Commonwealth v. Bank of America, N.A.
| Decision Date | 03 December 2012 |
| Docket Number | 11-4363-BLS1. |
| Parties | COMMONWEALTH of Massachusetts v. BANK OF AMERICA, N.A., et al.[1] |
| Court | Massachusetts Superior Court |
This action presents a dispute between the Attorney General of Massachusetts and certain banks and related entities regarding practices in connection with foreclosure of home mortgages. The Attorney General contends that certain alleged practices of the defendants are unfair and deceptive, in violation of G.L. c. 93A, § 2. At an earlier stage of this litigation, the parties stipulated to the dismissal with prejudice of three of the six counts of the complaint, as well as of certain prayers for relief.[2] Now before the Court are the defendants' motions to dismiss the remaining counts (I, V, and VI) for failure to state a claim on which relief may be granted, and a motion filed by all but one of the defendants to strike certain allegations. [3] For the reasons that will be explained, the motion to strike will be denied, and the motions to dismiss will be allowed in part and denied in part.
The Attorney General's complaint provides the following factual allegations relevant to the three remaining claims.[4] Eight of the ten defendants are banks or related entities that are or were in the business of servicing loans secured by mortgages on residential real estate in Massachusetts (collectively, " the banks"). As such, the complaint alleges, the banks " act as agent for the current holders of mortgage loans" (¶ 124). Defendant MERSCORP, Inc., owns and operates the MERS System, which is a national registry that tracks ownership and servicing rights in residential mortgage loans. Defendant Mortgage Electronic Registration System Inc., is its subsidiary; the complaint refers to these two defendants, collectively, as MERS.
The bank defendants, the complaint alleges (¶ 26) repeatedly " knowingly foreclosed on mortgages ... even though they were neither the mortgagee, nor the holder of the mortgage, at the time they initiated foreclosure proceedings." Further, the complaint alleges (¶ 27 29), the bank defendants " falsely identified themselves as the present holder of certain mortgages throughout the foreclosure process, including in notices sent to the mortgagor, in court filings-including affidavits ... and/or in published notices required" by statute. That conduct the complaint asserts, resulted in void foreclosures, with adverse effects on " hundreds, if not thousands, of properties" in Massachusetts (¶ 30).
The complaint provides what it characterizes as " illustrative examples." Three examples relate to defendant Chase Home Mortgage Finance LLC (" Chase"). In the first example, set forth at ¶ ¶ 31-35, on October 6, 2008, Chase filed a " complaint to foreclose" [5] a specified property in Hancock, alleging that it was " the assignee and holder" of a mortgage on the property. Chase received an order of notice in that action on February 6, 2009, in which it was named as the " holder of a Mortgage" on the property. Chase was not in fact the holder of the mortgage on those dates; it received an assignment on March 15, 2009. Chase sold the property at auction on December 16, 2009. A second example, involving a property in Brockton, appears at ¶ ¶ 36-40; again, Chase received an assignment of the mortgage after it had filed a complaint to foreclose in which it alleged that it was the " assignee and holder" of the mortgage, and after it had obtained an order of notice naming it as the " holder" of the mortgage, but before it sold the property at auction. In a third example, set forth at ¶ ¶ 41-47, involving a property in Boston, Chase received an assignment of the mortgage after it had filed a complaint to foreclose obtained an order of notice, published notice of sale, and sold the property at auction; it then recorded a certificate of entry, identifying itself as " the current holder" of the mortgage, but referring to an entry made on the date of the auction, before it had received the assignment. Examples involving Citibank, N. A., and CitiMortgage, Inc. (collectively, Citi) appear at ¶ ¶ 48-66. In one instance, involving property in Milford, Citi filed a complaint to foreclose on January 24, 2008, alleging that it was " the owner (or assignee) and holder" of the mortgage. It received an order of notice on the same date, identifying it as the " holder" of the mortgage. It sold the property at auction on March 25, 2008. It did not actually receive an assignment of the mortgage until after the sale, on May 21, 2008. On July 18, 2008, Citi recorded a certificate of entry, reflecting entry on April 23, 2008, before the assignment. In a second, similar example, with respect to a property in Boston, Citi filed a complaint to foreclose, obtained an order of notice, and sold the property at auction, all before receiving an assignment of the mortgage. After it received the assignment, it recorded a certificate of entry reflecting entry on the earlier date of the auction. A third example, regarding a property in Northbridge, is similar; Citi received the assignment after it had filed the complaint to foreclose, obtained the order of notice, and completed the auction sale; thereafter, it filed a certificate of entry reflecting entry on the date of the sale.
