Chain of Title Inconclusive in Foreclosure Action

For the second time in the last year, the New Mexico Supreme Court held that a particular bank’s right to foreclose on a home owned by a borrower could not be enforced by grant of summary judgment. Back in 2007 Mr. and Mrs. Quintana entered in to a residential loan agreement with First Franklin Financial Corporation (“First Franklin”), a subsidiary of Merrill Lynch. Under the terms of the agreement First Franklin lent the Quintanas $152,000 to pay off an old loan and to receive a cash payout of $11,773.70. The adjustable rate mortgage initially started with a 6.9% interest rate but could potentially reach 12.9% by late in 2009 per a schedule of prescribed change dates.

The Quintanas conveyed to First Franklin a security interest in their property as collateral for the loan.  They signed the mortgage contract with MERS (Mortgage Electronic Recording Systems) as the nominee for First Franklin. After her husband passed, Mrs. Quintana made payments on her mortgage to First Franklin Loan Services, a different entity than First Franklin through October 2008. On December 2, 2008, First Franklin Loan Services notified her that she was in default on her loan. The notice indicated that if she did not pay the arrearage by January 1, 2009, they could accelerate the note and foreclose on the property securing it. On January 29, 2009, a different bank, LaSalle Bank (“LaSalle”) filed a foreclosure complaint in District Court claiming it was the trustee for Merrill Lynch First Franklin Mortgage Loan Trust asset-backed securities 2007-2 series. LaSalle did not explain how it obtained the rights to the contract but it did attach some documentation showing 2 endorsements, stamps purported to indicate that a transferee became the holder of the note.

While the trial courts granted (and the Court of Appeals affirned) LaSalle’s motion for summary judgment permitting the foreclosure, the Supreme Court reached a different conclusion. It found that the two endorsements themselves were insufficient to establish LaSalle’s position as the current holder of the note. One of the endorsements failed to be dated or show to whom the note was conveyed. It noted that an assignment to LaSalle dated January 29, 2009 was back-dated to 2007. It rejected the testimony of a Vice President of a company called Home Loan Services suggesting its company’s records established that the note had been properly conveyed by affidavit as inadmissible hearsay because the individual failed to show he had actual knowledge of the conveyance and such testimony failed to constitute a proper exception to the rule excluding hearsay testimony. Accordingly, the Court in Bank of America v. Quintana, No. 33631 (Supreme Ct. NM 2014) reversed the summary judgment and sent the case back to the District Court for a trial on the issue of foreclosure as well as claims presented by Ms. Quintana.

Mr. Giddens and the other attorneys at Giddens & Gatton Law, P.C. have experience representing New Mexico businesses and property owners regarding real estate matters and litigation involving such matters. Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico. Call the office at (505) 633-6298 to set up an appointment or visit the firm’s website at giddenslaw.com for more information.