Nevada Attorney General finally announces arrests in the loan modification scam. Finally, a drastic action has been taken by the State Attorney General. Readers remembers Nevada as one of the highest state in USA in the rising numbers of foreclsoures and associated fraud with loan modification anand foreclosure scam.
Archive for December, 2009|Monthly archive page
Nevada Attorney General finally announces arrests in the loan modification scam. Finally, a drastic action has been taken by the State Attorney General. Readers remembers Nevada as one of the highest state in USA in the rising numbers of foreclsoures and associated fraud with loan modification anand foreclosure scam.
The following is a comprehensive list of failed banks. You can find out if your lender is a failed bank.
Has state opted out of federal bankruptcy exemptions?
Yes. Nev. Rev. Stat. § 21.090.
Is opt out limited to residents or domiciliaries of the state? Yes. Nev. Rev. Stat. § 21.090: ‘‘Any exemptions specified in [§ 522(d)],
do not apply to property owned by a resident of this State. . . .’’
Do state’s exemptions have extraterritorial application?Homestead: Uncertain.
Personal property: Uncertain.
Wages: Nev. Rev. Stat. §§ 21.090, 31.295 to 31.298.
Amount: Garnishment may not exceed the lesser of 25% of disposable earnings for the workweek or the amount by which
disposable earnings that week exceed 50 times the federal minimum wage.
Survival after payment/deposit:
Yes. Earnings are defined to include compensation received by the judgment debtor, in the possession of the judgment debtor, held in accounts in a bank or any other financial institution, or, in the case of a receivable, compensation that is due the judgment debtor.
Not specified in garnishment statute.
Homestead: Nev. Rev. Stat. §§ 21.090, 21.095, 115.005, 115.010, 115.040.
$550,000 in either land and a dwelling or a mobile home, subject to certain liens; land held in spendthrift trust for debtor is exempt. Unlimited exemption if ‘‘allodial title’’ has been established. (Nevada residents can acquire ‘‘allodial title’’ to their land by buying out the property tax right from the government. Then the landowner does not have to pay property tax on the land.) The primary dwelling, including a mobile home, and land may not be executed upon for a medical bill during the lifetime of the debtor, debtor’s spouse, a joint tenant who was a joint tenant at the time judgment was entered, or debtor’s disabled dependent adult child, or during the minority of any child of debtor. A 2007 amendment added an exemption for sums reasonably deposited with a landlord, to secure the rental or lease of debtor’s primary residence (except not exempt as to landlord’s claims for rent).
Procedure available for filing declaration of homestead. Exemption available even without declaration. Once declaration is filed, spouse must join in any encumbrance or sale.
Waiver: Spouse must join in conveyance or encumbrance of declared homestead.
Tangible personal property:
Nev. Rev. Stat. §§ 21.080, 21.090, 21.100.
Household goods: $12,000 necessary household goods, furnishings, electronics, wearing apparel, other personal effects and yard
Motor vehicles: $15,000, no limit if specially equipped for disabled
debtor or dependent.
Tools of trade:
$10,000 tools of trade; $4500 mining equipment; $4500 farm equipment.
Clothing and jewelry:
Jewelry is included in the $5000 wildcard exemption.
Miscellaneous and wildcard:
$5000 in private library, works of art, musical instruments and jewelry, all family pictures and keepsakes; health aids; property held in a spendthrift trust; uniforms debtor is legally required to keep, one gun, a collection of metal bearing ores, geological specimens, art curiosities or paleontological remains if the debtor catalogues them and the catalogue is kept near the collection for the free inspection of all visitors; coin collections are not exempt. $1000 in any property, including accounts in a financial institution.
Waiver: Not specified in exemption statute.
Benefits, retirement plans, insurance, judgments, and other intangibles: Nev. Rev. Stat. §§ 21.080, 21.090, 21.100.
Social Security benefits, including without limitation, retirement, survivors, SSI and disability. See Nev. Rev. Stat. § 422.291 (assistance awarded pursuant to public welfare administration laws is exempt). Earned income credit or any similar credit pursuant to state law.
Pensions, retirement plans and annuities:
Up to $500,000 (present value) in tax-qualified retirement plan.