Examples regarding GMAC Mortgage, LLC (GMAC), set forth at ¶ ¶ 67-92, are similar. In two instances, GMAC received the assignment after it had completed the sale at auction; in a third, it received the assignment after it had filed the complaint to foreclose, obtained an order of notice, and published notice of the sale, but before the auction; and in a fourth, it received the assignment after it had filed the complaint to foreclose but (as far as the complaint discloses) before other events relating to the foreclosure.
Examples involving Bank of America, relating to property in Revere and Oxford, appear at ¶ ¶ 93-97 and 98-102. In each instance the bank [6] filed a complaint to foreclose and obtained an order of notice before it received an assignment of the mortgage on the property, but it did not conduct the sale at auction until after it had received the assignment. Examples regarding Wells Fargo, relating to properties in Sturbridge and Lynn, appear at ¶ ¶ 103-114. In each instance the bank filed a complaint to foreclose and obtained an order of notice before receiving an assignment of the mortgage, but did not conduct the sale at auction until after it had received the assignment. The complaint does not allege the timing of the assignment in relation to the dates of the statutory notices of foreclosure in the instances involving Bank of America and Wells Fargo. As to the instance involving property in Sturbridge, however, the dates set forth would support an inference that the assignment to Wells Fargo occurred after publication of the notice of foreclosure.[7]
The complaint goes on to allege conduct of all defendants with respect to registration of instruments relating to mortgages on registered land. MERS, the complaint alleges, is owned by " some of the nation's biggest banks and mortgage companies, " including several of the bank defendants and their subsidiaries. [8] MERS " has created a private electronic database (the ‘ MERS' system), " which is " designed to be a national electronic registry that tracks changes in beneficial ownership interests and servicing rights associated with mortgage loans." In transactions utilizing the MERS system, MERS is named as the mortgagee either in the original mortgage, as nominee for the lender, or in a subsequent assignment. Through recording or registration of either the original mortgage or the assignment to MERS, the public record reflects its status as mortgagee.[9] The lender either retains the promissory note or sells it to investors, without making any public record of that transfer. Similarly, the lender may keep or transfer servicing rights, without making any public record. The MERS database tracks transfers of the note, and of servicing rights, but members of the general public do not have access to the database. MERS remains the mortgagee of record and " purportedly acts as an agent for each new owner of the promissory note" (¶ 150).
The complaint alleges that defendants created and adopted the MERS system " principally to avoid registration and recording requirements, " and that " by cutting these corners, " defendants " have sought to avoid payment of millions of dollars of filing fees, conceals from borrowers the true identity of the holder of the debt as memorialized in the promissory note, " which " impairs the borrower's ability to deal directly with the holder of the note."
The complaint again provides a series of " illustrative examples." The first example, set forth at ¶ ¶ 161-172, is typical: borrowers gave a mortgage in favor of MERS, on registered land in Wareham, to secure a note to Shamrock Financial Corporation. The mortgage was registered. Nearly three years after the loan, MERS transferred the mortgage to defendant BAC Home Loans Servicing, L.P., which then filed an action in the Land Court to establish that the borrowers were not entitled to protection under the Servicemembers Civil Relief Act. Over the next twenty-three months, the Land Court issued an order of notice, and a subsequent judgment, both of which were registered. Meanwhile, during this nearly five year period, according to information in the MERS system, Shamrock...
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