BROOKLYN, N.Y. (Legal Newsline) -- A federal judge ruled last week that a lawsuit filed by hundreds of homeowners against the national mortgage registry known as MERS and dozens of member institutions is unsupported by facts and rejected the mass action attempt.
Judge William F. Kuntz II of the U.S. District Court for the Eastern District of New York sided with MERSCORP Holdings Inc. and the banks in his memorandum and order, filed May 23.
In Abraham v. American Home Mortgage Servicing, Inc., et al., the plaintiffs -- a group of several hundred current and former homeowners -- sued several dozen mortgage originators and servicers, alleging they induced them to enter into mortgages based on inflated appraisals; purposefully avoided local recordation statutes, thereby clouding the plaintiffs' titles; transferred, bundled, packaged and sold their mortgages to investors while simultaneously betting against those mortgages; and failed to use Troubled Asset Relief Program, or TARP, funds to help the plaintiffs, as required under law.
As a result, the plaintiffs claimed they lost equity in their homes, suffered damage to their credit ratings and incurred unnecessary costs and expenses.
The plaintiffs first filed the suit in New York Supreme Court, Kings County, in May 2012. Months later, in September, PNC Bank, one of the defendants, had the case removed to the federal court.
Kuntz, in his 24-page order, rejected the mass action attempt by the plaintiffs, finding that they were joined improperly.
A "mass action" is defined as any civil action in which monetary relief claims of 100 or more persons are proposed to be tried together on the grounds that the plaintiffs' claims involve common question of law or fact.
"According to the allegations in the complaint, Plaintiffs engaged in separate loan transactions with different lenders in different offices in different states over a nine-year period. It is well established that separate loan transactions by different lenders do not constitute a single transaction or occurrence and claims by plaintiffs who engaged in those separate transactions generally cannot be joined in a single action," Kuntz wrote.
"Indeed, even claims by plaintiffs who engaged in separate loan transactions by the same lender cannot be joined in a single action."
The judge also ruled that the plaintiffs failed to plead "sufficient factual matter" to state a claim to relief that is "plausible on its face."
"Plaintiffs appear to argue that their claims arise out of a common series of transactions because 'Defendants were involved in a common scheme and plan,'" Kuntz wrote. "Plaintiffs have not provided any factual allegations supporting these contentions, such as evidence that Plaintiffs' individual mortgages were based on inflated appraisals or specific omissions by particular employees responsible for issuing Plaintiffs' mortgages.
"Although this Court must accept the factual allegations set forth in Plaintiffs' complaint as true, 'threadbare recitals' and 'conclusory statements' unsupported by specific facts are not entitled to such credence."
Read the judge's complete ruling here.
Kuntz granted the defendants' motion to sever and dismiss without prejudice all plaintiffs, except the first named plaintiff, Leela Abraham, whose complaints he subsequently dismissed in their entirety.
"Judge Kuntz's ruling clearly established that borrowers who engaged in separate loan transactions by different lenders generally cannot be joined in a single action," MERSCORP Holdings Director for Corporate Communications Jason Lobo said in a statement Wednesday.
"As importantly, he found that none of the allegations were supported by a single fact and further rejected an attempt to amend the complaint a third time as 'futile.'"
From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.