Lupu v. Loan City LLC

Lupu refinanced his home loan and mortgage with Loan City, which transferred both to IndyMac, then they went to Fannie Mae, next to OneWest, and finally to the current holder, Ocwen. After defaulting, Lupu sued to void the instruments evidencing his debt, challenging the use of the MERS System, a private mortgage registry that allows its members to avoid county-level public recordation when transferring mortgage interests. MERS is named as the mortgagee, as its members’ nominee, so members can transfer mortgage interests among themselves without recording. The system is generally in accord with Pennsylvania law. At one point, Lupu alleged forgery, The district court dismissed his action. A Stewart Title policy insured Loan City, its successors, and assignees, requiring Stewart to pay costs, attorneys’ fees and expenses incurred in defense of the title or the lien, but not “those causes of action which allege matters not insured against.” Steward denied Ocwen's request for defense coverage, except with respect to the forgery claim, stating “Lupu’s arguments concerned the securitization of the note secured by the insured mortgage and the validity of assignments of the insured mortgage rather than the execution and witnessing of the insured mortgage.” The Third Circuit ruled in favor of Stewart, predicting that state courts would not apply the “complete defense" rule, whereby a single covered claim triggers an obligation for the title insurer to defend the entire action. The court applied Pennsylvania’s rule that potentially covered claims are identified by “comparing the four corners of the insurance contract to the four corners of the complaint.” View "Lupu v. Loan City LLC" on Justia Law