Cnty. of Wash. v. U.S. Bank Nat'l Ass'n, Civil Action No. 11-1405
| Decision Date | 17 August 2012 |
| Docket Number | Civil Action No. 11-1405 |
| Parties | COUNTY OF WASHINGTON, PENNSYLVANIA, on behalf of itself and all similarly situated Pennsylvania Counties, Plaintiff, v. U.S. BANK NATIONAL ASSOCIATION, Defendant. |
| Court | U.S. District Court — Western District of Pennsylvania |
District Judge
Defendant U.S. Bank Association ("U.S. Bank") is the designated trustee for residential mortgage backed security ("RMBS") trusts which include mortgage loans on real estate situated in Washington County and other counties in Pennsylvania. The County of Washington, on behalf of itself and all other Pennsylvania counties, initiated this action in the Court of Common Pleas of Washington County alleging that U.S. Bank violated Pennsylvania law by failing to record with the Recorders of Deeds assignments of certain beneficial interests in said mortgage loans.
These assignments were made in a complicated series of transfers of beneficial interests in mortgage notes held by such RMBS trusts that are secured by mortgages naming Mortgage Electronic Registration Systems, Inc. ("MERS") as the mortgagee, but only in a "nominee" capacity. This complex mechanism was designed and implemented in order to be able to "securitize" mortgage loans and package them as RMBS trusts for investment. According to the Complaint, this securitization also had the effect, and the intent, to deprive County ofWashington and other Pennsylvania counties of the statutory recording fees that are required for every transfer of a beneficial interest in a mortgage.
U.S. Bank filed a Notice of Removal pursuant to 28 U.S.C. § 1441(a) on November 3, 2011, claiming original jurisdiction exists in federal court on the basis of diverse citizenship of the parties and an amount in controversy in excess of $75,000. 28 U.S.C. §1332(a)(1) (). After careful consideration of the Complaint and Defendant's Notice of Removal, Plaintiff's Motion to Remand (ECF No. 9) to state court for lack of jurisdiction, extensive briefing in support of and in opposition to the Motion to Remand, months of U.S. Bank's internal investigation and "information gathering" from various sources within and outside the bank, oral argument, testimony and documents submitted at an evidentiary hearing on July 2, 2012, and post-hearing submissions, this Court finds that U.S. Bank has failed to meet its burden of proving, by a preponderance of competent, admissible evidence, that the amount in controversy exceeds $75,000, the threshold for diversity of citizenship jurisdiction.
Accordingly, this Court recommends that Plaintiff's Motion to Remand be granted and that this case be remanded to the Court of Common Pleas of Washington County for further proceedings.
U.S. Bank, a national bank with its principal place of business in Ohio, serves as trustee for RMBS trusts containing mortgage loans on properties located in Washington County andother counties in Pennsylvania, including a trust known as the Mortgage Asset-Backed Pass Through Certificates Series 2005-EFC3, also known as "RAMP Series 2005-EFC3." The County of Washington, a political subdivision, one of 67 Pennsylvania counties, initiated the state court action on September 28, 2011, when it filed a three count Complaint in the Court of Common Pleas of Washington County. County of Washington summarizes the "Nature of the Action" as follows:
This is an action brought by the County of Washington, Pennsylvania, on its own behalf and on behalf of . . . all other similarly situated Pennsylvania Counties . . . against [U.S. Bank]. The Counties seek to recover the benefit Defendant received by relying on the real property recording systems of the Counties without compensating the Counties for that benefit. In connection with the creation of various residential mortgage backed security ("RMBS") trusts that purportedly hold mortgage loans on properties located in the Counties, the Defendant represented at the time these trusts were created that they possessed all the rights to certain mortgage loans attached to these properties, free and clear of any encumbrance. On the basis of these representations, the Trustee claims priority on the mortgages, the right to foreclose on non-performing mortgages, favorable tax treatment, insulation from the bankruptcy of other entities in the mortgage loans' chain of title, and other benefits. The Defendant, however, did not record, or cause to be recorded, certain mortgage assignments at the time the trusts were created, nor did it pay the accompanying fees, which are preconditions for enjoying the enumerated benefits. Rather, Defendant participated in a scheme by which it had notes transferred to the trusts it administered and recorded the change in note ownership only in the records of Mortgage Electronic Registration Systems, Inc. ("MERS"), a private corporation created for the express purpose of circumventing the payment of mortgage assignment fees to county governments. Consequently, Defendant has unjustly received a benefit which it should not be allowed to retain.
Complaint, (ECF No. 1-2), at 6-7.
The Complaint specifically identifies only one RMBS trust to which U.S. Bank is trustee, the RAMP Series 2005-EFC3 trust. The mechanism summarized above involving assignments of beneficial interests in mortgage loans through a chain of title and through the MERS-as-nominee system is known as "securitization." It is the mechanism by which, according to Plaintiff,statutory recording fees are avoided. Pennsylvania law requires that mortgage assignments must be in writing and filed with the counties' Recorders of Deeds within six months of origination, 21 Pa. Stat. Ann. § 621 (2001), and that for each recorded assignment, Washington County is entitled to a recording fee of $52.50. Complaint, (ECF No. 12), at ¶¶ 13, 31.
The Complaint describes the securitization process in some detail,1 as follows:
To continue reading
Request your trial