Once Again, Loans Can be Valid Even if the Lender is Not Licensed

Last week, we looked at a case about whether a loan as valid when the lender was never licensed under the Residential Mortgage License Act. This week, let’s look at a similar case — Nationstar Mortgage LLC v. Missirlian, 2017 IL App (1st) 152730 (February 10, 2017) Cook Co., 5th Div. – which discusses whether a loan is valid when it’s assigned by an entity that was not licensed.

The facts are straightforward: The defendant borrowed money from Lehman Brothers Bank FSB in 2007. The original mortgagee was Mortgage Electronic Registration Systems, Inc. (MERS). The defendant stopped making payment in March of 2009, and in June of that year, MERS assigned the mortgage to Aurora Loan Services. Aurora Loan Services filed a foreclosure action against the defendant. In 2012, Nationstar took over the servicing of the loan in question, although Aurora Loan Servicing did not formally assign the loan to Nationstar until 2013. In 2014, the defendant was foreclosed.

Nationstar then bought the property at auction and tried to confirm the sale. The defendant objected to the confirmation of sale, claiming that both MERS and Aurora Loan Services operated without a license under the Residential Mortgage License Act of 1987. As a result, in 2015, the trial court denied the confirmation of sale and dismissed the foreclosure lawsuit. Eventually the matter was appealed.

The appellate court disagreed with the trial court. The trial court had relied on the ruling in First Mortgage Co. v. Dina, 2014 IL App (2d) 130567 (another case which we touched on last week), but according to the appellate court, that case is no longer good law because the legislature has since amended the Residential Mortgage License Act. The law actually now states:  “A mortgage loan brokered, funded, originated, serviced, or purchased by a party who is not licensed under this Section shall not be held to be invalid solely on the basis of a violation under this Section.”  As a result, the case was remanded to the trial court for confirmation of sale.