October 2, 2014

Since its release in 2010, the U.S. Court of Appeals for the 6th Circuit’s decision in Livonia Properties Holdings LLC v. 12840-12976 Farmington Holdings LLC, 399 F. App’x 91 (6th Cir. 2010) has been misused by bank and servicer attorneys, and erroneously interpreted by many courts, for the alleged proposition that a homeowner never has standing to challenge an assignment to which the homeowner was not a party. Notwithstanding that the assignment is an attempt to transfer the homeowner’s mortgage or Deed of Trust to another party, the banks and servicers consistently take the position that the homeowner is not a “party” to the assignment.

The 6th Circuit has finally clarified Livonia Properties in Slorp v. Lerner Sampson et al., No. 13-3402 (6th Cir., opinion issued September 29, 2014), which reversed an adverse decision to the homeowner made by the Ohio Federal District Court and permitted the homeowner to assert numerous claims including a claim under the Federal RICO Act. The Court stated that its Livonia Properties opinion “has confounded some courts and litigants”, and admitted that the sweeping rule which was quoted and which endorsed the general statement was done “perhaps inartfully.”

The Court also stated that it “quickly limited the scope of that rule, clarifying that a non-party homeowner may challenge the validity of an assignment to establish the assignee’s lack of title, among other defects”, and “Thus, a non-party homeowner may challenge a putative assignment’s validity on the basis that it was not effective to pass title to the putative assignee” (citing several other cases). In reversing the District Court, the 6th Circuit permitted Slorp (the homeowner) to challenge the assignment by asserting that “Bank of America (the putative assignee) held neither his mortgage nor the attendant promissory note when it filed the foreclosure action because the parties lacked the authority to assign his mortgage to Bank of America when they purported to do so”, and “That distinction makes all the difference”.

The Court held that because Slorp alleged that the assignment was fraudulent and that Bank of America therefore did not hold title at the time of the foreclosure that Livonia Properties did not bar his suit, and stated “in fact, it supports it.”

This is a milestone decision of more than significant importance. This decision needs to be given to every Judge in every case where the homeowner challenges an assignment in the manner which Slorp did and the bank or servicer attorney counters with the misinterpretation of Livonia Properties in an argument that the homeowner allegedly lacks standing to challenge the assignment. In fact, we urge counsel in those states whose appellate courts have come to the same erroneous reasoning to seek to vacate any decision which denied a similar challenge to an assignment based on the misapplication and misreading of Livonia Properties.

We thank one of our dedicated followers for bringing this decision to our attention today.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com