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Whitehead v. HMC Assets, LLC

United States District Court, D. Massachusetts

October 10, 2014

KENNETH WHITEHEAD and LISA WHITEHEAD, Plaintiffs,
v.
HMC ASSETS, LLC as trustee for CAM MORTGAGE TRUST 2013-1 and BSI FINANCIAL SERVICES, INC., Defendants.

MEMORANDUM & ORDER

INDIRA TALWANI, District Judge.

I. Introduction

This case concerns a threatened foreclosure following multiple reassignments of a mortgage. Because Defendant HMC Assets, LLC as Trustee for CAM Mortgage Trust 2013-1 ("HMC") appears to now have both the note and mortgage, Plaintiffs Kenneth and Lisa Whitehead have failed to show a likelihood of success on the merits of their underlying claims. Accordingly, Plaintiffs' Motion for Temporary Restraining Order and Preliminary Injunction [#8] is DENIED.

II. Background

On December 2, 2004, Plaintiffs executed a note to Novelle Financial Services ("Novelle") in the amount of $398, 250.00. Compl. ¶4 [#6]. This loan was secured by a mortgage on Plaintiffs' residence in North Andover, Massachusetts. Id.

On April 25, 2014, HMC Assets, LLC as Trustee of CAM Mortgage Trust 2013-1 ("HMC") published a notice of foreclosure sale for Plaintiffs' property in the North Andover Citizen, a local paper in North Andover, Massachusetts. See Aff. Reneau J. Longoria Supp. Opp'n Mot., ¶16, Ex. 7 [#14]. On April 28, 2014, HMC also sent Plaintiffs a notice of intent to foreclose, which stated that a foreclosure sale would occur on or after May 22, 2014. See id. at ¶17, Ex. 8. Attached to the notice of intent to foreclose was a certificate prepared by BSI Financial Services ("BSI Financial") that purported to state the basis of HMC's authority to foreclose and attached the relevant loan documents, including a copy of Plaintiffs' note. Id. at Ex. 8.

The foreclosure sale, originally slated for no earlier than May 22, 2014, was postponed three times before this case came before this court. Twice, the foreclosure sale was rescheduled due to Lisa Whitehead's then-pending petitions for bankruptcy relief. See Defs.' Statement Material Facts Supp. Mem. Opp'n Pls.' Mot. Prelim. Inj., ¶¶25-26 [#12] [hereinafter, Defs.' Facts]. The sale was then postponed a third time after Plaintiffs initiated the instant action in the Superior Court of Essex County, Massachusetts, and that court granted Plaintiffs' motion for a temporary restraining order. See Order Allowing Temporary Restraining Order, 33 [#6]. Defendants subsequently removed the case to federal court, see Notice Removal Matter United States District Court, 1-7 [#1], and on September 8, 2014, Plaintiffs filed their Motion for Temporary Restraining Order and Preliminary Injunction [#8]. In support of this motion, Plaintiffs assert that HMC has not shown that it gained possession of both Plaintiffs' note and mortgage from their original lender, Novelle. Plaintiffs assert that without possession of both their note and mortgage, Defendants may not foreclose on their home.

In opposition to Plaintiffs' motion for a preliminary injunction, Defendants assert that they gained possession of Plaintiffs' mortgage through a set of assignments. According to Defendants, on November 3, 2006, Novelle assigned Plaintiffs' mortgage to GRP Loan, LLC ("GRP Loan"). See Aff. Gary McCarthy Supp. Opp'n Mot., Ex. 1 [#13-18]. This assignment, a copy of which was presented to the court, was notarized and recorded in the Essex County Registry of Deeds. See id.

Defendants explain that by late 2011 Plaintiffs were in significant default on their loan obligations. See id. at Ex. H [#13-17]. An October 26, 2011, letter sent to Plaintiffs by the loan's then-servicer, Select Portfolio Servicing, Inc. ("Select"), stated that the loan's outstanding balance was $247, 968.42. See id. This letter gave Plaintiffs 150 days to cure the loan default and stated that a failure to cure by March 24, 2012, could result in acceleration of the loan and the initiation of foreclosure proceedings. Id.

According to Defendants, despite the fact that Plaintiffs were in default on their loan, Plaintiffs' mortgage continued to be assigned. See Defs.' Facts at ¶¶14-15, 17. On July 30, 2012, two assignments occurred in quick succession. First, GRP Loan assigned the mortgage to DLJ Mortgage Capital, Inc. ("DLJ Mortgage"). See Aff. Gary McCarthy Supp. Opp'n Mot. at Ex. J [#13-19]. Second, DLJ Mortgage immediately assigned the mortgage to HMC Assets, LLC as Trustee of CAM V Trust. See id. at Ex. K [#13-20]. A final assignment occurred on May 8, 2013, when HMC Assets, LLC as Trustee of CAM V Trust assigned the mortgage to HMC Assets, LLC as Trustee of CAM Mortgage Trust 2013-1 ("HMC"). See id. at Ex. O [#13-24]. Each of these assignments was notarized and recorded in the Essex County Registry of Deeds. See id. at Exs. J-K, O. After HMC purchased the mortgage, it hired BSI Financial to act as the loan's servicer; BSI Financial took over the position from Select. See id. at Ex. O.[1]

On September 18, 2014, the court heard oral argument on the pending motion. At this hearing, Defendants' counsel presented the original note. The note presented to the court, however, did not match a version of the note submitted electronically with Defendants' opposition papers. Specifically, affixed to the hardcopy note were two allonges - the first endorsed specifically from Novelle to GRP Loan and the second endorsed in blank by GRP Loan. In contrast, Defendants' electronic submission showed only the first allonge, endorsed in blank by Novelle. Compare id. at Ex. E [#13-14] (presenting a copy of the note identical to the hardcopy presented at the hearing), with Aff. Reneau J. Longoria Supp. Opp'n Mot., Ex. 8 (presenting a copy of the note with only one allonge affixed), and Defs.' Verified Answer, Affirmative Defenses, and Countercls., Ex. 4 [#10-4] (same).

Due to this discrepancy, Defendants agreed to provide additional documents to the court and to voluntarily postpone the foreclosure sale for a period of three weeks. See Order, 1 [#16]. Based on the postponement, the court denied Plaintiffs' motion for a temporary restraining order. Id . The court held over determination of Plaintiffs' motion for a preliminary injunction and gave Defendants an opportunity to file supplemental affidavits authenticating the allonges affixed to the hardcopy note. Id.

On September 26, 2014, Defendants filed a supplemental affidavit from Gary McCarthy, who stated that he has worked at HMC since April 30, 2013. See Supplemental Aff. Gary McCarthy, ¶1 [#22]. This affidavit purports to be based on McCarthy's personal knowledge as well as a review of records held by HMC and BSI Financial, but the specific records are not identified. Id. at ¶3. In this affidavit, McCarthy asserts that the discrepancy in note versions was caused by BSI Financial's mistaken reliance on an outdated version of the note.

Specifically, McCarthy claims that the note's original holder, Novelle, executed and affixed the first allonge, bearing a blank endorsement, to the note at some unspecified time. See id. at ¶7. At that same time, a copy of the note and allonge were purportedly sent to Select, the loan's servicer, and saved electronically in Select's files. See id. at ¶8. McCarthy states that at some later time Novelle transferred physical possession of the original note to GRP Loan and filled out the first allonge so that the note was endorsed specifically to GRP Loan. See id. at ...


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