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Judges split on mortgage issue

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In a case of first impression between a lender and the mortgagee on record, the Indiana Court of Appeals was divided as to whether the mortgagee on record had an enforceable right under a mortgage.

Shannon Barabas’ mortgage on her property in Pendleton said that the security instrument “is given to Mortgage Electronic Registration Systems, Inc. (“MERS”), (solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns), as mortgagee.” It also defined the lender in the mortgage as Irwin Mortgage Corporation and gave its address, and said any notice to lender shall be given to lender’s address.

Barabas refinanced the property with ReCasa, defaulted, and ReCasa foreclosed in June 2008. It named Irwin as a defendant, which disclaimed any interest in the real estate. The property was sold back to ReCasa at a sheriff’s sale and then sold to Rick Sanders in March 2009.

In April 2009, MERS assigned the MERS mortgage to Citimortgage and in October, Citi filed a motion to intervene and for relief from the September 2008 amended default judgment in the foreclosure lawsuit. Citi claimed as the assignee of MERS, it could assert any and all rights of MERS and it was the holder of the first mortgage on the property. It sought to foreclose on the MERS mortgage. The trial court declined to set aside ReCasa’s amended default judgment.

Citi argued that because ReCasa didn’t name MERS as a party defendant, it rendered the foreclosure judgment ineffective as to MERS and its assignee, Citi. The trial court held that Citi failed to redeem the property within one year of the judicial sale and as a result, its claim is precluded by Indiana Code Section 32-29-8-3. The majority, citing the June 2008 date in which ReCasa filed its foreclosure complaint, affirmed the lower court in Citimortgage, Inc. v. Shannon S. Barabas, et al., No. 48A04-1004-CC-232.

Judge Elaine Brown dissented on this point, noting that the time period is one year after the sale. The judicial sale happened on Jan. 23, 2009, in this case, not on the date ReCasa first foreclosed on the property or the date the mortgage was assigned to Citi. She wrote that the statute didn’t preclude Citi’s claim because it filed a motion to interview and for relief in October 2009.

The judges also disagreed as to whether MERS is a party possessing rights under the mortgage. Citi also argued that I.C. Section 32-29-8-3 doesn’t apply because MERS – as the mortgagee on record – should have been given notice of ReCasa’s initial foreclosure lawsuit instead of Irwin. An analysis of this relationship between MERS and Irwin is a matter of first impression.

The majority chose to follow the ruling in Landmark Nat’l Bank v. Kesler, 216 P.3d 158, 161 (Kan. 2009), which held that MERS was little more than a “straw man” for a lender.

“Like Landmark, Citi seeks to have the default judgment set aside based on the fact that it received its interest from MERS, which served as the mortgagee ‘solely as nominee’ for Irwin Mortgage,” wrote Judge Patricia Riley. “Thus, when Irwin Mortgage filed a petition and disclaimed its interest in the foreclosure, MERS, as mere nominee and holder of nothing more than bare legal title to the mortgage, did not have an enforceable right under the mortgage separate from the interest held by Irwin Mortgage.”

Judge Brown dissented, noting in the instant case, the mortgage was given to MERS as mortgagee, which was not the case in Landmark. Also, the fact that MERS assigned the mortgage to Citi and Irwin issued a disclaimer of interest indicate that MERS was more than a “straw man” and had a real interest in the property, she wrote.

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  1. This law is troubling in two respects: First, why wasn't the law reviewed "with the intention of getting all the facts surrounding the legislation and its actual impact on the marketplace" BEFORE it was passed and signed? Seems a bit backwards to me (even acknowledging that this is the Indiana state legislature we're talking about. Second, what is it with the laws in this state that seem to create artificial monopolies in various industries? Besides this one, the other law that comes to mind is the legislation that governed the granting of licenses to firms that wanted to set up craft distilleries. The licensing was limited to only those entities that were already in the craft beer brewing business. Republicans in this state talk a big game when it comes to being "business friendly". They're friendly alright . . . to certain businesses.

  2. Gretchen, Asia, Roberto, Tonia, Shannon, Cheri, Nicholas, Sondra, Carey, Laura ... my heart breaks for you, reaching out in a forum in which you are ignored by a professional suffering through both compassion fatigue and the love of filthy lucre. Most if not all of you seek a warm blooded Hoosier attorney unafraid to take on the government and plead that government officials have acted unconstitutionally to try to save a family and/or rescue children in need and/or press individual rights against the Leviathan state. I know an attorney from Kansas who has taken such cases across the country, arguing before half of the federal courts of appeal and presenting cases to the US S.Ct. numerous times seeking cert. Unfortunately, due to his zeal for the constitutional rights of peasants and willingness to confront powerful government bureaucrats seemingly violating the same ... he was denied character and fitness certification to join the Indiana bar, even after he was cleared to sit for, and passed, both the bar exam and ethics exam. And was even admitted to the Indiana federal bar! NOW KNOW THIS .... you will face headwinds and difficulties in locating a zealously motivated Hoosier attorney to face off against powerful government agents who violate the constitution, for those who do so tend to end up as marginalized as Paul Odgen, who was driven from the profession. So beware, many are mere expensive lapdogs, the kind of breed who will gladly take a large retainer, but then fail to press against the status quo and powers that be when told to heel to. It is a common belief among some in Indiana that those attorneys who truly fight the power and rigorously confront corruption often end up, actually or metaphorically, in real life or at least as to their careers, as dead as the late, great Gary Welch. All of that said, I wish you the very best in finding a Hoosier attorney with a fighting spirit to press your rights as far as you can, for you do have rights against government actors, no matter what said actors may tell you otherwise. Attorneys outside the elitist camp are often better fighters that those owing the powers that be for their salaries, corner offices and end of year bonuses. So do not be afraid to retain a green horn or unconnected lawyer, many of them are fine men and woman who are yet untainted by the "unique" Hoosier system.

  3. I am not the John below. He is a journalist and talk show host who knows me through my years working in Kansas government. I did no ask John to post the note below ...

  4. "...not those committed in the heat of an argument." If I ever see a man physically abusing a woman or a child and I'm close enough to intercede I will not ask him why he is abusing her/him. I will give him a split second to cease his attack and put his hands in the air while I call the police. If he continues, I will still call the police but to report, "Man down with a gunshot wound,"instead.

  5. And so the therapeutic state is weaonized. How soon until those with ideologies opposing the elite are disarmed in the name of mental health? If it can start anywhere it can start in the hoosiers' slavishly politically correct capital city.

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