Begos & Horgan LLP
From The Firm — Press Release
Court Decision Could Make Foreclosures More Difficult for Lenders
WESTPORT, CT., Apr. 22, 2008 – A decision released on April 17 could make it more difficult for lenders to foreclose on mortgages. The Connecticut Superior Court ruled that the institution that began a foreclosure action against a Madison woman could not go forward because the institution could not establish that it owned the loan.
The case, Mortgage Electronic Registration Systems, Inc. as nominee for Finance America LLC vs. Anna M. Miller, involved an action MERS filed in November 2004 to foreclose on Mrs. Miller's house in Madison. After forcing MERS to produce extensive documents detailing the changes in ownership of the loan, Christopher Brown, the Miller's attorney, became convinced that MERS did not own the loan when it started the action. Attorney Brown asked the Court to dismiss the action, a request that MERS and its lawyers vigorously fought. The court held a hearing in March 2008; though MERS brought a witness from Colorado to testify about the ownership of the loan, the Court was not persuaded, and the Court dismissed the action on April 17.
"This is a ground-breaking ruling," says Atty. Brown, a partner in the Westport law firm of Begos Horgan & Brown LLP. "The Court said that a lender can't foreclose on a mortgage if it can't prove that it owned the loan when it filed the action. It may sound like a simple idea, but as far as I know, it's the first time a Connecticut court has dismissed a foreclosure for this reason. It is likely that the same defect that was fatal to the lender in this case exists in many, many other mortgage foreclosure cases. Lenders have grown sloppy, suing first, and then trying to fix up the paperwork later. This ruling has significant implications for both lenders and borrowers in the foreclosure wave that has already started to crash in the courts."
There are two parts to a mortgage – the note and the mortgage. The note is the borrower's promise to repay the loan. The mortgage allows the lender to foreclose on the house if there is a default on the note. Once the loan closes, the note becomes "merchandise" for the loan originator to sell to another institution that, in turn, might sell it to yet another institution, perhaps several times. Whoever owns the note has the right to receive the payments that the borrower makes. Often, the owner will "break" the note into pieces, by, for example, selling the right to receive interest payments to one investor, and the right to receive principal payments to another. Because the ownership of the note may
Back to From The Firm
|
