Hooker v Northwest Trustee Opinion and Order on Motion to Dismiss 25 May 2011

8/6/2019 Hooker v Northwest Trustee Opinion and Order on Motion to Dismiss 25 May 2011

http://slidepdf.com/reader/full/hooker-v-northwest-trustee-opinion-and-order-on-motion-to-dismiss-25-may-2011 1/16

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

IVAN

HOOKER,

HOOKER and KATHERINE

P l a i n t i f f s , Civ. No. 10-3111-PA

v.ORDER

NORTHWEST TRUSTEE SERVICES,

INC.; BANK OF AMERICA, N.A.;MORTGAGE ELECTRONIC

REGISTRATION SYSTEMS, INC.,

Defendants.

PANNER, J.

Before the cour t i s a mot to dismiss (#8) and reques t fo r

j u d i c i a l not i ce (#6) by Bank o f America, N.A. and Mortgage

Elec t ronic Reg i s t ra t ion Systems, Inc. (MERS).: Defendants '

request for j ud i a l not ice i s GRANTED. Defendants ' motion to

dismiss i s DENIED. P la in t if ' reques t fo r a de r a to ry judgment

i s GRANTED.

Pl a i n t i dismissed t h e i r cla ims aga ins t Northwest Trus teeServ ices , Inc (Northwest) .

ORDER

Case 1:10-cv-03111-PA Document 32 Filed 05/25/11 Page 1 of 16 Page ID#: 393



BACKGROUND

where noted , th e fo l lowing background i s

or j ud i c i a l l y not iceable mater ia l s .

On November 17, 2005, p l a i n t i f f s obta ined a loan from GN

Mortgage, LLC. A t r u s t deed secured the loan. The note and t r u s t

list GN as the l ender . The t r u s t deed l i s t s MERS as the

MERS i s not l i s t ed on the note . The t r u s t deed l i s t s

Trus tee Services Corp. as t rus tee . On November 23, 2005,

t r u s t was recorded in the Jackson County land records.

In r 2009, p l a i n t i f f s defaul ted . On May 3, 2010,

MERS ass t r u s t deed to Bank of America. Also on May 3,

MERS appoin ted Northwest successor t r u s t e e . That same day,

Northwest executed a not ice of defau l t and e lec t ion to s e l l . On

May 7, 2010, defendants recorded th e May 3 assignment of th e

t r u s t deed, appointment o f successor t rus tee , and not ice of

I t and e lec t ion to s e l l .

On September 7, 2010, p l a i n t i f f s f i l e d the complaint in

s t a t e cour t . On September 13, 2010, Wells Fargo Bank, N.A., as

a t to rney in fo r Bank of America, appoin ted Northwest

successor t r u s t e e . On September 16, 2010, Northwest executed a

res ss ion of th e not ice of d e f au l t recorded on May 7, 2010. Also

on r 16, 2010, Northwest executed a second not ice of

e ion to s e l l . On September 20, 2010, defendants

the September 16, 2010 appointment , r esc i s s ion , and

2 - ORDER




second not ice of d e f au l t .

On October 7, 2010, defendants removed the case to t h i s

cour t . On January 19, 2011, pursuan t to my order , defendants

submit ted a complete chain of title fo r the note and t r u s t deed.

Defendants ' chain of title inc luded a copy of a January 3, 2011

"MIN Summary and Miles tones . " (Jan. 31, 2011 McCarthy Decl . , Ex.

1, 1-2. ) The MIN Summary i s how MERS members t r ack t r a n s fe r s of

se rvic ing and ownership r igh t s of loans within the MERS system.

According to th e MIN Summary, on December 9, 2005, Guaranty Bank,

FSB t rans fe r red the b en e f i c i a l i n t e r e s t in th e t r u s t deed to

Wells Fargo Home Mortgage. (Jan. 31, 2011 McCarthy Decl . , Ex . 1,

1-2 . ) Although Guaranty Bank appears to have been th e or ig ina l

se rv ice r of the loan, th e record i s s i l e n t as to how or when

Guaranty Bank obta ined the benef i c i a l i n t e r e s t in the t r u s t deed.

