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Justices tackle home foreclosure issue involving MERS

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Indiana Justice Mark Massa, writing for the court Thursday, delved into the history of the Mortgage Electronic Registration Systems Inc. and its role in today’s mortgage industry in a case involving a foreclosed home in Madison County.

The opinion, Citimortgage, Inc. v. Shannon S. Barabas a/k/a Shannon Sheets Barabas, ReCasa Financial Group, LLC, and Rick A. Sanders, 48S04-1204-CC-00213, provides background on how the mortgage industry has changed from involving just a borrower and lender to now include a lender, loan servicer, title company, and a whole host of other parties. Massa explains the creation in the 1990s of MERS, which maintains a computer database that tracks servicing and ownership rights of mortgage loans in the U.S. MERS member banks list MERS as “nominee” for lender and as “mortgagee” on their mortgage documents.

Shannon Barabas obtained a mortgage through Irwin Mortgage Corp. in 2005, to which the agreement said that the security instrument is given to MERS “(solely as nominee for Lender, as hereinafter defined, and Lender’s successors and assigns), as mortgagee.”

Two years later, she took a second mortgage out with ReCasa Financial Group. But she couldn’t keep up on payments with ReCasa, and it filed suit for foreclosure of the mortgage and for a sheriff’s sale. Irwin disclaimed any interest in the real estate in 2008. The sheriff’s sale occurred in January 2009.

In April 2009, MERS assigned the Irwin mortgage to Citimortgage. Citmortgage then filed a motion pursuant to Ind. Trial Rules 24(A) and 60(B) seeking to intervene in the foreclosure suit and asking that the judgment granted to ReCasa be subject to the mortgage now held by Citimortgage. The trial judge ultimately denied the motion.

The justices unanimously held that Citimortgage has the right to intervene. They found the mortgage contract Irwin had with MERS to be ambiguous and that the parties intended to designate MERS as the lender’s agent.

“This agency relationship conferred various rights upon MERS, including rights that constitute protected property interests sufficient to entitle MERS—and Citimortgage standing in the shoes of MERS—to meet the first requirement for intervention of right,” Massa wrote. MERS’ interest in the mortgage survived through its other principals, including Citimortgage.

The high court also found that disposition of the foreclosure case may impair Citimortgage’s interest and that no other party is adequately representing that interest. Citimortgage’s motion to intervene was timely, as well as its motion for relief, because ReCasa failed to provide Citimortgage or its agent MERS with notice of the foreclosure suit.

Massa pointed out that this case highlights issues with using laws established in 1877 to deal with a modern mortgage industry. The drafters of the original version of I.C. 32-29-8-1 couldn’t have imagined more than two or three actors involved, Massa wrote. The General Assembly may soon have to modernize the law to accommodate “this new and larger cast of characters,” he wrote.

The case is sent back to the trial court with instructions to grant the motion to intervene and amend the default judgment to provide that ReCasa took Barabas’ property subject to Citimortgage’s lien.  

 

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  1. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  2. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

  3. While this right is guaranteed by our Constitution, it has in recent years been hampered by insurance companies, i.e.; the practice of the plaintiff's own insurance company intervening in an action and filing a lien against any proceeds paid to their insured. In essence, causing an additional financial hurdle for a plaintiff to overcome at trial in terms of overall award. In a very real sense an injured party in exercise of their right to trial by jury may be the only party in a cause that would end up with zero compensation.

  4. Why in the world would someone need a person to correct a transcript when a realtime court reporter could provide them with a transcript (rough draft) immediately?

  5. This article proved very enlightening. Right ahead of sitting the LSAT for the first time, I felt a sense of relief that a score of 141 was admitted to an Indiana Law School and did well under unique circumstances. While my GPA is currently 3.91 I fear standardized testing and hope that I too will get a good enough grade for acceptance here at home. Thanks so much for this informative post.

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