Culhane v. Aurora Loan Services
2011 U.S. Dist. LEXIS 136112
D. Mass.2011Background
- Culhane is the record owner of a Milton, MA home in default on a 2006 loan secured by a mortgage to MERS as nominee for Preferred.
- Note ownership ultimately rests with Deutsche as trustee for the RALI 2006-Q05 Trust; Aurora services the loan for Deutsche.
- On April 7, 2009, MERS, as nominee, assigned the mortgage to Aurora; JoAnn Rein (Aurora employee) executed the assignment before a notary.
- The assignment occurred before notice of sale; the foreclosure process began in 2009, with multiple postponements during loss mitigation and bankruptcy actions.
- Massachusetts law provides a non-judicial power of sale; unity of note and mortgage is debated, with case law splitting on whether the holder of the note must hold the mortgage to foreclose.
- The court ultimately held that Aurora had standing to foreclose because it possessed the mortgage through assignment from MERS and serviced the loan for Deutsche.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Unity of note and mortgage required to foreclose | Culhane argues cure requires note and mortgage unity. | Aurora argues foreclosure may proceed if the mortgage is assigned to the foreclosing entity and the note is held or serviced by the note holder. | Unity required; court held assignment to Aurora and servicing by Deutsche satisfied standing for foreclosure. |
| MERS’s authority to assign the mortgage | MERS’s role creates a cloud on title and questions authority to assign. | MERS, as nominee, may assign the mortgage to the note holder or servicing agent. | Assignment valid under Massachusetts law; MERS can assign the mortgage to the note holder’s servicer as necessary to foreclose. |
| MERS’s status as mortgagee of record and its effect on foreclosure | Culhane challenges MERS’s standing as mortgagee of record and its control over foreclosure. | MERS operates as nominee; it holds bare title and acts to facilitate transfers for the note holder. | MERS’s role does not prevent foreclosure where the note holder or servicer holds the debt and mortgage is properly assigned. |
| Proper procedure for mortgage assignment under MA law | Challenges the validity and process of the assignment by MERS to Aurora. | The assignment complied with MA law (ch. 183, § 54B) and was binding even if signer’s authority efficiency is unsettled. | Assignment binding and recordable before notice of sale; process conformed to § 54B. |
| Effect of securitization and MERS structure on title and foreclosure | Securitization creates potential title clouds and injures Culhane's standing. | securitization and MERS structure are compatible with existing law; standing to foreclose rests on proper assignment and servicing. | Court endorses standing and finds no defects in the foreclosure procedure under Massachusetts law. |
Key Cases Cited
- Bevilacqua v. Rodriguez, 460 Mass. 762 (Mass. 2011) (foreclosure process; limits on unlawful foreclosure)
- Ibanez, 458 Mass. 637 (Mass. 2011) (non-judicial foreclosure; unity of the note and mortgage; notice requirements)
- Rosa v. Mortgage Elec. Sys., Inc., 821 F. Supp. 2d 423 (D. Mass. 2011) (unity of note and mortgage; MERS involvement; chain of title)
- In re Marron, 455 B.R. 1 (Bankr. D. Mass. 2011) (trust/agency concepts; MERS power to assign; bankruptcy context)
- Davenport v. HSBC Bank USA, 275 Mich. App. 344 (Mich. Ct. App. 2007) (structural defects in foreclosures when assignments are improper)
- Kiah v. Aurora Loan Servs., LLC, 2011 WL 841282 (Mass. L. Ct. 2011) (agency and authority in MERS assignments (Western mass discussion))