The U.S. Court of Appeals for the First Circuit recently rejected a
borrower's allegations that an assignment of a mortgage from MERS to a
foreclosing bank was fraudulent. In so ruling, the First Circuit
determined the borrowers lacked standing to challenge the assignment in
question, because none of their claims -- including so-called
"robo-signing," fraud and the like - -would, even if proven, not render
the assignment void.
A copy of the opinion is available at
Two borrowers fell behind on their mortgage loan, the security instrument
for which was assigned by Mortgage Electronic Registration Systems, Inc.
("MERS") to a bank. The assignment was executed by an employee of the
bank, and indicated that the employee was a vice president of MERS. The
bank then instituted foreclosure proceedings.
The borrowers sued, arguing that the assignment was fraudulently executed
by an employee of the assignee (the bank) rather than the assignor (MERS).
The borrowers also contended that the bank employee had "robo-signed"
numerous documents on behalf of MERS and various lenders.
The bank filed a motion to dismiss for failure to state a claim, which the
lower court granted, holding that the borrowers did not have standing to
challenge the assignment in question. The borrowers appealed.
As you may recall, a recent First Circuit opinion established that "a
mortgagor has standing to challenge the assignment of a mortgage...to the
extent that such a challenge is necessary to contest a foreclosing
entity's status qua mortgagee." Culhane v. Aurora Loan Servs. of Neb.,
708 F.3d 282, 289 (1st Cir. 2013). More specifically, a mortgagee has
standing to allege shortcomings in an assignment that would render said
assignment void, but does not have standing where the alleged shortcomings
would render an assignment voidable. Id. at 291.
The First Circuit explained the difference between void and voidable
assignments, noting that the former are those "with no effect whatsoever,"
whereas the latter are those which may be avoided by one party, at that
party's discretion. A void mortgage assignment is one in which the
assignor "never properly held the mortgage and, thus, had no interest to
With the appropriate legal standards established, the First Circuit
considered whether the borrowers alleged that the assignment in question
was void or voidable. The First Circuit determined that although the
borrowers alleged that the bank employee "wore multiple hats, serving as
both an employee of [the bank] and as an officer of MERS," the borrowers
failed to allege that such dual agency violates common law or any statute
or applicable regulation.
The First Circuit examined the assignment in question, determining that
"the four corners of the document show in no uncertain terms that [the
bank employee] executed it in her capacity as vice-president of MERS."
In addition, the First Circuit determined that Massachusetts statutory law
provides that an assignment of a mortgage, executed by a person purported
to hold the position of vice president of the entity holding the mortgage
is binding on said entity. Mass. Gen. Laws ch. 183, Sec. 54B.
Accordingly, the First Circuit held that the borrowers "have not alleged
any facts which, if proven, would lead to a finding that [the assignment]
was void. Accordingly, the [borrowers] do not have standing to assert"
their related claims."
Because "everything [the borrowers] put before us gives us no reason to
question the validity of [the assignment from MERS to the bank,]" the
First Circuit affirmed the district court's dismissal of the borrowers'
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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