On December 14, 2005, Guaranty Bank t r ans fe r red th e

se rvic ing r igh t s to Wells Fargo Home Mortgage. (Jan . 31, 2011

McCarthy Decl . , Ex. 1, 2 .) On July 15, 2006, Wells Fargo Home

Mortgage t rans fe r red the benef ic i n t e r e s t in th e t r u s t deed to

Bank of America. (Jan . 31, 2011 McCarthy Decl . , Ex . 1, 2 .)

Defendants d id not record the t r a n s fe r of the benef i c i a l i n t e r e s t

in th e t r u s t deed from Guaranty Bank to Wells Fargo or from Wells

Fargo to Bank of America in the Jackson County land records . As

noted above, defendants did record a May 3, 2010 assignment of

th e t r u s t ed from MERS to Bank of America.

3 - ORDER




STANDARDS

On a motion to smiss, the cour t reviews the s f ic iency of

the comp into Scheuer V. Rhodes, 416 U.S. 232, 236 (1974). This

review i s gene ra l ly l imi t ed to the a l lega t ions in th e complaint ,

exh ib i t s a t tached to th e complain t , and j ud i c i a l l y not iceable

mater ia l s . Swartz V. KPMG LLP, 47 6 F.3d 756, 763 (9th Cir . 2007) .

To survive a motion to smiss under Rule 12(b) (6) , a complaint

must con ta in s u f f i c i e n t c t s t h a t " s t a t e a c ia to r e i f t h a t

i s plaus ib on s face ." Ashcro f t v. Iqba l , 129 S.Ct . 1937,

1949 (2009) . This p la us ib i l y s tandard requ i re s the p leader to

present f ac t s t ha t demonstra te "more than a sheer p o ss i b i l i t y "

t h a t defendant i s l i a b l e fo r th e a l leged misconduct . Id .

In consider ing a motion to dismiss , a cour t must d is t ingu ish

between the f ac tua l a l l ega t ions and l ega l conclus ions asser ted in

the complain t . 1 a l l eg a t i o n s of mate r i a l f ac t a re taken as

t rue and cons t rued in th e l i g h t most favorab le to th e nonmoving

pa r ty . American Family Ass 'n , Inc . V. City & County of San

Francisco , 277 F.3d 1114, 1120 (9th Cir . 2002) . At th e plead ings

s tage , "a p l a i n t i f f ' s ob l iga t ion to provide the ' g rounds ' of h is

' en t i t l e [men t ] to r e l i e f ' requi res more than l abe l s and

conclus ions . " Bel l Atl . Corp. v. Twombly, 550 U.S. 544, 555

(2007) . Therefo re , if th e wel l -p leaded f ac tua l a l l ega t ions

plaus ib ly give r i s e to th e r e l i e f sought, a cour t sh a l l deny the

motion to dismiss . Iqba l , 129 S.Ct . a t 1950.

4 - ORDER




DISCUSSION

I . Judic ia l Notice

r a l Rule of Evidence 201 s t a t e s a cour t may take

j ud i c i a l not ice of a c t outs ide the ngs i f the i s

"capable of accura te and ready determinat ion by reso r t to sources

whose accuracy cannot reasonably be ques t ioned ." Lee v. City of

250 F.3d 668, 689 (9th Cir . 2001) , impl iedly

overruled on othe r grounds as discussed in Gallardo v. Dicar lo ,

203 F.Supp.2d 1160, 1162 n.2 (C.D. Cal . 2002). Defendants s t

the court take j ud i c i a l not ice of the fo l lowing documents

reco September 20, 2010: (1) r esc i s s ion of the May 3, 2010

not ice of defau l t and e c t ion to s e l l ; (2) September 13, 2010

appointment of successor t r u s t e e ; and (3) ember 16, 2010

not ice of defau l t and e lec t ion to s e l l . document i s recorded

in the Jackson County land records . De s ' reques t r

j ud ic i not ice (#6) i s GRANTED.

I I . Motion to Dismiss

Under the Oregon Trus t Deed Act, ~ ' B e n e f i c i a r y ' means

person or otherwise igna ted in a t r u s t deed as the

person whose b en e f i t a t r u s t deed i s given, o r t he pe rson ' s

successor in i n t e re s t " ORS 86.705(1) . The t r u s t a t

i s sue s t a t e s :

The f ic ia ry of t h i s Secur i ty Ins t rument i s MERS

(so ly as nominee r Lender and r ' s successors

and assigns) and successors and ass igns of MERS.

