Appeals court reverses Edgerton foreclosure
MADISON A state appeals court reversed an Edgerton couple’s foreclosure Thursday, finding the mortgagor couldn’t prove at trial it held the note on the couple’s residence.
In reversing Rock County Judge James Welker, the District 4 Court of Appeals concluded that Aurora Loan Services had not submitted “admissible evidence” that it was the holder of the note.
Aurora Loan Services based in Littleton, Colo., had sought foreclosure against David and Linda Carlsen after the loan on their home at 502 Newville St. went into default in 2006. Because Aurora wasn’t the original lender, the Carlsens’ attorney, Reed Peterson of Madison, had asked that Aurora prove it was the current holder of the $159,000 mortgage.
“It used to be if a lender found you in default, you either paid up or you lost your house,” Peterson said in a phone interview. “Now, attorneys are asking lenders what’s their proof, do they have enough documentation to get a foreclosure?”
Although Aurora claimed it had bought the Carlsens' mortgage, the firm had no one who could testify before Welker that he or she had seen the document assigning the Carlsens' mortgage to Aurora.
Even so, Welker granted Aurora the foreclosure.
The Carlsens appealed.
The appeals court found that the rules of evidence apply to foreclosures and a trial judge can’t rely only on the arguments of a lender’s attorney.
While Aurora had its business records of Carlsens' mortgage, it lacked certification from the Rock County Register of Deeds Office that it had been assigned the note.
To save the filing fee at the register of deeds office, mortgage brokers often use mortgage electronic registration systems to document the transfer of mortgages from one lender to another. Peterson said that creates a problem when they try to prove in court that they hold the mortgage.
“Documents recorded with a register of deeds come with their certification—MERS doesn’t have a system in place that the rules of evidence recognizes as being trustworthy. When lenders come to court, they have a problem with proving they now have the mortgage,” he said.
Calls to Aurora and its attorney for comment on the opinion weren’t returned before deadline.
Peterson said the lack of authenticated records in foreclosures has created a “real mess that needs to be cleaned up.”
A bankruptcy court in New York has declared mortgage electronic registration systems to be “an illegal entity,” Peterson said.
The Carlsens have a mortgage on their property recorded with the register of deeds, but who actually owns the mortgage remains unclear, Peterson said.
Peterson said the Carlsens remain in their home.