A state appeals court decision could have a wide impact on dozens of lawsuits filed in Utah over home foreclosures that washed across the state in the wake of the Great Recession.
The Utah Court of Appeals has agreed with a lower court that a key loan servicer and an entity created by mortgage bankers have the legal right to foreclose on an Eagle Mountain home.
Lower federal and state courts have dismissed numerous foreclosure suits in Utah on the same grounds, but this decision is the first from a higher court, and its ruling may guide future judicial actions. The decision invalidates one of the legal theories that have guided dozens of lawsuits challenging the tens of thousands of foreclosures in Utah.
“This ruling will be brought to the attention of the trial judges in each of those lawsuits, and claims based on the theories rejected in our case should be dismissed,” said Ballard Spahr attorney Tony Kaye, who represented loan servicer CitiMortgage Inc. and Mortgage Electronic Registration Systems Inc. (MERS), a creation of the Mortgage Bankers Association and an actor in many of the foreclosures.
He also said Tuesday he thinks the decision could discourage others from filing lawsuits seeking to nullify trust deeds.
But Craig Smay, the attorney for the homeowner, said he will either ask for reconsideration of the decision or appeal to the Utah Supreme Court.
“Our intention is to not to let it stand. It’s obviously wrong.”
At issue in the case is the role in foreclosures of MERS and those who service loans. MERS was created in the mid-1990s by bankers as a way to register ownership of the mortgage notes in order to facilitate their transfer from an original lender into pools that were then marketed to investors. The system upended parts of the traditional registration of property interests with county recorders.
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24 CommentsMERS is listed on tens of thousands of trust deeds — used by holders of mortgage notes to foreclose if a homeowner fails to make payments — as the beneficiary or owner of the notes and also as the agent of the actual owners. As the agent, it claims the right to foreclose when homeowners violate the terms of the mortgage.
But attorneys in Utah and other states have challenged the MERS-related foreclosures, arguing long-established property law requires that only the person or entity holding the actual mortgage loan document can foreclose. They say MERS cannot legally foreclose because it does not have a financial interest in the mortgages or because it cannot prove it is acting as the agent of the pools that actually own the notes.
The Utah Court of Appeals ruled late last week, however, that state law does not prohibit MERS from acting as the agent of the mortgage note holders with the right to foreclose.
Chris Peterson, a University of Utah law school professor and associate dean, said the court did not rule on a very basic standard of traditional property law. Utah statues say the owner of a mortgage note cannot be separated from the deed of trust, and Peterson said MERS is clearly not the owner of such a note.
“We’re talking about basic, ground-level commercial law, and the court of appeals decision doesn’t answer that argument,” said Peterson, who is recognized as a national expert on legal questions related to MERS.
Abraham Bates, an attorney whose firm has filed dozens of suits challenging foreclosures, agreed with Peterson.
“The lender is the beneficiary of a trust deed — MERS is not,” Bates said in an email. “MERS may act as an agent [“nominee”] of the original lender — at the lender’s direction — but cannot validly claim to be the lender itself, as it does in tens of millions of county records across the country.”
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A READER'S COMMENT ABOUT THE RECENT
APPELLATE COURT DECISION IN FAVOR OF MERS
What about RK Arnold and Carson Mullen, President & Vice President of MERS, who stepped down after making millions of dollars screwing people over with their mortgage robo-signing garbage. They both stepped down from MERS, but RK Arnold is doing the same thing under another company name as is Carson Mullen.
They earned their money and live in huge homes paid for by misrepresenting themselves to homeowners who where not knowledgeable about their underhanded way of doing business.
MY QUESTION IS: HOW MANY PEOPLE IN POWER WHO DECIDE IF MERS AND THE PEOPLE WHO DID THE ILLEGAL ROBO SIGNING WILL BE PROSECUTED HAVE "BENEFITED" FINANCIALLY (WITH THEIR OWN MORTGAGES OR CAMPAIGN CONTRIBUTIONS) BY MR. R.K. ARNOLD AND MR. CARSON MULLEN?
Would not want anyone who is in Congress or on the Judicial Bench to be embarrassed by being caught having dealings with MERS which may have been legal but still immoral, whose constituents would be upset by special favors and/or huge financial breaks.
I HAVE BEEN TOLD THAT ALL THOSE CONNECTED WITH MERS CLAIM THEY ARE UNTOUCHABLE DUE TO THE PEOPLE THAT HAVE BENEFITED BY SPECIAL CAMPAIGN CONTRIBUTIONS AND UNBELIEVABLE MORTGAGE DEALS, IF THIS IS TRUE, WE NEED A BETTER GOVERNMENT THAN THE TWO PARTY SYSTEM WE CURRENTLY HAVE. IF THIS IS TRUE, WE MUST REALIZE THAT THE TWO PARTY SYSTEM HAS BECOME BOTH LAZY AND GREEDY BEYOND REPAIR. I DO NOT HAVE AN ANSWER TO THE PROBLEM OF OUR GOVERNMENT, BUT I DO KNOW THAT CONTINUED SELF-INTEREST AND PROTECTING THOSE WHO FLEECE AMERICA ARE WRONG AND DO NOT DESERVE OUR VOTES.