5 - ORDER


http://slidepdf.com/reader/full/F.Supp.2d

http://slidepdf.com/reader/full/F.Supp.2d



This secur i ty Ins t rument secures to Lender: (i) the

repayment of the Loan, and a l l renewals , extensions and

modi f ica t ions o f the Note; and ( i i ) the per formance of

Borrower 's covenants and agreements under t h i s Secur i ty

Ins t rument and th e Note.

Borrower unders tands and agrees t h a t MERS holds onlyl ega l title to th e i n t e r e s t s granted by Borrower in

t h i s Secur i ty Ins t rument , but , i f necessary to comply

with law or custom, MERS (as nominee fo r Lender and

Lender ' s successors and ass igns) has th e r igh t : to

exerc ise any or a l l of those i n t e r e s t s , inc lud ing , but

not l imi t ed to , th e ght to fo rec lose and s 1 th e

Proper ty; and to take any ac t ion regu i red of Lender

including, but not l imi ted to , re l ea s ing and cance l l ing

t h i s Secur i ty Ins t rument .

(Notice of Removal, Ex. 1, 8 (emphasis added) . )

Although th e t r u s t deed l i s t s MERS as the nominal

bene c ia ry " so le ly as a nominee fo r Lender . . . ," (Notice of

Removal, Ex. 1, 7) , th e deed makes c l e a r t h a t MERS i s not " the

person fo r whose b en e f i t a t r u s t deed i s given ," ORS 86.705(1) .

Ins tead , th e t r u s t deed con rms t h a t GN holds th e b en e f i c i a l

i n t e re s t . The t r u s t deed l i s t s GN, not MERS, as "Lender ." (Notice

of Removal, Ex. 1, 6.) A ll payments on th e loan a re owed to GN,

not MERS. (Not ice of Removal, Ex. 1, 8 .) GN, not MERS, "may

invoke th e power of sa le and any othe r remedies permi t t ed by

Applicable Law." (Not ice of Removal, Ex. 1, 18, 22.)

While th e t r u s t deed l i s t sMERS

as the nominal bene f i c i a ry ,

th e t r u s t deed does no t author ize MERS to t ake any ac t ions on i t s

own beha l f . F i r s t , MERS holds only l eg a l t Ie to the t r u s t deed.

(Notice of Removal, Ex. 1, 8 .) Second, MERS ac t s so le ly as

ORDER




nominee fo r GN. (Notice of Removal, Ex. I , 7-8 . ) Fina l ly , MERS

may a c t as GN's nominee only " i f necessary to comply with law or

custom[. ]" (Notice of Removal, Ex. I , 8 .) The t r u s t deed

emphasizes t ha t MERS i s not the benef i c i a ry , but r a the r the

nominee or agen t of the l ender . Because the t r u s t deed c lea r ly

demonst ra tes GN, and not MERS, i s the person fo r whose b e n e f i t

th e t r u s t deed was given, GN (or i t s successor in i n t e r e s t ) i s

th e benef i c i a ry of the t r u s t deed. ORS 86 .705(1 ) ; see In re

McCoy, 2011 WL 477820, a t *3 (Bankr. D. Or. Feb. 7) .2

That MERS was th e agent o r nominee of the benef i ry does

not mean the non- jud ic ia l foreclosure proceedings necessa r i ly

v io la ted Oregon law. In re McCoy, 2011 WL 477820, a t *4. As

in o ther recent cases in t h i s d i s t r i c t , "The problem t h a t

defendants run in to in t h i s case i s an apparent f a i l u r e to record

assignments necessary r the fo rec losu re . " Burge t t v. MERS, 2010

WL 4282105, a t *3 (D. Or. Oct . 20) ; see also In re McCoy, 2011 WL

477820, a t *4. In Oregon, a t r u s t ee may conduct a non- jud ic i a l

foreclosure sa le only i f :

The t r u s t deed, any assignments of the t r u s t deed by

the t r u s t ee o r th e benef ic ia ry and any appointment of a

successor t r u s t e e are recorded in the mortgage records

2The note re inforces my conclus ion t ha t a i n t i f f s gran tedth e t r u s t deed for the b e n e f i t of GN , not MERS. The note s t a t e s

th e t r u s t deed "p ro tec t s the Note Holder from poss ib l e l o s ses

t ha t might r e s u l t if I do not keep the promises t ha t I make in

t h i s Note ." (Not ice of Removal, Ex. 1, 28, 1 11.) GN , not MERS,i s the "Note Holder ." (Not ice o f Removal, Ex. 1, 26, 1 1 .) MERS

i s not mentioned in the note .

