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Tenth Circuit Affirms Securitized Mortgage Trustee's Standing to Foreclosure

February 27, 2012

A recent ruling could put an end to some of the more wacky Internet-driven legal theories about mortgage securitizations. In a February 1, 2012 ruling, the U.S. Court of Appeals for the Tenth Circuit rejected just such a challenge to a securitized mortgage trustee’s standing to foreclose. In Scarborough v. LaSalle Bank National Association, No. 11-4092, the Court affirmed a prior Tenth Circuit holding, as well as a line of cases from the Utah Court of Appeals, that the securitization of a mortgage loan does not affect the foreclosure rights of the holder of an underlying trust deed or the rights of the holder's nominee. The Court also rejected the borrower’s argument that the trustee was required to obtain the express authorization from all the investors in the asset securitization trust before initiating the foreclose process. The Court explained that the borrower’s arguments were based on "an incorrect legal assertion...that securitization of a mortgage nullifies the rights of the holder of the underlying trust deed and its nominees." The court's analysis is spot on. It's just a matter of time before this oft-copied legal theory bites the dust.

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As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2012 Dykema Gossett PLLC. 

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2017 Dykema Gossett PLLC.