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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. I like the concept. Seems like a good idea and really inexpensive to manage.

  2. I don't agree that this is an extreme case. There are more of these people than you realize - people that are vindictive and/or with psychological issues have clogged the system with baseless suits that are costly to the defendant and to taxpayers. Restricting repeat offenders from further abusing the system is not akin to restricting their freedon, but to protecting their victims, and the court system, from allowing them unfettered access. From the Supreme Court opinion "he has burdened the opposing party and the courts of this state at every level with massive, confusing, disorganized, defective, repetitive, and often meritless filings."

  3. So, if you cry wolf one too many times courts may "restrict" your ability to pursue legal action? Also, why is document production equated with wealth? Anyone can "produce probably tens of thousands of pages of filings" if they have a public library card. I understand this is an extreme case, but our Supreme Court really got this one wrong.

  4. He called our nation a nation of cowards because we didn't want to talk about race. That was a cheap shot coming from the top cop. The man who decides who gets the federal government indicts. Wow. Not a gentleman if that is the measure. More importantly, this insult delivered as we all understand, to white people-- without him or anybody needing to explain that is precisely what he meant-- but this is an insult to timid white persons who fear the government and don't want to say anything about race for fear of being accused a racist. With all the legal heat that can come down on somebody if they say something which can be construed by a prosecutor like Mr Holder as racist, is it any wonder white people-- that's who he meant obviously-- is there any surprise that white people don't want to talk about race? And as lawyers we have even less freedom lest our remarks be considered violations of the rules. Mr Holder also demonstrated his bias by publically visiting with the family of the young man who was killed by a police offering in the line of duty, which was a very strong indicator of bias agains the offer who is under investigation, and was a failure to lead properly by letting his investigators do their job without him predetermining the proper outcome. He also has potentially biased the jury pool. All in all this worsens race relations by feeding into the perception shared by whites as well as blacks that justice will not be impartial. I will say this much, I do not blame Obama for all of HOlder's missteps. Obama has done a lot of things to stay above the fray and try and be a leader for all Americans. Maybe he should have reigned Holder in some but Obama's got his hands full with other problelms. Oh did I mention HOlder is a bank crony who will probably get a job in a silkstocking law firm working for millions of bucks a year defending bankers whom he didn't have the integrity or courage to hold to account for their acts of fraud on the United States, other financial institutions, and the people. His tenure will be regarded by history as a failure of leadership at one of the most important jobs in our nation. Finally and most importantly besides him insulting the public and letting off the big financial cheats, he has been at the forefront of over-prosecuting the secrecy laws to punish whistleblowers and chill free speech. What has Holder done to vindicate the rights of privacy of the American public against the illegal snooping of the NSA? He could have charged NSA personnel with violations of law for their warrantless wiretapping which has been done millions of times and instead he did not persecute a single soul. That is a defalcation of historical proportions and it signals to the public that the government DOJ under him was not willing to do a damn thing to protect the public against the rapid growth of the illegal surveillance state. Who else could have done this? Nobody. And for that omission Obama deserves the blame too. Here were are sliding into a police state and Eric Holder made it go all the faster.

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