7 - ORDER




t coun t ies in which th e proper ty descr ibed in th e

deed i s s i tua ted .

ORS 86.735 (1) (emphasis added) .

Should th e bene f i c i a ry choose to i t i a t e non- jud ic i a l

fo rec losure proceed ings , th e Act ' s record ing requirements mandate

the record ing of any assignments of th e b en e f i c i a l i n t e r e s t

the t r u s t deed . Burget t , 2010 WL 4282105, a t *2; In re McCoy,

2011 WL 477820, a t *3. Defendants appear to argue t h a t r a th e r

than requ i r ing the record ing of every ass ignment of th e t r u s t

deed, the Act a l lows defendants t o ins t ead t rack every ass ignment

of the t r u s t deed within the MERS sys tem, record ing only the

f i n a l assignment of the t r u s t deed in the county land records .

Because th e Oregon Trus t Deed Act requ i re s the record ing of a l l

assignments by the bene f i c i a ry , defendan t s ' argument f a i l s . ORS

86.735(1); see In re McCoy, 2011 WL 477820, a t *3 4.

Oregon 's record ing requi rement i s cons i s t en t with th e

longstanding ru l e t h a t the t r u s t deed or mortgage genera l ly

fo l lows the no te . Carpenter v. Longan, 83 U.S. 271, 274 (1872);

U.S. N a t ' l Bank of Port land v. Holton, 99 Or. 419, 427 9, 195 P.

823, 826 (1921) (co l l ec t ing ca se s ) . As not by defendan ts , " the

ass ignment o f th e note au tom at ica l ly ass igns the under ly ing

i n t e r e s t in the t r u s tdeed because

MERS

i snominee fo r

whichever

e n t i t y i s th e owner ( i f th e owner i s a MERS member)." (Defs . '

Reply, 10.) Defendants a lso s t a t e , " the con ten t o f the deed of

t r u s t i t s e l f . . . es tab l i shed the p a r t i e s ' i n t e n t t h a t th e t r u s t

8 - ORDER




deed , and MERS' agency r e l a t i o n s h ip , fol low th e no te . " (Id. a t

11.) In f ac t , th e t r u s t deed express ly s t a t e s , "The Note or a

p a r t i a l i n t e r e s t in the Note ( toge ther with t h i s Secur i ty

Inst rument) can be so ld one o r more t imes without p r i o r not ice to

Borrower ." (Not ice of Removal, Ex. 1, 16, 'J[ 20 (emphasis added) . )

I f t he re were t r a n s fe r s of the benef i a l i n t e r e s t in the t r u s t

deed, defendants were requ i red to record those t r a n s fe r s p r io r to

i n i t i a t i n g a non- jud ic i a l fo rec l o su re in th e manner provided in

ORS 86.740 to 86.755. ORS 86.735(1) .

Consider ing what i s commonly known about the MERS system and

the secondary market in mortgage loans , p l a i n t i f f s a l l ege

su f f i c i e n t f ac t s to make c l e a r t h a t defendants v io la ted the

Oregon T ru s t Deed Act by i l i ng to record a l l assignments of th e

t r u s t deed. 3 Therefore , defendan t s ' motion to dismiss i s DENIED.

The record demonst ra tes t h a t in addi t ion to requ i r ing the

d en i a l of defendan t s ' motion to dismiss , p l a i n t i f f s a re e n t i t l e d

to dec la ra to ry r e l i e f . Pursuant to my order , defendants submit ted

the MIN Summary and Miles tones fo r the loan a t i s sue . The MIN

Summary demonst ra tes t h a t on December 9, 2005, Guaranty Bank, FSB

t r an s f e r r ed th e b en e f i c i a l i n t e r e s t in th e t r u s t deed to Wells

3For background in fo rmat ion on MERS, see genera l ly GeraldKorngold, Legal and Pol icy Choices in the Aftermath of the

Subprime and Mortgage FiNancinc C r i s i s , 60 S.C. L. Rev. 727, 741

42 (Spring 2009) and Chr i s topher L. Peterson , Forec losure ,

Subprime Mortgage Lending, and th e Mortgage Elec t ronic

Regis t ra t ion System, 78 U. Cin. L. Rev. 1359, 1368-1374 (Summer

2010) .

