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Mills v. U.S. Bank, N.A.

United States Court of Appeals, First Circuit

May 27, 2014

RHONDA G. MILLS, Plaintiff, Appellant,
v.
U.S. BANK, NA, as Trustee for the Lehman XS Trust Mortgage Pass-Through Certificates, Series 2007-4N; ONEWEST BANK FSB individually and as successor to IndyMac Bank, F.S.B.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants, Appellees

Page 48

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Joseph L. Tauro, U.S. District Judge.

Rockwell P. Ludden, with whom Ludden Kramer Law, PC was on brief, for appellant.

David G. Thomas, with whom Russell P. Plato and Greenberg Traurig, LLP were on brief, for appellees.

Before Lynch, Chief Judge, Howard and Kayatta, Circuit Judges.

OPINION

Page 49

HOWARD, Circuit Judge.

Following the 2011 foreclosure on her home, plaintiff Rhonda Mills filed this suit against defendants U.S. Bank, N.A. (" U.S. Bank" ), OneWest Bank, F.S.B. (" OneWest" ), and Mortgage Electronic Registration Systems, Inc. (" MERS" ), raising a potpourri of challenges to OneWest's authority to foreclose on her property. On appeal from the district court's dismissal of her suit for failure to state a claim, Mills primarily takes issue with the district court's reliance on our decision in Culhane v. Aurora Loan Services of Nebraska, 708 F.3d 282 (1st Cir. 2013). Finding Culhane to be on point, we affirm.

I.

On October 6, 2006, Mills refinanced her home in Mashpee, Massachusetts, executing an adjustable rate note (the " note" ) in favor of MortgageIT, Inc. (" MortgageIT" ) for $376,000 and also granting a mortgage to MERS. The mortgage contract identified MortgageIT as the lender and MERS as the mortgagee, " acting solely as a nominee for Lender and Lender's successors and assigns." The mortgage provided MERS with " only legal title" to Mills's property, giving it the right to foreclose and sell the property " as nominee for Lender and Lender's successors and assigns."

MERS, as we explained in Culhane, " was formed by a consortium of residential mortgage lenders and investors desiring to streamline the process of transferring ownership of mortgage loans in order to facilitate securitization." Id. at 287. Joining MERS enables lenders to " name MERS as the mortgagee in mortgages that they originate, service, or own." Id. MERS itself acts solely as a " nominee" for the owner or servicer of a mortgage, giving MERS legal title to the mortgage but leaving it with no beneficial interest in the loan. Id. When a note is sold by one MERS member to another, MERS memorializes the sale in its database but remains the mortgagee of record, thereby avoiding the time and expense of publicly assigning the mortgage to a new noteholder. Id.; see also Butler v. Deutsche Bank Trust Co. Ams., No. 12-2108, 748 F.3d 28, 2014 WL 1328296, at *3 (1st Cir. Apr. 4, 2014). On the other hand, when a note is sold to a nonmember, MERS assigns the mortgage to the new noteholder or its designee. Culhane, 708 F.3d at 287.

Like Culhane, this case illustrates the function served by MERS. Mills's note was sold by MortgageIT on the secondary market and changed hands several times before ultimately being deposited into the Lehman XS Trust, Mortgage Pass-Through Certificates, Series 2007-4N (the " Trust" ), of which U.S. Bank was trustee; no corresponding assignments were made of legal title to the mortgage. Mills, meanwhile, began struggling to keep up with her loan payments, and applied to IndyMac, F.S.B. (" IndyMac" ), the loan servicer at the time, for a loan modification. IndyMac approved Mills's loan modification application in December 2008, and Mills signed, notarized, and returned the modification agreement. Unfortunately for Mills, however, in March 2009 IndyMac was succeeded as loan servicer by OneWest, which failed to honor the modification. On April 23, 2009, MERS executed a document assigning the mortgage to OneWest,

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which subsequently recorded the assignment with the Barnstable Land Court Registry. Finally, on January 21, 2011, OneWest foreclosed Mills's mortgage and sold her property at public auction to U.S. Bank.

Mills filed this lawsuit on May 23, 2012 in Barnstable Superior Court; the defendants removed the case to the District of Massachusetts a week later. Following the plaintiff's submission of an amended complaint, the defendants moved for dismissal for failure to state a claim. On March 28, 2013, the district court granted the defendants' motions to dismiss and denied Mills's motion to amend her complaint and add an allegation to her claim under Mass. Gen. Laws ch. 93A. ...


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