Update on Failure to Comply with PSA

I previously posted an argument for a motion to vacate based upon the Plaintiff's failure to comply with the Pooling and servicing agreement.  Counsel for the Banks continue to cite the same cases asserting that the Homeowner lacks standing to challenge the Plaintiff's compliance with the Pooling and Servicing Agreements.  Some Ohio Trial Courts are beginning to agree with the argument.  In both Columbiana County and Perry County the trial court, in ruling on motions for relief from judgment, found that the failure to comply with the Pooling and Servicing Agreement was a meritorious defense.

Other Courts are starting to agree with the concept. 
 

Alexander vs. Deutsche Bank National Trust Co. (N.D. Ohio West Dis.)

Case No.: 3:12-CV-02704;

BAC Home Loan Serv. v. McFerren (Ohio App. 9^th Dist.), 2013-Ohio-3228;

Wells Fargo Bank, N.A. v. Erobobo, et al., 2013 WL 1831799

(N.Y. Sup. Ct. April 29, 2013); and

In Re Saldivar (June 5, 2013), United States District Court,

Southern District of Texas, case No. 11-10689.

The United States District Court, Bankruptcy Court for the Northern District of Ohio, decision in Alexander vs. Deutsche Bank National Trust Co. (N.D. Ohio West Dis.) Case No.: 3:12-CV-02704, stated:

A number of Ohio appellate courts have applied the general principal that a debtor may not

challenge an assignment between an assignor and an assignee and concluded that, under Ohio law, a mortgagor does not have standing to challenge an assignment of a mortgage.

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            The Alexander Court then discusses the cases typically relied upon to challenge the Homeowners ability to raise the failure to comply with the PSA: Bank of New York Mellon Trust Co. v. Unger; LSF6 Mercury REO Invests. Trust Series 2008-1 v. Locke; and Deutsche Bank Nat’l Trust Co. v. Rudolph.  These cases are then discussed in light of Fed. Home Loan Mortg. Corp. v. Schwartzwald.

“It does not follow, however, that Alexander is wholly barred from challenging the assignment. The Supreme Court of Ohio acknowledged the general principle “that standing is a ‘jurisdictional requirement’” that, if not present, subjects the complaint to dismissal. Schwartzwald, 979 N.E.2d at 1219. The court also stated “[w]here [a] party does not rely on any specific statute authorizing invocation of the judicial process, the question of standing depends on whether the party has alleged . . . a ‘personal stake in the outcome of the controversy.’” Id. (quoting Cleveland v. Shaker Heights, 507 N.E.2d 323, 325 (Ohio 1987)). As the Sixth Circuit has noted, “[a]n obligor ‘may assert as a defense any matter which renders the assignment absolutely invalid or ineffective, or void.’ . . . Obligors have standing to raise these claims because they cannot otherwise protect themselves from having to pay the same debt twice.” Livonia Prop. Holdings, L.L.C. v. 12840-12976 Farmington Road Holdings, L.L.C., 399 F. App’x 97, 102 (6th Cir. 2010) (citing 6A C.J.S. Assignments § 132 (2010)).

 

BAC Home Loan Serv. v. McFerren (Ohio App. 9^th Dist.), 2013-Ohio-3228.  While the McFerren Court did not address the issue, at footnote 4, the Court stated:

We note that it is unclear why a foreclosure defendant would lack “standing” to raise issues concerning the legal effect of prior assignments or other transactions in defending the foreclosure action. In that context, the defendant may raise legally relevant defenses as such would relate to the character of the obligation (i.e. secured or not secured) and to whom the obligation is actually owed (in cases of multiple assignments, to avoid the risk that multiple parties claim the right to collect). Bank of America relies upon Livonia Props. Holdings, LLC v. 12840-12976 Farmington Rd. Holdings, LLC, 399 Fed.Appx. 97 (6th Cir.2010), and Bridge v. Aames Capital Corp., N.D.Ohio No. 1:09 CV 2947, 2010 WL 3834059 (Sept. 29, 2010), in support. However, the procedural posture and substantive issues addressed in those cases are distinct from the instant matter and those cases do not stand for the blanket proposition that in all contexts an obligor may not raise defenses concerning the assignment of the obligation. Bridge is readily distinguishable because the mortgagor was a plaintiff seeking a declaratory judgment and the court addressed standing in the context of Ohio’s declaratory judgment statute. Livonia addressed the question of the meaning of “record chain of title” under Michigan’s foreclosure by advertisement statute. See id. at 99.

Both Wells Fargo Bank, N.A. v. Erobobo, et al., 2013 WL 1831799 (N.Y. Sup. Ct. April 29, 2013); and In Re Saldivar (June 5, 2013), United States District Court, Southern District of Texas, case No. 11-10689, find that the failure to comply with the Pooling and Servicing Agreement results in the transactions being void. 



Hopefully, the above information will be helpful.  Should any Homeowner or Attorney representing Homeowners need additional assistance, please contact my office.