Mr. and Mrs. Starkey enlisted the help of this Firm to defend the attempted foreclosure of their home in January of 2009. The Firm defended the Starkey's position in the Land Court, as well as at the Superior Court. The Superior Court matter was stayed during the pendency of the Land Court matter, and once the Land Court matter was decided, the litigation resumed in the Superior Court case.
The issues involved in the Superior Court matter involve Washington Mutual Bank, N.A., and precisely what assets were "owned" by that entity at the time of its failure and takeover by the FDIC, and purported subsequent transfer by sale to JP Morgan Chase. The answer to this question has proved to be quite elusive in litigation seeking the same answer in various cases filed across the United States, for instance, see Jolley v. Chase Home Finance, LLC, 153 Cal. Reptr. 3d 546 (Ct. App. Ct. 2013)
The Superior Court Judge dismissed all of the Starkey's claims based upon JP Morgan Chase's claimed bar due to the requirement to file any "claim" against a failed bank (Washington Mutual) under a "claims procedure" in Washington D.C. under the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA") However, this federal statute provides that only "creditors" of the Failed Bank receive notice of this requirement. Indeed, this statute was enacted by Congress in 1989 in response to the Savings and Loan crisis at that time. Thus, at the time that FIRREA was enacted, there was never any question that a Failed Bank was the "owner" of the loan at the time of its failure and takeover by the FDIC.Thus, the application of the FIRREA jurisdictional bar, "as applied" to borrowers, raises potentially serious due process concerns.
Fast forward to the years beginning at the dawn of the new millennium, and we find that very few if any of the large "banks" own the mortgage loan after it is "originated", as such loans are "immediately packaged and sold" to the secondary mortgage market, and the "originator", may retain the right to "service" (not own the right to payment and right to enforce the security instrument).
The failure to adhere to the FIRREA "claims procedure" has found to prove fatal to a claim brought against the Failed Bank in litigation brought in any other forum. Indeed, federal courts have interpreted this "bar" to apply to borrowers, even though these same borrowers never received notice regarding the mandatory nature of this process. Thus, decisions have held that where a borrower fails to undertake this "claims procedure", they are forever barred from raising any defense related to any "claim" levied against a Failed Bank taken over by the FDIC
This is the precise issue involved in the Starkey matter. JP Morgan Chase solely relied upon the jurisdictional bar of FIRREA to argue that the Starkey's complaint should be dismissed, solely on the basis of failing to undertake the claims procedure under the FDIC, in Washington D.C., even though they had no notice of such requirement.
The Superior Court merely applied the holding made by the First Circuit in DeMelo v. U.S. Bank Nat'l Ass'n, 727 F. 3d. 117 (1st Cir. 2013) holding that the Starkey's failure to exhaust this claims procedure precluded the Superior Court's jurisdiction to even hear the Starkey's challenge.
On September 11, 2018, the Massachusetts Appeals Court sided with the Firm on its argument that such dismissal by the Superior Court Judge was error, see Starkey v. Deutsche Bank, N.T. Co., 94 Mass. App. Ct. 1 (2018). Subsequently, the firm defending the Defendants [Morgan Lewis, Bockius) filed a "Petition for rehearing", which was Denied by the Panel, see the PDF's of the briefs filed in this matter in the following link, and the following entry on the Appeal docket here, [at last entry]:
10/18/2018 | RE#24: Defendants-Appellees JPMorgan Chase Bank, N.A. and Deutsche Bank National Trust Company, Acting Solely in its Capacity as Trustee for the WAMU Mortgage Pass-Through Certificates Series 2006 AR1 Trust have filed a petition for rehearing "or, in the alternative, clarification of [this court's] opinion of September 11, 2018 in the above captioned appeal." The premise of that motion is that "[o]n Appeal, Appellants sought reversal only of the Trial Court's dismissal of Count I." Petition at 4. That premise is incorrect. See, e.g., Appellants' Brief at 38 ("Therefore, it was error for the Superior Court Judge to dismiss Plaintiffs remaining claims solely on the basis of the holding in DeMelo . . ."). Although our opinion is clear, the motion is allowed to the extent it seeks clarification concerning the scope of our judgment: We reversed the dismissal of counts 1, 2, 3, 4, 6, and 7 and remanded the case to the Superior Court for further proceedings consistent with our opinion. To the extent the petition seeks rehearing it is denied. (Rubin, Lemire, Shin, JJ.) *Notice Subsequently, the Defendants hired Wilmer, Cutler, Pickering, Hale and Dorr LLP to file a Petition for Further Appellate Review to the Massachusetts Supreme Judicial Court, see docket here Defendants have submitted their Petition, and this Firm has submitted its Opposition thereto. As this is active litigation, thus, the Firm cannot comment further regarding the Starkey's position, and merely sets out the facts of this case as presented. We will keep you updated as to whether the SJC decides to take this matter up |