Pamela Owen. Civil Rights. Exhibit 1 to Declaration of Jody m. Mccormick. Document 41-1

Case 8-10-77338-reg Doc 41-1 Filed 02110111 Entered 02/1011114:13:10

Mortgagee status

The Movant's failure to show that U.S. Bank holds the Note should be fatal to the

Movant's st.anding. However, even if the Movant could show that U.S. Bank is the holder of the

Note, it still would have to establish that it holds the Mortgage in order to prove that it is a

secured creditor with standing to bring th is Motion before this Court. The Movant urges the

Court to adhere to the adage that a mortgage necessarily follows the same path as the note for

which it stands as collateral. See Wells Fargo Bank, N.A. v. Perry, 875 N.Y.S.2d 853, 856 (N.Y.

Sup. Ct. 2009). In simple tenns the Movant relies on the argument that a note and mortgage are

inseparable. See Carpenter v. Longan. 83 U.S. 271, 274 (1872). While it is generally true that a

mortgage travels a parallel path with its corresponding debt obligation, the parties in this case

have adopted a process which by its very terms alters this practice \Vhere mortgages are held by

MERS as "mortgagee of record." By MERS's own account, the Note in this case was

transferred among its members, while the Mortgage remained in MERS's name. MERS ad1nits

that the very foundation of its business model as described herein requires that the Note and

Mortgage travel on divergent paths. Because the Note and Mortgage did not travel together,

Movant must prove not only that it is acting on behalf ofa valid assignee of the Note, but also

that it is acting on behalf of the valid assignee of the Mortgage.$

' MERS argues that notes and mortgages processed through the MERS System are never "separated"' because beneficial ownership of the notes and mortgages are always held by the same entity, The Court will not address that issue in this De(:ision, but leaves open the issue as to whet11er mortgages processed through the MERS syste1n are properly perfected and valid liens. See Carpenter v. Longan, 83 U.S. at 274 (finding that an assignment of the mortgage without the note is a nullity); Lancbnark Nat'l Bank v. Kesler, 216 P.3d 158, 166-67 (Kan. 2009) ("[l]n the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable").

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MERS asserts that its right to assign the Mo11gage to U.S. Bank in this case, and in what

it estimates to be literally millions of other cases, stems from three sources: the Mortgage

documents; the MERS membership agreement; and state law. In order to provide some context

to this discussion, the Court will begin its analysis \Vith an overview of mortgage and loan

processing within the MERS network of lenders as set forth in the record of this case.

ln the most com1non residential lending scenario, there are two parties to a real property

mortgage- a mortgagee, i.e., a lender, and a mortgagor, i.e., a borrower. With some nuances

and allowances for the needs of modern finance this model has been followed for hundreds of

years. The MERS business plan, as envisioned and implemented by lenders and others involved

in what has become known as the mortgage finance industry, is based in large part on amending

this traditional model and introducing a third party into the equation. MERS is, in fact, neither a

borrower nor a lender, but rather purports to be both "mortgagee of record" and a "nomitiee" for

the mortgagee. MERS was created to alleviate problems created by, what was determined by the

financial community to be, slow and burdenso1ne recording processes adopted by virtually every

state and locality. In effect the MERS system was designed to circumvent these procedures.

MERS, as envisioned by its originators, operates as a replace1nent for our traditional system of

public recordation of mortgages.

Caselaw and commentary addressing MERS's role in the mortgage recording and

foreclosure process abound. See Christopher L. Peterson, Foreclosure, S11bprin1e Mortgage

Lending, and the Mortgage Electronic Registration System, 78 U. Cin. L. Rev. 1359 (2010). ln a

2006 published opinion, the New York Court of Appeals described MERS system as follows:

In 1993, the MERS systen1 was created by several large participants in the real estate 1nortgage industry to track ownership interests in residential mortgages.

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Case 8-10-77338-reg Doc 41-1 Filed 02/10/11 Entered 02/10/1114:13:10

Mortgage lenders and other entities, known as MERS members, subscribe to the MERS system and pay annual fees for the electronic processing and tracking of ownership and transfers of mortgages. Me1nbers contractually agree to appoint MERS to act as their corninon agent on all mortgages they register in the MERS system.

The initial MERS mortgage is recorded in the County Clerk's office with 'Mortgage Electronic Registration Systems, Inc.' named as the lender's nominee or mortgagee of record on the instrument During the lifetime of the mortgage, the beneficial ownership interest or servicing rights may be transferred among MERS members (MERS assignments). but these assignments are not publicly recorded; instead they are tracked electronically in MERS's private system. In the MERS system, the mortgagor is notified of transfers of servicing rights pursuant to the Truth in Lending Act, but not necessarily of assignments of the beneficial interest in the mortgage.

Merscorp, Inc., v. Romaine, 8 N.Y .3d 90 (N .Y. 2006) (footnotes omitted).

In the words ofMERS's legal counsel, "[t]he essence ofMERS' business is to hold legal

title to beneficial interests under mortgages and deeds of trust in the land records. The MERS®

System is designed to allow its members, which include originators, lenders, servicers, and

investors, to accurately and efficiently track transfers of servicing rights and beneficial

ownership." (MERS Memorandu1n of Law at 5). The MERS® System" ... eliminate[s] the

need for frequent, recorded assign1nents of subsequent transfers." (MERS Supplemental

Memorandum of Law at 4). "Prior to MERS, every time a Joan secured by a mortgage was sold,

the assignee would need to record the assignment to protect the security interest. If a servicing

company serviced the loan and the servicing rights were sold, - an event that could occur

multiple times during the life of a single mortgage loan - multiple assignments were recorded to

ensure that the proper servicer appeared in the land records in the County Clerk's office."

(MERS Supplemental Memorandum of Law at 4-S).

"When the beneficial interest in a Joan is sold, the promissory note is still transferred by

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Case 8-10-77338-reg Doc 41-1 Filed 02/10/11 Entered 02110/1114:13:10

an endorsement and delivery from the buyer to the seller, but MERS Members are obligated to

update the MERS® System to reflect the change in o\vnership of the pro1nissory note .... So

long as the sale of the note involves a MERS Men1ber, MERS remains the named 1nortgagee of

record, and continues to act as the mo1tgagee, as the nominee for the new beneficial owner of the

note (and MERS' Member). The seller of the note does not and need not assign the mortgage

because under the terms of that security instrument.. t-.1ERS remains the holder of title to the

mortgage, that is, the mortgagee, as the nominee for the purchaser of the note, who is then the

lender's successor and/or assign." (MERS Supplemental Memorandum ofLa\v at 6). "At all

times during this process, the original mortgage or an assignment of the mortgage to MERS

remains of record in the public land records where the security real estate is located, providing

notice of MERS's disclosed role as the agent for the MERS Me1nber lender and the lender's

successors and assigns." (Declaration of William C. Hultman, ,9).

MERS asserts that it has authority to act as agent for each and every MERS n1e111ber

which claims ownership of a note and mortgage registered in its systen1. This authority is based

not in the statutes or case law, but rather derives from the terms and conditions of a MERS

membership agreement. Those terms and conditions provide that "MERS shall serve as

mortgagee of record with respect to all such mortgage loans solely as a no1ninee, in an

administrative capacity, for the beneficial owner or owners thereof from time to time."

(Declaration of William C. Hultman, ,5). M£RS "holds the legal title to the mortgage and acts

as the agent or nominee for the MERS Member lender, or O\vner of the 1nortgage loan."

(Declaration of William C. Hultman, ,6). According to MERS, it is the "intent of the parties ...

for MERS to serve as the comn1011 nominee or agenl for MERS Member lenders and their

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Case 8-10-77338-reg Doc 41-1 Filed 02110/11 Entered 0211011114:13:10

successors and assigns." (MERS Supplemental Memorandu1n of Law at 19) (e1nphasis added by

the Court). "Because MERS holds the mortgage lien for the lender \Vho 1nay freely transfer its

interest in the note, without the need for a recorded assignment document in the land records,

MERS holds the mortgage lien for any intended tran~feree of the note." (MERS Supplemental

Memorandum of Law at 15) (emphasis added by the Court). If a MERS member subsequently

assigns the note to a non-MERS member, or if the MERS member which holds the note decides

to foreclose. only then is an assignment of the 1nortgage from MERS to the noteholder

docu1nented and recorded in the public !and records where the property is located. (Declaration

of William C. Hultman, ,12).

Before commenting on the legal effect of the MERS n1embership rules or the alleged

"common agency" agreement created among MERS n1embers, the Court will review the relevant

portions of the documents presented in this case to evaluate v.•hether the docu1nentation, on its

face, is sufficient to prove a valid assignment of the Mortgage to U.S. Bank.

The Mortgage

First Franklin is the "Lender" named in the Mortgage. With reference to MERS's role in

the transaction, the Mortgage states:

MERS is a separate corporation that is acling solely as a non1inee for Lender and Lender's successors and assigns. MERS is organized and existing under the laws of Delaware, and has an address and telephone number of P.O. Box 2026. Flint, Ml 48501-2026, tel. (888) 679 MERS. FOR PURPOSES OF RECORDING TJDS MORTGAGE, MERS IS THE MORTGAGEE OF RECORD.

(Mortgage at I (emphasis added by the Court)).

The Mortgage also purports to contain a transfer to MERS of the Borrower's (i.e., the

Page 27 of 37

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Case 8-10-77338-reg Doc 41-1 Filed 02110111 Entered 0211011114:13:10

Debtor's) rights in the subject Property as follows:

BORROWER'S TRANSFER TO LENDER OF RIGHTS IN THE PROPERTY

[The Borrower) mortgage[s], grant[s] and convey[s] the Property to MERS (solely as nominee for Lender and Lender's successors in interest) and its successors in interest subject to the terms of this Security Instrument. This means that, by signing this Security Instrument, [the Borrower is] giving Lender those rights that are stated in this Security Instrument and also those rights that Applicable Law gives to lenders who hold mortgage on real property. [The Borrower is] giving Lender these rights to protect Lender from possible losses that might result if[the Borrower] fail[s] to [comply with certain obligations under the Security Instrument and accompanying Note.]

[The Borrower] understand[s] and agree[s] that MERS holds only legal title to the rights granted by [the Borrower] in this Security Instrument, but, if necessary to comply with law or custom, MERS (as no1nineefor Lender and Lenders 's successors and assigns) has the righ1.· (A) to exerc1'.<;e any or all those rights, including, but not limited lo, the right to foreclose and sell the Property; and (BJ to take any action required of Lender including, but not lirnited to, releasing and canceling this Security Jnstrun1ent.

[The Borrower gives] MERS (solely as nominee for Lender and Lender's successors in interest), rights in the Property ...

(Mortgage at 3) (emphasis added).

The Assignment of Mortgage references the ~1ortgage and defines the "Assignor" as

'"Mers' Mortgage Electronic Registration Systems, Inc., 2150 North First Street. San Jose,

California 95131, as non1ineefor First Franklin, a division of National City Bank of IN, 2150

North First Street San Jose, California 95153." (E1nphasis added by the Court). The "Assignee""

is U.S. Bank.

Premised on the foregoing documentation, MERS argues that it had full authority to

validly execute the Assignment of Mortgage to U.S. Bank on February J, 2008, and that as of the

date the foreclosure proceeding was co1nmenced U.S. Bank held both the Note and the

Mortgage. However, without more, this Court finds that MERS's ''nominee" status and the

Page 28 of 37

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case 8-10-77338-reg Doc 41-1 Filed 02110/11 Entered 02110/1114:13:10

rights bestowed upon MERS within the Mortgage itself, are insufficient to empower MERS to

effectuate a valid assignment of mortgage.

There are several published New York state trial level decisions holding that the status of

"nominee" or "'mortgagee of record" bestowed upon MERS in the mortgage documents, by

itself, does not empower MERS to effectuate an assignment of the mortgage. These cases hold

that MERS may not validly assign a mortgage based on its nominee status, absent so1ne evidence

of specific authority to assign the mortgage. See Banko/Nev.• York v. Mulligan, No. 29399/07,

2010 WL 3339452, at *7 (N.Y. Sup. Ct. Aug. 25, 2010); One West Bank, F.S.B. v. Drayton, 910

N.Y.S.2d 857, 871 (N.Y. Sup. Ct. 2010); Bank of New Yorkv. Alderazi, 900 N.Y.S.2d 821, 824

(N.Y. Sup. Ct. 2010) (the "party who claims to be the agent of another bears the burden of

proving the agency relationship by a preponderance of the evidence"); HSBC Bank USA v.

Yeosmin, No. 34142107, 2010 WL 2089273, at '3 (N.Y. Sup. Ct May 24, 2010); HSBC Bank

USA v. Vasquez, No. 37410/07, 2009 WL 2581672, at '3 (N.Y. Sup. Ct. Aug. 21, 2010); LaSalle

Bank NA. v. Lamy, 824 N.Y.S.2d 769, 2006 WL 2251721, at '2 (N.Y. Sup. Ct. Aug. 7, 2006)

("A nominee of the owner of a note and mortgage may not effectively assign the note and

1nortgage to another for want of an ownership interest in said note and 1nortgage by the

nominee."). See also MERSv. Saunders, 2 A.3d 289, 295 (Me. 2010) ("MERS's only right is to

record the mortgage. Its designation as the 'mortgagee of record' in the document does not

change or expand that right .. "). But see US Bank, N.A. v. Flynn, 897 N.Y .S.2d 855 (N.Y. Sup.

Ct. 2010) (finding that MERS's "nominee" status and the mortgage documents give MERS

authority to assign); Cru1n v. LaSalle Bank, N.A., No. 2080110, 2009 WL 2986655, at *3 (Ala.

Civ. App., Sept. 18, 2009) (finding MERS validly assigned its and the lender's rights to

Page 29 of 37

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Case 8-10-77338-reg Doc 41-1 Filed 02110/11 Entered 02110/1114:13:10

assignee); Blau v. An1erica 's Serv;cing Co111pany, el al.. No. CV-08-773-PHX-MHM, 2009 WL

3174823, at '8 (D. Ariz. Sept. 29, 2009) (finding that assignee of MERS had standing to

foreclose).

In LaSalle Ban~ N.A. v. Bau/oute, No. 41583107, 2010 WL 3359552, at '2 (N.Y. Sup.

Aug. 26, 2010), the court analyzed the relationship between MERS and the original lender and

concluded that a nominee possesses few or no legally enforceable rights beyond those of a

principal whom the nominee serves. The court stated:

MERS ... recorded the subject mortgage as ... nominee" for FFFC. The word "nominee" is defined as "[a] person designated to act in place of another, usu. in a very limited way" or "[a] party who holds bare legal title for the benefit of others.'' (Black's Law Dictionary 1076 [8th ed 2004] ). ''This definition suggests that a nominee possesses few or no legally enforceable rights beyond those ofa principal whom the nominee serves." (Landmark National Bank v. Kesler, 289 Kan 528, 538 [2009) ). The Supren1e Court of Kansas, in Landn1ark National Bank, 289 Kan at 539, observed that:

The legal status of a nominee, then, depends on the context of the relationship of the nominee to its principal. Various courts have interpreted the relationship ofMERS and the lender as an agency relationship. See Jn re Sheridan, 2009 WL631355, at *4 (Bankr. D. Idaho. March 12, 2009) (MERS "acts not on its own account. Its capacity is representative."); Mortgage Elec. Registrations Systems, Inc. v. Southwest, 2009 Ark. 152 ---, 30 I SW3d l, 2009 WL 723182 (March 19, 2009) ("MERS, by the terms of the deed of trust, and its own stated purposes, was the lender's agent"); La Salle Naz. Bankv. La1ny, 12 Misc.3d 1191 [A), at "'2 {Sup Ct, Suffolk County 2006]) ... ("A nominee of the o\vner of a note and tnortgage may not effectively assign the note and mortgage to another for want of an ownership interest in said note and mortgage by the nominee.").

LaSalle Bank, N.A. v. Bouloute, No. 41583/07, 2010 WL 3359552, at *2; see also Bank of Nell'

York v. Alderaz;, 900 N.Y.S.2d 821, 823 (N.Y. Sup. Ct. 2010) (nominee is '"[a] person

designated to act in place of another, usually in a very limited way."') (quoting Black's Law

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Case 8-10-77338-reg Doc 41-1 Filed 02110/11 Entered 02110/1114:13:10

Dictionary)).

In LaSalle Bank, N.A. v. Bouloute the court concluded that MERS must have some

evidence of authority to assign the mortgage in order for an assignment of a mortgage by MERS

to be effective. Evidence ofMERS's authority to assign could be by way of a power of attorney

or some other document executed by the original lender. See Boufoute, 2010 WL 3359552, at

*I; Alderazi, 900 N.Y.S.2d at 823 ('"To have a proper assignment of a mortgage by an

authorized agent. a power of attorney is necessary to demonstrate how the agent is vested with

the authority to assign the mortgage.'") (quoting HSBC Bank USA, NA v. Yeasmin, 866 N.Y .S.2d

92 (N.Y. Sup. Ct. 2008)).

Other than naming MERS as "nominee", the Mortgage also provides that the Borrower

transfers legal title to the subject property to MERS, as the Lender's nominee, and acknowledges

MERS's rights to exercise certain of the Lender's rights under state law. This too, is insufficient

to bestow any authority upon MERS to assign the 111ortgage. In Bank of New York v. Alderazi,

the court found "[t]he fact that the borrower acknowledged and consented to MERS acting as

nominee of the lender has no bearing on what specific powers and authority the lender granted

MERS." Alderazi, 900 N.Y .S.2d at 824. Even if it did bestow some authority upon MERS, the

court in Alderazi found that the mortgage did not convey the specific right to assign the

mortgage.

The Court agrees with the reasoning and the analysis in Bouloute and Alderazi, and the

other cases cited herein and finds that the Mortgage, by naming MERS a "nominee," and/or

"mortgagee of record'' did not bestow authority upon MERS to assign the Mortgage.

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The MERS membership rules

According to MERS, in addition to the alleged authority granted to it in the Mortgage

itself, the documentation of the Assignment of Mortgage comports with all the legal

requirements of agency when read in conjunction with the overall MERS System. MERS's

argutnent requires that this Court disregard the specific words of the Assignment of Mortgage or,

at the very least, interpret the Assignment in light of the overall MERS System of tracking the

beneficial interests in mortgage securities. MERS urges the Court to look beyond the four

comers of the Mortgage and take into consideration the agency relationship created by the

agreements entered into by the lenders participating in the MERS Syste1n, including their

agreement to be bound by the tenns and conditions of membership.

