William Chhun et al. : v. : Mortgage Electronic Registration Systems - The Court's Opinion

William Chhun et al. : v. : Mortgage Electronic Registration Systems

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William Chhun et al. : v. : Mortgage Electronic Registration Systems - A Victory

On February 4, 2014, the Rhode Island Supreme Court issued a decision that gave homeowners hope that the Court is sympathetic to their fight against the banks and servicers. In William Chhun et al. : v. : Mortgage Electronic Registration Systems, : Inc., et al. , the suit survived a motion to dismiss and the court found that the homeowners’ allegations were probable.  Specifically, Justice Golberg wrote:  “homeowners in Rhode Island have standing to challenge the assignment of mortgages on their homes to the extent necessary to contest the foreclosing entity’s authority to foreclose.” The homeowners are left to prove their allegations in discovery and at trial.

 This can be seen as a major victory in the State of Rhode Island that will allow the majority of homeowners to hold the banks and servicers accountable for practicing illegal foreclosure activities. This ruling provides hope and demonstrates that the Rhode Island Supreme Court is on the side of the homeowners when combatting illegal home foreclosure.  The public should be reminded that each ruling issued changes the landscape of foreclosure law and should be looked to nationally as an example. In each decision, the Rhode Island Supreme Court is redefining Rhode Island mortgage and foreclosure law.  All of the professionals who have tackled this issue should be seen as crusaders for the homeowner’s rights.

FEDERAL COURT HOLDS THAT HOMEOWNER CAN ATTACK POST-TRUST CLOSING ASSIGNMENT; REJECTS “LACK OF STANDING TO CHALLENGE AN ASSIGNMENT YOU ARE NOT A PARTY TO” ARGUMENT

FEDERAL COURT HOLDS THAT HOMEOWNER CAN ATTACK POST-TRUST CLOSING ASSIGNMENT; REJECTS “LACK OF STANDING TO CHALLENGE AN ASSIGNMENT YOU ARE NOT A PARTY TO” ARGUMENT

The United States District Court for the District of Rhode Island released its opinion last month in the matter of Cosajay v. Mortgage Electronic Registration Systems, Inc., 2013 WL 5912569 (D. Rhode Island, Nov. 5, 2013) which permits a homeowner to challenge a post-trust closing assignment in defending a foreclosure action. The Defendants’ “lack of standing because you are not a party to the assignment” argument was soundly rejected as an “absurd position” which would “unduly insulate assignments” and deprive homeowners of their legally protected right to have a foreclosure proceed legally and correctly.

The homeowner challenged a MERS assignment to a securitized mortgage loan trust which had occurred outside of the time specified by the securitized trust for such an assignment. The challenged MERS assignment was on March 12, 2008; however, the trust had closed on April 30, 2007, and thus no 2008 assignment was possible. The homeowner sought a declaration that the assignment was invalid, that the Defendants did not hold her mortgage and note, and that the Defendants lacked standing to foreclose or to enforce the note.

The Magistrate recommended that the case be dismissed because the homeowner lacked standing as she was not a party to the challenged assignments. The court rejected the Magistrate’s Report and Recommendation, and thoroughly and repeatedly rejected the Defendants’ “lack of standing to challenge the assignment” argument citing to holdings from the United States Court of Appeals for the First Circuit which held that there is “no principled basis for employing standing doctrine as a sword to deprive mortgagors of legal protection conferred upon them under state law”, and that the Defendants’ argument as to an alleged lack of standing by the homeowner to challenge the assignment was “extreme and incongruous”.

Bravo to the Hon. John J. McConnell, Jr. for this opinion, which is another in the recent line of cases permitting such challenges including the Glaski decision from California; the Erobobo decision from New York; and the In Re Saldivar decision from the Texas Bankruptcy Court, which follow the reasoning of the earlier Horace decision from Alabama and the Hendricks decision from Michigan (where Mr. Barnes represented the homeowner (Hendricks) with the court granting summary judgment to the homeowner when it was shown that there was no compliance with the mortgage loan transfer provisions of the PSA). A Federal court has cited Hendricks in another case, stating that its logic is plausible.

It has taken six long years of work across the US, but the courts are finally coming to the realization that the one-theme mantra of the banks and servicers of “we have the note, thus we win” no longer carries the day, and that the banks and servicers now have a lot more to allege and prove before they can be permitted to seek the drastic remedy of foreclosure.