Insurance, judgments or other compensation for injury: Money or benefits in any manner growing out of life insurance, if premium not more than $15,000 per year (for higher premium, the proportion that $15,000 bears to the premium paid); $16,500 personal injury judgment; wrongful death judgment for person on whom debtor was dependent; compensation for loss of future earnings of debtor or person on whom debtor was dependent, so far as needed for support; criminal restitution.
Not specified in exemption statute.
Alimony, child support:
Court-ordered family support.
Survival after payment or deposit:
Not specified in exemption statute.
The law office of Malik W. Ahmad is always in the forefront of combating unlawful foreclosure and predatory lending. Also, it is the determined effort of Law Office of Malik Ahmad to publish as much information as possible in this fight and we continuously update all our resources to combat this menace of rising foreclosure. We never hid anything from our readers and we have countless readers of our blog and continuously gets email throughout United States on the peculiar problems the homeowners are facing. We try to help as much as possible and we have a very strong track record of saving home.
Following is a federal website and it has all the details how a loan modification should actually work. Once someone is armed with this knowledge, it is easier to negotiate with a lender.
Shamefully, some of the homeowners are stripping everything from their former dream home and leaving nothig. This article is a sad plight of such a story where the home is stripped to the bare wall. This is despicable. If the homeowner has lost all the battle, they should walk out decently and without making a noise. Of course stripping the homes of all of its chattles is shameful and despicable outright. Please stop this practice. Hopefully, it would make us more responsible as homeowners.
Banks initially did lots of trial loan modifications, and every one expected that soon they would become permanent loan modification. Even the trial loan modification promised that after three trial payments sent on time, a permanent loan modifications shall be done. This, of course, is not happening as the banks are still cheating and not doing permanent loan modification. In our law office (law office of Malik Ahmad) we have done substantial number of trial loan modifications and are still talking to lenders to change them to permanent loan modifications. They keep on promising to make them permanent. Now, we hear from other sources that banks are started cheating on this promise, and playing a double game. Our fears are substantial especially after the major banks had paid back their bailout money, and Obama Plan has no teeth othr than putting “shame” to the bank. What an enforcement? We had said time and again, that the saving of homeownership is the key to resotore the American economy. We had submitted the offer, and this law office is again stressing the need for a permanent loan modificatioan with only two steps. We are not suggesting Utopian measures, we are suggesting only two measures which can fix the economy for a very long term. Here are the two steps.
1. Reduce everyone’s mortgage to 4% regardless of their ownership (whether primary or investment)
2. This 4% rate should be fixed for 5 years.
3. After that it would be fixed to 5% for the balance of the loan.
4. Under Obama Plan, the Fed is going to pay $1,000.00 to bank. Our proposal includes one additional step. Every homeowner whose home shall be modified under our proposal shall pay to their lender $2,000.00 from their pockets. That mean bank would get $3,000.00 and would not lose money. In fact, this is a win-win proposal for all of us.
Here is the link of bank’s continuous cheating:
The HAMP was launched with considerable fanfare but its effects are dwindling even though it has made considerable dent in overall foreclosure mess across US. However, the Obama plan could not stem the tide of this foreclosure tidal waves and its impacts are deeper. This is an interesting article which is suggesting lots of substitute measures helpful in the reduction of foreclosure throughout USA.
We had stated in other posts on this blog few times and we like to restate it again. Nevada is running high on this omnipresent foreclosure crisis which is deepening every day and we don’t see the end in sight. its omnious effect is everywhere. We see U-Haul truck almost every day and throw away garage sale. We have provided statistics many times, and in fact, all national magazines are full of these statistics about Nevada. We are high not only on foreclosure rates, but highschool drop out rate along with highest teenagers pregnancy. Our schools admissions are falling as of this time as more and more student either dropping out or changing to other states. This all is relating to our endemic homeownership crisis. As we had suggested earlier, this crisis would not come to an end unless and until homeownership is revitalized with loan modification and intense government attention which is missing still in this regard. More and more homes are foreclosed. We had suggested a novel homeownership plan based on the following recommendations and we like to mention them again:
-All mortgage should have only 2% interest rate for the next 5 years regardless of the income status of the owner.
-No documentation should be required for this purpose.
-Your old original documentation is enough.
- No disparity between primary homeowners and secondary homes. Every home is entitled for loan modification.