MERS has asserted that each of its member/lenders agrees to appoint MERS to act as its

agent. In tltis particular case, the Treasurer ofMERS, William C. Hultman, df:clared under

penalty of perjury that "pursuant to the MERS' s Rules of Membership, Rule 2, Section 5 ... First

Franklin appointed MERS to act as its agent to hold the Mortgage as nominee on First Franklin's

behalf, and on behalf of First Franklin's successors and assigns." (Affirmation of William C.

Hultman, ~7). However, Section S of Rule 2, which '~as attached to the Hultman Affim1ation as

an exhibit, cont.ains no explicit reference to the creation of an agency or nominee relationship.

Consistent with this failure to explicitly refer to the creation of an agency agreement, the rules of

membership do not grant any clear authority to MERS to take any action with respect to the

mortgages held by MERS members, including but not limited to executing assign1nents. The

rules of membership do require that MERS members name MERS as "mortgagee of record" and

that MERS appears in the public land records as such. Section 6 of Rule 2 states that "MERS

Page 32 of 37 EXHIBIT =-=---.... PAGE 3 fa- OF .l2_



shall at all tilncs comply with the instructions of the holder of mortgage loan promissory notes,''

but this does not confer any specific power or authority to MERS.

State law

Under New York agency Jaws, an agency relationship can be created by a "1nanifestation

of consent by one person to another that the other shall act on his behalf and subject to his

control, and the consent by the other to act." Meiselv. Grunberg, 65\ F.Supp.2d 98, 110

(S.D.N.Y. 2009) (citing N.Y. Marine & Gen. Ins. Co. v. Trade/ine, L.L.C., 266F.3dI12, 122 (2d

Cir.2001)).

'Such authority to act for a principal may be actual or apparent.' ... Actual authority arises from a direct 1nanifestation of consent from the principal to the agent ..... The existence of actual authority 'depends upon the actual interaction between the putative principal and agent, not on any perception a third party may have of the relationship.'

Meisel v. Grunberg, 651 F.Supp.2d at 110 (citations omitted).

Because MERS's me1nbers, the beneficial noteholders, purported to bestow upon MERS

interests in real property sufficient to authorize the assignments of mortgage, the alleged agency

relationship must be committed to writing by application of the statute of frauds. Section 5-

703(2) of the New York General Obligations Law states that:

An estate or interest in real property, other than a lease for a term not exceeding one year, or any trust or power, over or concerning real property, or in any manner relating thereto, cannot be created, granted, assigned, surrendered or declared, unless by act or operation of law, or by a deed or conveyance in writing, subscribed by the person creating, granting, assigning, surrendering or declaring the same, or by his lmvfal agent, thereunto aulhorized by writing.

See N.Y. Gen. Oblig. Law§ 5-703(1) (McKinney 2011); Republic of Benin v. Mezei, No. 06 Civ.

870 (JGK), 2010 WL 3564270, at '3 (S.D.N.Y. Sept. 9, 2010); Urga v. Pare/, 746 N.Y.S.2d 733

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Case 8-10-77338-reg Doc 41-1 Filed 02110111 Entered 0211011114:13:10

(N.Y. App. Div. 2002) (finding that unwritten apparent authority is insufficient to satisfy the

statute of frauds) (citing Diocese of Buffalo v. McCarthy, 91 A.D.2d 1210 (41h Dept 1983)); see

also N.Y. Gen. Oblig. Law§ 5-1501(McKinney2011) ("'agent' means a person granted

authority to act as attorney-in-fact for the principal under a power of attorney ... "). MERS asks

this Court to liberally interpret the laws of agency and find that an agency agreement may take

any form "desired by the parties concerned." However, this does not free MERS fron1 the

constraints of applicable agency Jaws.

The Court finds that the record of this case is insufficient to prove that an agency

relationship exists under the laws of the state of New York between MERS and its members.

According to MERS, the principal/agent relationship ainong itself and its members is created by

the MERS rules of membership and tenns and conditions, as we!I as the Mortgage itself.

However, none of the documents expressly creates an agency relationship or even mentions the

word "agency." MERS would have this Court cobble together the documents and draw

inferences from the words contained in those documents. For exa1nple, MERS argues that its

agent status can be found in the Mortgage wAich states that MERS is a "no1ninee" and a

"mortgagee of record." FCowever, the fact that MERS is named "nominee" in the Mortgage is

not dispositive of the existence of an agency relationship and does not, in and of itself, give

MERS any "authority to act" See Steinbeck v. Steinbeck Heritage Foundation, No. 09-J 8360cv,

2010 WL 3995982, at '2 (2d Cir. Oct. 13, 2010) (finding that use of the words "attorney in fact"

in documents can constitute evidence of agency but finding that such labels are not dispositivc);

MERSv. Saunders, 2 A.3d 289, 295 (Me. 2010) (designation as the 'mortgagee of record' does

not qualify MERS as a "mortgagee"). MERS also relies on its rules of membership as evidence

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Case 8-10-77338-reg Doc 41-1 Filed 02/10/11 Entered 02110/1114:13:10

of the agency relationship. However, the rules Jack.any specific mention of an agency

relationship, and do not bestow upon MERS any authority to act Rather, the rules are

ambiguous as to MERS's authority to take affirmative actions with respect to 1nortgages

registered on its system.

In addition to casting itself as nominee/agent, MERS seems to argue that its role as

"mortgagee cf record" gives it the rights ofa mortgagee in its own right. MERS relies on the

definition of"mortgagee" in the New York Real Property Actions and Proceedings Law Section

1921 which states that a "mortgagee" 1vhen usr:d in the context of Section 1921, means the

"current holder of the mortgage of record ... or their agents, successors or assigns." N.Y. Real

Prop. Acts. L. § 1921 (McKinney 2011 ). The provisions of Section 1921 relate solely to the

discharge of mortgages and the Court will not apply tbat definition beyond the provisions of that

section in order to find that MERS is a "tnortgagee" \vith full authority to perforin the duties of

mortgagee in its own right. Aside from the inappropriate reliance upon the statutory definition

of"mortgd.gee," MERS's position that it can be both the mortgagee and an agent of the

mortgagee is absurd, at best.

Adding to this absurdity, it is notable in this case that the Assignment of Mortgage was

by MERS, as nominee/or First Franklin, the original lender. By the Movant's and MERS's

own admission, at the time the assignment \vas effectuated, First Franklin no longer held any

interest in the Note. Both the Movant and MERS have represented to the Court that subsequent

to the origination of the loan, the Note was assigned, through the MERS tracking systen1, from

First Franklin to Aurora. and then fro1n Aurora to U.S. Bank. Accordingly, at the time that

MERS, as nominee of First f'ranklin, assigned the interest in the Mortgage to U.S. Bank, U.S.

Page 35 of 37 EXHIBIT :-....._ __ PAGE 35 OF 31 --



Bank allegedly already held the Note and it was at U.S. Bank's direction, not First Franklin's,

that the Mortgage was assigned to U.S. Bank. Said another way, when MERS assigned the

Mortgage to U.S. Bank on First Franklin's behalf, it took its direction from U.S. Bank, not First

Franklin, to provide documentation of an assignn1ent fron1 an entity that no longer had any rights

to the Note or the Mortgage. The documentation provided to the Court in this case (and the

Court has no reason to believe that any further documentation exists), is stunningly inconsistent

with what the parties define as the facts of this case.

However, even if MERS had assigned the Mortgage acting on behalf of the entity which

held the Note at the time of the assignment, this Court finds that MERS did not have authority,

as "nominee" or agent, to assign the Mortgage absent a showing that it was given specific

written directions by its principal.

This Court finds that MERS's theory that it can act as a "common agent" for undisclosed

principals is not supported by the law. The relationship between MERS and its lenders and its

distortion of its alleged "nominee" status was appropriately described by the Supreme Court of

Kansas as follows: "The parties appear to have defined the word [nominee) in much the same

way that the blind men of Indian legend described an elephant- their description depended on

which part they were touching at any given time." Landmark Nat 'I Bank v. Kesler, 216 P .3d

158, 166-67 (Kan. 2010).

Conclusion

for all of the foregoing reasons. the Court finds that the Motion in this case should be

granted. However, in all future cases which involve MERS, the moving party must show that it

Page 36 of 37 EXHIBIT__. __

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validly holds both the mortgage and the underlying note in order to prove standing be fore this

Court.

Dated: Central Islip, New York February I 0, 2011 I.fl Robert E. Grossman

Hon. Robert E. Grossman United States Bankruptcy Judge

Page 37 of 37 EXHIBIT_'--_ PAGE 3'70F37


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STATE OF WASHINGTON KING COUNTY SUPERIOR COURT

9 STATEOFWASHINGTON,

NO.

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Plaintiff, v.

RECONTRUST COMPANY, N.A.,

Defendant.

COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF UNDER THE CONSUMER PROTECTION ACT

Tue Plaintiff, State of Washington, by and tluough its attorneys Robert M. McKenna,

Attorney General, and James T. Sugarman, Assistant Attomey General, brings this action

16 against the defendant named below. The State alleges the following on infonnation and belief;

17 I. PLAINTIFF

18 1.1 ThePlaintiffistheStateofWashington.

19 1.2 The Attorney General is authorized to commence this action pursuant to

20 RCW 19.86.080 and RCW 19.86.140.

21 II. DEFENDANT

22 2.1 Defendant RECONTRUST COMPANY, N.A, (ReconTrust or Defendant) is a

23 for-profit business entity permitted by the U.S. Office of the Comptroller of the Currency as a

24 nondepository, uninsured, limited~purpose national trust bank.

25 2.2 ReconTrust is a California corporation and is a wholly-owned subsidiary of

26 Bank of America, N.A. EXHIBIT --:2-::;__+-~= ~· PAGE I OF 'V

~\YCE•••, mATTilllFO!Wv'"~ - ~

I LE'. illDG\CTCOP'fOfTII ATIORNEYGENERAL~f'\'.A:S~!NGTON TH • Consvnicr Protec:uon DiY1S1on

BOO flfthAvenua, SUitclOOO _.- ~ Sellnle, WA 911~-llll ~for ~ (2<16)464-774$

COMPLAINT - I

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1 2.3 ReconTrust forecloses 19ans serviced by Bank of America, N.A. and its wholly-

2 owned subsidiary, BAC Home Loans Servicing, L.P.

3 2.4 ReconTrust claims CT Corporation, 1801 West Bay Drive NW, Suite 206,

4 Olympia, WA 98502 as its sole registered agent for service of process.

5 2.5 ReconTrust claims CT Corporation, 1801 West Bay Drive NW, Suite 206,

6 Olympia, WA 98502 as its sole "physical presence" in the State of Washington pursuant to

7 RCW 61.24.030(6).

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2.6

2.7

ReconTrust is acting as a foreclosure trustee in the State of Washington.

Foreclosure trustees are responsible for conducting nonjudicial foreclosures,

10 called trustee's sales, in accordance with the Deed of Trust Act, RCW 61.24 er al, and the

11 tenns of the mortgage transaction documents.

12 2.8 Foreclosure trustees must perform their duties in good faith and owe that duty to

13 the borrower and the beneficiary'. RCW 61.24.010(4). A foreclosure trustee may not be the

14 same entity as the beneTiciary. RCW 61.24.020.

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16 3.1

III. JURISDICTION AND VENUE

The State files this complaint and institutes these proceedings under the

17 provisions of the Consumer Protection Act, RCW 19.86.

18 3.2 The Defendant bas engaged in the condu.ct set forth in this complaint in King

19 County and elsewhere in the state of Washington.

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4.1

Venue is proper in King County pursuant to RCW 4.12.020 and RCW 4.12.025.

IV. SUMMARY OF ENFORCEMENT ACTION

Defendant is now, and has been at all times relevant to this lawsuit, acting as a

23 trustee on thousands of deeds of trust throughout the State of Washington and is thus engaged

24 in trade or conunercc within the meaning ofRCW 19.86,020.

25 4.2 Homeowners facing foreclosure are captive to ReconTrust's trustee services.

26 Homeowners cannot shop around for another trustee, they cannot negotiate the cost of

COMPLAINT • 2 ATTORNEY OENERAL OF WASHINGTON Consumer l'rot~cti011 OiviGioct-vHIBrT 9 soo Fifth Awnuc., s~1111200>CA tr :

Senll!e, WA 98104·3188 <') j """,.,.m, PAGE ~ OF .J1J_


1 ReconTrust's services or the co~t of the third party services ReconTrust chooses, and they

2 cannot direct ReconTrust's activities. This vulnerable situation is compounded for

3 homeowners by the complexities of the foreclosure process, by the homeowners' highly

4 distressed financial circumstances, and the high stakes nature of the proceeding. Foreclosure

5 sales are usually irreversible. Any defense must be asse11ed before the sale occun;. Because

6 courts are not involved in foreclosures, homeowners' only protections are the detailed

7 procedures and requirements contained in the Deed of Trust Act, and a neutral foreclosure

8 trustee who insures those procedures arc followed to the Jetter.

9 4.3 ReconTrust is a foreclosure trustee that has failed to comply with the procedures

10 of the Deed of Trust Act in each and every foreclosure it has conducted since at least June 12,

11 2008, and it is a trustee who is wholly owned by the Joan servicer seeking to foreclose.

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13 5.1

v. FACTS

ReconTrust regulurly acts as a successor trustee for deeds of trust secured by

14 residential real property located in the State of Washington.

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5.2 ReconTrust has been at all times relevant to this action in competition with

others engaged in similar activities in the state of Washington and engages in the acts below as

a matter of practice.

ReconTrust Fails to Maintain an Office in the State of Washington as Required by Law.

5.3 Defendant has failed to maintain the statutorily-required physical presence in

the State of Washington, with telephone service at that address. RCW 61.24.030(6).

COMPLAINT· 3

a. By issuing Notices of Trustee's Sal~ conducting trustee's sales, and

issuing Trustee's Deeds without maintaining the required physical

presence, Defendant has misrepresented its authority to issue such

notices, conduct trustee's sales, and issue Trustee's Deeds.

ATTORNEYOENERALOFW~ '] COllSW!IU Prolection Dhisio (8 IT q-800 Fifth Avenue. Suite · toFmt ·~-.. WA 9Bl<H-3lU PAGE 3 OF I

(206} 464-7745 -


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b. By conducting the nonjudicial foreclosure process while failing to

maintain a physical presence with telephone service, the Defendant has

unfairly: i) prevented homeowners from having face-to-face contact with

their trustee, ii) prevented homeowners from gaining responses to time

sensitive foreclosure issues, iii) prevented homeowners from physically

presenting time-sensitive payments to stop a foreclosure, iv) prevented

homeowners from delivering payments in a inanner that insures that the

beneficiary can not deny pay1nent was made, v) prevented homeowners

from physically presenting mortgage-related documents in a manner that

will stop the beneficiary from claiming the bomeowner failed to provide

such documents, and vi) potentially clouded title to homes it has sold at

auction.

ReconTrust Fails to Conduct Foreclosures as a Neutral Third Party With a Duty of Go-od Faith Towards the Borro\vcr and the Lepder.

5.4 ~ a trustee on deeds of trust, Defendant has a duty of good faith tov.'ards the

borrowe; and granter on the deed of trust, as well as to the beneficiary.

5.5 ReconTrust has agreements with beneficiaries and/or their agents to the effect

that ReconTrust will only cancel or continue nonpjudicial foreclosure sales if the beneficiary or

agent approves.

5.6 When borrowers have asked ReconTrust to cancel a sale date because of issues

they believe require cancellation or continuance of the sale, ReconTrust has told borrowers that

it will not or cannot stop a sale without the permission of the lender or servicer.

5.7 ReconTrust has committed unfair and deceptive acts at1d violated its duty of

good faith by noticing and conducting trustee sales while failing to perform statutory requisites

for conducting such sales as contained in the Deed of Trust Act, RCW 61.24.030 and .040.

Those failures include:

COMPLAINT • 4


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COMPLAINT· 5

a. Failing to maintain a physical presence with telephone service at that

address.

b. . Failing to identify the actual owner of the Promissory Note in the Notice

of Default.

c. Failing to obtain proof that the beneficiary is the owner of the

promissory note secured by the deed of trust.

d. Failing to clearly and conspicuously identify in the Notice of Trustee's

Sale the defaults, other than nonpayment, that entitle the beneficiary to

foreclose and which may be cured by the borrower. lnstead,

ReconTrust's Notices identify every possible default and demand those

defaults be cured whether those defaults have actually occurred or not.

e. Conducting foreclosure sales in non-public places such as the garage of

a private office building and a hotel ballroom.

f. Creating or using documents essential to a valid trustee's sale, or to a

reconveyance of the deed of trust, that are improperly executed,

notarized or sworn to, including: i) documents that were not signed in

front of a notary, ii) documents that had both the signature and

notarization applied mechanically while claiming that the signatory

personally appeared before the notary, iii) using signatories who

simultaneously claim to be officers of the beneficiary, ofMERS, and of

a servicer, all while actually being employees of ReconTrust, and

iv) executing documents without direct knowledge of the facts contained

therein.

g. Conducting joint prosecution and/or defense of legal claims with the

beneficiary or its agent on matters related to its duty of good faith to the

borrower.

ATIORNEYGENERALOFWA~/R~ ComrumerPron:ction Divisio MltlilT OJ... 800 Fi fib Aven.ie, SuiLC _;:;_ __ -i,-

Se1nlc, WA 981().1.3\SS PAGE i;::: Qf ( Oi' ('206)~61-774S ~ ~


1 5.8 Homeowners have the right to stop a tbreclosure by paying an amount (the

2 ''reinstatement aniount") set by staMe and itemized by the foreclosure trustee.

3 RCW 61.24.090.

4 5.9 The Deed of Trust Act 1imits the reinstatement amount to the following charges:

5 arrearagcs on the loan; expenses "actually incurred" by the trustee to enforce the note; a

6 reasonable trustee's fee; a reasonable attorney's fee; and, the costs of l'ecording a notice of

7 discontinuance of the foreclosure. RCW 61.24.090 (!)(a) and (b).

8 5.10 Defendant bas failed to properly itemize and/or misrepresented the

9 reinstatement amount by, including but not limited to, overcharging for recording fees, posting

10 fees, and mailing fees.

11 5.11 By demanding inaccurate amounts and failing to properly itemize amounts,

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Defendant has prevented borrowers from determining whether fees are reasonable, has

overcharged borrowers and has prevented borrowers from curing their default within the

statutory guidelines for reinstatement.