9 - ORDER




Fargo Home Mortgage. (Jan. 31, 2011 McCarthy Decl . , Ex . 1, 2.) As

noted above, the record i s s i l e n t as to how or when Guaranty Bank

acqu i red any i n t e r e s t in the loan . On Ju ly 15, 2006, Wells Fargo

t r ans fe r red the benef i 1 i n t e r e s t in th e t r u s t deed to Bank of

America. (Jan. 31, 2011 McCarthy Decl . , Ex. 1, 2.) Defendants d id

not record Guaranty Bank's t r a ns f e r of th e b en e f i c i a l i n t e r e s t in

t r u s t deed to Wells Fargo. Defendants ' chain of tit

submission the re fo re demonstra tes t h a t defendants v io ed ORS

86.735(1) by i n i t i a t i ng non- jud ic i a l forec losure proceedings

p r i o r to recording a l l assignments of the t r u s t deed in the

Jackson County land records .

While I recognize t h a t p l a i n t i f f s have fa i l ed to ma any

payments on the note s ince September 2009, t ha t f a i l u re does not

permit defendants to v io la t e Oregon law regu la t ing non- jud ic ia l

forec losure . The Oregon Trust Deed Act " repre sen t s a wel l

coord ina ted s t a tu to ry scheme to p r o t ec t grantors from the

unauthorized forec losure and wrongful sa le of proper ty , whi a t

th e same t ime prov id ing cred i to rs with a quick and e f f i c i e n t

remedy aga ins t a defau l t ing g ran to r . " S ta f fo rdsh i re Inves tments ,

Inc . v. Cal-Western Reconveyance Corp. , 209 Or.App. 528, 542, 149

P.3d 150, 157 (2006). In p a r t due to th e l e g i s l a t u r e ' s des i re " to

pro tec t the gran to r aga ins t th e unau thor iz l o s s of i t s

prope r ty , " a pa r ty conduct ing a non- jud ic ia l forec losure must

demonst ra te s t r i c t compliance with th e Act. As demonstrated

10 - ORDER




above, th e MIN Summary demonstra tes fendants led to comply

with the Oregon Trust Deed Act.

Although not af fec t ing my conclus ion here, the MIN Summary

ses an add i t iona l concern re l evan t to numerous cases pending

fore me. As noted above, GN i s l i s t ed as Lender on both th e

t r u s t deed and the no te . The MIN Summary, however, makes no

mention of GN. In f ac t , MIN Summary i s s i l e n t as to how or

when Guaranty Bank became an "Inves tor" ho ng th e f i c i a l

i n t e r e s t in th e t r u s t deed. (Jan. 31, 2011 McCarthy Decl . , Ex . 1,

2 .) The MIN Summary ind ica tes only t h a t on December 1, 2005,

Guaranty Bank reg i s t e red the in th e MERS system. What

occurred before r e g i s t r a t i on , and how or when Guaranty Bank

obta ined any e re s t th e loan (from GN or another) i s not

revea led .

The apparent gap in chain of title i s not the only i s sue

t h a t causes me concern . On May 7 , 2010, defendants recorded: ( 1 )

an assignment o f t r u s t deed from MERS to Bank of America; (2 )

MERS's appointment of Northwest as successor t r u s t e e ; and (3) a

ce of f a u l t and e ion to s e l l . Regarding th e May 7

recordings, defendants s t a t e , "Af te r rece ng p l a i n t i f f s '

complain t , Northwest Trus tee Serv ices , Inc . recognized t h a t

ce r t a in documents were recorded ou t -o f -o rder . " (Oct. 14, 2010

Mem. Supp. Mot. Di ss , 4.) Upon recogniz ing th e problems

a f t e r i n i t i a t i n g non-judi a l forec losure proceedings and only

11 - ORDER




a f t e r rece iv ing p l a i n t i f f s ' complaint a l leg ing improper

record ings - defendants rescinded the May 7, 2010 not ice of

defau l t and e lec t ion to s e l l . The "ou t -o f -o rde r" record ings

demonst ra te problems, not a ty p i ca l in my view, of t en caused by

forec los ing p a r t i e s rushing to expedi te non j ud i c i a l

forec losures .

