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North Carolina High Court Reinstates Foreclosure, Finding Chain of Title Adequate - In re Foreclosure of Bass

March 21, 2013

Vincent Howard and our Riverside foreclosure defense attorneys were interested to see a case in which the foreclosure was dismissed, then revived by the state's highest court. In In re Foreclosure of Bass, the North Carolina Supreme Court reverses a trial-court decision to stop a foreclosure on the home of Tonya Bass. Bass challenged her foreclosure because the paperwork transferring ownership of her mortgage note in one instance was missing a signature in one instance. The trial court said that impropriety invalidated the transfer, thus invalidating subsequent transfers and taking away the right of the final note holder to pursue a foreclosure. The North Carolina Supreme Court reversed this, saying the indorsements on the note were unambiguous about their intent to transfer, and thus the final note holder had the right to foreclose.

Bass took out an adjustable-rate mortgage in 2005. The loan was from Mortgage Lenders Network USA, which transferred the note to Emax Financial Group, which transferred it to Residential Funding Corp., which transferred it to U.S. Bank, NA. The first transfer is the focus of the challenge. The Note was stamped by Mortgage Lenders with a stamp saying "Pay to the Order of Emax Financial Group LLC without recourse. By: Mortgage Lenders Network USA, Inc." No signature or individual's name accompanied the stamp. This came to light after U.S. Bank filed a foreclosure action against Bass, and Bass appealed it to the Superior Court, arguing that the lack of a signature or identification of a party made the transfer to Emax invalid, thus invalidating subsequent transfers. The trial court agreed and dismissed the foreclosure. The Court of Appeals in North Carolina agreed, finding the stamp "facially invalid" under previous cases.

The North Carolina Supreme Court reversed, finding that U.S. Bank is the holder of the note despite the missing signature. North Carolina has adopted the Uniform Commercial Code, which says transfer of a mortgage note requires indorsement by each previous holder. Under the UCC, the court said, indorsement requires a signature--but it defines "signature" broadly, including "any symbol executed or adopted with present intention to adopt or accept a writing." The accompanying official comment on the UCC says the symbol may be a thumbprint, initials or a stamped or printed symbol, as long as it signals the intention of adopting or accepting the writing. Thus, the stamp is sufficient, the court said, because it doesn't indicate an intention to do anything other than transfer, is on the same page as other accepted indorsements, and indeed was followed up by an actual transfer.

Vincent Howard and our Costa Mesa foreclosure defense lawyers suspect another court could have come to a different conclusion, because it's unclear what writing the stamp is "accepting or adopting." We also would have preferred a decision without unnecessary emphasis on Bass having defaulted on her mortgage, a fact that is not contested. The implication is that Bass found a technicality to avoid the consequences of her failure to pay, but ownership of property is not a mere technicality to the property's true owner. And unfortunately, there are a lot of reasons other than irresponsibility why people have become unable to pay their mortgages in the past five years. At Howard Law, P.C., our Pomona foreclosure defense attorneys help clients who are in those sticky situations fight the predatory lending practices that often got them there.

If you believe you were lied to or misled when you took out your home loan, don't wait to call Vincent Howard and the team at Howard Law, P.C. For a free, confidential case evaluation, send us an email or call 1-800-872-5925.

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