ReconTrust Conceals or Misrepresents the Identity of the Actual Owner of the Debt.

5.12 Defendant systematically conceals, 1nisrepresents or inaccurately diwlges the

true parties to the mortgage transaction in its foreclosure notices and related documents.

COMPLAINT - 6

a. ReconTrust accepts and records in county land records Appointments of

Successor Trustee from _purported beneficiaries such as Bank of

America, NA, knowing, or duty-bound to know, that they are not the

holders of the loans and are therefore not beneficiaries under the Deed of

Trust Act.

b. In Notices of Default, ReconTrust misrepresents the owner of the

Promissory Note by only naming the servicer, such as BAC Home

Loans Servicing, LP, when the actual owner is a securitization trust.

ATTORNEYOENERALOfWASlll!IU[tlBIT ~ CDnaumi:r Protection DivisidiJ\fl I I

BOO Fifth Avenu~ Suite 200

""'''WA""'"'" ~AGE (p OF { (206) ~64-1745 -


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COMPLAINT· 7

Defendant does not identify the actual owner anywhere on the Notices

of Default. The Deed of Trust Act requires ReconTrust to identify both

the owner of the note and the servicer of the note, with their respective

addresses, as well as the servicer's phone number, on each N'Otice of

Default. RCW 61.24.030(8)0).

c. In a fonn document with the title "Important Legal Notice" ReconTrust

claims that BAC Home Loans Servicing, LP is the "Credito! to whom

· the debt is owed" when Defendant knows, or should know, that BAC is

not the creditor to whom the debt is owed.

d. In Notices of Trustee's Sale ReconTrust claims that the current

beneficiary is "BAC Home Loans Servicing, LP FKA Countrywide

Home Loans Servicing f,P, (BAC)", or "Bank of America, N.A,

Successor by Merger to BAC Home Loans Servicing, LP FKA

Countrywide Home Loans Servicing LP", when Defendant knows or

should know that these entities are loan servicers and not benefici8J.ies of

the deed of trust. In some Notices of Trustee's Sale, Defendant fails to

name any cun-ent beneficiary.

e. In Notices of Trustee's Sale RcconTrost claims that the deed of trust

secures an obligation in favor of Mortgage Electronic Registration

System.s, Inc, (MERS) as beneficiary, when Defendant knows or should

know that MERS is never the party to whom the obligation is owed.

f. In its Trustee's Deeds Recon'frust claims that the promissory note was

executed in favor of MERS when MERS never appears in promissory

notes and is never the party to be repaid.

g. In its Trustee's Deeds ReconTrust claims that BAC Home Loans

Servicing, LP FKA Countrywide Haine Loans Servicing LP, was "the

ATIORNEYGENERALOFWASHING'fON J) i COl1$Ulll~J Pro\~lion Division EXHIBIT ~ I ~00 Fiflh Avenue, Sui111 2000 ~le, WA. 98104-3188 =

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bolder of the indebtedness secured by the Deed of Trust" at the tlJ:ne it

requested that the Defendant foreclose when Defendant knew or should

have known BAC.was not the holder of the indebtednesS. v

ReconTrust's Trustee's Deeds Contain Material Misrepresentations.

5 5.13 ReconTrust's duty of. good faith includes creating and recording a Trustee's

6 Deed after the foreclosure sale which transfers the property from the h01neowner to the highest

7 bidder at the foreclosure auction.

8 5.14 The Trustee's Deed must recite facts showing that the sale was conducted in

9 compliance with the specific requirements of the Deed of Tn)St Act so that the successful

JD bidder at the sale may rely on these recitals as conclusive evidence the Act was followed, and

l 1 clear title is delivered. RCW 61.24.040(7).

12 5.15 ReconTrust's Trustee's Deeds claim that it has complied with every provision

13 of the Deed of Trust Act when ReconTrust does not comply with every provision of that Act

14 ReconTrust believes the Deed of Trust Act is preempted by federal law and therefore

15 consciously does not comply with provisions of the Act

16 5.16 ReconTrust's Trustee's Deeds claim that copies of the Note were served on the

17 homeowner when Defendant knew or should have known that copies of the Note were not

18 delivered to the homeowner.

19 5.17 ReconTrust's Trustee's Deeds make contradictory assertions regarding a

20 material fact of the trustee's sale: whether the transaction was sold to the highest bidder for

21 cash or whether it was a "credit bid" where the owner of the debt bid the amount owing in

22 satisfaction of the debt. This distinction has in1portant ranlifications regarding titl~ excise tax

23 consequences, and whether a void foreclosure can be set aside.

24 5.18 Defendant's failures to abide by the Deed of Trust Act have concealed material

25 infonnation needed by homeowoers to assert rights and defenses stemming from their loan

26 transaction, to meaningfully negotiate the tenns of a loan modification, to exercise their

CbM'.PLAINT - B ATTORNEY GENERAL OP WASHINGTON !') \

c~-""'°"''"' EXHIBITM' aoo Fiflh Awn~.s~ite :zooo Seaal<!, WA 98104..JI 88 n'AGE ,,.

(206)464-7145 r. ---2- OF l I


1 statutory right to reinstate their mortgage, to cure their defaults, and to postpone or stop a

2 foreclosure sale.

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4 A.

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VI. CAUSES OF ACTION

Misrepresentations

6.1 In the course of conducting its business Defendant made numerous

6 misreptesentations and failed to disclose material terms as alleged in paragraphs 1.1 through 5.18.

7 Such conduct constitutes unfair or deceptive acts or practices in trade or commerce, and/or unfair

8 methods of competition in violation ofRCW 19.86.020, is contrary to the public interest, and is

9 not reasonable in relation to the development and preservation of business.

10 B.

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Unfair Practices

6.2 In the course of conducting its business DefendWlt engaged in numerous unfair

12 acts and practices as alleged in paragraphs 1.1 through 5.18. Such conduct constitutes unfair

13 practices and violates RCW 19.86.020, is contrary to the public interest, and is not reasonable in

14 relation to the development and preservation of business.

15 VU. PRAYER FOR RELIEF

16 WHEREFORE, Plaintiff: State of Washington, prays for relief as follows:

17 7.1 That the Court adjudge and decree that the Defendant has engaged in the conduct

18 complained of herein.

19 7.2 That the Court adjudge and decree that the conduct complained of constitutes

20 unfair or deceptive acts and practices and an unfair method of competition and is unJawful in

21 violation of the Consumer Protection Act, Chapter 19.86 RCW.

22 7.3 That the Court issue a permanent injunction enjollring and restraining the

23 Defendant, and its representatives, sucCessors, assigns, officers, agents, servants, employees, and

24 all other persons acting or claiming to act for, on behalf of, or in active concert or participation

25 with the Defendant, from continuing or engaging in the unlawful conduct complained of herein.

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COMPLAINT~ 9 A ITORNEY GENERAL OF WASKINOTON CPllSUmu rrotcctlM Divisi9ivHIBIT ') 800 Fifth Avenue, Suite 2llCllA -~tJ'-o._ __ _,...

See.tile, WA 9810o\.J\S8 ,

~"""·"" PAGE___:]_ OF jQi_ '


1 7.4 That the Court assess civil penalties, pursuant to RCW 19.86.140, of up to two

2 thousand dollars ($2,000) per violation against the Defendant for each and every violation of

3 RCW 19.86.020 caused by the conduct complained of herein. '

4 7.5 That the Court make such orders pursuant to RCW 19.86.080 as it deems

5 appropriate to provide for restitution to consumers of money or property acqWred by the

6 Defendant as a result of the conduct complained of herein.

7 7.6 That the Court make such orders pursuant to RCW 19.86.080 to provide that the

8 plaintiff~ State of Washington, have and recover from the Defendant the costs of this action,

9 including reasonable attorneys' fees.

10 7.7 For such other relief as the Court may deem just and proper.

11 DATED this fi'1'tdayof rfl!fwf=, 2011.

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COMPLAINT- 10

ROBERT M. MCKENNA Attorney General

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A ITORNEY OENERAL OF W ASHlNGTON Consumerl'fcl1ectian DiliisicmVHIBIT '1 aoo Fiftll Avenue, Sui1<120C&" _,..,,,-..,_ _ __,_

""'"'· w• ""'°''"p·'GE ro o r 11,· {106)464-7145 I"\ _ F ~


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Case 2:11-cv-01460-JLR Document 17 Filed 08/20/12 Page 1 of 13

case 2:11-cv-01460-JLR Document 16 Filed 08114112 Page 1of13

11111111111 DIR Ulll lllU 11111111111101 1 mllll IH Hm 111IUI111 IHI ll-CV-Ol460-0RD

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

STATE OF WASHINGTON, No. 2:11-cv-J460

CONSENT DECREE Plaintiff,

v.

RECONTRUST COMPANY, N.A.,

Defcndanc

L JUDGMENT SUMMARY

1.1

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Judgment Creditor

Judgment Debtor

Principal Judgment Amowrt

Post Judgment lntereot JWe:

Attorneys for Judgment-Creditor.

.Aitomcys for Judgment Debtor:

State of Wasbing100

ReccmTrust Company, NA

SJ,090,000

12% per annum

James T. Sngannan. . Assistant Attorney General

Johns. Devlin. Ill Lane1 Powell, PC·

Plaintiff State of Washington, having oondootod "" Investigation 8lld commenced

this action pursuant to RCW 19.86, tho Consumer Protection Act ("CPA"); and

ATl'ORNEY OiiNERAL Oll WASHIW<l"l'Oll' c~~Dhiskin MIO Fitlh.Avcl\llC', Sullll 2000

se1nle, WA 9ll04-JIJI (2.06} <164-7145

EXHIBIT _,_.3,___, .. PAGE I OF 13 -- 3


Case 2:11-cv-01460-JLR Document 17 Filed 08/20/12 Page 2at13

Case 2:11-cv-01460-JLR Document 16 Filed 08/14/12 Page 2 at 13

1.8 Defendant ReconTnist Company, National Association ("ReconTrust''), a Califor-

2 nir. eoiporation, having been served with the Summons and Complaint; and Washington., appear-

3 · ing by and through its attorneys, Robert M. M~ Attomey Gener~ and James T. Suganmm,

4 Assistant Attorney General; .00 Defendant, appearmg by and through !ts attorney John S. Devlin,

5 lll, Lane, Powell, PC; and

6 1.9 Washington fUld Defendant having agreed on a basis for the settlement of the mat-

7 tors alleged in the Complaint and to the ontry of this CoD3Clll Decree against Defendant Without

8 the need for trial or adjudication of any issue of law or fact; and

9 1.10 Defendant. by entering into thi!'! C~t Decree, does not admit the allegations of

IO the Complaint other than thOsc facts deemed necessary to the Jurisdiction of this Court; and

11 1.11 Washington and Defendant agree this c;onsent Decree does not constitute evi-

12 dence o,r an admission regarding the existence or non-existence of any issue, :fact. or violation of

13 any Jaw alleged by Washington; and·

14 1.12 Defendant recognizes and states this Consent Decree is entered into v<1luntarily

1 S and that no promises, rep1-esentations, or threats have been mftde by the Attorney General's Office

16 or any member. officer, agent, or representative thereof 10 induce it to enter into this Consent De-

17 cree. except for the promises' and representations provided herein; and

18 1.13 Defendant waivCs any right it may Ii.ave to appeal frQm this Consent Deeree or to

19 · otherwise contest the v~dity of tliis Consent Decree; and

20 1.14 Defendall1 further agrees this Court shall retain jurisdicti~ of this action and ju~

21 risclictlon over Defendant for the purpose of Implementing and enforcing the temis and conditions

22 of this C~ Decree and for all other purposes related to this matter; and

23 1.15 Defendant further agrees its payments made or due pursuant to this Consent De~

24 cree Ille not amenable to discharge in bankruptcy and it shall not seek or wpport its discharge in

25 bankruptcy, nor oppose its being determined not amenable to discharge in bankruptcy; and.

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CONSENT DECREB 2 ATTORNEY OENERAL Of WASHIHOTON Consainu Plotrdlo.n D!Yblon &DO fifth Avenue. Suitt lOOO

Se.Ille. WA 9'104·3188 (106)464•7745

EXHIBIT 3 ~"---........

PAGE ~OFI?


Case 2:11-cv-01460-JLR Document l7 Filed 08120112 Page 3 of 13

Case 2:11-cv-01460-JLR Document 16 Filed 08114112 Page 3 of 13

I 1.16 Defendant further agrees its payments made or due pursuant to this Consent De·

2 cree are not prefereatial transfers of assets and it shall not make nor support arguments to the con-

3 trary in bankruptcy court.or elsewhere.

4 The Court. finding no just reason for delay;

5 NOW, TBE.REFORE, it is h=by ORDERED, ADJUDGED, AND DECREED as fol-

6 lows:

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n. GENERAL

2.1 This Caurt has jurisdiction of the subject matter of this action and of the parties.

2.2 This Consent Decree or the fact of its entry does not consti~ evidence or an ad-

mission by any party regarding the existence or non-existence of any issue, fact, or violation

of any law alleged by Washington. To the contrary, Defcn.dan.t has denied and continues to deny

8ny and all wrongdoing of any kind whatsoever and retains, and does not waive, any and all de.

fenses Defendant may have with respect to such mattefs.

2.3 This Consent Decree fully Md fmally resolves and forever discharges all claims

and couses of oction Wider the CPA and tho Deeds of Trust Act that the State of WesblngtOn has

filed or may in the fulUre file against ReconTrust arising out of or relating to the facts and matters

described in the Complaint. except that RcconTrust's material failure to comply with this Consent

Deeree s1m1l pemiit the Attomey General ofWashiogton to take such further action against Re·

oonTrusl es provided for herein.

Ill. INJUNCTION

3.1 The iajunctive provisions of this Consent Decree shall appJy tG Defendant solely

in its capacity aS foreclosw;c trustee and to its SlJ?Cessors and assigns.

23 3.2 Dofendent represents that it is no longer dojng busines6 as a foreclosure trustee

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under docds of 1?ust with respect t<> property looated wi- the State of W ashlngton, ••ocpt to the

extent that such property has already been subject to a foreclomre sale and Defendant is engaged

in post.foreclosure activities.

CONSENT DECREE 3 A.TIOIUEY G5NERAL OF WASHil'ffnON CODllKllCr~ Divllkln 800 Fifth A¥mll0. Suitt 1000

S.:llltle, WA !181044118 (206) 464-774S

EXHIBIT-"'3'--...._ PAGE~ OF .Ll_


Case 2:11-cv-01460-JLR Document 17 Filed 08/20/12 Page 4 ot 13

Case 2:11-cv-01460-JLR Document 16 Filed 08/14/12 Page 4 ot 13

1 3.3 If at 811Y time in the future .Defendant .returns to operating as a foreclosure trustee

2 in the.state of Washington, it shall not conduct non-judicial foreclosure proceedings involving

l residential property unless it:

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CONSENT DECREE

Maintains a physical presence and street address where personal service

of process may be made, with telephone service at that address. For pur

pose! of this Consent Decree only. physjcal presence in this context means

maintaining an office-that:

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. iii.

iv.

v.

iS within the geographic boundaries of the state of Washington;

is open during noimal business hours;

is staffed by a perSon or persons capable of responding to a.borrow

er's or grantor's questions concerning a non-judicial foreclosure

and directing the borrowet or grantor to another person or persons

capable of responding to questions conceming"the borrower's de-

.faul~

is autbarized to accept payments of the amount necessary to reins

tate the note and deed of trust or to direct the borrower to another

person or persons (whether located in the State of Washington or

otherwise) capable of reasonably promptly accep1log S11ch pay

ments, provided that directing a borrowef out.of-state does not pre

judi~e the borrOwer's right to reinstate their tom; and

is authori.1.ed, where appropriate and where warranted by the facts,

to postpone, reschedule or cancel foreclosure sales or to direct the

borrower to another person or persons (whether located in the State

of Washington or otherwise) capable of reasonably promptly, where

appropriate and where wamm.ted by the facts., postponing, mschc

duling or canc~ling foreclosure sales.

4 ATI'ORNEY OENERAL OF WASHINGTON COfll;umtr Protee:Lioo Divisklll 100 i'iftbAwnuc:,SublOOO

Se.We. WA !i111Q4.llll (206)464-7745

EXHIBIT ~-3:'--'-PAGE J OF 1? -


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12

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Case 2:11-cv-01460-JLR Document 17 Filed 08/20/12 Page 5of13


b.

c.

d

••

f,

CONSENT DECREE

Discloses, in notices required by the Deed of'frust Act, including notices

of foreclosure and notices of trustee's sale." but excluding notic.es of default,

the street address and telephone number for the office that constitutes the

"Jlbysical presence" required by the Deed of Tiust Act.

Does not misidentify the owner of the p1omissocy note or other obligation

secured by the deed of trost or the entity authorized to exercise the rights of

the o'Wller, in any notices required by the Deed of Trust Act.

Ideiltifies in the notice of default the name and actual address of the own-

er of imy promissory note or other ob~igation secured by the deed of trust,

and the name, address. and telephone number of a. party acting as ft servicer

of the obligations secured by the deed of trust.

Provides, upon the request of the deed of trust grantor or borr-0wer or

its representative, (i) copies of documentation sufficient to show the note

owner bas an enforceable interest in the mortgage or deed of trust andlot

(ii) copies of documentation sufficient to show that the entity claiming to

be the beneficiary is the owner of the promissory note; provided, however,

1hrt for purposes of this Conseu.t Judgment. a copy of the declilJe.ti.on de--

scribed in RCW 61.24.0l0(7)(a), when made in good faith and without no-

tice as to its inaccuracy, shall be deemed sufficient proof that the entity

claiming to be the beneficial')' is the owner of the promissoty note. If any

such d0CUD1ents are unavailable, Defendant shall provide documents and

sworn statements sufficient to establish the note owner's authority to en.

force the secUTity interest.

Ensurei that any demand for fees or response to a reinstatement amount re-

quest is accurate and contains only actual costs and fees incurred and that

5 ATIORNBYGENERAL OF WASHINUTON ~r P10Wlllon DifldOll IOOFJ8h A\'flllli!, Sui~1.060

Seattlc, WA 911K.:H88 (206)464-774~ 3

EXHIBIT __ _,__

PAGE 2:._ OF .Jj_


1

2

3

4

5

6

7

8

9

10



g.

such demand or amount is authorized by a term of the promissoey

note and/or deed of trust and is not pf?hlOited by the Deed of Trust Act.