-This modification would only last for the first 5 years.
-This should also entitle federal bankruptcy courts for a cramdown.
-Banks should be given more incentive both from Feds and homeowners.
This brings us to another important topic–which is the lack of knowledgeable foreclosure defense attorneys in Las Vegas. We had tried to fill this gap with our whole-hearted attempts to help our clients in both Clark county and US District Courts. We had successfully helped many clients in averting their imminent foreclosure as well as upsetting some of the wrongful foreclosure cases. We are proud that the Law Office of Malik Ahmad has a successful track record in this regard. Please see following an article in this regard which was recently published in Times weekly.
Chapter 13 deals with reorganization of your debts. It is the best tool to handle to stop an imminent and looming foreclosure because of the automatic stay inherent in such proceedings. I suspect that there are going to be more Chapter 13 bankruptcy filings soon because the foreclosure is going on unabated in Las Vegas, and in Nevada. This small post is an attempt to explain the various implications of filing a Chapter 13 bankruptcy. First of all, please stay away from petition preparer, they are not the right agency to do this monumental task of safeguarding your home.
I get many calls every day in my office from various parts of Las Vegas, including Henderson, Pahrump, North Las Vegas, Mountain Edge, Eastern part of Las Vegas, where people are complaining about foreclosure and the default notices they had received recently. Most of these homeowners have little or no equity in their homes. Many of them has lost jobs, and had tried their best to find a job, and their unemployment allowance are running out. Values of their real estate had dropped more than 50% and still depreciating everyday. Most of them were attracted to teaser rate and ARMS. I don’t blame them. It was the norm at that time, and no one even the very knowledgeable people didn’t know the total implications of all these mortgage problems.
Well, in this harsh and very depressed economic times, Chapter 13 may be a good option for those with regular income. If their budget can carry the regular monthly payment plus something extra each month to pay back mortgage arrears and other debts in a consolidated payment to a trustee, they may be able to save their property. Under Chapter 13, an automatic stay (injunction) freezes all collection litigation, including foreclosures. The plan period can last 3 to 5 years. In some cases the unsecured creditors (like credit cards) don’t have to be repaid in full – so the cost of doing the bankruptcy may be more than covered by the money saved (discharged).
Chapter 13 is a difficult process. Calling a lawyer and choosing the right one for your case is the first step. Not all lawyer’s fees are the same, but then again not all will provide the same level of personal attention. In my office, we meet all the clients personally and answers all their phone calls and emails. I personally do not get involved a paralegal until I do most of the work myself. It is risky thing, and I would not let a paralegal do it. Of course, they do most of the procedural work but the main job is handled by attorneys in our office. We try to save your home if no modification is done, or the lender is reluctant in doing modification of your loan.
Don’t let your bankruptcy be handled by someone doing a production job, or if cheaper rates are your prime concern. Cheap rates means no quick and solid service. Please stay away from bankruptcy factory type production firms. Would your lawyer be with you when you need him? Would he be picking up the phone and answering your questions. Would he be accompanying you when you need him during the 341 meeting? These are the important questions, you need to know.
Would he let you case be handled by inexperienced clerical type people?
It is good to check out the lawyer you want to hire. Find out about their website, and visit their website. Read his or her profile. If there isn’t one available beware. You should know about your lawyer’s prior experience and education. This information should be readily available on his website.
You should also find out if your lawyer offers unlimited availability to you via email or phone as I do for my clients. I answer their questions very quickly and suggest them to approach me via email because this is the best medium of contact where I can even answer their questions while sitting in my home and on my off time.
Short sale was considered a less painful choice because it stops an imminent foreclosure and it is some kind of face saving devise which is not as Draconian as a foreclosure. Also, it does not make much noise and is not very public also. Homeowners can also stay free for some few months and without the plethora of calls from bill collectors. However, this is the end of it. New York Times has a very good article on this matter. Please read it and make your own judgment.
Again, it is not the best news for homeowners. “A cloud of foreclosures will hang over Las Vegas for at least a couple more years and median prices will continue to fall in 2010, most likely by double digits, executives from two California-based real estate tracking firms said Tuesday”. About $2.5 trillion in mortgages are due to reset next year, a substantial amount of it in places already reeling from the foreclosure crisis, said Rick Sharga, senior vice president of Irvine, Calif.-based RealtyTrac.
