Alert August 26, 2008

Massachusetts Bankruptcy Court Denies Request for Stay Relief Due to Insufficient Proof of Standing

A Massachusetts bankruptcy judge has ruled that parties who cannot prove that they hold a note or mortgage or service a mortgage loan, do not have standing to pursue motions for relief from the automatic stay or to defend against objections to proofs of claim. The court found that the trustee of a securitization loan pool lacked standing because (1) it failed to show each assignment along the chain, including assignments between two related lender entities; (2) one assignment was ineffective, as the limited power of attorney under which the assignment was granted did not provide the required authority; and (3) the trustee failed to introduce any evidence that the loan at issue was part of the pooling and servicing agreement, e.g., the trustee did not submit the mortgage loan schedule as evidence. The court also required the servicer and trustee to show cause why sanctions should not be imposed for filing a motion for relief from stay without sufficient evidence of standing. Click here for a copy of In re: Hayes, No. 07-13967 (Bkcy. D. Mass. Aug. 19, 2008).