BAIN v. METROPOLITAN MORTG. GROUP, INC.
285 P.3d 34 (2012)
Kristin BAIN, Plaintiff,
METROPOLITAN MORTGAGE GROUP, INC., IndyMac Bank, FSB; Mortgage Electronics Registration Systems; Regional Trustee Service; Fidelity National Title; and Doe Defendants 1 through 20, inclusive, Defendants.
Kevin Selkowitz, an individual, Plaintiff,
Litton Loan Servicing, LP, a Delaware limited partnership; New Century Mortgage Corporation, a California corporation; Quality Loan Service Corporation of Washington, a Washington corporation; First American Title Insurance Company, a Washington corporation; Mortgage Electronic Registration Systems, Inc., a Delaware corporation; and Doe Defendants 1 through 20, Defendants.
Nos. 86206-1, 86207-9.
Supreme Court of Washington, En Banc.
Argued July 7, 2011.
Decided August 16, 2012.
Ann T. Marshall, Kennard M. Goodman, Bishop White Marshall & Weibel PS, Douglas Lowell Davies, Davies Law Group, Russell Brent Wuehler, DLA Piper LLP, Jennifer Lynn Tait, Nicolas Adam Daluiso, Robinson Tait PS, Seattle, WA, Heidi E. Buck, Bellevue, WA, Charles Thomas Meyer, Attorney at Law, Newport Beach, CA, Robert J. Pratte, Fulbright & Jaworski, LLP, Minneapolis, MN, Robert Norman, Jr., Houser & Allison, Irving, CA, Mary Stearns, McCarthy & Holthus, LLP, Poulsbo, WA, Melissa Robbins Coutts, San Diego, CA, for Defendants.
James T. Sugarman, Attorney at Law, Seattle, WA, amicus counsel for Attorney General of State of Washington.
Scott Erik Stafne, Rebecca Thorley, Andrew J. Krawczyk Stafne Law Firm, Arlington, WA, Ha Thu Dao, Grand Central Law, PLLC, Lakeland, FL, Timothy Charles Robbins, Nicholas D. Fisher, Attorneys at Law, Everett, WA, amicus counsel for Homeowners' Attorneys.
David A. Leen, Leen & O'Sullivan PLLC, Seattle, WA, Geoff Walsh, Boston, MA, amicus counsel for National Consumer Law Center.
Shawn Timothy Newman, Attorney at Law, Olympia, WA, amicus counsel for Organization United for Reform Our Washington.
¶ 1 In the 1990s, the Mortgage Electronic Registration System Inc. (MERS) was established by several large players in the mortgage industry. MERS and its allied corporations maintain a private electronic registration system for tracking ownership of mortgage-related debt. This system allows its users to avoid the cost and inconvenience of the traditional public recording system and has facilitated a robust secondary market in mortgage backed debt and securities. Its customers include lenders, debt servicers, and financial institutes that trade in mortgage debt and mortgage backed securities, among others. MERS does not merely track ownership; in many states, including our own, MERS is frequently listed as the "beneficiary" of the deeds of trust that secure its customers' interests in the homes securing the debts. Traditionally, the "beneficiary" of a deed of trust is the lender who has loaned money to the homeowner (or other real property owner). The deed of trust protects the lender by giving the lender the power to nominate a trustee and giving that trustee the power to sell the home if the homeowner's debt is not paid. Lenders, of course, have long been free to sell that secured debt, typically by selling the promissory note signed by the homeowner. Our deed of trust act, chapter 61.24 RCW, recognizes that the beneficiary of a deed of trust at any one time might not be the original lender. The act gives subsequent holders of the debt the benefit of the act by defining "beneficiary" broadly as "the holder of the instrument or document evidencing the obligations secured by the deed of trust." RCW 61.24.005(2).
¶ 2 Judge John C. Coughenour of the Federal District Court for the Western District of Washington has asked us to answer three certified questions relating to two home foreclosures pending in King County. In both cases, MERS, in its role as the beneficiary of the deed of trust, was informed by the loan servicers that the homeowners were delinquent on their mortgages. MERS then appointed trustees who initiated foreclosure proceedings. The primary issue is whether MERS is a lawful beneficiary with the power to appoint trustees within the deed of trust act if it does not hold the promissory notes secured by the deeds of trust. A plain reading of the statute leads us to conclude that only the actual holder of the promissory note or other instrument evidencing the obligation may be a beneficiary with the power to appoint a trustee to proceed with a nonjudicial foreclosure on real property. Simply put, if
MERS does not hold the note, it is not a lawful beneficiary.
¶ 3 Next, we are asked to determine the "legal effect" of MERS not being a lawful beneficiary. Unfortunately, we conclude we are unable to do so based upon the record and argument before us.
¶ 4 Finally, we are asked to determine if a homeowner has a Consumer Protection Act (CPA), chapter 19.86 RCW, claim based upon MERS representing that it is a beneficiary. We conclude that a homeowner may, but it will turn on the specific facts of each case.FACTS
¶ 5 In 2006 and 2007 respectively, Kevin Selkowitz and Kristin Bain bought homes in King County. Selkowitz's deed of trust named First American Title Company as the trustee, New Century Mortgage Corporation as the lender, and MERS as the beneficiary and nominee for the lender. Bain's deed of trust named IndyMac Bank FSB as the lender, Stewart Title Guarantee Company as the trustee, and, again, MERS as the beneficiary. Subsequently, New Century filed for bankruptcy protection, IndyMac went into receivership,1 and both Bain and Selkowitz fell behind on their mortgage payments. In May 2010, MERS, in its role as the beneficiary of the deeds of trust, named Quality Loan Service Corporation as the successor trustee in Selkowitz's case, and Regional Trustee Services as the trustee in Bain's case. A few weeks later the trustees began foreclosure proceedings. According to the attorneys in both cases, the assignments of the promissory notes were not publically recorded.2