On May 3, 2010, a "Vice Pres iden t" MERS assigned the

t r u s t deed to Bank of America. (Notice of Removal, Ex. 1, 32.)

That same day, ano ther "Vice President" of MERS appointed

Northwest successor t r u s t e e . (Notice of Removal, Ex. 1, 34.) Also

on May 3, 2010, an "Ass i s t an t Vice Pres iden t" of Northwest signed

the not ice of de I t and e lec t ion to s e l l . (Notice of Removal,

Ex. 1, 36-37.) The same notary publ apparen t ly witnessed a l l

three execut ives s ign the documents on the same day. Cons r ing

de ndants re l i ed on the May 3, 2010 documents to j u s t i non-

j u d i c i a l forec losure proceedings , defendan t s ' document review

appears rushed. Considering th e t ime spen t reviewing th e

documents, ass ign ing the t r u s t deed, appoint ing a successor

t r u s t e e , and i s su ing a not ice o f d e f au l t and e l ec t i o n t o s e l l , I

am not su rp r i sed to l ea rn t h a t " [ a ] f t e r rece iv ing p l a i n t i

complaint , Northwest Trus tee Serv ices , Inc. recognized t h a t

ce r t a in documents were recorded ou t -o f -o rder . "

Notwithstanding th e above concerns, I note th e May 3, 2010

ass ignment s t a t e s t h a t MERS ass igns "a l l b en e f i c i a l i n t e r e s t "

12 ORDER




the t r u s t deed to Bank of America. (Notice of Removal, Ex. 1,

32.) As expla ined above, MERS never had any bene 1 i n t e re s t

in the t r u s t ed. MERS held only l ega l title as an agent or

nominee of GN (or GN's successors ) . I f MERS acted only as an

agent or nominee, why i s the pr inc ipa l not i den t i f in t May

3, 2010 assignment? confusion i s ightened as th e MIN

Summary demonstra tes a t l e a s t tw o unrecorded t r a n s fe r s of the

benef i a l i n t e r e s t in t r u s t deed occurred be re May 3,

2010. As Jus t i ce Page of the Supreme Court of Minnesota

summariz

MERS cla ims to hold l ega l t i t l e , but only l ega l tit

to the mortgage ing forec losed. MERS a lso cla ims t h a t

in los ing mortgages it ac t s only as nominee

i t s members. But MERS can ac t as nominee fo r only thepa r t i c u l a r MERS member who holds the promissory note a t

any p a r t i ar t ime and, when t ha t promissory note i s

assigned between members, the member fo r which MERS

ac t s as nominee, and on whose beha l f MERS holds 1 1t i t l e , neces sa r i ly changes. In othe r wo ,the e n t i t y

on whose beha l f MERS holds 1 1 title to the mortgage

changes every t ime the promissory note i s ass igned.

Jackson v. Mortgage Elec t ronic Regis t ra t ion Systems, Inc . , 770

N.W.2d 487, 503-04 (Minn. 2009) (Page, J . , d i ssen t ing ) . Although

Jus t i ce Page wrote in d i s sen t in a case involving a Minnesota

s t a t u t e , h is concerns apply to numerous cases pending fore me.

Fo sure by adver t isement and sa le , which i s designed to

take place outs of any jud i a l review, necessa ly r e l i e s on

the forec los ing par ty to accurate ly review and assess i t s own

au thor i ty to forec se . Considering t ha t non- jud ic ia l

13 ORDER




fo rec losure o f one ' s home i s a pa r t i c u l a r ly harsh even t , and

given th e numerous problems I see in near ly every non- jud ic ia l

fo rec losure case I pres ide over, a procedure re ly ing on a bank or

t r u s t e e to se l f - a s se s s i t s own au thor i ty to fo rec lose i s deeply

t roubl ing to me.

I recognize t h a t MERS, and i t s r eg i s te red bank users ,

c rea ted much of the confusion involved in th e forec losure

process . By l i s t i ng a nominal benef ic ia ry t h a t i s c l e a r l y

descr ibed in th e t r u s t deed as anything but tactual

bene f i c i a ry , the MERS system crea tes confusion as to who has t

au thor i ty to do what with th e t r u s t deed. The MERS system ra i ses

se r ious concerns regard ing the appropr ia teness and va l id i t y of

fo rec losure by adver t i sement and sa le outs ide of any j ud i a l

proceeding.

