Vincent Howard and our Rancho Cucamonga foreclosure defense lawyers were interested to read a state-court decision about yet another case of defective mortgage paperwork complicating a foreclosure. In Citimortgage Inc. v. Barabas, the second mortgagee on Shannon Barabas's Indiana home, ReCasa Financial Group, foreclosed without notice to the first, Citimortgage. The first mortgagee sought to intervene, but the Indiana trial court found it had no rights because its assignment of the mortgage was improperly recorded. The Indiana Supreme Court reversed, finding the trial court lacked personal jurisdiction over Citimortgage because Citimortgage had never gotten notice of the foreclosure.
Shannon Barabas took out her first mortgage in 2005 from Irwin Mortgage Corp., but like most mortgages, it named MERS as nominee for Irwin. In 2007, Barabas took out a second mortgage from ReCasa for slightly less than the first mortgage. She later fell behind on payments to ReCasa and ReCasa filed a foreclosure lawsuit, naming Irwin as well as Barabas. Barabas filed for bankruptcy and Citimortgage filed for relief from the automatic stay; that motion was served to ReCasa, whose lawyer told Citimortgage's lawyer that ReCasa had already foreclosed. After the bankruptcy discharge, the foreclosure sale went ahead and ReCasa eventually sold the property to Rick Sanders. After that sale, MERS assigned the mortgage to Citimortgage, which petitioned to intervene in the foreclosure. The court agreed, but after Citimortgage filed its own foreclosure and ReCasa objected, it ruled that Citimortgage was bound by the default judgment because its assignment was never properly recorded. A divided Indiana Court of Appeals affirmed.
The Indiana Supreme Court reversed, finding that Citimortgage did have the right to intervene. The court found MERS was the lender's agent, and that relationship permitted Citimortgage to intervene even though Irwin may have extinguished its rights. The high court then dismissed ReCasa's argument that Citimortgage's intervention was untimely, noting that the considerable delay was largely due to ReCasa's failure to provide notice to Citimortgage through MERS. Finally, the Indiana Supreme Court agreed with Citimortgage that the default judgment should be voided for lack of personal jurisdiction because Citimortgage got no notice of the foreclosure. ReCasa argued that Citimortgage got notice through the bankruptcy proceeding, but even if this provided actual knowledge, the court said, it didn't satisfy the standards for personal jurisdiction. However, the high court disagreed that MERS is a mortgagee entitled to notice, saying the drafters of the 1877 Indiana law at issue would likely not have recognized MERS as a mortgagee. In closing, it suggested that the Indiana legislature might want to modernize the statutes.
At Howard Law, P.C., our Huntington Beach foreclosure defense attorneys would welcome modernization of state laws addressing this issue, precisely because they don't take into account the secondary mortgage market. That secondary market has caused a lot of problems in the foreclosure crisis, causing confusion about who has the right to foreclose, bureaucratic delays, and occasionally creating wrongful foreclosures. Though courts have ruled that MERS is legal (despite the fact that its entire goal is to end-run around county recording statutes), they haven't been able to create practical solutions that protect every party's rights. Vincent Howard and our San Bernardino foreclosure defense lawyerswould like to see such solutions for original borrowers like Barabas and foreclosure-sale buyers like Sanders, who presumably have fewer resources than large banks.
Howard Law, P.C., represents Californians who believe they can save their homes from foreclosure, even if the lender or loan servicer has been less than helpful. To speak to partner Vincent Howard and our legal team about your case and your options, send us an email today or call toll-free at 1-800-872-5925.