Vincent Howard and our Corona foreclosure defense lawyers were interested to see a recent decision rejecting a claim by Massachusetts homeowners that an assignment of their mortgage was not valid. Gregory and Anjeza Lemelson sued under a Massachusetts try title statute to invalidate the transfer of their loan to U.S. Bank, which they expect to start foreclosure proceedings. In Lemelson v. U.S. Bank NA, the district court granted the bank's motion to dismiss for failure to state a claim, agreeing that an effort to foreclose does not constitute an adverse claim to title under Massachusetts law. The couple appealed, but the First U.S. Circuit Court of Appeals upheld the decision, saying Massachusetts law requires an allegation of an adverse claim clouding the title of the record title holder.
A try title petition is a lawsuit seeking to compel the adverse claimant to bring an action for title of the disputed property. The Lemelsons bought their home in 2006 for $1.6 million. The loan was sold and transferred several times, becoming securitized, and the loan servicer also changed several times. The Lemelsons stopped paying their mortgage in 2010. In 2011, MERS assigned the mortgage and note to U.S. Bank. No foreclosure case is alleged to have been filed. The try title action the Lemelsons subsequently filed alleges that the assignment to U.S. Bank created an adverse claim, and that there were multiple reasons the assignment was deficient and should be voided. They sought an order requiring the bank to bring a title action, an injunction against foreclosure and an expungement of the assignment. U.S. Bank removed the case to federal court and successfully moved to dismiss.
The First Circuit upheld the dismissal, finding that the couple indeed failed to state a claim. The Lemelsons argued on appeal both that Massachusetts law doesn't require an adverse claim for a try title action, and that they did show that there was such a claim, by alleging that U.S. Bank had made efforts to foreclose. In arguing the first point, the appeals court said, the couple mischaracterized the Massachusetts Supreme Judicial Court's ruling in Bevilacqua v. Rodriguez, which had to do with standing rather than stating a claim. The district court's holding on the subject, by contrast, followed the plain language of the law. It then concluded that they failed to adequately allege that U.S. Bank had an adverse title claim. The petition made no mention of any actual actions by U.S. Bank, the court said. Thus, the only interest it has in the property is as mortgagee, which is insufficient to show an adverse title claim. The court affirmed dismissal.
Vincent Howard and our Costa Mesa foreclosure defense attorneys see claims alleging deficient assignments fairly often, but not the kind of title challenge that was brought here. Indeed, some claims of deficient assignments are sustained, because banks got sloppy during the housing bubble. When the market took its downturn, that sloppiness occasionally stopped or slowed a foreclosure, even where the homeowner clearly did not pay the mortgage. As the foreclosures have slowed--or perhaps as lenders have gotten better at checking their paperwork ahead of time--it's become more common to see courts reject lawsuits alleging deficient chain of title. Vincent Howard and our Rancho Cucamonga foreclosure defense lawyers check all of our clients' loan documents for sloppiness or evidence of law-breaking, to ensure we can make every good argument available in court.