Summary
The Rhode Island Supreme Court reviewed a summary judgment ruling involving a residential mortgage foreclosure, the authority of Mortgage Electronic Registration Systems, Inc. (MERS) to assign the mortgage, and the validity of the foreclosure sale. The Court held that the homeowner had standing to challenge an assignment that was allegedly invalid, ineffective, or void, but concluded that the assignment to the Federal National Mortgage Association was valid and that the foreclosure sale was authorized. The Superior Court judgment was vacated in part and affirmed in part.
Topics
Practice areas
Questions Presented
- Whether Mruk had standing to challenge the validity of the assignment of his mortgage to FNMA, despite not being a party to the assignment.
- Whether the record presented genuine issues of material fact concerning the validity of the note endorsement, the authenticity and authority of the mortgage assignment signature, and the admissibility of the Boyle affidavit.
- Whether MERS could hold legal title to the mortgage and assign it to FNMA even though MERS did not hold the note.
- Whether FNMA acquired and could exercise the statutory power of sale through its assignment from MERS.
- Whether summary judgment was proper on Mruk's claims challenging the foreclosure and seeking to quiet title and declaratory relief.
Holdings
- A residential mortgagor has standing to challenge an assignment of the mortgage on the mortgagor's home to the extent necessary to contest the foreclosing entity's authority to foreclose, but only when the alleged defect renders the assignment invalid, ineffective, or void rather than merely voidable.
- Unsupported allegations, conclusory affidavits, and nonexpert opinions do not create a genuine issue of material fact sufficient to defeat summary judgment.
- Under Rhode Island law, MERS may hold legal title to a mortgage as nominee for the noteholder while another entity holds the note or equitable interest, and the note and mortgage need not be held by the same entity.
- An assignee of MERS acquires the rights MERS possessed under the mortgage, including the statutory power of sale where the mortgage expressly grants that power to MERS and its successors and assigns.
Key quotations
“Accordingly, we hold that homeowners in Rhode Island have standing to challenge the assignment of mortgages on their homes to the extent necessary to contest the foreclosing entity’s authority to foreclose.” (82 A.3d 538)
“In so holding, we emphasize that this exception to the general rule precluding third-party standing to challenge a contract is narrow and confined to the circumstances of a mortgagor challenging an “invalid, ineffective, or void” assignment of the mortgage.” (82 A.3d 538)
“Accordingly, we agree with the trial justice that FNMA possessed the statutory power of sale by way of assignment from MERS and had the right to exercise the power of sale upon Mruk’s default.” (82 A.3d 541)
Factual background
Mruk executed a promissory note and mortgage on his Coventry, Rhode Island property in 2006. The mortgage named MERS as mortgagee and nominee for Dollar Mortgage Corporation and granted MERS and its successors and assigns the statutory power of sale; the note was later endorsed in blank and serviced by entities acquired by OneWest. After Mruk defaulted, MERS assigned the mortgage to FNMA, which conducted a foreclosure sale and purchased the property. Mruk challenged the assignment, the authority to foreclose, the foreclosure sale, and the evidentiary foundation of a defense affidavit.
Procedural history
Mruk filed suit in the Kent County Superior Court after FNMA purchased his property at a foreclosure sale. The Superior Court granted defendants' motion for summary judgment, ruling that no genuine issue of material fact existed, that the assignment to FNMA was valid, and that Mruk lacked standing to challenge the assignment. The Rhode Island Supreme Court held that Mruk did have standing to challenge an allegedly invalid assignment insofar as necessary to contest the foreclosing entity's authority, but affirmed summary judgment on the merits.