It’s difficult to pinpoint numbers market by market, Sharga said, but he’s estimating foreclosure filings could approach 4 million nationwide next year with about half of them coming primarily in four states – Florida, Nevada, California and Arizona.
MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., APPELLANT, VS. SOUTHWEST HOMES OF ARKANSAS, APPELLEE
SUPREME COURT OF ARKANSAS
2009 Ark. LEXIS 121
March 19, 2009, Opinion Delivered
THE LEXIS PAGINATION OF THIS DOCUMENT IS SUBJECT TO CHANGE PENDING RELEASE OF THE FINAL PUBLISHED VERSION.
SUBSEQUENT HISTORY: Rehearing denied by Mortgage Elec. Registration Sys. v. Southwest Homes of Ark., Inc., 2009 Ark. LEXIS 458 (Ark., Apr. 23, 2009)
PRIOR HISTORY: [*1]
APPEAL FROM THE BENTON COUNTY CIRCUIT COURT, NO. CIV07-223-2, HON. DAVID S. CLINGER, JUDGE.
COUNSEL: George Nicholas Arnold – Counsel for the Appellant.
Howard Keith Morrison – Counsel for the Appellant.
Thomas D. Stockland – Counsel for the Appellee.
JUDGES: JIM HANNAH, Chief Justice. IMBER, DANIELSON and WILLS, JJ., concur.
OPINION BY: JIM HANNAH
JIM HANNAH, Chief Justice
Mortgage Electronic Registration System, Inc. (”MERS”) appeals a decision of the Benton County Circuit Court denying its motion to set aside a decree of foreclosure and to dismiss the foreclosure action. 1 MERS alleges that the circuit court erred in ordering foreclosure because as the holder of legal title it was a necessary party that was never served. We affirm the circuit court and hold that under the recorded deed of trust in this case, James C. East, as trustee under the deed of trust, held legal title. Because MERS was at most the mere agent of the lender Pulaski Mortgage Company, Inc., it held no property interest and was not a necessary party. As this case presents an issue of first impression, our jurisdiction is pursuant to Arkansas Supreme Court Rule 1-2(b)(1).
1 Mortgage Electronic Registration System, Inc.’s (”MERS”) motion was [*2] entitled Motion to Set Aside Default Judgment; however, the circuit court found, and the parties agree, that MERS was never served. Because MERS was never served, it could not have failed to respond to that service and suffer a default judgment. The relief sought was that the decree of foreclosure be set aside and the foreclosure action be dismissed.
This case arises from foreclosure on a 2006 mortgage granted in a one-acre lot. A prior deed of trust also encumbered the property. In 2003, Jason Paul Lindsey and Julie Ann Lindsey entered into a deed of trust on a one-acre lot in Benton County to secure a promissory note. The lender on that deed of trust was Pulaski Mortgage, the trustee was James C. East, and the borrowers were the Lindseys. MERS was listed on the deed of trust as the “Beneficiary” acting “solely as nominee for Lender,” and “Lender’s successors and assigns.” The second page of the deed of trust states that “the Borrower understands and agrees that MERS holds only legal title to the interests granted by the Borrower and further that MERS as nominee of the Lender has the right to exercise all rights of the Lender including foreclosure.” The deed of trust was recorded.
In [*3] 2006, the Lindseys granted the subject mortgage on the same property to Southwest Homes of Arkansas, Inc. to secure a second promissory note. This mortgage was recorded. On February 9, 2007, Southwest Homes filed a Petition for Foreclosure in Rem against the Lindseys under the 2006 mortgage. The Lindseys, the Benton County Tax Collector, and “Mortgage Electronic Registration System, Inc. (Pulaski Mortgage Company)” were listed as respondents. Pulaski Mortgage was served; however, MERS was never served. Pulaski Mortgage did not file an answer. 2 A Decree of Foreclosure in Rem was entered on April 4, 2007, and the property was auctioned to Southwest. An Order Approving and Confirming Commissioner’s Sale was entered on May 8, 2007. In February 2008, MERS learned of the foreclosure and moved for relief, arguing it was a necessary party to the foreclosure action. The circuit court denied the motion, and this appeal followed.
