DEUTCHE BANK SLAMMED IN HAWAI’I AND FLORIDA: HAWAI’I FEDERAL COURT ISSUES LANDMARK DECISION PERMITTING BORROWER TO ATTACK COMPLIANCE WITH PSA AS A STANDING DEFENSE IN JUDICIAL FORECLOSURE; FLORIDA APPEALS COURT REVERSES SUMMARY JUDGMENT WHERE COMPELLED SECURITIZATION DISCOVERY OUTSTANDING

April 4, 2012

A landmark decision was issued on March 29, 2012 by the U.S. District Court for the District of Hawai’i in the matter of Deutsche Bank National Trust Company as Trustee, etc. v. Williams, Civ. No. 11-00632 JMS/RLP, which dismissed DB’s Complaint for foreclosure after finding that the purported “Assignment of Mortgage” was fatally flawed and there was no demonstated compliance, by DB, with the PSA. The mortgage and Note were to Home 123, a subsidiary of the bankrupt New Century Mortgage. The court found that the January 13, 2009 assignment by Home 123 to DB as Trustee of the securitized mortgage loan trust was impossible in view of the Home 123 bankruptcy and liquidation effective April 1, 2008.

The court also highlighted the “inexplicable” arguments by DB’s counsel that discovery was required to determine the Note’s assignment where DB claimed that it “may have” received the mortgage and/or Note pursuant to a PSA in 2007. The court found that the PSA required the seller to deliver to DB the assignments of mortgage for each mortgage loan and for DB to certify receipt of a Note and Assignment of Mortgage for each loan. The court found that if DB was to receive the Note and mortgage through a 2007 PSA, then the 2009 Assignment was “a nullity”. The court also found that there was no evidence establishing which mortgages were included in the PSA.

Perhaps most important is the fact that the court distinguished its own prior decisions which did not permit a borrower to attack compliance with the PSA when a borrower sued, which cases were relied on by DB that the Williamses were not parties or beneficiaries to the assignment and thus cannot challenge them. The court stated: “Plaintiff’s argument confuses a borrower’s, as opposed to a lender’s, standing to raise affirmative claims…In this action the proverbial shoe is on the other foot — Deutsche Bank asserts affirmative claims against the Williamses seeking to enforce the Mortgage and Note, and therefore must establish its legal right (i.e. standing) to do so.”

Separately, the Florida Fourth District Court of Appeal reversed a summary judgment where there was outstanding court-ordered securitization discovery. In Osorto v. Deutsche Bank, No. 4D10-3631 (opinion filed March 28, 2012), the trial court had granted the homeowner’s Motion to Compel the PSA, agreements containing any obligation to repurchase the loan; documents attached to the PSA; documents concerning the reassignment or repurchase of the loan from the buyer or assignee back to the original seller or assignor or to any predecessor; and documents concerning the transfer or assignment of the the loan.

These cases highlight the fact that the courts are now permitting homeowners to raise defenses and seek discovery on securitization issues, which is something we have been pushing for over the last 4 and 1/2 years. We have previously advised of numerous cases we have had dismissed because of an abject refusal of a foreclosing party to provide these documents. These recent decisions go further to specifically discuss why such documents are relevant and that they are subject to being produced, and how they directly relate to standing issues.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

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