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Home Foreclosures: 2.6.1 Overview

Multiple assignments of a mortgage or deed of trust are commonplace in today’s lending market.433 In addition to scrutinizing the note and its indorsements for compliance with negotiable instruments law and other contract law, practitioners should check for the existence of and the validity of assignments of the security instrument, whether this be a mortgage or a deed of trust.

Home Foreclosures: 3.1 Introduction

The previous chapter discussed the general concepts behind the authority to foreclose, focusing on the role of the key documents in a mortgage transaction: the promissory note and the security instrument (a mortgage or deed of trust). The prevailing view among the states is that authority to foreclose is determined by the right to enforce the promissory note. This chapter focuses on how to raise challenges to authority to foreclose in the context of a foreclosure. Foreclosures can occur through either judicial or non-judicial procedures.

Home Foreclosures: 3.2.3 State Laws Requiring Disclosure of Ownership of Mortgage Loans

State laws can require disclosure of ownership of mortgage loans in several contexts. These laws are in effect in both non-judicial and judicial foreclosure jurisdictions. In the case of non-judicial foreclosures the laws may require the foreclosing party to disclose the identity of the loan’s owner in pre-foreclosure notices to borrowers or in documents that must be recorded in order to conduct a foreclosure sale.

Home Foreclosures: 3.3.4 Constitutional Standing Requirements

Standing is a basic element of any civil action. A foreclosing plaintiff may be barred from all relief if it fails this basic test. For federal courts, which include the bankruptcy courts, standing has a constitutional foundation. Article III of the U.S.

Home Foreclosures: 3.3.5 Real Party in Interest

In addition to the constitutional “case or controversy” requirement, federal standing jurisprudence recognizes a “prudential” limit on the exercise of a court’s jurisdiction. The “prudential” standing doctrine requires that the party bringing the lawsuit assert its own rights and interests and not those of some other party.64 Federal Rule of Civil Procedure 17 embodies this prudential standing principle.

Home Foreclosures: 3.3.6.1 Generally

A homeowner in foreclosure typically faces a complaint containing averments to the effect that the named plaintiff meets all state law requirements for authority to foreclose. Complaints often state in conclusory fashion that the plaintiff has authority to enforce the promissory note and is the current assignee of the mortgage.

Home Foreclosures: 3.3.6.2 Challenging Authority to Foreclose by Motion to Dismiss

One option for challenging the plaintiff’s authority to foreclose could be a motion to dismiss the complaint for failure to state a claim or for lack of jurisdiction.88 The motion to dismiss is appropriate where a statute or court rule mandates that the complaint contain specific averments and certain required allegations are absent.

Home Foreclosures: 3.3.6.3 Opposing the Plaintiff’s Motion for Summary Judgment When the Plaintiff Lacks Authority to Foreclose

A plaintiff may be able to defeat a motion to dismiss with conclusory pleading of authority to foreclose. Nevertheless, the same foreclosure plaintiff may be unable to prevail when it seeks to obtain summary judgment in its favor. To succeed in a summary judgment motion when its authority to foreclose has been challenged, the plaintiff must specify the facts that support its authority.

Home Foreclosures: 3.3.6.4 Proving Authority to Foreclose at Trial

As long as the borrower/defendant disputed standing to foreclose in the answer, the plaintiff lender must establish its standing as part of its case at trial.109 If the note with an undated blank indorsement was attached to the complaint, and the plaintiff produces the original of this note at trial with the same indorsements, and there is no evidence of contradictory indorsements, then this plaintiff should have established standing at trial.110 The trial court has authority to resolve certain

Home Foreclosures: 3.4.2 Authority to Conduct Non-Judicial Foreclosure Based on Right to Enforce Security Instrument

Regardless of the jurisdiction, there is little dispute that the party seeking to conduct a non-judicial foreclosure sale must have authority to enforce the underlying security instrument, whether this be a deed of trust or mortgage.150 Even courts that minimize the burden on a party claiming authority to foreclose agree that the party must be able to enforce a contractual power of sale contained in a security instrument.151 Beyond this essential point, courts in different states diverge over ho

Home Foreclosures: 3.4.3 Authority to Conduct Non-Judicial Foreclosure Based on Right to Enforce Promissory Note

As a general rule, the party seeking to conduct a non-judicial foreclosure sale upon default in payments due under a promissory note should be the party with authority to enforce the note. This seems like a plain enough rule. Recognition of this general principle, however, has not been uniform around the country. The 2007 foreclosure crisis spawned an enormous amount of litigation over this question. Two events coalesced to produce a confusing body of case law on the subject.

Home Foreclosures: 3.4.3.1 Generally

Two decisions of the Massachusetts Supreme Judicial Court addressed the critical issues related to enforcement of notes and mortgages in non-judicial foreclosures. The court’s decisions in U.S. Bank v. Ibanez170 and Eaton v. Federal National Mortgage Association171 focused on one state’s foreclosure statute and common law.

Home Foreclosures: 3.4.3.2 The Ibanez Decision

In Ibanez the Massachusetts high court addressed two significant issues: (a) the standing of a trust owning securitized mortgage obligations to conduct a valid non-judicial foreclosure sale and (b) the important role played by preforeclosure notices that must be served and published as a condition to a valid sale under state law.

Truth in Lending: 5.1 Introduction

This chapter reviews the specific disclosures required under TILA for closed-end loans. Special disclosures required for reverse mortgages, mortgage loans more generally, and HOEPA loans are discussed elsewhere in this treatise.1

Truth in Lending: 5.3.1 General

The “amount financed” must be disclosed using that term.8 A brief description of the amount financed must be provided, in language similar to the regulation’s “the amount of credit provided to you or on your behalf.”9

Truth in Lending: 5.3.2.1 General

The down payment is the amount, including the value of any property used as a trade-in, paid to a seller to reduce the cash price of goods or services purchased in a credit sale transaction.20 It may include cash rebates or incentives paid to consumers.21 In some circumstances, deferred or “pickup” payments also may be included in the down payment.22

Truth in Lending: 5.5.6.2.2 Payment schedule and other irregularities in calculating the APR

Creditors have the option of disregarding some payment schedule irregularities.180 Creditors may disregard first payment periods that are longer or shorter than “regular” periods within prescribed limits, as well as any payment irregularity that results from the irregular first period.181 A “first” period runs from the date on which the finance charge begins to be earned to the date of the first payment.182 The “regular” period is the most co

Truth in Lending: 5.5.6.3.1 Introduction

The APR for a variable rate transaction is calculated like other APRs, based on the legal obligation as it exists at the time of origination. With a variable rate transaction, however, the question arises as to which interest rate to use in calculating the payment schedule on which the APR is based. The rate at origination will change; from the beginning, the note presumes a change in the rate. This choice is further complicated in notes that set an initial rate artificially low, such that the rate will, without doubt readjust to a higher rate during the note term.

Truth in Lending: 5.5.6.3.2 Calculation of interest rate changes in variable rate transactions

Variable rate transactions, like fixed rate transactions, will usually have a stated interest rate in the note. This stated interest rate, however, is subject to change. Usually, after some specified period (which may be as little as a day), the fixed rate in the note gives way to a variable rate. The note will set forth how the rate will be calculated after the initial fixed period expires.