Lack Of Evidence Of Individual's Authority To Execute Assignment Of Mortgage Sinks Foreclosing Assignee In Attempt To Lift Stay In Ch. 13 Proceeding

In a recent ruling by a U.S. Bankruptcy Court in Boston, Massachusetts, a foreclosing lender was denied relief from an automatic stay to foreclose on a mortgage. As the basis for its ruling, the court pointed to the failure of the foreclosing lender, Property Asset Management, Inc. ("PAM"), who purportedly acquired its interest in the mortgage via an assignment, to prove that the multiple-corporate-hat-wearing individual who executed the assignment on behalf of the assigning company had authority to do so.(1) Accordingly, the court found that the foreclosing lender failed in its burden of proving that it had authority to foreclose, standing to move for relief from the automatic stay, and therefore denied the lender's motion for relief from the stay, without prejudice to renewal upon proper proof.

For the ruling, see In re: Moreno, Case No. 08-17715-FJB (Bankr. D. Mass., Eastern Div. May 24, 2010).

(1) In denying the lender's motion for relief from the automatic stay, the court made the following analysis (bold text is my emphasis, not in the original text):

• As the party seeking relief from stay to foreclose a mortgage on the debtor's property, PAM bears the burden of proving that it has authority under applicable state law to foreclose the mortgage in question and, by virtue of that authority, standing to move for relief from the automatic stay to foreclose.

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• To show that it presently holds the mortgage, PAM must show a valid assignment of the mortgage from MERS to itself. PAM contends that it holds the mortgage by assignment from MERS. Accordingly, PAM must show that the assignment, which was executed for MERS by Denise Bailey, was within the scope of Bailey's limited authority to act for MERS.

• Ms. Bailey's authority to act for MERS is defined in the MERS Authorization in seven enumerated paragraphs. In each, Ms. Bailey's authority to act is dependent on the existence of a specified relationship of Litton, the MERS member by whom she is employed, to the loan in question. PAM has submitted no evidence of the existence of any such relationship. The beneficial owner of the loan at the time of the assignment was Aurora Bank FSB, but there is no evidence that Litton was at the time the servicer of the loan for Aurora Bank FSB or was registered with MERS as such.

• The Court does not find that Aurora Bank FSB had not retained Litton as its servicer; there is simply no evidence on the issue. But the burden is on PAM to prove that it had, and PAM has not adduced evidence to that effect.

• Accordingly, by a separate order, the Court will deny PAM's motion for relief from the automatic stay without prejudice to renewal upon proper proof.