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The PSA further set forth four ways in which third-party defendant loan servicer could handle loans that went into default. The servicer could permit the loan to be paid in full, modified, or brought current. The servicer also had the option to initiate foreclosure proceedings.
Borrowers eventually defaulted on their loan payments and the successor trustee ("Plaintiff Trustee") brought a foreclosure action against Borrowers. The trial court granted summary judgment in favor of Plaintiff Trustee, ruling that Plaintiff Trustee had standing to foreclose. Borrowers appealed, arguing that Plaintiff Trustee lacked standing to foreclose and that summary judgment was improper because Plaintiff Trustee breached the PSA.
Next, addressing the question as to Plaintiff Trustee's standing to foreclose, the Court rejected Borrowers' argument that because the mortgages were conveyed in a manner that violated the PSA, Plaintiff Trustee did not have good title to the mortgages and thus lacked standing to enforce an interest it did not own.
In so doing, the Court recognized that a borrower ordinarily lacks standing to challenge a mortgage assignment, but may raise a defense to an assignment, as long as the defense rendered the assignment completely void. See Livonia Property Holdings, L.L.C. v. 12840-12976 Farmington Road Holdings, L.L.C., 717 F. Supp. 2d 724, 735-36 (E.D. Mich. 2010)(debtor may challenge a void assignment, but not an assignment that is merely voidable).
Ralph T. Wutscher
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