Acts cansist.ent with its statutocy duty of good faith toward the borrower,

beneficiwy and grantor and its duty to act independentiy when eoforcing

the deed of trust provisions. For purposes of this Consent Judgment only,

h l• a breach of the duty of geed faith to "1llor into an agroement with a

note owner, beneficiary Or its agent wherein Defendant agrees to stop or

postpone a foreclosure only when. approved by the noteowner, beneficiary

or 8$ent, or to otherwise defer solely to a single party when acting as a

trustee.

11 3.4 Defendam may not act es foreclosure trustee where it is also the beneficiary of the

12 deed of trust.

13 3.5 Defen®nt may not describe in its notice of trustee's sale defaults that may have,

14 but did not actually, occur.

15 3.6 Defendant shall immediately cease operating as a foreclosure ttustee with respect

16

17

18

19

20

21

22

23

24

25

26

to propert). in the State of Washington until it is in compliance with the requirements: of the

Washington Deed of Trust Act. RCW 61.24, et seq.; provided, however, that Defendant may coo

tinue to engage in Lawful post-sale activities descnbed in Paragraph 3.2, above, fur properties that

have been sold at foreclosure prior to the entry of this Order. Defendant sball infonn its respec

tive directors, successors1 assigns. officers, and managemen1 leve1 employees having responsibili·

ties with respect to the subject matter of this Consent Decree, by announcing this Consent Decree

to them and by making its tenns and conditions available to them. IV. MONETARYPAYMENT

4.1 Pursuant to RCW 19;86.080, Weshingt.on shall recover and Defendant shall pay

the Plaintiff the am.O)lilt of $1,0901000 for costs and reasonable attom.ey•s .fees incurred by Wash

ington in pursuing this matter, for. monitoring and potential enforceaient of this Consent Decree,

and for ~e enforcement of RCW t 9.86. Upon payment of this amount to Washington. Bank CONSENT DECREE ' ATI'OJUIBY GBNEIW. OF WASfllMOTON

Calsumer J'fOllecliOD Di'rii!Clll 800 'Fifth AVIAllO, Sulti 1000

SMt\11, WA !illlD4-3\18

. "WiiBif 3 ~----PAGE _h_ OF ( 3 -


Case 2:11-cv-01460-JLR Document 17 Filed 08120112 Page 7of13

Case 2:11-cv·0.1460-JLR Document 16 Filed 08114112 Page 7 of 13

t of Amcrlca Corporation and its affiliated entiti~ shall receive credit in the amount ofSl)0~,000

2 against _any obligations to make cash payments to the State of Washington pursuant

3 -to a COllSeDSUal settlement of1hc cuacnt Jllultistate loan-servicing related investigation by the Of-

4 fice of the Attomoy General.

S 4.2 ln any successful action to oillorce this C1JDScnt Decree against Defendant. Defen-

6 dant shall bear Washington's reasonable costs, including reasonable attorneys' fees.

7 4,3 Defendant's failure to pay attorneys' fees and costs tri Washington as required

8 by this Consent Decree shall be a msterial breach of the Consent Decree.

9 v. TERMS OF PAYMENT

10 S.1 Within 30 days of entry oftbis Consent Decree, or at such other time as agreed to

It by Washington in writing, Defendant shall pay a rota! of$1,090,000 fD the State of Washington.

12 hterest shall aocrue at the rate of twelve percent (JPAt) per annum until such payment is made in

t3 full

14 · 5.2 Defendant shall make all payments owed pursuant to this Consent Decree by

IS

16

t7

18

bank cashier's chcclc payable to the Attorney General - State of Washington, and shall mail or

deliver such payments to the Office of 1:1ie Attorney General, Co~ Protection Division. 800 . .

lthAvenue, Suite 2000, Seattle, Washington 98t04-3188, Attention: Cynthia Lockridge, un·

less otherwise agreed to in writins by Washington.

19 5,3 ·Defendant's failure to timely make payments as required by this Consem De-

20

21

22

23

24

25

26

aee, withciuf written ~ement by Washington, sliall be a mtrterial breach of this Consent De:·

crce.

VI. ENFORCEMENT

6.1 Defendant shall be in full compliance with all requirements end obligations this

Consent Decree imposes on Defendant at the time: it is entered by the Court. other than the mone·

uny payment obligation set forth in Paragraph 4.1) _above.

CONSENT DECREE 7 ATIORNEYOEM!RALOPWASHJNGiON Cmmmllt Prolecl!oa Division IOG FilUI Av.us, Suitt 2000

5attll. WA 91!Q4..1181 (206) 4*714j

EXHIBIT 3 PAGE 7;:;--0-F -,I 3,.. -


Case 2:11Mcv-01460-JLR Document 17 Filed 08/20/12 Page 8of13

Case 2:11-cv-01460-JLR Document 16 Filed 08/14112 Page 8of13

6.2 If Defendant violates a material condition of this Consent Decree. and if Defendant

2 does not cure the violation after notice by Washington. Washington may seek the imposition of

3 additional conditions. civil penalties, restitution, injunctive relief, attorney's fees, costs and such

4 other remedies as the Court may ~ appropriate against Defendant ai an evidentimy hearing in

5 which Defentlant has on opportunity ro be bwq, if the Court find3 by a preponderance of ovi-

6 dence the1 Defendam bas violated a material condition of this Consent Decree.

1 6.3 Jurisdiction is retained by this Court for the purpose of enabling any party to this

8 Constnt Decree to apply· to the Court, to the extent permitted herein. for .enforcement of cotn·

~ pliance with this Consent Deace. to punish violations thereof, or otherwise address 1he provisions

10 of this Consent Decree.

11 6.4 Nothing in this Consent Decree shall grant any third·party beneficiary or other

12 rightS to any person .not a party to this Consent Decree. For the· -avoidance· of doubt, nothing µi

13 this Consent Decree confers any right or ability to sue to any trust grantor or borrower, nor does

,14 this Consent Decree create any obligation on the part of any party to such trust grantO? or borrow-

IS er.

16 6.5 Nothing in this Consent Decree shall be construed to limit or bar any other go-

1 '1 vemmeotal entity or person from pursuing other available remedies against Defendan1 or any oth·

1& er person.

19 6.6 Under no circumstances shall this Consent Decree, or the name of the Stam of

20 Washington, this Court. the Office of the Attorney Genoral, the Consumer Protection. Division. or

21 an~· of their employees or representatives be used by Defendant or any of its respective owners,

22 members, directors, successors. !'lSSigns. transferees, officers, agents, servants, employees, repre-

23 septatives, and all other persons OT entities in active concert or partfuipation with Defendant, in

24 connectlon with any selling, advertisin~ OT promotion of products OJ services, or as an endorse·

2S mentor approval of Defendant's acts, practices, 01 ·conduct of business.

26

CONSENT DECREE I ATIORNEY ClEHERAL OJI W ASHINQiON C-llllllltl'rottaion Division SllO Flflh A-Yenws, Suil!e 2000

Sc«tk. WA 518104.JIU (20f)464-7745 3

EXHIBIT -=---_,_ PAGE 'if OF /3 --


Case 2:11-cv-01460-JLR Document 17 Filed 08120/12 Page 9 ol 13

Case 2:11-cv-01460-JLR Document 16 Filed 08/14112 Page 9 of 13

1 6.7 Washington shall~ permitted, upon advance notice of twenty days to Defelldant,

2 to access, inspect and/or copy business records or documents in possession, custody or under con-

3 trol of Defendant to monitor compliance with tbi~ Consent Decree, provided that the inspection

4 and copying shall avoid unreasonable disruption of Defendant's business activitit.!. Washington

S shall not disclose lUJY information described in this Paragraph 6,7 \Confidential Informirtion")

6 unless such disclosure is required by law. In the ~cnt that Washington receives &. request under

7 the Public Records Act, subpoena.. or other demand for production. that seeks the disclosure of

8 Confidential Information, Washington shall notify Ddendant as soon as practiCabl~ mid in no . 9 event more than ten (10) calendar days, after receiving such request and shall allow Defendant a

10 reasonable timo, not less than ten (10) calendar days, from the receipt of such notice to seek a

11 protective order relating to the Confidential Information or to otherwise resolve any disputes re-

12 lating to the production of the Confidential. Information before Washington discloses any Confi-

13 dential Infonnation. Nothing in this Consent Decree shall affect State of Washington's com-

14 pliance with the Public Record,, Act, RCW 42.56.

IS 6.8 To monitor compliance with this Consent Decree, Washington shall be permitted

16 to serve interrogatories pursuant to the provisions of CR 26 and CR 33 and to question Defendant

17 or 'any officer, director, agent, or empioyee of Defendant by deposition pursuant to the provisions

18 of CR 26 and CR 30 provided that WaSbington attempts in good :failh to schedule the deposition

19 at a time convertlent fur the deponent and his or her legal counsel.

20 6.9 This Consent Decree in no wr.y limits Washington from conducting any lawful

21 non-public investigation to monitor Defendant's compliance with this Consent Decree or to in-

22 vestigate other alleged violations of the CPA, which may include but is not limited to interview-

23 ~customers or former employees of Defendant.

24 6.10 ThUi Consent Decree shall be binding upon and inure to the benefit of Recon-

25 Trust's successors and essigns. ReconTrust, and it:a successors and assigns, shall noUfy the At-

26 tor.:tey General's Office at least thirty (30) days_ prior to any change-in-control of ReconTrust that

CONSENT DECREE ' ATTORNEYOSNERALOFWASH!NGTON

~=.r=~Dtvit~ Scanlc, WA 98'104-,1118

(206)464·1745

·EXHIBIT 3 ~--PAGE q OF (3 --



Case 2:11-cv--01460-JLR Document 16 Filed 08/14/12 Page 10 of 13

1 would change the identity of the cor:porate entity responsible for compliance obligations arislng

2 under this Consent ~e, including, but not limited to. dissolution, assignment, sele, merger, or

3 other action that would result in the emergence of a successor corporation; the creation or dissolu-

4 tion of a subsidi~, parent. 01 affiliate that engages in any acts or practices subject to this order.

S the proposed filing of a bankruptcy petition; or a change in the corporate name or 'address. Pro-

6 vided. however, that. with respect to any proposed change in the corporation about which Defen-

7 dant, and its successors and assiglls, learp lesS than thirty (30) days prior to the date such action is

8 to take place. Defendant and its successors and assigns, sbtilt notify the AO as soon as is practica-

9 ble after obtaining such knowledge.

10 6.11 The injunctive provisions described in Paragraphs 3.2-3.5, above, shall apply to

11 any bona fide purchaser of the foreclosure tn19tee business of Recon.Trust (the "Purchaser'') in the

12 Purchaser's capacity as foreclo~ trustee, but only with respect to aoy foreclosure referrals that

13 the Purchaser receives from Ballk of America, N.A. in the State of Washington after the closing

14 of the sale of ReconTrust's foreclosure trustee busllless to the Purchaser, This Consent Decree

lS shall not otherwise apply to any activities of the Purchaser, including, for the avoidance of doubt,

· 16 any foreclosure referrals thRt the Puri:haser receives from another person or entity in the State of

17 Washington or any ·other business conducted by the Purchaser in the State of Washington other .. 18 than the business referred to in the foregoing sentence. Fo1 the avoidance of doubti nothing in

19 tbi~ Consent Deorce shall release any claims that the Stete ofWasbingt~n has or may have against

20 the Purchaser, except for any claims that the State ofWeshington may assert against the Purchas·

21 er based cin any theory of successor liability, vicarious liability, de facto ~ger, fraudulent con-

22 veyence, or other similar claim or theory for the obligations, exposures, or liabilities of Recon-

23 TtuSt with respect to the claims released in this Consent Decree (such claims, "Success0r UabiH-

24 ty Cl~j. The ~urchascr is hereby released and forever discharged from any Successor Lla-

25 bility Claims. The Purchaser sba.11 not be deemed a successor, assign, or transferee for purposes

26 ofthisConsentDecrea

CONSENT DECREE to ATIORNEYGENliRALOFWASH~OTON ' C-onfJll\CI" PfOtecl\gn DMslan

BOO P'Jfth AvGlllll), Suite 2000 Sc:lltlle. WA 5'Bl64·JL8B

(206)464·7145

EXHIBIT --.... 3..____,_ PAGE /OOF 13 --


Case 2:11-cv-01460-JLR Document 17 Filed 08120/12 Page 11of13 Case 2:11-cv-01460-JLR Document 16 Filed 08114112 Page 11 of 13

1 6.12 Any notice or other communication required or permitted under this Consent De--

2 cre:e shall be in writing and delivered to the following persons or any person subsequently desig-

3 oated by the parties:

4 For ReconTrust:

5 RabertJ. McGahan,Esq.

6 Associate General Counsel

7 214 Nor1h Tryon St!eet

8 NC1-o27-20-05

9 c,harlottc, NC 28255

10

11 For Washiniiton:

12 JamesT.Sugerman,

13 Assistant Attorney General

14 Consumer Protection Division

15 800FifthAvenue, Suite2000

16 Seattle, WA98104-3188

17 6.13 The Clerk of the Court is ordered to enter the foregoing Judgment and Consent

18 Decree immediately.

19 VIL TERMINATION

20 7 .1 This Consent Decree, and ell obligations of Defendent thereun<lcr, shall terminate

21

22

23

24

25

26

three years from the date of entry of the foregoing Judgment and Consent Decree, except that, if

the United States Securities and Exchange Commission does not grant the application fur !'!-per

manent exemption to be filed by affiliates of Defendant from the provisions of Section 9 of the

Jnvestment Company Act of 1940, this Con~ent Decree shall thereupon t.ertninate upon expiration

of illlY temporary exemption granted by the staff of the Co~ssion and the parties shall in all

~cts return to the positions that they were in prior to entry of this Consent Decree, it being

CONSENT DECREE ii ATIORNiY GENBRAL OF WASHINGTON Colllll!llCr f'mleetioii Di'rillion 100 Fiftb.A.vl:PllC, SWiii 2000

seattle, WA 9HJ04·llll (206) 464•7MS

EXHIBIT ~3..._ __ PAGE -1.!.._ OF I .3 -


Case 2:11-cv-01460-JLR Document 17 Filed 08/20/12 Page 12of13


1 understood that W asbington may thereupon assert any claims arising out of or relating to the facts

2 and matters descn'bcd in the Complaint notwithstanding the release of claims in Paragraph 2.3,

3 above, or any release of claims in the multistete settlement referenced in Paragraph 4. 1. above.

4

s 6

7

8

9

io

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

. 26

•

CONSENT DECREE AT?OlNEY Q&N£RAL OF W ASHINCJI'O)I Conmmer PntoeOoa DlvblDn 800 Fift!IA-c. S\lllelOOO S~~. WA 911°'4·3118

(206) 464·77otS

EXHIBIT 3 ~---

PAGE I 7-QF 13 --


....------------~-.--


Case 2:11-cv-01460-JLR Document 16 Filed 08/14112 Page 13of13

"" DONE JN OPEN COURT1his_\'i_ day of__;l.:$!""""3t.~20 l'Z..

2

3

4

s Presontod By:

6 ROBERT M. MCKENNA 7 Attorney°""""'

8By:~ 9 /)~39107

A:ilsiirtant Attomey General 10 Attomeys for PlaiutiffS1"1" ofW~n

!1

12 Notlcc of Pt"eSentm.8nt W aiv8cl. and Approved as to E,mn by:

ll

t7

18

19

20

21

22

23

24

25

26

CONSENT DECREE 13

EXHIBIT _3_..,.__ PAGE __!_1_ OF _}_1:_


NO. 10-5523-JCC

SUPREME COURT OF THE STATE OF WASHINGTON

KRTSTIN BAIN,

Petitioner,

v.

METROPOLl'['AN MORTGAGE GROUP INC. et al.,

Respondents.

