Johnson v HSBC: Homeowner Not Categorically Excluded From Claims Based Upon Securitization Allegations

Johnson v HSBC Bank USA Nat Ass’n

Nice one, from the federal district court no less, S.D. Cal.   I see this argument all of the time, that somehow a homeowner cannot challenge the authority of the assignee when it tries to take a home because the assignment of the beneficial interest in the deed of trust just should not concern the homeowner.  This argument ignores that the assignee’s identity determines the homeowner’s contractual counter-party to the deed of trust, and the party with the authority to accept payment of his note, or negotiate regarding the note, release the note when paid, etc.

A snippet:

A. Viability of Attack on Loan Securitization

1. Ability to Challenge Loan Securitization

The threshold issue of whether Plaintiff can make any claim related to the loan’s securitization affects the viability of many of the individual claims discussed below. BOA cites Rodenhurst v. Bank of America, 773 F.Supp.2d 886, 899 (D.Haw.2011) for its statement that “[t]he overwhelming authority does not support a cause of action based upon improper securitization.” However, the discussion cited in that case centers on plaintiffs who claim that securitization itself violates the agreement between the mortgagor and mortgagee. Here, Plaintiff does not dispute the right to securitize the mortgage, but alleges that as a result of improper procedures, the true owner of his mortgage is unclear. As a result, he has allegedly been paying improper entities an excess amount.

Ninth Circuit district courts have come to different conclusions when analyzing a plaintiff’s right to challenge the securitization process as Plaintiff has here. See Schafer v. CitiMortgage, Inc., 2011 WL 2437267 (C.D.Cal.2011) (denying defendants’ motion to dismiss declaratory relief claim, which was based on alleged improper transfer due to alleged fraud in signing of documents); Vogan v. Wells Fargo Bank, N.A., 2011 WL 5826016 (E.D.Cal.2011) (allowing § 17200 claim when plaintiffs alleged that assignment was executed after the closing date of securities pool, “giving rise to a plausible inference that at least some part of the recorded assignment was fabricated”). But see Armeni v. America’s Wholesale Lender, 2012 WL 603242 (C.D.Cal.2012) (dismissing declaratory relief, quasi-contract, UCL, and accounting claims because “plaintiff lack[ed] standing to challenge the process by which his mortgage was (or was not) securitized because he is not a party to the PSA”); Junger v. Bank of America, N.A., 2012 WL 603262 at *3 (C.D.Cal.2012).

*3 Here, the court finds that Plaintiff is not categorically excluded from making claims based on allegations surrounding the loan’s securitization.3 As in Vogan, and unlike Armeni, Plaintiff here alleges both violations of the PSA and relevant law. BOA has not sufficiently demonstrated that violations of law associated with the loan’s securitization can go unchecked because Plaintiff is not a party to the PSA.

Other cases cited by BOA on this issue are irrelevant or inapplicable here.

. . .

2. Sufficiency of Allegations of Improper Assignment

BOA also argues that Plaintiff makes no showing that the assignment was improper. It claims that Treva Moreland was authorized to assign the Deed of Trust, and there was no violation of the statute, asserting that “[n]owhere in [the complaint] does [Plaintiff] allege facts showing the Assignment was defective, invalid, or somehow voidable.” MTD at 4. However, the complaint states that MERS had no knowledge of the assignment, that Treva Moreland was never appointed to “assistant secretary” by the MERS board of directors, and thus there was no authority to make the assignment.

While BOA cites no case law on this point, Plaintiff provides persuasive authority to demonstrate that courts have accepted allegations such as his. In Kingman Holdings, LLC v. CitiMortgage, Inc., 2011 WL 1883829 (E.D.Tex.2011), the court assessed a fraud claim against CitiMortgage in which the plaintiff alleged that MERS’ appointment of an assistant secretary (“Blackstun,” who later made the assignment) was invalid because it was not approved by the board of directors. The court upheld the fraud claim under the 9(b) standard, finding that Plaintiff’s allegations were plausible and that if Blackstun had no authority to bind MERS, then MERS filed a fraudulent document after he executed the assignment.

Similarly, in Vogan, the court denied defendants’ motion to dismiss a § 17200 claim because, as here, the plaintiff pleaded that Wells Fargo recorded a fabricated assignment of the loan because the assignment was executed after the closing date of the mortgage-backed security pool, “giving rise to a plausible inference” of fabrication. Id. at *7. Here, in addition to attacking Treva Moreland’s authority, Plaintiff has alleged that the assignment was made after the closing date of the trust, as required by Section 2.1 of the PSA.


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