Lack of Authority to Assign Deed of Trust Does Not Support Wrongful Foreclosure Claim

Helmert v. Cenlar FSB, 802 Fed. Appx. 125 (5th Cir. 2020). Helmert refinanced his home in Lafayette County, Mississippi with Merchants &Farmers Bank and granted a deed of trust to Merchants & Farmers Bank, which assigned the deed of trust to Taylor, Bean & Whitaker Mortgage Corporation. Taylor, Bean & Whitaker subsequently assigned the deed of trust to Cenlar, but the person who signed the assignment lacked the authority to sign on behalf of Taylor, Bean & Whitaker, making the assignment ineffective. Cenlar then assigned the deed of trust to Nationstar. Nationstar appointed a substituted trustee who foreclosed on the house after Helmert defaulted on the loan. More than a year after the foreclosure, Taylor, Bean & Whitaker and Cenlar executed a corrected deed of trust, and Cenlar assigned the corrected deed of trust to Nationstar. The substituted trustee for Nationstar rescinded the initial foreclosure sale and conducted another sale. Helmert filed suit against Cenlar and Nationstar in Mississippi state court for wrongful foreclosure, negligence, fraud and improperly issuing two 1099-A tax forms. The case was removed to federal court. Helmert claimed that Cenlar negligently and/or fraudulently assigned the deed of trust to Nationstar and that Nationstar wrongfully foreclosed without authority. Cenlar and Nationstar both filed motions to dismiss for failure to state a claim, which the district court granted. The district court held that Helmert lacked standing on his wrongful foreclosure claim because he was a non-party to the assignment. The court found that Helmert failed to state a claim against Nationstar for negligence and wrongful foreclosure because Helmert conceded that he was in default and therefore Nationstar had the right to foreclose. The district court also dismissed Helmert’s fraud claim. Helmert appealed the dismissal of his wrongful foreclosure and negligence claims. On appeal, the Fifth Circuit Court of Appeals agreed that Helmert failed to state a claim against Cenlar for negligent conveyance because Mississippi law does not recognize a claim for negligent conveyance. The Fifth Circuit also found that Helmert lacked standing to bring claims against Nationstar for negligence and wrongful foreclosure because he had defaulted on the loan. The Fifth Circuit wrote that “Mississippi case law holds that when an obligor defaults, the trustee of a deed may foreclose, and the obligor lacks standing to pursue a wrongful-foreclosure claim.”

Note: This opinion was not selected for publication and does not have any precedential value except under the limited circumstances set forth in 5th Cir. R. 47.5.4.

To learn more about the co-authors, Rod Clement and Lindy Brown, visit Rod’s member profile or firm profile or Lindy’s firm profile.