2 Pulaski Mortgage was the lender of record. No assignment of the deed of trust was recorded nor had Pulaski Mortgage’s security interest been satisfied of record.
MERS asserts that it held legal title to the property and, therefore, it was a necessary party to any action [*4] regarding title to the property. The deed of trust indicates that MERS holds legal title and is the beneficiary, as well as the nominee of the lender. It further purports by contractual agreement with the borrower to grant MERS the power to “exercise any and all rights” of the lender, including the right of foreclosure. However the deed of trust provides that all payments are to be made to the lender, that the lender makes decisions on late payments, and that all rights to foreclosure are held by the lender.
No payments on the underlying debt were ever made to MERS. MERS did not service the loan in any way. It did not oversee payments, delinquency of payments, or administration of the loan in any way. Instead, MERS asserts to be a corporation providing electronic tracking of ownership interests in residential real property security instruments. See In re MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81, 828 N.Y.S.2d 266 (2006). According to MERS, it was developed by the “real estate finance industry” and was designed to facilitate the sale and resale of instruments in “the secondary mortgage market, which include one of the government sponsored entities.”
MERS contracts with lenders to track security [*5] instruments in return for an annual fee. MERSCORP, supra. Those who contract with MERS are referred to by MERS as “MERS members.” According to MERS, MERS members contractually agree to appoint MERS as their common agent for all security instruments registered with MERS. 3 MERS asserts that it holds the authority to exercise the rights of the lender, and for that purpose, it holds bare legal title. Thus, it is alleged that a principal-agent relationship existed between MERS and Pulaski Mortgage under the contract terms of the deed of trust. 4
3 The Kansas Court of Appeals, in Lankmark National Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177 (2008), likewise found that Mortgage Electronic Registration System, Inc. acts as an agent. We note the analysis in this case is consistent with our own but also note that the Kansas Supreme Court granted review of the Landmark case.
4 MERS is listed as a nominee on the deed of trust. A nominee is “a person designated to act on behalf of another, usu. in a very limited way.” Black’s Law Dictionary 1076 (8th ed. 2004). A nominee is also a “person who holds bare legal title for the benefit of others or who receives and distributes funds for the benefit [*6] of others.” Id. As discussed above, MERS was not designated to act on behalf of another under the facts of this case. Further, it held no title in this case where title vested in the trustee, and finally, it received and distributed no funds for the benefit of others.
“An agent is a person who, by agreement with another called the principal, acts for the principal and is subject to his control.” Taylor v. Gill, 326 Ark. 1040, 1044, 934 S.W.2d 919, 922 (1996) (quoting AMI 3d 701 (1989)). Thus, MERS, by the terms of the deed of trust, and its own stated purposes, was the lender’s agent, including not only Pulaski Mortgage but also any successors and assigns.
MERS asserts authority to act, arguing that once it becomes the agent on a security instrument, it remains so for every MERS member lender who acquires ownership. This authority is alleged to arise from the contractual relationship between MERS and MERS members. Thus, MERS argues it may act to preserve the rights of the lender regardless of who the lender may be under the MERS electronic registration. We specifically reject the notion that MERS may act on its own, independent of the direction of the specific lender who holds the repayment [*7] interest in the security instrument at the time MERS purports to act. “[A]n agent is authorized to do, and to do only, what it is reasonable for him to infer that the principal desires him to do in the light of the principal’s manifestation and the facts as he knows or should know them at the time he acts.” Hot Stuff, Inc. v. Kinko’s Graphic Corp., 50 Ark. App. 56, 59, 901 S.W.2d 854, 856 (1995) (citing Restatement (Second) of Agency
§ 33 (1958)). Nothing in the record shows that MERS had authority to act. Here, Pulaski Mortgage was the lender and MERS’s principal. Pulaski Mortgage was a named party in the foreclosure action. Thus, MERS was not acting as the lender’s agent at the time it moved to set aside the decree of foreclosure.
However, MERS also argues that it holds a property interest through holding legal title. Specifically, it purports to hold legal title with respect to the rights conveyed by the borrower to the lender. We disagree.