Addi t iona l ly , th e MERS system allowed th e r i s e of th e

secondary market and se c u r i t i z a t i o n of home loans . A lender

ending to immediat y s e l l a loan on th e secondary mar i s

not concerned with th e sk involved in th e loan, but with th e

fees generated . I f a lender aims to quic y pass a loan o ff onto

an i nves to r , a s ta ted- income loan appears not as an unacceptable

r i sk , but as an income st ream. MERS makes it much more d i f f i c u l t

fo r a l l r t i e s to scover who "owns Hthe loan . When a borrower

on th e verge of d e f au l t cannot f ind out who has th e au thor i ty to

modify the loan, a modi f ica t ion o r a r t s a l e , even if

14 - ORDER




b en e f i c i a l to both the borrower and the bene f i c i a ry , cannot

occur .

When no borrowers defau l t , the problems inherent in th e MERS

system may go unnot iced . Unfortunately fo r banks, borrowers ,

inves to r s , and cour t s throughout th e country , many borrowers a re

now defau l t ing . Count less grantors of t r u s t deeds now the

harsh prospect of los ing a home outs ide of any j ud i c i a l

proceeding . At the same t ime, th e MERS s tern g r ea t l y increased

th e number of i nves to rs s tuck holding worthless notes. A lender

t h a t knows it wi l l immediately s e l l a loan on th e secondary

market has no incent ive to ensure th e appra i sa l o f the secur i ty

i s accura te . S imi la r ly , the l ender need not concern i t s e l f with

the verac i ty of any rep re sen ta t ions made to th e borrower . In

shor t , th e MERS system al lows the lender to sh i rk i t s t r a d i t i ona l

due di l igence d u t i e s . The requirement under Oregon law t h a t a l l

assignments be recorded p r i o r to a non- jud ic ia l forec losure i s

sound publ ic pol icy:

[ I ] t i s apparent with th e b en e f i t of hinds ight t h a t th e

a b i l y of 1 r s to f ree ly and anonymously t r a n s fe r

notes among themselves fa 1 a ted , if not crea ted , the

f i n an c i a l banking c r i s i s in which our country cur ren t ly

f inds i t s e l f . I t i s not only borrowers bu t a l so o the r

l enders who r i gh t fu l ly a re i n t e res t ed in who has held a

pa r t i c u l a r promissory note . For example, a lender who

holds a promissory note t ha t has become worthless mayhave an i n t e r e s t in knowing th e hands through which

t h a t note passed .

Jackson, 770 N.W.2d a t 504 (Page, J . , d is sen t ing) . Jus t i ce Page

wrote in d is sen t , bu t s views are persuas ive .

15 - ORDER




Although t concerns r a i sed in t h i s 0 r appear in many

foreclosure cases before me, I reso the cur ren t

cont roversy on narrow grounds . Fol lowing de s ' removal of

the complaint , p la i still seek dec la ra to r e l i e f t ha t

defendants ' non- j a l foreclosure i s wrongful . I agree with

Judge Alley t h a t "Oregon law permi ts fo rec losu re without th e

b e n e f i t of a j ud i c i a l proceeding only when i n t e r e s t of the

benef i c i a ry i s c lea r ly documented in a pub l i c record ." In re

McCoy, 2011 WL 477820, a t *4. Because de n ts fa i l ed to record

a l l assignments o f t r u s t deed, th e non- jud ic ia l foreclosure

proceedings 1 Oregon Trus t Act. Therefo re ,

p la in t i f f s are en t led to dec la ra to ry r e l i e f on t ha t cla im.

CONCLUSION

Defendants ' t fo r j ud i c i a l not ice (#6) i s GRANTED.

Defendants ' motion to dismiss (#8) i s DENIED. P l a i n t i f f s are

en t i t l ed to a r a to ry judgment s t a t i fendants v io la ted

ORS 86.735(1) . This non- jud ic ia l foreclosure proceeding i s

dismissed . Judgement and cos t s r p l a i n t i f f s .

IT IS SO ORDERED.

DATED t s ~ d a y of May, 2011.

OWEN M. PANNER

U.S. DISTRICT JUDGE

16 - ORDER


Hooker v Northwest Trustee Opinion and Order on Motion to Dismiss 25 May 2011

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