Dear Reader:
Amen. Amen. Amen. I could not agree with you more. I'm sick of the system.
Kelly L. Hansen
Recent Utah Court Decisions re MERS
by Tom Cook
Lundberg & Associates – USFN Member (UT)
Lundberg & Associates – USFN Member (UT)
Three recent court cases in Utah regarding MERS have resulted in contradictory decisions and are worthy of lender and servicer attention.
First case: A case in state court, successfully removed to federal court (Case No. 1:10-cv-00033-CW), was brought by the trustor against MERS, the original lender, the foreclosure trustee, the junior lienholder, and the investor. After the case was removed, a motion for summary judgment was filed. The court decision signed October 19, 2010 held that: (1) securitization of the note did not strip the holder of authority to appoint a trustee and foreclose; (2) the plaintiff failed to meet the requirements of his equitable estoppel cause of action; (3) the Uniform Commercial Code arguments did not succeed where there is a distinct nonjudicial foreclosure statute; (4) MERS has the right “to act on behalf of those parties who have the ultimate right to collect the debt”; (5) MERS has standing as a proper party to the action; and (6) the trustor’s claim of quiet title alleging that no trust deed lien remained attached to the property was insufficient; and, all causes of action against the first position trust deed were dismissed with prejudice.
First case: A case in state court, successfully removed to federal court (Case No. 1:10-cv-00033-CW), was brought by the trustor against MERS, the original lender, the foreclosure trustee, the junior lienholder, and the investor. After the case was removed, a motion for summary judgment was filed. The court decision signed October 19, 2010 held that: (1) securitization of the note did not strip the holder of authority to appoint a trustee and foreclose; (2) the plaintiff failed to meet the requirements of his equitable estoppel cause of action; (3) the Uniform Commercial Code arguments did not succeed where there is a distinct nonjudicial foreclosure statute; (4) MERS has the right “to act on behalf of those parties who have the ultimate right to collect the debt”; (5) MERS has standing as a proper party to the action; and (6) the trustor’s claim of quiet title alleging that no trust deed lien remained attached to the property was insufficient; and, all causes of action against the first position trust deed were dismissed with prejudice.
Second case: A December 16, 2010 decision in a case in Utah’s 4th District Court (a lower state court) reached virtually the identical decision on mostly the same arguments by the trustor. (Case No. 100403141; no further citation is available for a Utah lower court decision). The following statements from the decision define the court’s opinion of this type of action against MERS: “The court concludes that MERS has standing to serve as beneficiary and to appoint a successor trustee. The court further concludes that the plaintiffs (trustor) consented to MERS as beneficiary with the power to foreclose on the plaintiffs’ property.”
The significance of the cases discussed above is that the court recognized the authority and standing of MERS and, in the first case, struck down an attempt to quiet title. The following case has the opposite result.
The significance of the cases discussed above is that the court recognized the authority and standing of MERS and, in the first case, struck down an attempt to quiet title. The following case has the opposite result.
Third case: A case for quiet title was filed to clear title to a property with a recorded trust deed that named MERS as the beneficiary. The trustor purposely kept the loan current during the pendency of the litigation to avoid any unwanted documents, such as a substitution of trustee or notice of default, being recorded with the county recorder. The lawsuit named and served only the original lender and the original trustee on two recorded trust deeds. MERS, as the original beneficiary, was intentionally omitted as a party defendant. The attorney also had the ability to determine the entity to which the trustor was making payment and failed to name that party.
All served parties failed to answer or disavowed any ongoing interest in the property. The court entered default judgment and quieted title to the property in the plaintiff without ever having a hearing or questioning the list of defendants. The trustor sold the property clear of the trust deeds and thereafter stopped making payments. The extinguished senior trust deed has now been referred for foreclosure. The question is: what is left to foreclose? It appears that this action may result in protracted and costly litigation.
The attorney in this third case allegedly claims the same result in two other cases. Moreover, another attorney has apparently jumped on the band wagon, contending the same success in a similar case. Both purport to have a number of these cases pending and are obtaining many new clients for the same action. An article was published in the Salt Lake Tribune about these actions and MERS on January 15, 2011, and updated the next day. The newspaper’s website is accessible here; find the referenced article by using the search term “MERS.”
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