSBC failed to respond to the complaint and Harbour obtained a default judgment. HSBC then moved to set aside the default judgment, but the trial court denied the motion. HSBC appealed. Continue Reading Questions & comments
Massachusetts Supreme Judicial Court Holds That Bad Foreclosure = Bad Title For Bona Fide Purchaser
The Massachusetts Supreme Judicial Court ruled this week that owners of property whose titles have been rendered defective due to improper foreclosures cannot bring a court action to clear their titles under the “try title” procedure in the Massachusetts Land Court. The Court, which in January found that banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the Court ruled. Left open, however, was whether owners could attempt to put their chains of title back together and conduct new foreclosure sales to clear their titles. Unfortunately, the Court did not provide the real estate community with any further guidance as to how best to resolve these complicated title defects.
Continue Reading Questions & commentsNo Need To Record An Assignment Of A Deed Of Trust Prior To Foreclosure
In Calvo v. HSBC Bank USA, --- Cal.Rptr.3d ----, 2011 WL 4035791 (Cal.App. 2 Dist. 2011), the California Court of Appeal affirmed the longstanding rule that an assignee of a beneficiary under a deed of trust need not record its beneficial interest prior to initiating foreclosure. In Calvo, the plaintiff argued the foreclosure sale of her property was void because HSBC did not record the assignment of the beneficial interest from the original lender to HSBC. She claimed this violated California Civil Code Section 2932.5. Like the lower court, the Court of Appeal found "no merit" to her claims.
Continue Reading Questions & commentsDispelling the Myth of MERS as a "Sham" Beneficiary
In the current flood of mortgage litigation, plaintiffs often rely on myth to avoid paying their debts. One of the most pervasive concerns the Mortgage Electronic Registration System (MERS). Plaintiffs accuse MERS of being a "sham" entity, lacking authority to foreclosure and used by lenders to engage in fraud. In Cervantes v. Countrywide Home Loans, Inc., No. 09-17364 (9th Cir. Sept. 7, 2011), the Ninth Circuit Court of Appeals joins other recent courts in dispelling the Myth of MERS.
Continue Reading Questions & commentsHUD Revamps FHA Lending Requirements
On September 23, 2011, HUD issued Mortgagee Letter 2011-34 (the "Letter"). The provisions of the Letter, which became effective immediately upon the Letter's release, dramatically revamp requirements for FHA-approved lenders. Most significantly, HUD has expanded the single family origination lending area of each home office and registered branch office to include all HUD field office jurisdictions. Previously, a specific office could only make loans in a particular geographic lending area. Under the rules set forth in the Letter, an FHA single-family lender may make loans on a nationwide basis out of any home or registered branch office, provided that the lender independently meets the loan origination requirements of each state in which the loans are made. This represents a major expansion of the ability of FHA lenders to make loans nationally, and for those lenders able to meet the net worth and other requirements of the FHA now and in the future, will facilitate nationwide FHA lending activities.
Continue Reading Questions & commentsToo Little, Too Late For Plaintiff's Fraud-Based Mortgage Lawsuit
In Vaca v. Wachovia Mortgage Corporation, --- Cal.Rptr.3d ----, 2011 WL 3659938 (Cal.App. 4 Dist. 2011), the California Court of Appeal affirmed the dismissal of a fraud claim on statute of limitations grounds. In 2005, the plaintiff sued her ex-husband, claiming he created false credit histories for their children and used those histories to refinance their mortgages with Wachovia. That case soon settled and, in 2009, the plaintiff sued Wachovia and its successor, Wells Fargo, claiming they participated in her ex-husband's fraud.
Continue Reading Questions & commentsThe California Court Of Appeal Again Rejects A Claim For Wrongful Foreclosure At The Pleading Stage
The recent published decision of Fontenot v. Wells Fargo Bank, N.A. (Cal.App.1 Dist., August 11, 2011) --- Cal.Rptr.3d ----. 2011 WL 3506177, adds several more arrows to a secured lender's quiver of arguments challenging wrongful foreclosure claims at the pleading stage. First, the Court explains in detail how and why publicly recorded documents can be judicially noticed to defeat contradictory allegations. Second, the Court holds MERS properly has all the authority to act on behalf of a lender or beneficiary under the terms of the agency agreement between MERS and the lender. Third, plaintiffs must plead "actual prejudice" to set aside a foreclosure sale based on irregularities in the foreclosure process. Here, even if MERS lacked authority to assist with the foreclosure, the only prejudice would be to the lender or the beneficiary, not the borrower. Fourth, if a plaintiff pleads breach of contract, it cannot also plead promissory estoppel based on that contract. If the contract claim fails, the estoppel claim must also fail.
Continue Reading Questions & commentsThe California Court Of Appeals Weighs In On Option ARM Class Actions
In a pyrrhic victory for plaintiffs, the California Court of Appeal has held that an Option ARM class action survives the pleading stage. See Boschma v. Home Loan Center, Inc. (August 10, 2011) --- Cal.Rptr.3d ---, 2011 WL 3486440. This is the first published California case to address Option ARM cases in such detail. These cases are part of the wave of mortgage litigation flooding the courts in recent years.
Continue Reading Questions & commentsMore Teeth For The Tender Rule
In the current flood of mortgage litigation, the so-called "tender rule"—that a borrower generally cannot set aside a foreclosure unless he or she tenders the full amount owed on the loan—poses a significant obstacle for many plaintiffs. The rationale behind this rule is that a borrower should not be able to avoid foreclosure when the borrower cannot pay his or her debt and any procedural errors could be cured. In Ferguson v. Avelo Mortgage, LLC (Cal.App. 2 Dist. Jun. 1, 2011) --- Cal.Rptr.3d ---, 2011 WL 2139143, the Court of Appeal again affirmed the tender rule and, by doing so, took an additional step favorable to lenders.
Continue Reading Questions & commentsTo Avoid Assuming Fiduciary Duties, Mortgage Lenders Should Take Care to Avoid Acting as Mortgage Brokers
"A mortgage broker has fiduciary duties to a borrower. A mortgage lender does not." A decision published on March 28, 2011 by the California Court of Appeals (2 Dist.) clarifies the differences between duties owed to a borrower by a mortgage broker and those owed by a mortgage lender. To avoid potential lawsuits for breach of fiduciary duty or negligence, mortgage lenders should take care not to assume the mantle a mortgage broker (e.g. soliciting lenders or negotiating loans with third party lenders on behalf of a borrowers for a fee).
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