BRIEF OF AMICUS CURIAE ATTORNEY GENERAL OF STA1'E OF WASIUNGTON IN

SUPPORT OF PETmONER

ROBERT M. MCKENNA Attorney General

JAMES T. SUGARMAN Assistant Attorney General WSBA#39!07 800 Fifth Avenue, Suite 2000 Seattle, WA 98104 (206) 389-2514

EXHIBJT--'IJ"'--_ PAGE _L_ OF --1,£. '


TABLE OF CONTENTS

1. INTEREST OF AM!CUS ................................................................. !

ll. ISSUES ADDRESSED BY AMICUS .............................................. I

A. Question t; MERS is Not aJ..,awful Ben~ficiary Under the Deed of Trust Act, .............................................. , . .,, ............. 2

1. Severing the Nole from the Deed ofTrust Creates Havoc in the Marketplace ........................................... , ....... 6

B. Question 3. By Aeling As Dn Unlawf11l -Beneficiary1

Certain Acts and Practices by MERS Violate Uw Coninuner Protection Act· ................................................ ,. .. , .... 13

1. MERS Acts Are Unfair or Deceptive ............................... 13

2. MERS Acts in Tl'ade or Conunerce .................................. 17

3. MERS Acts In1pact the Public Interest ............................. 18

4. MERS Acts injure C-onsumers ......................................... 18

5, MERS' Business Practices Cause Consumer Injury ........ 19

Ill. CONCLUSION ............................................................................... 20

EXHIBIT 'f . PAGE~OF _l£


TABLE OF AUTHORITIES

Beckman 1'. Ward, 174 Wash. 326, 24 P-2d 1091 (1933) ..................................................... 6

Bo}1•ers v. Transamerica Tille Ins. Co., 100 Wn.2d 581, 675 P.2d 193 (1983) ................................................... 16

Braclford v. HSBC Mortg. C'o1p., 799 f. Supp. 2d 625 (E.D. Va. 2011) ................................................... 10

Brmvn v. Ifousehold Rtalty Co1p., 146 Wn. App. 157, 189 P.3d 233 (2008) .............................................. 12

Chris/en.van v. Raggio, 47 Wash. 468, 92 P. 348 ( 1907) ............................................................. 6

Co11tmon~vealth by Pac/eel v. Tolleson, 14 Pa.Cmwllli. 72, 321 A2d 664 (Pa.Cmwlth. 1974) .......................... 16

Co.t v. He/enlus, 103 Wn.2d 383, 693 P.2d 683 (1985) ................................................... 12

Du11n v, Neu, 179 WW1h. 351, 37 Pc2d. 883 (1934) ...................................................... 7

Dwyer v. J. l Kislak Mortgage, 103 Wn. App. 542, 13 P.Jd 240 (2000) ................................................ 16

Erickson v. Kenddl/, 112 Wash. 26, 191 P. 842 (1920) ........................................................... 7

Escalante v SenJry Inc. Co., 49 Wn. App. 375, 743 P.2d 832 (1987) ................................................ 17

Evergreen Collectors Y .. Holt, 60Wn. App.151,803P.2d10(1991) .................................................. 16

H

EXHIBIT t..f PAGE ..,.3_,_0_F -z_"'~-- -


E.'T:perience Hendrix, L.l.C. v. Hendri:-clicensing.co111, LTD, 766F. Supp. 2d 1122 (W.D. Wash. 2011) ........................................ , ... 16

Fidelity & Deposit Co. ofi\{,f, v. T!COR Title Insur. Co., 88 Wn. App 64, 943 P.2d 710 (1997) ............................................... 7, 10

FJoersheini v. Federal' Trade G'omm 'n, 411 F.2d 874 (9th Cir. 1969) .............................................................. ; \6

Godfrey v. Hartford Cas. ln.s. Co., \42 Wn.2d 885, 16 P.Jd 617 (200\) ................................................... 5, 6

Ha11g111an Ridge Training Stables v. Safeco, 105 Wn.2d 778, 7\9 P.2d 531 (1986) ...................................... ,. ..... 13, \8

lfarrisv, OSI Financial Se1•1'ices, Jnc., 595 F. Supp. 2d 885 (N.D.111. 2009) ..................................................... 11

HSBC.' Bank v. Antrobus, 872N,Y.S.2d 691 (N.Y. Sup. 2008) ..................................................... 10

lmpac v, Credit Suisse Bo:,·/011 LLC, No.: 06-56024, 2008 Westlaw 731050 (9th Cir. 2008) .......................... 7

Jn re CoJ11mbia Pac. Mortgage, inc., 22 Bankr. 753 (W.D. Wnsh. 1982) ......................................................... 7

In re Foreclosure ('ases, 521 F. Supp. 2d 650 (N.D. Ohio 2007) ................................................. I 0

In re Ken1p, 440 B.R. 624 (Bankr. D. NJ. 20 I 0) ........................................................ 8

lva11 's Tire Service v. Goodyear Tire, 10 Wn. App. IIO, 517 .p, 2d 229 (1973) ............................................... 13

Jackson v. MERS, 770 N.W.2d 487 (Minn. 2009) ......................................................... 4, IO

Kennebec, Inc. v. Bank of the West, 88 Wn.2d 718, 565 P.2d 812 (1977) ....................................................... 6

EXHIBIT t.J. iii

-,,..-...,,.. PAGE_!:{_ OF Z.S


Kinkopfv. Triborough Bt'idge & Tunnel Authority, I Miso.3d 417, 764 N.Y.S.2d 549 (N. Y.City Civ.Cl 2003) ................. 16

Lomayaktewa v. J!a1hm11ay, 520 F.2d 1324 (9th Cir. 1975) .............................................................. l l

MtJson v. Mortgage America, Inc., 114 Wn.2d 842, 792 P.Zd 142 (1990) ................................................... 19

Miguel v. Counlry Funding Corp., 309F.3d1161 (9th Cir. 2002) .............................................................. 11

AJ01·tgage Electronic Registration Systems, Inc. 1•. Nebraska Dept. of Banking and Finance, 704 N. W.2d 784 (Neb. 2005) ........................................... 3, 4, l 0, 14, I 5

1.Vordstrom, Inc. v. Tampoul'los, 107 Wn.2d 735, 733 P.2d 208 (1987) ............................................. 13, l 8

Panagv. Fatn1ers Ins. Co. of Washington, 66 Wn.2d 27, 204 P.Jd 885 (2009) ....................................................... 19

Pe1msylvonia. Dep 't of Banking v. NCA.!3 of Delmrare, /.,LC-', 995 A.2d 422 (Pa. Comm. Ct. 2010) .................................................... 13

Plein v, IAckey, 149 Wn.2d 214, 67 P.3d 1061 (2003) ................................................... 12

Price v. Northern Jiond & Nlortgage l'o .. 161 Wash. 690, 297 P. 786 (l 931) ..................................................... 4, 7

l'ublic Employees' Retire1nent ,{j;1sten1 qflv!ississippi v. Merrill Lynch & Co., Inc., 277 F.R.D. 97{S.D.N.Y. 2011) .............................................................. 8

Rodgers v. Seattie-First Nat 'I BC1nk. 40 Wn. App. 127, 697P.2d1009 (l 985) ......................................... 7, I l

Ruscal/eda v,' IISBC Bank USA, 43 So.3d 947 (Fla. Dist. Ct. App. ioJO) ............................................... I 0

;,

EXHIBIT _'-f..___,,. PAGE~OF 2.S


Salois"· Mutual of Or11aha ins. Co., 90 Wn.2d 355, 58 l P,2d l351 ( 1978) ................................................... 17

Scott v. Cingular Wireless, l 60 WC.2d 843, 161 P.3d 1000 (2007) ................................................... 6

Sign-0-lile Sign$, Inc. v. DeLautentiFlorests, !Jtc., 64 Wn. App. 553, 825 P.2d 714 (1992) ................................. : .............. 19

Sorrel v. Eagle Healthcare, inc~, lJOWn. App. 290,)8 P. 3d 1024 (2002) ............................................. 19

State v: Kaiser, 161 Wn. App. 705, 254 P.Jd 850 (2011) .............................................. 14

State v. A1orley, 134 Wn.2d 588, 952 P.2d 167 (1998) ..................................................... 5

,S1ephens v. 01nni Ins. Co., 138 Wn. App. IS!, l59P.3d 10 (2007) .................................... 13, 16, 18

Teslo v. Russ Du1un;re Oldsn10~1/e, Inc., 16 Wu. App. 39, 554 P.2d 349 (1976) .................................................. 16

Te.xas v. lln1erlcan Blastfa:c, Inc., 164 F. Supp. 2d 892 (W.D. Tex. 2001) ................................................ 16

Thepvo11gsa v. Reg'lonal Trustee Servfce C'orp., No. 10-cv-1045, 2011 WL 307364, (W.D. Wash. Jan. 26, 2011) .... 9, 10

Washington Dept. of l~ev. v. Security }Jae. l)ank oj'Jfr'1sh., N.A., 109 Wn. App 795, 38 P.3d 354 (2002) ................................................... 8

Wells Fargo Bankv. Farmer, 867 N.Y .S.2d 21 (N.Y. Sup. 2008) ....................................................... 10

Young An1ericansfor Jtl·eedan1 v. Gor1011, 91 Wn.2d 204, 588 P.2d 195 (1978) ....................................................... 1

Zolfagharf v. Sheikho/esla1ni, 943 F2d 451 (4th Cir. 1991) .................................................................. 7

v

EXHIBIT"'-/_;,,__~ PAGE (',, OF 2.l:J --


Statutes

15 u.s.c. § !635(Q ................................................................................... 11

RCW 7.04 ................................................................................................... 5

RCW 19.86.010(;1) .............................................................................. 17, 18

RCW 19.86.080 ....................................................... : .................................. 1

RCW 19.86.093 ........................................................................................ 18

RCW 31.04.015(7) ................................................................................... 15

RCW 31.04.015(26) .................................................................................. 15

RCW 31.04.035 ........................................................................................ 15

RCW 61.24.005(2) .................................................................................. I, 2

RCW 61.24.030(7) ...................................................................................... 4

RCW 61.24.030(8)(1) .................................................................................. 4

RCW 61.24.130 ........................................................................................ 12

RCW 61.24.130(2) .................................................................................... 12

RCW 61.24.135 ........................................................................................ 13

RCW 61.24.172(2) ...................................................................................... I

RCW 62A.3-302 ....................................................................................... 11

RCW 62A.3-302{a)(2) .............................................................................. 12

RCW 62A.3-305 ....................................................................................... 11

RCW 62A.3-602(a)(ii) ................................................................................ 7

EXHIBIT__..:±.__

PAGE _1_ OF'}[


Other Authorities

Adam Ashcraft & Til Schuermann, Untlerstonding lhe Securifiz(ltion ofSubprime MQrtgage Credit, Federal Reserve Banlc ofNew York, (March 2008), http://www. newyorlefed org/reseorch/.'lfqf/ JO port slsrJ 18.pdj. ............... 8

Dale Whitman, How Negotiability Ha.\• Fonlul Up the Seconda1,, ]efortgage Market, and What To Do 1lbo111 Jt, 37 Pepp. L. Rev. 738 (2010) ... , ............ ,.,.,, ..................................... , .............. _ ...... ., ................. , .... g

Dj;;uie E. Thompson, Foreclosing IVlodifications: .J:Jow Servicer Incentives Discourage Loan Modifications, 86· Wash. L. Rev. 755 (2011) ..................................................................... ., ............................. 17

Frar~dSchen1e Characteristic, Fannie !Vlae, https://www.efanniernac.com/utility/!egaUpdt7fraudschchnr.pdf (Jost visited Feb. 14, 2012) ...................................................................... 6

Kurt Eggert. field Up in Due Co11r!1:e: Predatory Lending, Securilizalion, and the Holder in Due Course Doclrin1t, 35 Creighton L. Rev. 503 (2002.) ................................................................. 8

Nfortgage~Backed Securilie$, U.S. Securities and Exchange Co1nmission, http.:llWl4'W.sec.gov/annversln101·tgagesecirrities.hln1 (lasl visited Feb. 14, 2012); .................................................................... 8

Wash. Proctlcc, R~al &tate § 18. l S (2d ed.) ............................................ 11

Regulatiggs

16 C.F.R. § 321.l(o) (2011) ...................................................................... 16

vil

EXHIBIT _Lf.:..__ PAGE ___!'_ OF _bi_


I. INTEREST OF AMICUS

Amicus Curiae is the Attorney General of Washington. The

Attorney General's constitutional and s~tutot:y powers. include the

submission of a1nicus cu1"iC1e briefs on matters affecting tbe public

interest.1 Tl1is mattet: requires an interpretation of the Washington Deed of

Trust Act ("DTA''), RCW 61.24.005(2). The Attorney General is charged

with enfOr-cing the Deed of Trust Act,2 and is currently involved in

litigation and enforcement actions regarding mortgage lending and

foreclosures in the State of Washington. 3 ln addition, this matter concerns

whether lhe actions of Respondent Mortgage Electonic Registration

Systems1 Inc, (MERS) falls within the Consumer Protection Act The

Attorney General enforces the Consunier Protection Act, RCW 19.86 on

behalf of the public.'1

II. ISSUES ADDRESSED BY AMICUS

The Attorney General flies this brief '"ith respect lo Certilied

Questions l and 3, We do not address Que.c;tion 2 because we believe it is

too broad to be answered generically.

1 Ses. Yo1111gA1111:rica!1s fol' f"i·eedo111 v, Gorto11, 91 Wn.Zd 204, 212, 588 P2d 195 (1978).

1 RCW61.24.172(2).

JLR.

3 See, e.g., Stritll of Wmhf11glon v. Reca11Tr11.t1, W.D.Wash. No.: 2:11-cv-1460·

~ RCW 19.86.080.

EXHIBIT 4 PAGE~OF 2. 0


(l) MERS is not a la\vfui "beneficiary'' Within lhe terms of

Washington's Deed of Trust Act, RCW 61.24,005(2), if it ·never held the

promis.sory no~ secw·ed by the deed of trust.

(3) Hoineowners may possess a cause of action under

Wamington's Consumer Protection Acl against MERS when MERS acts

ns nn unlawful beneficiary under the tei111s of Washington's Deed of l'rust

Act.

A. Questjon 1:

The federal court nsks: (1) ls MERS a lawfnl 1'benefieiary"

within the tCrms of Washington's Deed of Trust Act, RCW 61.24.005(2},

if it never held 1he pr9n1issory note secured by the deed of tmsi?

This question is inlfficdiately answered by the plain language of the

Deed of Trust Act ·- a "beneficim'y" is defined as the .. holder" of tl1e

pro1nlssory note. RCW 61,24.005(2). Thus, if MERS never "helQ the

pron1issory note" then. it is not a lawful ben~fu.::iary. The D1'·A

unambiguously defines "beneficiary" as: '"Beneficiary means the holder of

the instrument or document evidencing the obligation.s secured by the deed

of ln1st.11 Jd. The "lnstn1ment" obviously means the promissory note

because the only other document in the transaction is the deed of trust and

EXHIBIT '4 ------2 PAGE _l.Q_ OF .-2!_


it would be absurd to read this definition as saying that '"beneficiary

means the holder of the deed of trust secured by the deed of trust "'5

The State agrees "'lh Plaintiffs Bain and Selkowitz that MERS

violated the .statut.Qry language of the Deed of Trust Act,, the law of

Negotiable Instruments, and the common law principles of real property,

which all provide ~ the legal status of the note is determinative of the

power to enforce ·the 11ote. MERS maintains that there is no statutory or

public policy l'eason for preventing it from ex.panding the definition of

beneficiary to a parly thar holds. only the deed of trust. JvlERS Selkov.11'12

Response Br. at 12. The State files tbi~ rl111icus Petition to provide the

Court \Vith both statutory and public policy reasons why the MERS system

conceals t11e true owner of the pron1issory nc>le and why this is do.n1aging

to a free, fair and tmnsparen1 mo11gage marketplace.

ln Mortgage Electronic Rflgistrution Systems, Inc. v. Nehras.ka

Dern of Banking and Finance, 704 N, W.2d 784, 787 (Neb. 2005~ MERS

and the Court describe its role in the marketplace:

MERS argues that . , . it only bolds legal title to members' mortgages in a no1ninee capacity and is contractually prohibited from exercising any righ\.51 with respect to the mortgages (Le., foreclosure) without the authorization of the members. Further, MERS fil"gues that it does not own the promissory notes secured b)' the mortgages and has no right to payments made on the notes, MERS explains that it

5 Respondent MERS advocates for this absurd interpretation in pages 13 - 15 of its Rcsponso in Selk011•flz.

3

EXHIBIT _I./""-_ PAGE -1!_ OF]£__


merely "immobili2.es lhe mortgage lien -;vbije trdnsfers or the proutisson .notes and servicing rights co11tinue to

~·"

Id. (emphasis added). T11erefot'e1 the very purpose of MI-:RS is to hold

onto the securjty inlerest while ownership of the loa11 passes from party to

party. 6 This role is contrary to Washington's fundamental principle of real

property fmance law that "the note is considered the obligation, and the

mortgage but an incident of the note which passes with it." P1·/ce v.

Norlhern Bond & Mortgage Co., 161 Wash. 690, 695, 297P. 786 (1931).

It is nol just decades of case law that rely on the note and the

security instru1nent transferring together, The Deed of Trust Act (DTA)

Qssu1ues it throughout its provisions. The DTA sta1es U1at "the trustee

shall have proof that the beneficiary is lhc owner of any promissory note"

p1ior to foreclosing. RCW 61 .24.030(7). The OTA also requires tbe

trustee to disclose in the· Notice of Defnult the nnrne and address of the

owner of the promissory note. RCW 61.24.030(8)(1).

MERS maintains tb.a,t because the defmition section of the DTA

contains the phrase "'(t)be definitions in this section apply throl1gl1out this

chapter unless the contex_t clearly requires othern1isc," MF...RS may expand

the definition of ~'beneficiary" to cover parties that do nol hold lhc note

but instead hold the deed of trust. MERS Selkowi1z Resp. at 12. The

6 See Q/so, Jackson v. MERS, 770 N. W.2d 487 (MiM. 2009) ("By acting as the norninal mortgagee of record for its 1nennbers, MERS has essentially separated the pron1i5socy note and the 5~urity Instrument, allo\ving tho debt to be trnnsrerrcd without t1tt asslgnm~t of the :security instrumonl." Id at 494.)

EXHIBIT 4 4

PAGE ..11::: OF 2i;,


definition of beneficiary is not ambiguous, and the phrase "unless the

c_m-rtext clenrly requires otherv,,ise" only means that a definition "viii not be

_applied to yield an absurd result. The phrase is not intended to provide an

opportuniiy to disregard the plain language of the DT A. 7

MERS contends that it may circumvent the 'OTA requirements by

creating a deed of trust thal uses a third ·party "nominee" as the

benefioiary.8 However, in pleuary statutes such as the DTA, where the

legislature J1as expressed Washington's- public policy on l1ow foreclosure~

sbnll occur, parties may not vary the tenns by contract.

An analogous situation arose regru·d.ing Washington 1s former

Arbitration Act.9 In Godji·ey v. Hartford Cas. Ins. Co., 142 Wn.2d 885, 16

P 3d 617 (2001 ), the Court examined the Act and determined that the

defe11,dants would not be allowed to conlractua1ly alter its leans. The

Court held that because the Act was an expression of public policy by the

Legi.sl~e it inust be apptied as a whole and \vitho\1t "common law"

alternatives to its provisions.10 Not only wouJd this violate the

legislature's stated public policy, but also because the parties would be

invoking the powers of the st.ate to enforce the arb.itration decision, they

7 8t111e v. Morley, l34 Wn,2d 588, 598, 952 P.2d l67 (1998) {this phmsc means the deftnilion section "should not be blindly 11pi:;lied.")

1 The term no1ninee is not round in the OTA, negotiable instru1nents lnw or Washington real property lll\Y generally.

~RCW7.04. IO God[rf!y, l42 Wn.2d at 896.

5

EXHIBIT __!±__ PAGE~


must provide the rigb.ts and responsibilities contained i11 tbe stntu101·y

procedure to arrive at that decision. 11

The OTA is also a co1nprehensive expression of p\lblic policy.12

Like arbitration decisions. a nonjudicial foreclosure is likely to require

state powers to enforce the result through an eviction action. The

Legislature bas set forth in enormous detail how nonjudicial foreclosures

may proceed and p!lrties should not be allowed to vary these procedures

by contract.

1. Severing the Note from the Deed of Trust Creates liavoe in the Marketplnce.

The. practice of sevel':ing the note frotn the security interest has a

history of causing havoc in Wasltington's mortgage marketpJace. An

early example of the problem was a scam that has come to be known a.s

"double selling.1'13 A lender makes a loan secured by a home and sells the

loan to an -investor. ·fhe: lender then sells the same Joan again to a

different investor, 01· more loans secured by the same mortgage. 1 ~

11 fd at &97, ('1T]he)' brought into play tlro jurisdiction and p_ower of tho co4rcaa set foath in the [Arbitration Ac1]. By so doi11g, they h11ve activated 1he c11tire chapter llDd the policy embodied therein, not just tho pnrts tha1 are t1seful to them.") Sec ulso Scofl v. Clngillar Wireless. lGO Wn,2d 843, 851, 161 P.3d 1000 (200i') (A oont\"actunl agreement "that violates public policy may bt:: void and unenf'Ql"CCable.")

