The world of securitization and mortgage-backed securities has resulted in many mortgage loans, both residential and commercial, being held by trusts instead of conventional banks or lending institutions. As such, instead of seeing a mortgage foreclosure suit’s caption as "Local Bank v. Borrower, LLC," we see something like "Bank, as Trustee, for 2007 Mortgage Pass-Through Certificates Series 2007-H47 Trust v. Borrower, LLC." (For background on today’s mortgage industry, see the Indiana Supreme Court’s Citimortgage opinion involving MERS.) The Indiana Court of Appeals opinion in Lunsford v. Deutsche Bank, 966 N.E.2d 815 (Ind. Ct. App. 2013) tackles the question of whether the trust itself, as opposed to the trustee, needs to be a party to the foreclosure suit.
Another “standing” theory. The defendant in Lunsford contended that the plaintiff didn’t have authority to enforce the underlying promissory note and mortgage. The named plaintiff was “Deutsche Bank Trust Company Americas as Trustee.” Deutsche was trustee for “RALI Series 2005-QS15 Trust.” Normally we see the full name of the trust in the caption of the case, but for some reason only the trustee was identified in Lunsford. The defendant asserted that the trustee had not joined an indispensable party because it failed to name the trust in the action. See, Ind. Trial Rule 17(A)(1). The contention was similar to the standing and “real party in interest” arguments made over the last several years. (See: 10/25/13.) The Court reminded us that the purpose of the standing rules “is to ensure that the party before the court has the substantive right to enforce the claim being asserted.” For instance, if the court awards a money judgment, the system needs to ensure the plaintiff is the party entitled to the money.
Trustee rules. The Court concluded it was not necessary for Deutsche Bank to name the actual trust as a party to the action. Ind. Trial Rule 17(A) states that a “trustee . . . may sue in his own name without joining with him the party for whose benefit the action is brought . . . .” Ind. Code § 30-4-3-15 provides that (paraphrasing) “trustees may maintain in their representative capacities civil actions for remedies against a third party that they could maintain in their own right if they were the owner. In short, Deutsche Bank, the trustee, had the authority to enforce the loan documents in Lunsford.
Lunsford tells us that it is perfectly fine for the trustee to be the plaintiff in suits that foreclose mortgages held by trusts.