The securitization of a mortgage doesn’t nullify the rights of the holder of the underlying trust deed or the rights of the holder’s agents, the 10th Circuit Court of Appeals has ruled.

In its February 1 ruling in Scarborough v. LaSalle Bank National Association, the 10th Circuit adopted the reasoning of a string of recent decisions from the Utah Court of Appeals rejecting the theory advanced by Scarborough.

Scarborough brought suit following a foreclosure sale of his home claiming that defendants were not the proper parties to foreclose. He alleged the lender had transferred the note into a trust along with other notes, and that certificates were issued from the trust to investors. The certificates, he alleged, transferred the debt to the investors, and the investors were therefore the proper parties to determine when to foreclose, not the trustee of the trust.

The defendants jointly moved for dismissal and the district court converted the motion into one for summary judgment. When Scarborough failed to present evidence to support his claims, the district court entered judgment in favor of  defendants—LaSalle Bank National Association, as Trustee for First Franklin Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates Series 2007 FF2; Mortgage Electronic Registration Systems, Inc. (MERS); and First Franklin Financial Corp.

The 10th Circuit upheld the dismissal, concluding that Scarborough’s “procedural failings were fatal to the claims asserted in his complaint,” and that “even if we could somehow overlook Scarborough’s procedural failings, we would reject his claims on the basis of existing Tenth Circuit and Utah case law.”

Acknowledging that the case was “but the latest in a series of nearly identical cases filed by Scarborough’s attorney on behalf of various clients in Utah seeking ‘mortgage relief,’” the 10th Circuit cited to another recent 10th Circuit decision, Commonwealth Prop. Advocates, LLC v. MERS, and two decisions from the Utah Court of Appeals in which attorneys from Ballard Spahr represented defendants—the July 2011 ruling in Commonwealth Prop. Advocates, LLC v. MERS, and the January 2012 decision in Howard v. PNC Mortgage.

“These cases,” the 10th Circuit panel said, “clearly require our affirmance of the district court’s dismissal of Scarborough’s claims.”

The lesson of these cases is unequivocal—securitization of a mortgage does not nullify the rights of the holder of the underlying trust deed and its agents, such as MERS, from directing the foreclosure process.

“This decision represents just the most recent in a long line of similar rulings we’ve obtained in state and federal trial courts and at the Utah Court of Appeals, but is significant in that the 10th Circuit Court of Appeals has now acknowledged the Utah Court of Appeals got it right in the Commonwealth decision,” said Ballard Spahr partner Mark R. Gaylord, who, along with associate Steven D. Burt, represented defendants in the case.

Ballard Spahr’s Consumer Financial Services Group has substantial experience in defending financial institutions against the kinds of claims and theories advanced by plaintiff in this case. The group also produces the CFPB Monitor, a blog that focuses exclusively on important Consumer Financial Protection Bureau developments. To subscribe, use the link provided to the right.

For more information, please contact Mark R. Gaylord, 801.531.3070 or; Anthony C. Kaye, 801.531.3069 or


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