320 P.3d 1
N.M.2014Background
- In 2006 Joseph and Mary Romero refinanced with Equity One via a NINA (no‑income‑no‑assets) loan that increased their rate, monthly payment, and principal but provided ~ $30,000 net cash at closing.
- Equity One recorded the mortgage with MERS as nominee; the note was payable to Equity One and multiple versions in the record showed conflicting indorsements (one blank indorsement and one special indorsement payable to JPMorgan Chase).
- The Bank of New York (BONY) filed for foreclosure in April 2008 claiming to be holder/trustee; MERS executed an assignment of the mortgage to BONY on June 25, 2008 (after the foreclosure filing).
- At trial BONY relied on possession of a copy of the note and testimony from Litton employees (servicer) and an affidavit (some of which concerned events before Litton serviced the loan); the trial court admitted that testimony under the business‑records exception.
- The district court entered foreclosure for BONY, finding HLPA compliance (reasonable, tangible net benefit) and applying federal preemption; the Court of Appeals affirmed on standing and HLPA grounds; the New Mexico Supreme Court granted certiorari.
Issues
| Issue | Plaintiff's Argument (Bank/BONY) | Defendant's Argument (Romero) | Held |
|---|---|---|---|
| Standing to foreclose (who was entitled to enforce the note at filing) | BONY possessed the note and offered MERS assignment and servicer testimony showing transfer to BONY | Possession alone insufficient; note contained special indorsement to JPMorgan Chase; MERS assignment post‑dated filing; servicer testimony lacked personal knowledge and underlying records were not admitted | BONY lacked standing: possession and post‑filing mortgage assignment/testimony did not establish right to enforce the note at suit commencement |
| Effect of indorsements / UCC enforcement route | Possession of note copies and testimony demonstrated holder status or transferee rights | Special indorsement to JPMorgan Chase prevails; blank indorsement cannot override special indorsement; no admissible proof of negotiation/transfer | Under UCC, special indorsement to JPMorgan Chase defeats BONY's claim; BONY failed to prove negotiation or valid transfer to enforce the note |
| Whether lender must consider borrower’s ability to repay under HLPA antiflipping provision | BONY: HLPA’s phrase “borrower’s circumstances” need not include ability to repay; lender compliance can rest on borrower certifications and lender’s checklist | Romero: HLPA’s “all of the circumstances, including the borrower’s circumstances” requires consideration of ability to repay; NINA loans targeted by HLPA | Court holds ability to repay is a required element of the “borrower’s circumstances” inquiry under HLPA’s reasonable, tangible net benefit test; lender cannot ignore known facts that call income claims into question |
| Federal preemption (National Bank Act/OCC preemption) | BONY: OCC’s 2004 preemption rule and administrative guidance relieve national banks from HLPA restrictions | Romero: subsequent Supreme Court decisions and Dodd‑Frank limit OCC’s blanket preemption; HLPA is a state law of general applicability | HLPA is not preempted: applying Dodd‑Frank and Supreme Court preemption standards, HLPA does not significantly interfere with national bank powers and is not discriminatorily preempted |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing evaluated as of commencement of suit)
- Barnett Bank of Marion Cnty. v. Nelson, 517 U.S. 25 (state law preemption requires preventing or significantly interfering with national bank powers)
- Watters v. Wachovia Bank, N.A., 550 U.S. 1 (scope of state regulation of national banks; no preemption where no significant interference)
- Cuomo v. Clearing House Ass’n, L.L.C., 557 U.S. 519 (limits to OCC’s claimed preemptive authority and preservation of some state enforcement)