“A deed of trust is ‘a deed conveying title to real property to a trustee as security until the grantor repays a loan.’” First United Bank v. Phase II, Edgewater Addition, 347 Ark. 879, 894, 69 S.W.3d 33, 44 (2001)(quoting Black’s Law Dictionary [*8] 773 (7th ed. 1999)); see also House v. Long, 244 Ark. 718, 426 S.W.2d 814 (1968). The encumbrance created by the deed of trust may be described as a lien. See, e.g., First Amer. Nat’l Bank of Nashville v. Booth, 270 Ark. 702, 606 S.W. 2d 70 (1980).
Under a deed of trust, the borrower conveys legal title in the property by a deed of trust to the trustee. Phase II, supra. “In this state, the naked legal title to real property included in a mortgage passes to the mortgagee, or to the trustee in a deed of trust, to make the security available for the payment of the debt.” Harris v. Collins, 202 Ark. 445, 447, 150 S.W.2d 749, 750 (1941). The trustee is limited in use of the title to passing title back to the grantor/borrower in the case of payment, or to the lender in the event of foreclosure. See Forman v. Holloway, 122 Ark. 341,183 S.W. 763 (1916). The lender holds the indebtedness and is the beneficiary of the deed of trust. House, supra. A trustee under a deed of trust is not a true trustee. Heritage Oaks Partners v. First Amer. Title, Ins. Co., 155 Cal. App. 4th 339, 66 Cal. Rptr.3d 510 (Cal. Ct. App. 2007). Under a deed of trust, the trustee’s duties are limited to (1) upon default undertaking foreclosure [*9] and (2)
upon satisfaction of the debt to reconvey the deed of trust. Id.
In the present case, all the required parties to a deed of trust under Arkansas law are present, the borrower in the Lindseys, the Lender in Pulaski Mortgage, and the trustee in James C. East. Under a deed of trust in Arkansas, title is conveyed to the trustee. Harris, supra. MERS is not the trustee. Here, the deed of trust renamed James C. East as the trustee. The deed of trust did not convey title to MERS. Further, MERS is not the beneficiary, even though it is so designated in the deed of trust. Pulaski Mortgage, as the lender on the deed of trust, was the beneficiary. It receives the payments on the debt.
The cases cited by MERS only confirm that MERS could not obtain legal title under the deed of trust. MERS relies on Hannah v. Carrington, 18 Ark. 85 (1856); however, that case stands for the proposition that a deed of trust vests legal tide in the trustee. We are also cited to Shinn v. Kitchens, 208 Ark. 321, 326, 186 S.W.2d 168, 171 (1945), where this court stated that “[t]he trustee named in the deeds of trust was a necessary party at the institution of the foreclosure suit, as also, of course, was Kitchens, [*10] the holder of the indebtedness.” East, as trustee, was a necessary party. MERS was not. Finally, we are cited to Beloate v. New England Securities Co., 165 Ark. 571, 575,265 S.W. 83 (1924), where this court stated that the real owner of the debt, as well as the trustee in the mortgage, are necessary parties in the action to recover the debt and foreclose the mortgage. Again, this case supports the conclusion that East was a necessary party and MERS was not.
Further, under Arkansas foreclosure law, a deed of trust is defined as “a deed conveying real property in trust to secure the performance of an obligation of the grantor or any other person named in the deed to a beneficiary and conferring upon the trustee a power of sale for breach of an obligation of the grantor contained in the deed of trust.” Ark. Code Ann. § 18-50-101(2) (Repl. 2003). Thus, under the statutes, and under the common law noted above, a deed of trust grants to the trustee the powers MERS purports to hold. Those powers were held by East as trustee. Those powers were not conveyed to MERS.
MERS holds no authority to act as an agent and holds no property interest in the mortgaged land. It is not a necessary party. In [*11] this dispute over foreclosure on the subject real property under the mortgage and the deed of trust, complete relief may be granted whether or not MERS is a party. MERS has no interest to protect. It simply was not a necessary party. See Ark. R. Civ. P. 19(a). MERS’s role in this transaction casts no light on the contractual issues on appeal in this case. See, e.g., Wilmans v. Sears, Roebuck & Co., 355 Ark. 668, 144 S.W.3d 245 (2004).
