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High Court Rejects Arguments That Defective Assignments Should Void Foreclosure - Wells Fargo Bank v. Schultz

March 13, 2013

Vincent Howard and our Rubidoux foreclosure defense lawyers were sad to see another case involving allegations of defects in the chain of assignments rejected. In Wells Fargo Bank v. Schultz, Scott Schultz moved to dismiss Wells Fargo's possession action on his former house. The home had been foreclosed and Wells Fargo had won an eviction, after which it filed the possession case. Schultz argued that the case should be dismissed because the right to possession by Wells Fargo was based on defective, "if not fraudulent," assignments of the mortgage. The trial court dismissed Schultz's motion and the New Hampshire Supreme Court ultimately upheld that decision.

Schultz took out a loan in 2006 to purchase the home, in East Hampstead, NH. The loan was from Option One, and Schultz executed a promissory note and mortgage to Option One. In 2008, Schultz fell behind; in early 2009, he was informed that the home would be sold at foreclosure. He did not fight the foreclosure. For reasons not specified, the foreclosure sale happened two years later, in 2011. Wells Fargo bought the property in May of 2011, and served Schultz with an eviction notice in June of 2011. In July, Wells Fargo filed this possessory action against Schultz, and Schultz finally responded. He filed a motion to dismiss, saying Wells Fargo lacked standing to possess the property because its right to the property was based on two defective prior assignments. The trial court denied the motion, saying it lacked jurisdiction to rule on issues affecting title to real estate. It eventually entered judgment for Wells Fargo and this appeal followed.

The New Hampshire Supreme Court framed the case as a question of law: what qualifies an entity as the owner of a property? In a previous case, the court had rejected a claim of ownership by a plaintiff that attempted to prove ownership with uncertified copies of a foreclosure deed, an affidavit and a mortgage assignment. In so ruling, the high court had said that authenticated documents could have changed the outcome. In this case, by contrast, the high court found that Wells Fargo had satisfactorily proven ownership: it produced a certified copy of the foreclosure deed establishing that it had purchased the property at a foreclosure sale. It rejected Schultz's argument that Wells Fargo should be required to prove its ownership via the chain of assignments of the mortgage, saying New Hampshire district courts, which hear possession cases, lack jurisdiction on title issues.

Vincent Howard and our Irvine foreclosure defense attorneys are disappointed to see jurisdiction issues stymie this claim. New Hampshire has an alternative procedure for challenging title in possession cases, but it requires the person challenging title to pay rent "pending the action," as well as potential damages and costs. This is a risk for someone who is already in financial trouble. Defects in the chain of ownership of a mortgage have become a common complaint since the foreclosure crisis, frequently because of actual defects created by sloppy paperwork and over-reliance on databases instead of physical transfers of paperwork. Depending on the state law and the circumstances, demonstrating this can stop a foreclosure, slow it or have no effect at all. Vincent Howard and our Ontario foreclosure defense lawyers scrutinize all paperwork carefully when we take a new foreclosure case, looking for potential flaws open to challenges.

If you were foreclosed on, or you're about to be, and you believe there are serious problems with the right to foreclose or the initial loan, don't wait to call Howard Law, P.C. You can send us a message through our website or call 1-800-872-5925 today.

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