June 6, 2011

FDN attorneys Jeff Barnes, Esq. and James Fraser, Esq. have scored what appears to be the first decision in Michigan granting summary judgment to borrowers against a securitized mortgage loan trust and MERS based on the failure of the Defendants to comply with the terms and conditions of the Pooling and Servicing Agreement and New York Trust law as to the purported conveyance of the borrowers’ loan to the trust. The decision also appears to be only the second in the entire United States on this specific legal issue, the other being the recent Horace decision from Alabama.

The borrowers sued US Bank National Association as Successor Trustee to Bank of America as successor by merger to LaSalle Bank as Trustee for a First Franklin Mortgage Loan Trust, MERS, and First Franklin for Declaratory and Injunctive Relief to declare that a nonjudicial foreclosure was void. The Court, after full briefing, granted the Plaintiff borrowers’ Motion for Summary Judgment in a 7-page written opinion. The Court cited to the recent Residential Funding v. Sauerman decision from the Michigan Court of Appeals and detailed the history of MERS, rejecting the Defendants’ contention that the Defendants could grant MERS authority to take action where Michigan statute prohibits it.

Most important, however, is the Court’s holding that the securitized trustee bank (US Bank) never actually received ownership of the Plaintiffs’ loan because the loan was not ever properly transferred to US Bank according to the terms of the PSA, and that the assignments did not follow the law of trusts in the State of New York. The Court found that the MERS assignment to US Bank did not comply with the chain of intervening assignments required by the PSA:

    “Defendants’ failure to strictly comply with the terms of the PSA means that the loan at issue was never properly transferred to the trust. Any transfer of mortgage loans, such as Plaintiffs, was mandated to comply with New York Trust law and the terms and conditions of the PSA governing conveyance of mortgage loans into the Trust. This the Defendants did not do. The Court finds that the [MERS] “Assignment” recorded on December 30, 2009 in the Washtenaw County Register of Deeds serves to transfer nothing. The alleged conveyance failed to comply with the terms and conditions of the PSA and New York Trust law which governs the PSA. The alleged conveyance stated that MERS assigned the Mortgage and Promissory Note to USB, however, there has been no evidence presented to support the chain of the required assignments and endorsements of the mortgage and note as required by the terms and conditions of the PSA….Therefore, the purported transfers, endorsements or assignments are void ab initio or never properly transferred to the Trust.” (emphasis added)

The Court granted summary judgment to the borrowers and declared that the nonjudicial foreclosure sale was void ab initio.

This extremely well-written decision demonstrates that the Horace decision was not isolated, and also demonstrates that millions of MERS “assignments” which did not comply with the strict requirements of a PSA governing a securitized mortgage loan trust are worthless and of no legal effect.

The drafting of the pleadings, Plaintiffs’ Motion for Summary Disposition, and briefing was a joint effort of Mr. Barnes and Mr. Fraser.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com