Finally, we note that Arkansas is a recording state. Notice of transactions in real property is provided by recording. See Ark. Code Ann. § 14-15-404 (Supp. 2007). Southwest is entitled to rely upon what is filed of record. In the present case, MERS was at best the agent of the lender. The only recorded document provides notice that Pulaski Mortgage is the lender and, therefore, MERS’s principal. MERS asserts Pulaski Mortgage is not its principal. Yet no other lender recorded its interest as an assignee of Pulaski Mortgage. Permitting an agent such as MERS purports to be to step in and act without a recorded lender directing its action would wreak havoc on notice in this state.
IMBER, DANIELSON and WILLS, JJ., concur.
CONCUR BY: PAUL E. DANIELSON
CONCURRING [*12] OPINION.
PAUL E. DANIELSON, Associate Justice
I concur that the circuit court’s order should be affirmed, but write solely because I view the decisive issue to be whether MERS was, pursuant to Arkansas Rule of Civil Procedure 19(a) (2008), a necessary party to the foreclosure action. It can generally be said that “[n]ecessary parties to a foreclosure action are parties whose interest are inseparable such that a court would be unable to determine the rights of one party without affecting the rights of another.” 59A C.J.S. Mortgages § 708 (2008). See also 55 Am. Jur. 2d Mortgages § 647 (2008) (”[A]ll persons who are beneficially interested, either in the estate mortgaged or the demand secured, are proper or necessary parties to a suit to foreclose.”). Moreover, “[p]ersons having no interest are neither necessary nor proper parties, and the mere fact that they were parties to transactions out of which the mortgage arose does not give them such an interest as to make them necessary parties to an action to foreclose
the mortgage.” Id. Indeed, our rules of civil procedure contemplate the same.
Rule 19(a) of the Arkansas Rules of Civil Procedure speaks to necessary parties:
(a) Persons to Be [*13] Joined if Feasible. A person who is subject to service of process shall be joined as a party in the action if (1) in his absence complete relief cannot be accorded among those already parties, or, (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter, impair or impede his ability to protect that interest, or, (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple or otherwise inconsistent obligations by reason of his claimed interest. If he has not been joined, the court shall order that he be made a party. If he should join as a plaintiff, but refuses to do so, he may be made a defendant; or, in a proper case, an involuntary plaintiff.
Ark. R. Civ. P. 19(a) (2008).
Here, a review of the deed of trust for the subject property reveals four parties to the deed: (1) Jason Paul Lindsey and Julie Ann Lindsey, “Borrower”; (2) James C. East, “Trustee”; (3) MERS, “(solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns)”; and (4) Pulaski Mortgage Company, “Lender.” The question, then, is whether MERS, [*14] as nominee, was a necessary party that had an interest “so situated that the disposition of the action in [its] absence may” have impaired its ability to protect its interest or left a subsequent purchaser or other subject to a substantial risk by reason of its interest. The answer is no; MERS, as nominee, was not a necessary party to the foreclosure action, because it held no such interest.
Initially, I must note that my review of the deed’s notice provision reveals that the deed clearly contemplated the Lender as the party with interest, in that it provided:
13. Notices. . . . Any notice to Lender shall be given by first class mail to Lender’s address stated herein or any address Lender designates by notice to Borrower. Any notice provided for in this Security’ Instrument shall be deemed to have been given to Borrower or Lender when given as in this paragraph.
Here, as stated in the circuit court’s order of foreclosure. Pulaski Mortgage, as Lender, was served with notice of the foreclosure action, in accord with paragraph thirteen.
But, in addition, MERS claims that because it holds legal title, it has an interest so as to render it a necessary party pursuant to Rule 19(a). Indeed, pursuant [*15] to the deed of trust, MERS held “only legal title to the interests granted” by the Lindseys,
but, if necessary to comply with law or custom, MERS, (as nominee for Lender and Lender’s successors and assigns) has the right to exercise any and all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.
“Legal title” is defined as “[a] title that evidences apparent ownership but does not necessarily signify full and complete title or a beneficial interest.” Black’s Law Dictionary 1523 (8th ed. 2004) (emphasis added). Thus, as evidenced by the definition, holding legal title alone in no way demonstrates the interest required by Rule 19(a).
