The term “robosigner” has recently entered the American
lexicon to refer derogatively to individuals employed by mortgage servicing
companies who execute certain paperwork on the company’s behalf. Many consumer advocates have relied on this
term to launch lawsuits against their clients’ mortgagees seeking to invalidate,
or at the very least, delay an impending foreclosure. A recent federal court decision obtained by
Prince Lobel’s Financial Services Group has put a significant dent in a
plaintiff’s ability to assert these claims.
In Peterson v. GMAC
Mortgage, LLC et al., borrowers who had defaulted on their payment
obligations alleged that a mortgage assignment transferring the mortgage from
the original mortgagee to the foreclosing entity was invalid because it was
executed by a “well-known robosigner,” a practice that was, according to the
plaintiff, an endemic problem that impacted the mortgagee’s authority to
foreclose. The federal district court,
however, dismissed their claims at the outset, finding that the borrowers lacked
standing to challenge the mortgage assignment.
The court relied on simple contract law to hold that a
defaulted borrower does not possess the “legally protected interest” needed to invalidate
the assignment. The borrowers were not parties
to the assignment, were not granted any rights thereunder, and were, in the
court’s words, a “complete stranger” to the mortgage transfer. While a few other decisions have touched
briefly on this subject, this decision is the first to hold that the borrower’s
standing is not impacted by the Supreme Judicial Court’s holding in U.S. Bank, N.A. v. Ibanez.
This decision is significant in that it removes a
borrower’s ability to assert what has become one of the most prevalent
challenges used to delay an impending foreclosure. It also serves as a good reminder to defense
counsel to analyze not just the substance of the claims, but who is entitled to
assert them as well.
The court also joined the numerous (and growing) number
of trial court decisions holding that a mortgagee does not need to hold the
underlying promissory note in order to validly foreclose under Massachusetts
law. Prince Lobel’s Financial Services
Group just argued this issue before the Supreme Judicial Court and a decision
is expected within the next two months.
Please click the link
below for the October 2011 Federal District Court Order.