12 KenntJbcC. Inc. 11. Bankoft~e Jl'est,88 W1l.2d 7!8, 725, 565 P.2d 812 (1977) (''ln 1965 the !egislllture, ln enacting what is codified as RCW 61.24, again cha11gcd the public policy ofU1is state." Id) (citalion omitted).

HSee, Froud Scho"1e Charocter'i:ttlc, Fllnnie Mae, hllps:/Jwww .efann~ae.comlutility/legaVpdf/fraudschchar.pdf (last visited Feb. 14, 2012).

1~ Chrlstrutfon 11, 11.aggfo, 47 WQSh. 468, 92 P, 348 ( 1907); B11clu»an 11, Ward, 174 Wash, 32lj, 24 P2d l09l (1933); Fidelity & Dep~IJ Ct'J. of Md"· TICOR 'f'ilfe

EXHIBIT t.j-PAGE '14-r--oF_,W,.,....

6


Alternatively~ a lender will only sell the note to an investor once, but

conceal tbe transfer and direct the borrower to keep paying- him. Tue

lender wrongfully keeps 1he money, leaving a.11 investor who beli.eyes she

~ a defaulted loan on which she can foreclose, and a borrower who

believes .]1e has a satisfied loan on which the security interest should be

released.1s

'fhese schen1es result in two or more innocent parties that have

fulfilled their contractual duties but are denied their contracn1al benefits.

The Court is left to pick a winner among. the parties and must resort to

usiug procedural failures that would 0U1erwise be non-actiona_ble. As ao

example, the- Cou11 has said that bo1Towers who pay otf their loans without

knowing t11e owner of the lom.1 should take the risk of loss if another

asserts the same .debt.16 The Cou1t has also said that a party that hwi

recorded a mortgage but not received a note has priority QVer an earlier

assignee of I.he note who did .not record the mortgage. 17

Insur. Co., 118 Wn. App 64, 943 P.2d 710 (1997); see. al.so Zolfagf1arl v. Sheikflole.:/f1ml, 943 F.2d 451 (4th Cir. 1991) (discussing n11tional ltnder that sold the same mortgages more lhan once to several different investorS); llnpnc "· CrediJ Suisse BO!ton LLC, No.: 0&-56024, 2008 ·westlaw _731050 {9th Cir. 2008) (same).

15 Erick.ton v, Kendall, 112 Wash. 26, 191 P. 842 (1920); D1111n 1'. Neu, 179 Wash, 351, ~7 P.2d 883 (1934); !Wtlger~ v. Saaufe·Fir.~l J1lat'I Brmk. 40 Wn. App. 127, 691P.2d1009 (1985); Price v. Northern Boni/ & /\'!01•/gage Co .. L61 W-11sh. 690, 297 P. 186 (1931).

16 Rodgers, 40 Wn. App, Qt 132, (lt is "lo11g-selll® law that· one paying a note, either negotiable or nonnegotiable, should demand producllon of it Upon payment or risk b11ving lo pay again to the 118llignee.") (citing In re Colu111bia Pac. Mr1rf8t1ge, Inc., 22 Bankr. 753 (W.D. Wash. 1982); RCW 62A.3·602(a)(ii) (a loan is only considered paid io lhc extent that the payment Is "to a person ei.1till.::d co enforce the Instrument.")

1' Pric~ L6l Wash. 690.

7

EXHIBIT _4,__...,.. PAGE _1i_ OF _2]_


Under MERS and the sc:curitization process, \Vhat \Vas once a

sporadic problem has become a systemic and illlll1anageable one. In the

present mortgage market, the note, or at least ownership of the loan, IS is

tmnsferred fron1 the originating lender to an entity called a. sponsor that

buys hundreds of loans to form a securitization trust. The sponsor lhen

lransfers the loan to a depositor who then transfers the loan to a

securilization trust where it sits as an asset for investment products. 19

Investors can purchase. certificates in the trust tliat entitle them lO a stream

of payments based on the boiTowers' payments on their loons.20

Sometimes even· this is not the end of the loan's journey. IF a bo1To\ver

defaults in the first Few months, the trust can often ntake the sponsor buy it

back. and sometimes the sponsor can make t.h.e originator buy it back. The

trust can also force a l;>uyback. of loans later if the ~ponsor or originator

18 There is evidCDte ihal son1e lenders never tran$ferred promissory notes at 1111. &g. In re Ken1p, 440 B.R. 624, 628 (Ban.kr. D. NJ. 2010) (bank officer testifies lhal it \VllS customary for otiginnting blink 10 maintain possession of the original note \\•hen the loan was sold.); Dn.lc Wl1lnnan, Haw Negotiablflry Haf Fouled Up the Secomfq1'' Mortgage Markel, am:I IYhqt T{J Do Abf)l1/ II, 37 Pepp. L, Rev. 738, 157-758 (2010),

19 Sss Kurt Eggert, Hold lip in Due Cou/'se: Preda101'' lending, Securili:Wlon, and the Holder 'in D11e Cou1'$e Doctrine, 35 Creighton L. Rev. 503, 538 ('l002); Morlgage--Backed Secl1rlflu, U.S. Secw-ities and Exchange Commission, hLl1Nll1nnv,sgc.'.govlgnswe1'sfmqrlgqg~ee1wiflr.s.hhn (last visited Feb. 14, 2012); 'Washing/on Dopf. of Rev. v. Sec11rily ftfc. Bank (If lfrtsfl,, N.A., 109 Wn. App 195, 3ti p,Jd 354 ~2002).

- See P11bllc &1pf0J>ees' Retire111ent S}'1te111 of A1ississippi l', AJen·ilf l)'llch & Co., lm:., 277 F.R.D. 97, 102, n. 3-7 (S.D.N.Y. '2011}; Adam Ashcraft.& Ti! Scbul!tmaru1, Undel'~landing the Sec11ril/1otfon o/Snbpri1ne Mor1gage C1·edit, Federal Rese1ve. Bank of New York, 5 (March 2008), hllp.·Ul\'lvw.11tr!Vl'Urifed.oref,.ru·earcW.stq[ reeort.efir118,pdf

' EXHIBIT_.!:!:_ PAGE --1112_ OF _Zi


misrepresented the quality of the lo_an.21 These ;'putback" cases now

involve disputed ownership of loans worth billions of dollars.22 Some

loans are purchased fro1n lenders tha1 have liquidated, further

complicating the status of the holder.23

With this system in place sonlt parties cannot even locate tl1e note

or trace the path of its ownership. for example, in Thepvongsa v.

Regional Trustee Service Carp., No. tOwcv· 1045, 2011 WL 307364, (W.D,

Wash. Jan. 26, 2011) (Unpublished Opinion) a prose plaintiff atte1npted

to unravel what happened to his two loans after they were originated.

Although the Court had the MERS deed of trust before it and a subsequent

assign1nent of the deed of tnist, si111ilnr to Bain, the Court could not

detc111llnc whether the defendants hnd lbe authority to foreclose~ stating:

In the ab~ence o.I' a complete record of all relevant dOcuments, i11cluding the promissory notes, and all purported transfers of the notes , , , the Court cannot

·•t ·-'--- See, B4mi.- of Nrnv Yot.k Mel/on"' /l'a/n111 Place l.LC, - F.Supp. 2d-·, 2011 WL 4953907, l (S.D.N.Y. 2011); Syncora G1jarantll Jnr:. ''· Co11111ryivfdi: lfa111e J,aciru-. /11c. 935 N.Y.S.2d 858, 660 (N.V. Sup. 2012),

.ll E.g. lJa11k of Ne1v YGirk M1:11/on v. lf(l/1tur Pfnt:e, LLC, S.D.N.Y No.: I !-cv-5988~ wblch involves 530 diftercn! sc.:W'hization trusts, Se.e, Alison Frankel, Banli.1 bawarc: 17111e i.~ l'ipefor MBS breridi-of..-cm1trt1cr si1ilJ, Reuters Edilion U.S. Blog, (Sept . . 19, 20 l l)., hllg,;/,'l)loG:1,rcyte!'s,C01n!t1l is on- frankeV2011/09/I9/bt1nk$-beW11J·t-!ime-js-ripe· fot-1r1bJ-hiyach·of..contmct::milll. (idenlifyiJ1g suits regardi11g trusts with face V11lues of over$ lOO billion In lo11J15); P'or1n111· C"fonial Bank Mor1gaga Lendfng S11per11isor Plirads G11ilzy ta Frm1d Sdie111e, U.S. Dcpartruent of Justice, (Mar. 16, 201.J), hup://www.lustlcago11/opa/prl20l J/Marcb/l J-cnu-J39.htm! (describing how n1ortg11ge lender double sold loans and sold non-exl~tent loans to investors.)

23 Jackson v, MERS, 770 N.W.2d 4B7, 492 (Minn. 2009); Paul Kiel, Jntarr111l Du~ Raveu/s GA/AC Filed False Docume111 fn Bid to For~c/o;te, l'ro Publicn, (July 27, 20 11 ), hup:l/www.prcmublica.orWrtjs;Jelgmac-n1ortas-'vhisde!>lwer· furecl!l!Jqrefsjnglc

9

EXHIBIT ___,f'--PAGE ..L/_ OF -1.R..


determine who held the promissory nole and 11nder what authority the default and sale \Vas to occu1'. Additionally, pun;uant to the D1'A, the beneficiary or trustee was required to provide ... the name and address of the owner of any promissory notes or other obligations secured by the deed Uf trust. RCW 6 l.24 .030(8)(1). ·

!d1~ Because they are strjpped of the deed of trust and ·any public record$,

lost promissory notes may be conm1onplace. This is alarming because the

overWheLining majority of foreclosures ncv_er face judicial scrutiny tCl sort

through ownership of the note. The party demanding fOreclosure sale may

or may not be the owner, and the foreclosure proceeds mny or may not be

sent to satisfy the debt. 25 The homeowner has no way to be sure other

than filing suit and engaging in discovery, which for many foreclosed·

upon homeowners would be financially impossible. Given MERS1

practice of .. immobilizing the mortgage lien while trunstC.rs of the

protnissory noles ... continue to occ\lt',26 it is praetically impossible for a

:MSee-a/so, BraJ[ordv. HSBC ~1ol'lif,. COTp., 799 F. SUpp. 2d 625, 628 (E.D. V11. 201 l) {homeo\vner faced with three defendants e11ch claiming tho other is the holder or the promissory note 11nd MERS will not identify noteholdcr); Jackson v. A-IE.RS, 770 N.W.2d 4.87 (Minn. 2009) ("A side effect ofthci MERS system is that a U'ansfer of[t.he] loon bct\Yeen t\\'O MERS meJubers is unkno\vn to those outside the MERS system .. ,. [E]ach named plaintiff in this case bas been unable to obtain informlltion ubo"t the cutrt-nl owner of his or her indebtedness , ... several of the originel leoll.ers for the no1ne<l platntiffs h!'Ve gone out ofbusiness.'1 Jd. ot 491); Jn re Ft1rec/0111ro Cases, 521 f. Supp. 2d 650, 654 (N.D. Ohio 2007). HSBC Bank v. Anltobus, 872 N.Y.S.2tl 691 (N.Y. Sup. 2008); 11'ef(.r .Fargo Bank v. Fann et, 867 N. Y.S.2d 2 i (N.Y. Sup. 2008).

1' See. FitklJty &. Deposll G'a, af Md. v. 11COR Till~ ln.!rir. Co., 88 Wn. App 64~

R//'1.calledo .... HSB(: bank l!Stl, 43 So.3d 947, 949 (Fla. Dis:t. Ct. App. 201 O) (two bunks foreelos~on the same note).

MQl'lgogv £lecr1'0!lic RegislraJl(Jn Syste11is, l1:1r. v. Nebraska Dep1. of Banking and Finance, 704 N.W.2d 784, 787 (Neb. 2005).

10

EXHIBIT If. PAGE _11..,..,) ,.....O_F z:-.e,...


borrower to comply with the "long~settled Jaw'' that a borrower inust be

certain he is paying the note bolder or risk having to pay it twicc.27

MERS' concealment of loan transfers also deprives ho1neowners

of other rights. The federal Truth in J~ending Act allows homeowners to

rescind their -loan U'&nsaction for cert11in violations of that Act.28 But the

hon1eowner ca11 not rescind against an agent of a loon holder.29 Further,

most other suits seeking to rescind require t11c presence of t11e actual

owner of the debt. lG

Borco\VeJ.'S must also know what happened to their promissory note

to determine whether the O\vner is a holder in due course.31 T11ose who

bave contract claims or recoupment clain1s ste1nnrin& fi:mn the original

loa11 transaction cannot assert those claims against a holder iTI due

course. 32 riowever, depending on how and wJ1en the note was transferred,

the current assignee may not have this status. For example, if the loan is

27 Rodgers, 4{) Wn. App. 127. 11 IS U.S.C. § 1635(1). •

9 lviig11el v. Co1rnt1y F1111dlng Corp,. 309 F .3d I 161, 1162-65 (9th Cir, 2002.) ("While the- Bnnk's servicing agent ... received notice of C11ncelhl.tion within the relevanl three-year period1 no authority supports the proposition that notice to {the loan set'Vicer] should suffice for notice to the Bank."} Jd, al J 165; Ha1rls '" OSJ Ffno11cial Services, Inc., 595 F. ·supp. 2d 885, 897 (N.D.IJJ. 2009) (Rescission is void because. while the original note owner re1:eived the rescission nolice, Um assignee did not.)

JQ SetJ Lo111o;iiabei1•0 v. Jfathaway, 520 F2d 1324, 1325 (9th Cir. 1975) ("No procedural principle is 1nore deeply imbcdded in the comn1on law than tbat, Jn an action to set &S,ide a ... contract.. all parties wl'lo ntay be affec1ed by the deteonination of the action are. indispensable."}

31 RCW 62A.3-302. Washington tnortgagc loans may use 11 nego1iab\e insttum.enl or 11 non-negotiable instrumtnt as the Writing evidencing the debt. See Wuh. Pra.ctlCe, Real Estate § 18.. 18 .{2d ed.)

ll RCW 62A.J.j05.

II

EXHIBJT __.tf __ PAGE _jj_ OF ...18_


transferred after the borrower has defaulted .. the current transferee would

not be a .holder in due course,33 MERS' practice is to not transfer the loan

until the foreclosure_ process: is siarted so note holder status will always be

e potenti_al issue.

Once a defaulted borrower deler1nines who the real note holder is

the borrower must use the D1'A's injune1ive process to asse1't his-or her

claims.34 The DTA contalns the only legal protess borrowers may use lO

stop a foreclosure, end if their claints are riot asserted before sale their

claims arc forever waived, and title to lbe property will not be restored.15

Under this process hon1eowncrs only have fi·om five days to Six months to

learn the holder of their note and assert their claims:'6

S1ated succinctly, tl:ie use of MERS as a placeholder beneficiary

while the loan flies from D\vner to owner has brought chaos to the

mortgage 1nw:kctplace and stopped the effmient processing of

foreclosures. This Court would bring c..'Crtainty ro the marketplace by

interpreting the OTA in a 1TI8JU1er 1hal insures that t11e path of transf~ of

pron1issory notes is transparent, and lhat notes are ~creed by their

holder, not the assignee of a nonholder.

JJ RCW 62A.3·302(a)(2). 1

• RCW 61.24.130. '.I' Br~wn 11. H011~cho/1l Rit(l/ry Corp., 146 Wn. App. 157~ 163, 189 P.3d

23J ('2008) {stating lhat the DT A is the only means to stop a foreclosure), (citing, Co.\· ir. HeleRiris, 103 Wn.2d 383, 3&8, 69.3 P.2d 683 (1985)~ P/ein 11. Lael!!)" 149 Wn.2d 214, 67 P.ld 1061 (200)).

3' RCW 61.24. 130(2).

12 EXHIBIT _4~-PAGE 2.0 OF 2.rJ --


B. Question 3. By Acting As an Unlawful Beneficiary, Certain Acts and Practices by MERS Violate· the Consumer P1·otection Act.

The Deed of Trust Act (D'f A) creates two statulory pr!r .~e

violations of the CPA: collusio1) a1noug bidders at 1:1 foreclosure sale &lid

bad faith mediation practices. 37 However, the existence of statutory ·per se

violatiqns does not grant immunity to the parties from the broader CPA

prohibitions 1;1.gainst other unfair or deceptive practices. These arc

analyzed like any othe\' business practice, under tl'le five elements of

Hangman R;dge Training Stables v. Safeco, 105 Wn,2d 778, 719 P.2d 531

(1986)."

1. MERS Acts Arc Unfair or Dc~ptive

The CPA does not define "unfair" or "deceptive." Instead, courts

have developed stan<:Jatds on a case-by-case basis. 39

To prove that an act or practice is deceptive, neither intent nor actual deception is required. The question is whether the conduct has the capacity to deceive a substantial pol'tion of the public. Even accurate information may be deceptive if there is a repJ"esentation, omission or p1"actice

31 RCW 61.24.135. 31Nordstrom, inc. v. Tu111po11r/0J, 107 Wn.2d 735, 742-43, 733 P.2d 208 (1981)

C'While we h11ve eschewed. the use of judicially created per se violations ... we nevertheless recognize that ce1tain acls, by !lteir very nature, must full'illcerlnln prongs of the Hang111a1r Ridge tost."); Stepht!n.v ,,, On1ni Ins. Co., -138 Wn. App. 151, 177, 159 P.3U JO (2007) ("ThJs is not a case wl1ere the public interest element ls-satisfied per se by 1 , .. specific legislative declaration of public interest Impact. Whether the public has an interest Is therefore an issue to be detonnin~d by the trier of tact."); see Pe:nn:rylt•onia. Dep'l of.Banking, v, NCAS o[Delaivare, LLC, 995 A.2d 422, 442 (Pa. Co1nm, Ct. 2010) .(acts. not sr,-eifically incorporat1.?d by per JSe language can still be a CPA violation),

~ Ivan's TlraService-l'. Goodyear Tire, 10 Wn: App, t 10, 517 P. 2d 229 (1973).

