Defect In Mtg. Assignment Sinks Lender's Post-F'closure Sale Attempt To Boot Ex-Homeowners; May Not Have Had Power To Foreclose When Proceedings Began

The Court of Civil Appeals of Alabama recently reversed a lower court ruling favoring a foreclosing lender and nixed an attempt by the lender to boot the homeowners out of their home after the foreclosure sale already took place.

In the case, the lender filed an action seeking possession of certain real property that was in the possession of the homeowners, who were using it as their residence. the lender claimed that it had acquired title to the real property through a foreclosure sale and that the homeowners had unlawfully detained the real property following the termination of their right of possession in the home.

The homeowners filed a pro se answer generally denying the allegations in the complaint, saying that "we can show that our property was foreclosed on without just cause."

The basis for the reversal revolved around a conflict with the date the mortgage was assigned to the foreclosing lender. According to the facts, a notary certified that the document was signed on April 20, 2009. On the other hand, the lender attached an affidavit by an employee indicating that it had acquired the mortgage via a sale effective December 30, 2009.

Meanwhile, the evidence showed that the foreclosing lender accelerated the debt as of December 11, 2009, and that the notice of the foreclosure sale was first published on December 15, 2009, prior to the date the mortgage was acquired by the lender according to its affidavit.

Based on the foregoing dates, it was established that the foreclosure proceedings might have been initiated by the lender without first having acquired a valid assignment of mortgage, creating a genuine issue of material fact as to whether it had the power to foreclose and sell the property when the foreclosure proceedings were initiated.

The court ruled that the foreclosing lender may have lacked standing to initiate the foreclosure process when it did which would have rendered the foreclosure deed void. Accordingly, it reversed the lower court ruling indicating otherwise.(1)

For the ruling, see Byrd v. MorEquity, Inc., No. 2100734 (Ala. Ct. of Civ. App. March 16, 2012).

(1) From the court ruling:

• The conflict as to the date of assignment materially impacts the standing issue. In Sturdivant, this court held that, in order to conduct a foreclosure sale, a party must have the power to foreclose and sell the property as of the date of the initiation of the foreclosure proceedings, ___ So. 3d at ___, which is the date the party "accelerates the maturity date of the indebtedness and publishes notice of a foreclosure sale," Perry v. Federal Nat'l Mortg. Ass'n, [Ms. 2100235, Dec. 30, 2011] ___ So. 3d ___, ___ (Ala. Civ. App. 2011), impliedly overruled on other grounds by Ex parte Secretary of Veterans Affairs, [Ms. 1101171, Feb. 10, 2012] ___ So. 3d ___ (Ala. 2012).
  
  The undisputed evidence in this case shows that the debt had been accelerated as of December 11, 2009, and that the notice of the foreclosure sale was first published on December 15, 2009, which was long after the alleged April 20, 2009, assignment date but over two weeks before the alleged December 30, 2009, assignment date.
  
  If the latter date is accurate, MorEquity would not have had authority to initiate the foreclosure proceedings; only Wilmington Finance, Inc., or MERS could have started foreclosure proceedings at that time.
  
  Pointedly, two December 11, 2009, letters submitted by MorEquity, notifying the Byrds individually of the acceleration of the debt, and the notices of foreclosure sale published beginning on December 15, 2009, all indicate that Wilmington Finance, Inc., had invoked the foreclosure process, implying that the assignment had not yet occurred by mid-December, as the document attached to Schutte's affidavit reflects.
  
  MorEquity did not present a prima facie case of standing because its own evidence creates a genuine issue of material fact as to whether it had the power to foreclose and sell the property when the foreclosure proceedings were initiated on December 15, 2009.