The matter arose out of a debtor’s Chapter 13 petition listing a secured subprime mortgage note purportedly held by Ameriquest Mortgage Company. Throughout the course of the litigation, Ameriquest and its attorneys repeatedly referred to Ameriquest as the “holder” of the securitized note. In reality, however, the true “holder” of the note was Wells Fargo, the trustee for a trust which held an entire pool of subprime mortgages, including the debtor’s. The loan was originated by Ameriquest but subsequently assigned to the trust, which eventually issued mortgage-backed securities. Pursuant to a pooling and servicing agreement, Ameriquest retained the obligation to service the underlying loans held as collateral for the securities while the loans themselves were held in trust. Despite this, it was Ameriquest that sought to assert creditor’s rights with respect to the mortgage before the bankruptcy court.
The bankruptcy court ordered Rule 9011 sanctions not only against Ameriquest for misrepresenting its creditor status as a “holder” of the mortgage, but also against Wells Fargo for failing to correct the misrepresentation. In doing so, the court flatly rejected the arguments of both Ameriquest and Wells Fargo that “[n]otes and mortgages are bought and sold so frequently that it is difficult to know at any given moment who holds the note and mortgage.” In a harshly worded opinion, the court chastised Wells Fargo for turning a “blind eye” towards Ameriquest’s conduct, stating that if Wells Fargo had “shown even a modicum of oversight or review of Ameriquest’s behavior, it should have been able to correct the misrepresentations.”
For a full copy of the order, please click here.
Wells Fargo has since filed an appeal of the bankruptcy court’s sanctions order.