13

EXHIBIT if PAGE .2:-;(-'0-F v"""'~:--


that is likely to tnis\ead. Misrepresentation of the material terms of a tl'ansaction or the failure to disclose material terms violates the CPA. Whether particular actions are deceptive is a question of lnw that we review de novo.

Stare v. Kaiser, 161 Wu. App. 705, 719, 254 P.3d 850 (2011) (citations omitted),

In i1$ deeds of trust~ MERS states that it is "the beneficiary under

this Security hIBtllllllent" (Bain Dkt. 147, 3)1 when it kno,vs or should

know tl1at 1u1der Washington law it must hold the note to be the

beneficiary. MERS states in its Assignn1ent of Deed of Trust that:

FOR VAl.UE RECEIVED, the undersigned, Mortgage Electonic Registrl\tion Systc1ns, Inc. [MERS] as Nominee For Its Successor~ And Assigns, by these p1·esents, grants, bargains, sells, assigns, tru!lsfcrs and sets over unto IndyMac Federal Bank., FSB all benelicild interest under that cerlllin Deed of Trust dated 319/2007.

(Dkt. I Ex.. A to Huelsman Deel.) What MERS is cJain1ing in this

document is that MERS is the Tiominee of lts own successors and assigns,

not that it is the nominee of the lender or the nominee of successprs to the

lender. MERS is claiming that it has its own authority t1.l assign the deed

of trust, without reference to a piincipal. This is contrary to MERS'

assertion tbat it is an agent acting fo1· lhe actual holder of the loan.~0 It

also conceals the identity of wllicbever loan holder MERS purports to be

acting for when assigning the deed of trust. This provides MERS with

40 MERS Response in Selkowi1;: at 29; Ne.braRka D.ipt. a/ Br111king and Financ:e, 704 N, W.2d at 787 (MERS is prohibited from exe~isihg mQJ'liilgc powers \V!lhout the autboriWian ofa principal).

EXHIBIT ~i-f-...,. PAGE _Q:: OF~


considerable flexibility to fmd a party to foreclose but is u

misrepresentation of its status and authority, This odd language is not an

isolated error on MERS' part. It uses tbe same language in its

Appointment of Successor Trustee wl1ere it states that:_ "[MERS] as

Nominee For Its Successors And Assigns is the beneficiary under that

certain deed of trust dated 3/912007." (Dkt l Ex. D lo Huelsman Deel.)

Once again, MEilS attempts to characterize itself nQt just as a nominee of

the lender but as the beneficiary with its own autl1ority to appoint ne'"'

beneficiaries, v..':ithout the demand of a principal, and thet1 act as that new

beneficiary's no1ninee.

The Assignment of Deed of Trust contains another

1nisrepresentation, MERS states thal it is also assigning "the Note or

Notes ... [and] the money due." (Dkt. 1 Ex. A to Huelsma11 Deel.) "fhis

contradicts MERS steadfast positi.on that it never bolds or owns the note,

never collects money due, and has no interest in the debt. 41 111us, MERS is

misrepresenting its authority to transter the note as well as the deed of

lrust.

It Is a classic CPA violation for a business 10 make statements thnt

confuse the public us to their identity, affiliation, authority or stntus. ln

~ 1 MERS 1nust rake this position to avoid being licensed and regulnted as 11.

mortgage lendar or servicer, RCW 31.04.015(7), (26) and 31.04.035; s~e also, Nel»·asft.a D!lpl. of B11nkfflgUJTdFina11ce, 704 N.W.2d at 787 (MERS bas no ri,&bt to the Note or i.t~ paymcn!s).

15

EXHIBIT __ lf_'"" PAGE tb OF tl:J


part-iculer, it is deceptive to clai..in son1e authority to take a legal act when

one does not have that aulhocity:~2 It is also deceptive to conceal the ttuc

party to a transaction, 4' and, it is deceptive to conceal mnteria1 information

that a business is bound to disclose.4'1 The OTA clearly requires that

MERS disclose the actual note bolder in the Notice of Default,

RCW 61.24.030(8)(1). MERS contends that it does not conceal the

identity of the true note holder, MERS SeJkoVi'ifz Response, at n. 118.

Ho\.veve.r, its explanation is not convincing. MER.f> does not state

struightforwardly that it discloses the identity of the note bolder in the

tbmts required by the Deed of Trust AcL Instead, it says it runs an

Internet \.Vebsite that identifies "lOOo/o of loan servicers", and that "97% of

the ... MERS System members disclose their investor identity." MERS

does not claim, and C8.lmot claim~ that a servicer is tl:ie same as a note

~2 Stephen.t, 138 Wn. App. at 177 (deceptive to 1nischoracterize the legal SIPtus of a debt); &perience Remirlx. L.LC', v. Huul1'ixLic11nsing.wut, LTJJ, 766 F. Supp. :2d 1122, 1147 (W,D. W11sh. 2011) (deceptive to folscly chdm licenr.ing nuthorily); D\lyer \.', J.I. Kis/ak Morlgqge. l03 Wn. App. 542, .547, 13 P3d 2<10 (2000) (deceptive 10 misch11rnctcr!ze a fee as legally required); Oo114!rs v, Tranra111erica Tit/a Ins. c:o.. 100 Wn.2d 581, :592, 675 P.2d 193 {1983) (deceptive to falsely claim auihoriiy to praccice law); Evergreen C..'ollccto1'.t v. }foll, 60 Wn. App, 151, 803 P.2d 10 (1991) (deceptive to falsely cl11l1n outJ!ority to collect attorney fees); see u/s(), Te..\·a.r v. An1;::rican Blattja:i.-. Inc., 164 F. Supp. 2d 892, 894 (W.D. Tex. 2001) (deceptive fnrbusiness lo claim it collld lawfully fax ads-when it could 1101).

43 16 C.F.R. § 321.3{0) (2011) (FTC Rlllc makC$ lideceplive to falsely claim to b11 cummt mortg11ge lender); Ffo't1'3hein1 v. f'ederaf Trade Co1nm 'n, 411 F 2d 874, 876· 77 (9.th Cir. 1969) (deceptive lo conceal thot act is by debt collector not guvemment or third party); 1(111/u;pfv. Triborough Brfdge & Tunnel A11tlwr~ty, I Mlsi;:.3d 417, 432, 764 N.Y,S.2d 549, 560 (N.Y.City Civ.Ct. 2003) (dcc~tiv~ to c11nceal trul!! party to contract); C.'on1n10111vea/tlJ bJ• Packel v. To/Jesr:J11, 14 Pa.Cmwlth. 72, 12.5, :321 A.2d 664, 694 (Pa.Cmwlth. 1974) (deceptive to falsely $ta.le that one is the owner ofa coanpany).

~4 Testo v. Russ D11nmire Ol&moblfe. Inc., 16 Wn. App. 39. SJ, $54 P.2d 349 (1976).

16

EXHIBIT __i:f:__ PAGE _d!:1 OF _.lli.


holder. Loan servicers are rarely the note liolder.45 It is unclear what

MERS means when it says thfil 97% of its 1nembers disclose their investor

identity or whether this is the same as saying 97% of-its loans disclose the

cwrent owner of the note. Whatever is meant by these statements, it is not

equivahmt to having a public record of who owns the Joan and how they·

received that interest. as was available before the advent of MERS.

MERS' failure to accurately rev~al the note holders and the chain of

transfers remains one· it!i most in1p0Ltant legal failings and is U1e subjec.t of

several state Attorney General actions.46

2. MERS Acts in Trade or Commerce.

The CPA broadly defines ''trade" and "con1mercef' to include "the

sale of nssets or services, and ru1y commerce directly or indirectly

affectjng )he people of lhc Slate of Washington." RCW 19.86.010(2).

Trade or commerce includes acts after the sale of a good or service and

does not require a consumer relationsltip between the parties.47 MERS

claims to hold interests in Washington real properly, it takes acts ii1

furtherance of collecting on mortgage debts including filing docun1ents. in

4' SIW Diane E. Thompson, fo!'l:closing Modifications: How· Service\' Cncentives Discourafce Loan Modifice.rion1, 86 WR$h, L. Rev. 755 (2011).

~ Stale of DeltTWarl! v. MERl?, Del. Chancery C1. No.: 6987-CS (alleging tha1 MERS unlewl\Jlly obscures true ownel' or note); Stale af N~w Yol'k v. A{ERS1 el al., Supreme Ct of NY {alleging the MERS system is riddled with iuaccuract~ and prevents J1omcowneB and tho public from tracking owl\crship}; Con11110/11\'ea/1h of Ma.rs v. Bank of Ainerlca, A1ERSCORP, Inc. e1 al. Super. Ct. Suffolk Cty No.: 11-4363 {alleglng MERS falls to identify the holder of the mortgage \Yhcn foreclosing).

'17 Salois v. M11r11af pf0111aha Ins. Cu., 90 Wn.2d 355, 359-60, 581 P.2d 1351

(1978); F.scal1J111evSt111try Inc. Co., 49Wn. App. 37S, 3&7, 743 P.2d 832 (19&7).

17

EXHIBIT If PAGE ~50F~


county land title f(:(;ords. and it charges for its services. Therefore, it i5

engaging in trade of commerce with.in the meaning ofRCV/ 19.86,0J 0(2).

3. MERS Acts Impact the PU:blic Interest,

A recent arnendn1ent to the CPA allows a clain1ant to establish the

public interest element if the act injured other persons; had the capacity 10

injure other persons, or has the capacity to injure other persons

RCW 19.86.093.411 In this matter, the certified questions assume 1hat

MERS is acting uniformly in acting as beneficiary without holding the

note and that this is MERS' generalized business practice. It jmmohilizes

the deed of trust to allow successive transfers of the promissory note. It

appears as the beneficiary on deeds of 1rust without holding the- note, and

it uses form -assignments in its Assignments of Deeds of Trust atid

Appointments of Successor Trustees. These practices are unifonn nnd

repeated and thus 11ave the capacity to irtjure others.49

4. MERS Acts Injure Consumers.

The test w1der Ha11gmon Ridge is not whether homeowners or

others have been damaged, it is \Yhether they have been injured. 50 Injury

under the; CPA docs not have to involve direct loss of 1noney. Jd It is

"'A/s~ Hangi11r11_1 Ridge, 105 Wn.2d at 789-90. 49 Stephe111, 138 Wn. App. al 178. '0 Tampourlos. I 01 Wn.'2d at 740, ("RCW 19.86.090 ... uses the tonn "injured"

rather than ~uffurlng 1'damagcs." 'this distb1ction makes It clear I.bat no moru:tary damages need be pro Yett, and that nonq.uantl fiable injuries, sueh as loss (If gnod1\ill 1vould suffice for thi& element of the Hang1non RiJge test. This Is bolstered by the fuel lhat lhe act allows for lnjunctlve relief, clearly implying thal injury wichoul monetary damages wil\ suffice.")

" EXHIBIT -,-•._f -..PAGE Z~ OF 1:.£_


enough tbot the act ]tas deprived a person of son1e property,s1 Temporary

loss of tltle to .real property can be sttfficient.:s2 Injury may be presumed

when the conswner has to take time or expend money to remediate his or

her status due to a. CPA violation. 53

5. MERS' Business Practices Cause Cbnsumer Injury.

There aie many sce.narios where MERS causes consumer injury

through its misrepresentatic;im; regarding its authority to foreclose and its

concealment of1he true holder of the 11ot.c. !fl1omcowncrs have to 111ake

calls, visit offi~s, send letters, or consult witb an attomey to determine

who owns their notes because tvlERS does not disclose thiS: critical

infonnation, then MERS has caused that injury.s~ lfhotncowners miss the

deadline to file for a DTA injunction because they ca11 not locale 1l1e -oote

holder and therefore lose thell· claints, they have been injured. If

consumers pay their loan ta the mortgagee identifled by MERS through its

assignment, but th~ dcbl is actually held by another. they can be lnjul'ed if

the note goes unsatisfied. The use of MERS causes consumer injury

\Vhere it makes it impossible ta find the note or wl1ere MERS has allowed

51 Sorrel 'II. Eagle J-lea/1hcure, Inc., 110 Wn. App. 290, 38 P. 3d f024 {2002) ("Sufficicn1 injury to satigfy the fourth and fifth elements of 11 Consumer Protecllon A<:t claim is established when a plaintiff is deprived oftbe use of his property as a -resullof.o.n unfuir or dcciiptive act or practice.")

5"J Mason v. Morfgag11Am11rica, Inc., 114 \Vn.2d 842, 854, 792 P.2d l42 ll990). '3 Panag v. Fartners In.f. Co. of fYashi11g1n11, 166 Wn.2d 27. 204 P.3d 885

(2009). ~ Sig11-0-Llte Signx. lnc. 1·. Delaurentl Flm·e.1·u, Inc., 64 Wn. App. 553, 82.S

P.2d 7J4 (1992); Pa1rag, 165 Wn.2d 27.

EXHIBIT '-f 19 PAGE~OF 2g


the note to be lost or destroyed because consumers will not kt10\v the party

entitled to enforce it and how it obtained its enforcement power. Because

the Note is the essential document to the transaction,. any deprivation of its

use can be injurious, not ju!>t to homeowneni but to subseq11ent tit·le

holders and loau investors, and MERS causes these injuries through its

actions.

Ill. CONCLUSION

This Court should answer ccrlille<l questions l and 3 affirmatively.

RESPECTFULLY SUBMITTED this 14th day offebniary, 2012.

ROBERT M. MCKENNA Atlorney General

As!>i_stant Attorney ·oeneral WSBA#39107 Attomeys. tbr Amicus Curla.e Attorney General of Washington

EXHIBIT I./-.,...~--.-

20 PAGE A OF .25l


Wlion itcOfded mllfl ~;

""""'" 450 £. B01E11d111 SL Attn: lttlemto.pl.

. Chlf>L-,SCUOU

lllMIIDlllUMml~I PodD.' lt4JOli'35S'l7llOJI

Tu.ID: llllCiW-Oll

PropfrtyA~

J9UNl57111AVI V1acoll\'ff', WA 98661-.»42 .,..~ .... ~11111""7 1-1\

-----"'""""-"'' llfl•t.of .iu.rlao l'rfpnd e,: ll•lllbC11111a llllloff).POJJ •SO I. lloliDdary SL Chapin, SC 191341

M!Nt: l23JL~1JIO MEIUIP"-1: IU..61M)T1

ASSIGNMENT OF DEED OP TRUST fllf Vlllua ~~ lbe uncllni!ped bolder of• Dnd of Trust (hnlD M,\ujpru!r") who-= 9ddrtu ii )JOO . s. w. 34TII AVENUE., surm 101 OCALJ., PL~,. d* h.IN!iy grmt, tell, .uipi, ~r ~ c:ga,wy 111110 BANK OF AMBRICA. NA., succr.ssoa JfY MPG ER TO BAC KOMI LOANS SltRVJCINC, LP FKA cotlNt'RVWIDE HOME LOANS seRVtClNG, LP wt.ost lddi9A 11 400 ?11ATJONAL WAY ,SIM) VALLEY, CA 9>0'5 .U tatellch1l ID!eni1 \llUStr lhlil °"""kl peed o!Tnist d'llKribed Nlow toJ*dill' wilh 1111! notc(i) 9llCI obUptlons lhmin dmcribed Ind tb, maal)' dn 11111 to bcanno due lhmoo Witb idvest and •II ri1kll .cenied ar10 l!Wll8 under u!d Deed ofTnuL

Orlcin•T Lender. LANDMARK MOATGAGE COMPANY MildeBy: ' PAMELAS.OWENAMil.RU:DWOMANASHIRSlll'ARATl

ISTATE Oripw Tnislet: FID!LITV NATIONAL TITLE INSORANCI I111eotO.d G!Trust: lV"2005 Oripill Lou! Amallot; SUIU!ll.llO ll;ecord«l In O.rk COUal]', WA oo; Tlfl51100S, book NIA. i-gt l'f/A ll>d ilstnimml 1D1111bcr 41112!1 T Properry Lepl Cucdp!tool: LOT'- ANDERSON SUBllMSION4, ACCORDING TO THE PLAT 11ltlU01, JtECORllED IN 'VOL.UM& C OF rt..\1'S, PAGE 4f1; llt:COJlllli OP Cl.ARK COUl'fl'V, WASHINGTON. A.PJll, #: 1D8"Ml2.

1N W!TN£SS WHBR80I'. the vndmipicd hll tatHd 111111 Aullftllltllto!Doo:d ofTNll 111 be exeeu10d O!I /Of~ft,,.

MQJl.TGAGB BLt:CTRONIC REOISTRATIOM 5Y'1'1:MS. INC,

.,,~ -

EXHIBIT S -:----PAGE I OF 2--- · -


I Rrtify a.oder PINALTY Oll' l'ElUUR.Y u•dtr 111, lnrt p(dn saw llfCo.lllonlllo lhat ~ forqo!Ds pan1npb b tnlt .•ad cornrt. ·

Docmi 1141069355'111022

Clark Auditor Mon Oct 17 14:38:22 PDT 2011 4799971 Page 2

EXHIBIT 5 PAGE r:J;;--=O-F c;t.....--


• RECORDING REQUESTED BY:

WHEN RECORDED MAIL DEED AND TAX STATEMENT TO:

Federal Home Loen Mortgage Corporation o/o BANK OF AMERICA, N.A. 2001 NW 46TH ST. KANSAS CITY, MO 64116

TS No: WA0900011fJ-14-1-FT

Rw;I £!.state ExdBe iax Ch. 11 Rev. Lawl 1951

Alfd. • 7.9LJ~!1~ I -J2 - /fi Toi'Detalle of tax paid IM

Alfd, ., -----==,,.------ Doug l.81hllr Clark county Traa11Uf'lll' Jt/;l,I

oep;;iy

APN 108669012 TO No.: 8417086

TRUSTEE'S DEEi> UPON SALE 1Si!itfM .P...

THE GRANTOR, MTC Financial Irie. dbe Trustee COl'JlS, as present Trustee under 11\al Deed of Tn.ist, as hereinafter p1111iculady described, Jn conshleratlon of ttie p1t1mlaea end payment rec:Hed below, hereby grants and conveys, wittiout warranty to Federal Home Loan Mortgage Gorporatlen, GRANTEE, that real property, sltua\IK! In the Cour1ty of Clark, ~tale of Washington, deac:ril?Od as folloltlS:

LOT 6, ANDERSON SUBDIVISION-2, ACCORDING TO THE PLAT THEREOF, RECORDED IN VOL.UMe G OF PLATS, PAGE 467, RECORDS OF CLARK COUNTY, WASHINGTON.

