First Circuit Court of Appeals Hears Culhane Case

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A panel of the United States Court of Appeals for the First Circuit heard oral argument in the matter of Oratai Culhane v. Aurora Loan Services of Nebraska earlier this week. The panel was comprised of Chief Judge Hon. Sandra L. Lynch, Senior Circuit Judge Hon. Bruce M. Selya, and retired U.S. Supreme Court Associate Justice Hon. David H. Souter, sitting by designation. The Culhane case is notable for District Court Judge Hon. William G. Young’s discussion in a summary judgment decision of Mortgage Electronic Registration Systems, Inc. (“MERS”) and the propriety of MERS’s system of assigning mortgages held in its name to loan servicers prior to foreclosure. See Culhane v. Aurora Loan Serv. of Neb., 826 F. Supp.2d 352 (2011).

In Culhane, Judge Young entered summary judgment for Defendant Aurora Loan Services of Nebraska, holding that there was no legal flaw in the process by which Aurora was assigned the mortgage granted by Plaintiff Oratai Culhane to MERS. Judge Young’s Culhane decision is also well known for its discussion of the legal theory that a mortgage and the note it secures must be held together prior to foreclosure in Massachusetts, which theory was ultimately addressed by the Massachusetts Supreme Judicial Court in Eaton v. Federal National Mortgage Association, 462 Mass. 569 (2012). The Eaton Court held that a foreclosing mortgagee must either hold the note or act as the note holder’s authorized agent (citing Culhane in its discussion), but also determined that its decision would apply only prospectively.

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