Debtor Without Lawyer Defeats Motion for Relief from Stay, Based on Lack of Standing

Debtor Without Lawyer Defeats Motion for Relief from Stay, Based on Lack of Standing
By Craig Andresen, Minnesota Bankruptcy Attorney on Mar 29, 2009 in Featured, Foreclosure Defense, Mortgage Issues In Bankruptcy, Mortgage Servicer Abuses

A Washington bankruptcy court recently agreed with a pro se debtor that mortgage servicing agents do not possess legal standing to bring relief from stay motions in chapter 13 cases.

In re Jacobson, 2009 WL 567188 (Bky.W.D.Wash. March 6, 2009), involved a chapter 13 bankruptcy debtor whose mortgage servicing agent filed a motion seeking an order from the bankruptcy court that it could foreclose on the debtor’s home mortgage, based upon lack of payments.  The debtor had a lawyer in the chapter 13 case, but the lawyer made no appearance.  Consequently, the debtor responded to the motion on his own behalf, and argued his case in open court with no lawyer.

The bankruptcy court was concerned that an out-of-state law firm had filed the motion on behalf of the mortgage servicer, but that a lawyer having no formal association with that firm appeared in court to argue the mortgage servicer’s motion.  Henceforth, the court stated, it would hear no arguments from such lawyers, unless a formal notice of association were timely filed.

The motion of “UBS AG, as servicing agent for ACT Properties, LLC (”Movant”),” was accompanied by an unauthenticated copy of an adjustable rate note in favor of Castle Point Mortgage, Inc.; and by a “barely legible” copy of a mortgage in favor of Castle Point Mortgage as “lender”; the beneficiary was identified as Mortgage Electronic Registration Systems, Inc. (MERS); and an apparently unrecorded “Assignment of Mortgage” to ACT Properties.  The motion was also supported by a declaration (made in Irvine, California) by a “bankruptcy specialist” that Wells Fargo Document Custody had possession of the note, mortgage, and assignment, in its Minnesota offices.

The court observed that the bankruptcy specialist had incorrectly noted the date the mortgage was signed, missing the actual date by several weeks.  It appeared doubtful the bankruptcy specialist had reliable knowledge of the mortgage or note.

In denying UBS AG’s motion, the bankruptcy court stated that only a “real party in interest” could file a motion in a federal court proceeding.  This was true even if the mortgage servicing agent had the power, granted to it by the owner of the mortgage, to file a bankruptcy court motion.  The court held that relief from stay had to be granted to the owner of the mortgage, and therefore the motion had to be filed by the owner of the mortgage.  It was not acceptable for the servicing agent to file the motion for relief from stay.

Because there was no evidence before the bankruptcy court that UBS AG was the owner of the mortgage note, or that UBS AG had any authority to foreclose the mortgage, UBS AG lacked standing; it was not the real party in interest.  The court ruled that UBS AG was not entitled to an order allowing it to foreclose the mortgage.

One Response

  1. CH 13 BK looks like a smartest tactic in non-judicial states. Put the burden of proof on MERS and the third party servicers.

    Obviously, they are going to appeal. Does anyone know what normally happens after a relief from stay motion is denied in this type of situation? Any possibility of the homeowner filing a quiet title action in Federal/State court?

Contribute to the discussion!

%d bloggers like this: