D.C. Superior Court Rules on Bank’s Authority to Foreclose
The D.C. Superior Court recently rejected yet another legal theory currently being asserted by many borrowers-in-default attempting to rescind or stall foreclosures in the District of Columbia. This advisory describes the plaintiff’s allegations and explains the court’s ruling in Rose v. Wells Fargo Bank, N.A.
In Rose, the plaintiff asserted, among other things, that a 2010 foreclosure sale should be rescinded because the assignee bank defendant had not recorded the assignment of its security interest in the property at issue. As support for her argument, the plaintiff cited provisions of the D.C. tax code requiring assignees to record assignment of their interests within 30 days.
The plaintiff further relied on the D.C. Attorney General’s October 27, 2010, Statement of Enforcement of Intent, stating that a “foreclosure may not be commenced against a D.C. homeowner unless the security interest of the current note holder is properly supported by public filings with the District’s Recorder of Deeds.” Based on these allegations, the plaintiff alleged (1) that the foreclosure should be rescinded and (2) that the bank had violated D.C.’s consumer protection statutes prohibiting false or misleading statements.
The Superior Court rejected the plaintiff’s theories and dismissed her claims, ruling that under well-established D.C. law the equitable security of a deed of trust automatically follows the transfer of the underlying debt obligation. Therefore, as a matter of law, the assignee of the debt obligation is secured by the deed of trust - regardless of whether there has been a written or official assignment of the security instrument and regardless of whether such assignment has been recorded.
Furthermore, the court noted that the D.C. Attorney General published a subsequent Statement of Enforcement Intent in December 2010, stating, among other things, that the “validity of a completed foreclosure sale” depends on the foreclosing entity’s “right to foreclose,” and not on the recordation requirements in the D.C. tax code. Finally, the court agreed with recent decisions by the U.S. District Court for the District of Columbia and D.C. Court of Appeals ruling that recordation is not a prerequisite for foreclosure.
The court’s decision is important because the Rose plaintiff’s recordation theory is one of many theories currently being asserted in D.C. and other jurisdictions in lawsuits to rescind or delay a foreclosure sale. The decision further illustrates the necessity to know and understand the property and foreclosure laws of a particular jurisdiction.
Troutman Sanders represented the successful defendant in the Rose matter and currently represents lenders, assignees, and loan servicers in similar claims throughout the country. The firm can provide valuable advice and analysis to make sure that your foreclosure procedures confirm with the terms of the loan documents and the controlling law. Troutman Sanders can also provide experienced and efficient legal representation in the event the validity of a foreclosure sale is challenged in a lawsuit.