Hayden v. HSBC Bank USA, National Ass'n
867 F.3d 222
| 1st Cir. | 2017Background
- In March 2007 Christopher Hayden and Denine Murphy borrowed $800,000 and executed a mortgage naming MERS as mortgagee "solely as a nominee" with power to assign and to exercise power of sale.
- MERS assigned the mortgage in 2008 to HSBC as trustee for a securitization trust; HSBC later reassigned the mortgage to itself as trustee for the same trust series.
- The Haydens defaulted in 2008, filed multiple bankruptcies, and delayed foreclosure until HSBC scheduled a sale in June 2016.
- The Haydens sued to enjoin the foreclosure and claimed (1) HSBC cannot foreclose under Mass. Gen. Laws ch. 244, § 14 because MERS’s assignment was invalid, and (2) the mortgage became obsolete under Mass. Gen. Laws ch. 260, § 33 due to note acceleration.
- The district court denied preliminary injunctive relief and dismissed the Haydens’ claims under Rule 12(b)(6); the Haydens appealed and the First Circuit summarily affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of MERS assignment / standing to challenge assignment | Assignment invalid because MERS lacked beneficial title; thus HSBC cannot foreclose | MERS may validly assign as nominee; borrowers lack standing to challenge assignments based on trust PSA violations | Dismissal affirmed — MERS assignment valid; plaintiffs lack standing; precedent controls |
| Effect of holding both note and mortgage after assignments | Eaton undermines cases allowing MERS assignments, so assignment here is ineffective | Holding both note and mortgage by assignee (HSBC) supports lawful foreclosure; Eaton does not change result | Dismissal affirmed — Dyer and Culhane govern; Eaton does not defeat foreclosure where assignee holds note and mortgage |
| Obsolete mortgage statute (Mass. Gen. Laws ch. 260, § 33) application after note acceleration | Acceleration of the note shortens the mortgage’s five-year obsolete period, causing automatic discharge | Statute’s five-year period runs from stated maturity/term; acceleration does not alter that statutory period | Dismissal affirmed — statute’s text and precedent do not support plaintiff’s theory about acceleration |
| Challenge based on trust pooling and servicing agreement (PSA) irregularities | Alleged PSA breaches invalidate the assignment or foreclosing party’s authority | Borrowers cannot enforce or challenge assignments based on third-party PSA breaches | Dismissal affirmed — borrowers lack standing to assert PSA-based challenges |
Key Cases Cited
- Culhane v. Aurora Loan Servs. of Neb., 708 F.3d 282 (1st Cir.) (MERS can validly be mortgagee/nominee and assign mortgages without holding beneficial title)
- Butler v. Deutsche Bank Tr. Co. Ams., 748 F.3d 28 (1st Cir.) (borrowers lack standing to challenge assignments based on alleged trust/PSA violations)
- Woods v. Wells Fargo Bank, N.A., 733 F.3d 349 (1st Cir.) (standing limits on borrower challenges to assignments)
- Dyer v. Wells Fargo Bank, N.A., 841 F.3d 550 (1st Cir.) (reaffirming Culhane and holding MERS assignments valid where foreclosing party holds note and mortgage)
- Eaton v. Fed. Nat'l Mortg. Ass'n, 969 N.E.2d 1118 (Mass.) (discusses proof of authority to foreclose by affidavit in registry of deeds)
- Deutsche Bank Nat'l Tr. Co. v. Fitchburg Capital, LLC, 28 N.E.3d 416 (Mass.) (addressed obsolete mortgage issues but did not support acceleration-based shortening of § 33 period)