MERS further claims that its status as nominee is evidence of its interest in the property, making it a necessary party. However, merely serving as nominee was recently held by one court to be insufficient to demonstrate an interest rising to the level to be a necessary party. In Landmark National Bank v. Kesler, 40 Kan. App. 2d 325, 192 P.3d 177 (2008), review granted, (Feb. 11, 2009). MERS also [*16] asserted that it was a necessary party to the foreclosure suit at issue. There, the district court found that MERS was not a necessary party, and the appellate court affirmed. Just as here, MERS was a party to the mortgage “solely as nominee for Lender.” 40 Kan. App. 2d at 327, 192 P.3d at 179. Based on that status, the Kansas court found that MERS was in essence, an agent for the lender, as its right to act to enforce the mortgage was strictly limited. See id.
Agreeing with MERS that a foreclosure judgment could be set aside for failure to join a “contingently necessary party,” the Kansas court observed that a party was “contingently necessary” under K.S.A. 60-219 if “the party claims an interest in the property at issue and the party is so situated that resolution of the lawsuit without that party may ‘as a practical matter substantially impair or impede [its] ability to protect that interest.’” Id. at 328, 192 P.3d at 180 (quoting K.S.A. 60-219). Notably, the language of K.S.A. 60-219 quoted by the Kansas court is practically identical to the language of Ark. R. Civ. P. 19(a).
The Kansas appellate court noted that MERS received no funds and that the mortgage required the borrower [*17] to pay his monthly payments to the lender. See id. It also observed, just as in the case at hand, that the notice provisions of the mortgage “did not list MERS as an entity to contact upon default or foreclosure.” Id. at 330, 192 P.3d at 181. After declaring that MERS did not have a “sort of substantial rights and interests” that had been found in a prior decision and noting that “a party with no beneficial interest is outside the realm of necessary parties,” the Kansas court concluded that “the failure to name and serve MERS as a defendant in a foreclosure action in which the lender of record has been served” was not such a fatal defect that the foreclosure judgment should be set aside. Id. at 331, 192 P.3d at 181-82.
It is my opinion that the same holds true in the instant case. Here, Pulaski Mortgage, the lender for whom MERS served as nominee, was served in the foreclosure action. But, further, neither MERS’s holding of legal title, nor its status as nominee, demonstrates any interest that would have rendered it a necessary party pursuant to Ark. R. Civ. P. 19(a). For these reasons, I concur that the circuit court’s order should be affirmed.
IMBER and WILLS, JJ., join.
As we had discussed previously in our blog that Blacks and Latinos are unfortunately disproportionately being hit by this rising menace of foreclosure and predatory lending practices. Our fears has been corroborated by a recent news items. Please read the following:
This is an interesting article and the writer is skeptical about the future of 650,000 or more trial loan modifications. There are some very interesting points raised by the author. The trial loan modification process is slow and cumbersome. However, it builds hope for homeowners. Banks are taking lots of time in completing this process.
A Long Island couple is home free after an outraged judge gave them an amazing Thanksgiving present — canceling their debt to ruthless bankers trying to toss them out on the street.
Suffolk Judge Jeffrey Spinner wiped out $525,000 in mortgage payments demanded by a California bank, blasting its “harsh, repugnant, shocking and repulsive” acts.
The bombshell decision leaves Diane Yano-Horoski and her husband, Greg Horoski, owing absolutely no money on their ranch house in East Patchogue.
Spinner pulled no punches as he smacked down the bankers at OneWest — who took an $814.2 million federal bailout but have a record of coldbloodedly foreclosing on any homeowner owing money.
The Obama administration disclosed a plan on Monday intended to increase pressure on mortgage companies to permanently reduce monthly payments for troubled homeowners.
Under the guidelines, the government will fine lenders that fail to find ways to increase the number of homeowners who are given relief on their mortgage bills.
The move is the government’s latest endeavor to reinvigorate a $75 billion program that promised to stem foreclosures and help hundreds of thousands of struggling homeowners with their mortgages. So far, however, only a small percentage of eligible Americans have had their mortgage payments reduced, and many are encountering difficulties as they try to make the cuts permanent.
The Treasury Department has blamed banks and mortgage companies, which it says have been slow to process documents, for the program’s lukewarm start.
Obama Plan has not produced much expected results. Lenders are still denying loan modification on one pretext or the other. Please read the following new item: