Jepson v. Bank of NY Mellon, No. 14-2459 (7th Cir. 2016)Annotate this Case
Jepson executed a note and mortgage on Illinois property, listing America’s Wholesale Lender as the lender and Mortgage Electronics Registration Systems (MERS) as its nominee. Jepson’s note was endorsed in blank by Countrywide, “doing business as America’s Wholesale Lender” and transferred to CWABS, a residential mortgage trust that pools loans and sells certificates backed by the mortgages to investors. CWABS was formed and governed by a Pooling and Service Agreement (PSA). BNYM, trustee for CWABS, now possesses Jepson’s note. MERS assigned Jepson’s mortgage to BNYM. Jepson defaulted. BNYM filed a foreclosure complaint. Jepson filed a Chapter 7 bankruptcy petition. BNYM sought to lift the automatic stay. Jepson filed an adversary complaint, seeking a declaration that BNYM had no interest in her mortgage because the note did not include a complete chain of intervening endorsements and was endorsed after the closing date in the PSA and that America’s is a fictitious entity, so that the note was void and not negotiable under Illinois law. The bankruptcy court held that, under governing New York law, Jepson lacked standing to challenge alleged violations of the PSA, dismissed the adversary complaint, and modified the automatic stay to allow BNYM to proceed with its Illinois foreclosure action. The district court affirmed. The Seventh Circuit agreed that Jepson lacks standing to raise challenges based on the PSA, but remanded for consideration of her other claims.
The court issued a subsequent related opinion or order on April 15, 2016.