Alabama judge denies securitization trustee standing to foreclose

by KERRI PANCHUK

housingwire.com

An Alabama circuit court in Russell County has issued a summary judgment this week in the case of Horace v. LaSalle Bank, preventing the bank from foreclosing due to irregularities with the assignment of a promissory note.

The ruling prevents defendant LaSalle Bank – as the trustee holding the plaintiff's securitized mortgage – from proceeding with a foreclosure because the trust failed to follow its own pooling and servicing agreement, and did not follow applicable New York law when trying to "obtain assignment of Horace's note and mortgage," according to the court order.

Without proof the mortgage had been assigned to the trust, in this case a Bear Stearns-related mortgage trust, the trustee lacked standing to foreclose, the court found.

Specifically, the homeowner alleged LaSalle only "produced a collateral file that included the original, wet-ink, signed note in the case," according to court records. That note contained a single endorsement in blank, which came from the originator of the mortgage, Encore Credit Corp. While the loan was sent through the securitization process – going through two other parties before reaching the trustee – the only assignment on record was from Encore.

"Accordingly, the endorsement chain … does not comply with that required by the PSA," Judge Albert Johnson wrote in an order granting summary judgment and permanently enjoining LaSalle from foreclosing on the property, a home in Phenix City, Ala.

"The court is surprised to the point of astonishment that the defendant trust (LaSalle Bank National Association) did not comply with the terms of its own pooling and servicing agreement and further did not comply with New York law in attempting to obtain assignment of plaintiff Horace's note and mortgage," the judge's order, signed March 25 and filed with the court Wednesday, said. "Horace is a third-party beneficiary of the pooling and servicing agreement … without such … plaintiff Horace and other mortgagors similarly situated would never have been able to obtain financing."

Horace's attorney, Nick Wooten, said the judge's decision proves "the securitization process totally and completely failed," and that many of these "assets were not transferred."

Read the rest here.