APN: 106669012

RECITALS;

1. Thie conWJyaric:e l• made pursuant to the pcwers, Including the power of sale, conferred upon said Trustee by that t:iertaln Dud of Trust dated November 4, 2005, •xecuted by PAMELA S. OWEN A MARRIED WOMAN AS HER SEPARATE ESTATE, es Granter, to FIDELITY NATIONAL TITLE INSURANCE, as Trustee, in favor cl MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. ("MERS"), ee das1gnaled nomine for LANDMARK MORTGAGE COMPANY. Beneftdsry of the aecurity instrument, !15 successors and &signs, recorded on November 15, 2005, ss Instrument No. 40823i7, of official mcords ln the Office cf the County Auditor of Clark County, Washington.

2. Said Oeed of Trusl was execu!Bd to secure, together with other undertakings, the payment ol one Pmmi&sory Note in the 11.1m of ~06,250.00 with lntereat thsreon, accorolng to !he terms ther&Of, In favor of MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., as nominee 1or LANDMARK MORTGAGE COMPANV, ae original BeneflciBry and to ••cure any olher 'ums of money Which might bacome due and payable under the terme of said Deed of Trust.

3. The detctlbed Deed Of Trust provldu that the real property conveyed therein la not used principally fol agr!cultural or farming purposes.

4. Derault /'laving occurred in !he Obligations seCCJrell and/or covenants or Iha Granfelr, as eel forth in No*e of T1u1tee's Sele described below, v#llch Dy the terms of the Deed of Trust make opt1rallve the power to sell, the thirty·day advance Notice of Default wae transmitted to the Granlor, or hie succe.ssor in Interest. and a corrt of 11ald Notice was posted or s•rved Jn alll:oldanco with law.

EXHIBIT---"~--,.PAGE _J_ OF 2:::::


• TS No:WA09000118-14-1-FT APN 106669012 TO No.: 8417086

5. Bank of America, N.A., Successor by Merger to BAC Home L.oans Servicing, LP FKA Countrywide Home ~ne 5e!Vlc:lng, LP. being then \he holder of lhe indebledness secured by said Deed of Trust, delivered to said Trustee a v.nilten requast direcilng &aid Trustea or his authorized agent to sell the described property In ee<:ordance with law end the lerrns or nid Deed of Trusl.

6. The defaults specified in the "Notice of Defaul1" not having been cured, the Trustee, In ccmpllance with tile terms of !;aid Deed or TNsl, 11 "Notice of TNstee's Sale" of siiid property record11d on Jun• 18, 2014 as A1.1dilors File No. S06D743 !n the Office of the Auditor of Cieri<. county, Washington.

7. The Trustee, in Its aforesaid "Notice of Trustee's Sale,' fixed the place of sale aa el the main entrance under the gaiebo to the Clark CoLJnty Government Building 1300 Franklin, Vancouver, WA 98860, a pubUo place, on January 16, 2015 et 11:00 AM, and In accordance wtlh law eau1ed oopiea of the atetulor'1 ·Notice or Trustee's Sele" to be transmitted by mail to ell persons •nllUed lherela and eilher p05ted or served prior W 91) days before the sale; furlher, Iha Truslee tatJ&ed a copy at said "Nollce of Tl'U!Jtee'a sa1e• to be published once batween the thlrty·llftfl end lwenty-a!ghth day before U1e date of sale, end once between the fourteenth and seventh dey before the date Df sale in a legal newtj)tlper in each county ln which the property or any part thereof 11 situated; and further, Included In tlia Notice, which waa transmitted to or served upon the Grantor ar his successor In lnteresl, e "Notice of Foniclosure· in eubetenjjelly the atatutory form.

8. During foreclosure, no actiori WllS pending on en obligation secured by said Deed of Trust

9. All legal requirements and ell provisions of said Deed of Trust have been complied with, as to aWi lo be parfomiad and notices to be given, ea provided In Chapter 61.24 RCW.

10. The def11ult5 spacilied h1 the "No~ce of Truslee'e Sale" nol having bean cured eleven days prior to the date of Trustee's Sale and aald obllgationa aecured by sald Deed of Trust f9mainln9 unpaid, on January 16, 2015, the ciate of sale, which waa no I less than i IW days lrom the date or default in the obligation secured, the Trustee lhen end there sold et public auction to said Grantee, the highest bidder therefotfl, the property herainabove described, for the sum of $295,860.75, by the satisfacUon In full of the ob1igetion then secured l;Jy said Deed of Trust, together wilh all feea, costs and expenses a& provided by statute.

Dat1d; January 19, 2015 MTC Flnanolal Inc, dbaTrustae Corps

~.;.;:.;;:;,gnato~ ...... ·····--·----····· STATE OF Washington COUNTYOf_..,{,:f~f0u~~'----~

I certify thel J know or have aaU&factory evidence lhal f/Yu 0(l ~ '(h..n la the person who appea~d before me, and uld parson 1cknow!edged than;e:/aiW &lgned lhl8 lnatrument, Ofl oath atated th11t +l&leha waa authorized to elCllcLl!e the Instrument and ackriowledged it es the Authorized Signatory fOf MTC Financial Inc. DBA Trust.a Corin lo be the fnte end voluntary act of such party for the uses_ and pt.irposea mentioned ln \he instrument

o ... ,,,.h.n 19 UJ/S"-MONJQue PA-ft aTAre a.. WABH~i::~

NV NOTARY PUBL~ COMMISSloN EXPIAQ

10-21-17

EXHIBIT fo

.I ..

PAGE .,2. OF ...L_


MIN: 1232l94000000473BO

NOVEMBER 4, 2005 [D~t,J

NOTE Loan Number: 105935577

PORTLAND OREGON !City! 1511"1

3912 NE 57TH AVENUE, VANCOUVER, WASHINGTON 98661 [Propnty AddrusJ

1. BORROWER'S PROMISE TO PAV Jn return for a loan lli.t J have recelvetl, I promise to pay U.S. S 20 8, 250 • 0 0 {this amount ls

calkd ~Ptintlpal~), plus lnlmll, tc lhe order of the Lender. Tho Lender 1$ LANDt•lARK f.IORTG~GE COMPANY, AN OREGON CORPORATION I \VU\ make 1111 payments under this Nnte In 1he form or cul1, check or mo11Cy order.

I understand Iha! the Lender may lransfer th!J Note. The Lc:ruler or uyone who take3 lhls Note Uy transfer and \Yho Is enUlled lo receive pay111ents under thil Note Is called the •Nute Holder.~

2. INTEREST Jn1erest will bl: charged on unpaid prJndpal unlil the run a111oun1 of Prlnclpal hu been paid. I 1vill pay interest

atayearlyrateor 6.125 %. The inh!resl rate required by !his Section 2 Is the r.lle I \\Ill! pay both before and after any default described in

Secllon 6(8) of llili Nole.

3. PAYMENTS {A) Tline and Place of Payments I will pay prlndp1l and Interest by Ulilking a payment every month. I \'Vlll make my monlhly payll1\lal on the 1st day of each month beginning on JANUARY l

2 00 6 . I will n1ake these payments eveiy muntb witll I have paltl all or the prlnclpal and intmst and any other charges destrlbed beJow thal I my owe under !his Note. Each monlhly paymenl will be applied as of Its scheduled due .Ute and will be appUed lo interesl before Principal. If, ou DECEMBER 1, 2035 , f still owe an101U1ts wider this Note, 1 will pay those amounts la full on that date, which b called lhe "Maturlly Date."

lwUlmakemymonthlypaymentsal 10415 SE STARK ST. STE. D, POR'l'LAND 1 OREGON 97216

or at a different pUce if req1drf!d by lhe Note Holder. (B) Amount of Monthly Payments My monthly paymem will be in ll1e amount of U.S. $ 1, 2 6 5 • 3 5

4. BORROWER'S RIGHT TO PREPAY J have the right 10 make payn1euls of Principal 11 any Ume before they are due. A payment of Plillc:ipal only

is known u a •prepaymen1," When l male a Prepayment. I wlll leJI tbe Nole Holder in writing lhat lam -dolng so. I may not d~lg.nato 11 payment u a Prepayment If I have not made all the monthly paymen1s doe under lhe Nole,

I may mike a run Prepayment or partial Prepaymenrs without paying a Prepayme11t charge. The Nole Holder will 115e my Prepaymenls to reduce the amount 0£ Principal tltat l owe under this Note. Howe Yer, the Note Holder may apply n1y Prepay1nent t11 the accrued and unpaid lnteresl on the Prepaymenl amounl, before applying my Prepayruenl tn reduce the PducipaJ antount of the Nole. If I make 1 partial Prepayment, there will be no ebanges in the due date or In the amowit of my rnonlhly payment uole.is the Note Holder agrees In writing to those cllaoges.

5. LOAN CHARGES 1£.1 law, which applies ta lhls loan 1md which &els maximum loan charges, ls f111ally lnterpteted so 1b11t the

h1.lere.5t or other loaP cl1ar&I!! collected or to be collected In connecUon with lhi.5 loan exceed tbe penniUed limits, then: (a) any such ge shall be reduced hy the amount necessary 10 reduce 1he charge lo the pennill!d limit:

Borrower InlU1l1:

?age 1 11! 3

.: ';.',·.

EXHIBIT_f __ ~~r: I no r


CRPRDHRBS48a. 10/2712011 10:66:15 AM • PAOE 8/084 •

eee-2s4-&B!5B

-....--:-··---ALLONGE TO NOTE

LOAN NUMBER!'' •

1.0ANAMOUNTI s2oe,2sc.oo

l~ ADDRUS:3!J12 Nii 57'J'R AV'EllOJ:, VANCOUVER., irABHrNGTON

AUONGllTONOJ'EDATIIDNOVSNBU 4, 2005

IN FAVOR OJI' LANDMARK MORTW\GZ COHPAMY

PAYTOTHEORI>BROF WUlftnWD>E BAJll:,. JI.A •

• TITLB:ASSrB1'AN'l' VJ:CB l'R!lSl:D'EN'l'

--_..........,_ EXHIBIT ___,,$'....__ ~~GE ,;;.... OF .::2 --

case 14-45542-BDL Doc 12-1 Flied 10129/14 Ent. 10129/14 12:59:46 Pg. 10 of 11


5059964 APTTR i Jhd'- - 11~ .II P..-: 1 -~ Pl~SJ:MG SOLutlott

lliniu11111•ilili .. ,., .. RECORDING REQUESTED BY

WHEN RECORDED MA1L TO:

Trustee Corps 170U SevtnlhAvenue &lite 2100 Seattlt, WA98101

.Trusl&e S•ll No WA0900011B-14·1 ·-·•••• ,., PropertyAddl'Ks: S912NE 51THAVENUE, VANCOllV!R. WA.98681

APPOINTMeNT OF successoR TRUSTee

Tille Order No 8417086

!STAM I

NOTICE IS HEREBY GIVEN that MTC Fln1ncf•l Inc. dba TrustH Carpi, who68 address Is 17DO Sevef'lthAVtlnua SUit& 2100, Seattle, WA 98101, I& appoin19CI successor TMtaa under that certain Deed or Trust in Whictl PAME~ s. O'NEN A MARRIED WOMAN AS HER SEPARATE f:STATE was 11'1e Granlor and FIDELITY NATIONAL Tm.E INSURANCE was the Criginal Trustee end MORTGAGe ELECTRONIC REGISTRATION SYSTEMS, INC. -nominee for LANDMARK MORTGAGE COMPANY was Iha- Oflglnill Beneficiary. which Deed or Trust ~ dll1Bd NOYtmber 4, 2005 and 19COfded on November 15, 2005 er. lnsllUment No. 4082317 of ofTk:ial records In the OTlloe ofttia RecOl'der OI Clal'k Cl>ll'lty. Wahington. It ta haV& 811 the poVfllr. cf saidorlg:lnal Trustee, efJeclMI forthwith,

IN WITNESS WHEREOF, the ~Md Bcno11ci1KY has ntrwmD let his hand; If tft& underaig.ned 16 a OOl'pMltlon, it 1\89 CllU!led 118 corporal& narne lo be isigned and affixed hareurio by b duly aulhortzed officer( a).

0atect ro "-ikb. 11 . l..:.l '..., I

BANK OF AMERICA, N.A.

n By; l!:\...to.~ ~ ~" '- :.... . ._J...._lfc. J IV''- 1 S~TEOF Yt,.. 0 >-1 f.,,..a . ..: l\.U1)f~ .... T v·,(.11. ,('.1,.,.JiJ. ...... .-COUNTYOF 4tlrt 1, ...... ~

' On balore me, b.M. rn. ~jl( ' Nolary Public. pal'SOnlly •PP11•1'9d wtlO pru¥ed to me on the Oesb DI salDrac:tory

!hat ~ 8ll8CUled the same In hi k' euSitlfited tapaeily(lea), and that by h air algneture(a) on evklance IC be e person(t) Mose e aubecribed to Iha within lns\nl~ant •c:~ to me

the I~ ilia pef$0fl(S), or Iha entity upon behalf of which the pe!WJl'l(s) acted. Instrument

I certify under PENALTY OF PERJURY undar lhe Jaws af the State or &.aa,l!rtJoi4 U\81 the fofegOlng paragraph Is lrua elld correct.

WITNESS my hand and official Beal

~

EXHIBIT 9 PAGE_L_OF I -

' Case 3:15-cv-05375-BHS Document 41-1 Filed 10/14/15 of 77

EXHIBIT E


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COPY Original FKed

APR 0 3 2015

Scott a Wbll; ~Ouk()).

IN THE SUPERIOR COURT OF THE STATE OF WASHINGTON IN AND FOR CLARK COUNTY

8 FEDERAL HOME LOAN MORTGAGE 9 CORPORATION,

JO

JI vs.

Plaintiff, Case No.:

12 PAMELA S. OWEN AND JOHN/JANE DOE OWEN, WIFE AND HUSBAND; AND JOHN

13 AND JANE DOE, UNKNOWN OCCUPANTS

14 OF THE PREMISES,

JUDGMENT FOR WRIT OF RESTmJTION ONLY

[Clerk's Action Required]

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Defendants

Judgment Creditor: Attorney for Judgment Creditor

Judgment Debtor(s):

Federal Home Loan Mortgage Corporation Katherine Christofilis Bishop, Marshall & Weibel, P.S. Pamela S. Owen and John/Jane Doe Owen and all Occupants of the Premises

JUDGMENT

This matter came on for hearing before the undersigned Judge/Court Commissioner

23 of Clark County Superior Court on the Plaintiff's Complaint for Unlawful Detainer. The

24 Coort, having reviewed the file and records herein, having read and considered the 25

Declaration of Katherine Christofilis and deeming itself fully advised, now makes the

following:

JUDGMENT FOR WRIT OF RESTITUTION ONLY- 1 Bishop, Marshall & Weibel, P.S. 720 OLIVE WAY, SUITE 1201

Evjdmtnonmoney/452 .1501456 SEA'ITLE, WA 98101

r?-:-;,, ,.:.~ 1 c· \i "· Y;o6J 622-5306 FAX: (206) 622--0354

·· .. · , \\J) Jr-' 1:


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FINDINGS OF FACT

1. At all material times herein, Plaintiff, Federal Home Loan Mortgage

Corporation, as authorized to do business in the State of Washington and owes no license

fees or taxes to the State of Washington.

6 2. Plaintiff is the owner of the following described real property (the subject

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property):

Lot 6, Anderson Subdivision-2, according to the Plat thereo~ Recorded in Volume G of Plats, Page 467, Records of Clark County, Washington.

Commonly known as: 3912 NE 57th Avenue, Vancouver, WA 98661 by reason of its

successful bid at a Trustee's fbreclosure sale held on January 16, 2015.

3. As provided by law, Plaintiff was entitled to possession of the subject property

on February S, 2015, the twentieth day following the Trustee's sale.

4. Defendants are still in possession of the subject property and refuse to

surrender possession thereof.

Having made the foregoing Findings of Fact, the Court now makes the following:

CONCLUSIONS OF LAW

1. The Court bas jurisdiction over the parties and subject matter of this lawsuit.

2. The Defendants are guilty of unlawful detainer from the date set forth in

22 Finding of Fact No. 3 to the date judgment is entered herein.

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3. The Plaintiff is entitled to (1) immediate possession of the subject real

property; and (2) to the issuance ofa Writ of Restitution.

Based on the foregoing Conclusions of Law, now, therefore, IT IS HEREBY:

ruDGMENT FOR WR!T OF RESTITUTION ONLY- 2

Bvjdm111onmaney/452 .1501456

Bishop, Marshall & Weibel, P.S. 720 OLIVE WAY, SUITE 120 l

SEATTLE, WA 98101 (206) 622-5306 FAX: (206) 622-0354


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I ORDERED, ADJUDGED and DECREED:

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I. THAT the Defendants and any and all occupants of the premises, shall be

evicted from the subject property, as described in the Fincling of Fact No. 2, commonly

known as: 3912 NE 57th Avenue, Vancouver, WA 98661.

2. THAT the Clerk of this c;ourt shall issue forthwith a Writ of Restitution,

returnable 20 days after its date of issuance, ordering the Sheriff of Clark County to restore

the subject property to the Plaintiff; provided, that if retum is not possible within 20 days,

the return on the writ shall be automatically extended for a second 20 day period. The

Writ aha!! also authorize the Sheriff to break and enter the subject property, as necessary.

3. THAT any personal property remaining on the above described real property

is deemed abandoned and valueless, and Plaintiff is hereby authorized to take possession

of such property or cliscard or destroy i~ as provided by law.

DONE IN OPEN COURT this '2;> '2015

/s/ ROBERT A. LEWIS

Judge/Court Commissioner

BISHOP, MARSHALL & WEIBEL, P.S.

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Katherine Cbrist~liS,'\VSBA 1142584 23

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Attorney for Plaintiff

JUDGMENT FOR WRJT OF RESTITUTION ONLY· 3

Evjdmtnonmoncy/452 .1501456

Bishop, Marshall & Weibel. P.S. 720 OLIVE WAY, SUITE 1201

SEATILB, WA 98101 (206) 622·'306 FAX: (206) 622·0354


Pamela Owen. Civil Rights. Exhibit 1 to Declaration of Jody m. Mccormick. Document 41-1

Documents

Transcript of Pamela Owen. Civil Rights. Exhibit 1 to Declaration of Jody m. Mccormick. Document 41-1