Culhane v. Aurora Loan Services of Nebras
2013 U.S. App. LEXIS 3313
| 1st Cir. | 2013Background
- In 2006, Culhane refinanced her mortgage, delivering a $548,000 promissory note to Preferred and executing a mortgage to MERS as nominee for Preferred, recorded April 11, 2006.
- MERS held legal title as mortgagee of record and acted as nominee for the noteholder, with its interest limited to member entities; the noteholder held the beneficial interest in the loan.
- Preferred transferred the note to Deutsche Bank Trust Company Americas (Deutsche) for the RALI 2006 Trust, while the mortgage remained in MERS’ name; the cut-off for RALI 2006 was May 1, 2006.
- Aurora Loan Services, acting for Deutsche as servicer, received an assignment from MERS transferring the mortgage to Aurora, dated April 7, 2009 and recorded April 24, 2009, executed by Joann Rein as MERS certifying officer.
- Aurora, as servicer and mortgagee of record, initiated foreclosure after Culhane defaulted; district court later granted summary judgment for Aurora; foreclosure occurred December 8, 2011.
- Massachusetts law allows foreclosure by power of sale without prior judicial authorization, and Eaton v. Fed. Nat’l Mortg. Ass’n (prospective) controls the interpretation of the related statutes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Culhane has standing to challenge the mortgage assignment | Culhane, a nonparty mortgagor, lacks standing to contest an assignment she did not sign. | Aurora asserts that the assignment is valid and Culhane cannot challenge it since she is not a party to the assignment. | Nonparty mortgagor has standing to challenge the assignment to the extent needed to contest foreclosing entity status. |
| Validity of MERS to assign the mortgage to Aurora | MERS never held the beneficial interest and thus had no authority to assign the mortgage. | MERS held bare legal title as nominee and had authority to assign the mortgage for the benefit of the noteholder. | MERS validly held the mortgage and properly assigned to Aurora; the assignment was valid. |
| Effect of the MERS framework on foreclosing authority under Massachusetts law | The MERS structure violates state law governing assignment and foreclosure. | The MERS framework aligns with longstanding mortgage-law distinctions between legal and beneficial interests and supports foreclosure authority. | MERS framework complies with Massachusetts law; foreclosure by Aurora was authorized. |
Key Cases Cited
- Eaton v. Fed. Nat'l Mortg. Ass'n, 969 N.E.2d 1118 (Mass. 2012) (explains binary requirement for control of note and mortgage to foreclose)
- Ibanez, 941 N.E.2d 40 (Mass. 2011) (void foreclosure if foreclosing party lacks jurisdiction and authority)
- McKenna v. Wells Fargo Bank, 693 F.3d 207 (1st Cir. 2012) (prospective effect of SJC rulings on foreclosure standards)
- Lamson & Co. v. Abrams, 25 N.E.2d 374 (Mass. 1940) (note and mortgage may be held by separate entities)
- Morrison v. Lennett, 616 N.E.2d 92 (Mass. 1993) (nominee holds legal title; equitable relation to beneficial interest)