Texas mortgage borrowers are not doing too well lately with "securitization" claims against their lenders and/or mortgage servicers, particularly in the 5th Circuit Court of Appeals. The 5th Circuit is only one step below the U.S. Supreme Court, and is the highest federal appeals court in this part of the U.S.
On Feb. 20, 2014, the 5th Circuit Court of Appeals affirmed the dismissal of a lawsuit brought against Wells Fargo Bank, N.A. in Texas for, among other things, having a "robo-signed" assignment. Golden v. Wells Fargo Bank, 5th Circuit Court of Appeals, 2014.
Facts: The Goldens bought their home in 1991, and later refinanced a home equity loan in 2006, obtaining a new loan from New Century Mortgage Company. As part of the transaction, the Goldens signed a note and deed of trust, and the note was then securitized. The Pooling and Servicing Agreement (PSA) governing the trust said that no loans could be transferred in or out of the trust after July 5, 2006. New Century later filed bankruptcy.
In January 2010, Tom Croft ("Croft") signed a document assigning the deed of trust and note to Wells Fargo, supposedly acting on behalf of Carrington Mortgage as attorney in fact for New Century. It was notarized and filed in the Bexar County, Texas real property records.
In February 2010, Wells Fargo filed an application in Texas state court to authorize foreclosure of the property, as required by state law. Attached to the application was an affidavit from Croft, who again acted on behalf of Carrington Mortgage Services but this time as "attorney in fact for Wells Fargo Bank, N.A." In his affidavit, Croft named Wells Fargo as the owner and holder of the note.
In 2011 the Goldens filed suit to stop the foreclosure, and in an amended complaint asserted that New Century had repudiated its MERS agreement so no one had authority to sign on behalf of New Century after the date of the repudiation.
Among other allegations, the Goldens alleged that the assignment violated the PSA, which prohibited the transfer of securitized notes in or out of the trust after July 5, 2006. The district court dismissed their complaint on Well's Fargo's motion to dismiss.
On appeal, the 5th Circuit said that its recent decision in Reinagel v. Deutsche Bank Nat'l Trust Co., 735 F.3d 220 (5th Cir. 2013) means that the Goldens lose their first two arguments, alleging that the assignment was void. According to the Reinagel decision, plaintiffs who are not party to the PSA cannot enforce its terms unless they are third-party beneficiaries.
The 5th Circuit went on to hold that the Goldens claim for using a fraudulent lien or claim fails, because it was not pled properly and the Goldens couldn't show that Wells Fargo intended to cause them injury.
The fourth claim for breach of contract also failed, according to the 5th Circuit, because the Goldens themselves were in breach (delinquent in payments), and "a party to a contract who is himself in default cannot maintain a suit for its breach" (citations omitted).
These types of claims are not having much luck lately at the 5th Circuit. If you really want to keep a home that is delinquent on payments, your best bet may be consider seeking a loan modification, or filing chapter 13 bankruptcy.
Do you think this decision was correct? Should homeowners be able to stop a foreclosure by challenging robo-signed documents? What is going on with the 5th Circuit on this issue?