Ann C. Jones

1
UNITED STATES BANKRUPTCY COURT
FOR THE
DISTRICT OF MASSACHUSETTS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In re
ANN C. JONES, 	Chapter 13
Debtor 	Case No. 07-15662-JNF
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MEMORANDUM
I. INTRODUCTION
The matter before the Court is the “Objection to Claim filed by Carrington
Mortgage” filed by the Debtor, Ann C. Jones (the “Debtor”). On August 29, 2008, the Court
heard the Debtor’s Objection and the Response filed by Carrington Mortgage Services, LLC
(“Carrington”), as “Successor to New Century Mortgage Corporation.” At the hearing, the
parties agreed to the submission of numerous documents. Additionally, they agreed that
their pleadings could be construed as cross-motions for summary judgment in this
contested matter. See Fed. R. Bankr. P. 9014(c). Neither party called witnesses or requested
an evidentiary hearing. The issue presented is whether Carrington established its standing
to file a proof of claim in the sum of $393,211.09, either as the successor servicer for
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For ease of reference, a timeline is set forth as an exhibit to the Court’s decision.1
The note provided for an initial 7.1% rate of interest and a monthly payment of2
$2,254.67. On Schedule I-Current Income of Individual Debtor(s), the Debtor disclosed
that she is an employee of the Registry of Motor Vehicles with monthly income of
$3,0666 (net $2,074), which she supplements with income from her rental property in
the sum of $1,200 and social security income of $796 for her disabled son. On Schedule
J-Current Expenditures of Individual Debtor(s), the Debtor set forth monthly
expenditures of $3,848, excluding a monthly mortgage payment, resulting in net income
of $222. 	Assuming the interest rate applicable to the Debtor’s mortgage obligation did
not adjust, her annual mortgage obligation, excluding the payment of insurance and
taxes, would be $27,048, compared with her annual income of $48,840 ($44,941 per Form
22C), an obligation which would consume 55.38% of her income. The interest rate
applicable to her note had the potential to adjust as high as 14.1%. 	Pursuant to her
Chapter 13 plan, filed on September 24, 2007, the Debtor proposed to pay no mortgage
arrears, and to sell the Radcliffe Street property “as soon as practicable, but in no event
more than three months after confirmation.” The Debtor subsequently filed a Second
Amended Chapter 13 plan, proposing to cramdown the mortgage, fixing the interest
rate at 7.1% and paying $1,500 per month toward the claim, amortized over 30 years.
2
Deutsche Bank National Trust Company, as Indenture Trustee for New Century Home
Equity Loan Trust 2005-2, or as the current holder of the mortgage executed by the Debtor
in favor of Ameripath Mortgage Corporation (“Ameripath”). 	The Court makes the
following findings of fact and rulings of law in accordance with Fed. R. Bankr. P. 7052 and
Fed. R. Bankr. P. 9014(c).
II. FACTS1
The parties submitted a Joint Pre-Trial Memorandum in which they agreed to the
following facts. On February 11, 2005, the Debtor executed an adjustable rate note in the
original principal amount of $335,500, 	as well as 	a mortgage in favor of Ameripath2
secured by her multi-family property located at 114 Radcliffe Street, Dorchester,
Massachusetts.
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The term “Purchaser” was not defined and the identity of the Purchaser was3
not specifically disclosed in the Servicing Agreement.
3
On February 15, 2005, Ameripath assigned the note to New Century Mortgage
Corporation. Carrington attached a copy of the assignment of the note to its proof of claim.
On April 22, 2005, New Century Mortgage Corporation, as Master Servicer, New
Century Home Equity Loan Trust 2005-2, as Issuer, and Deutsche Bank National Trust
Company, as Indenture Trustee, executed a Servicing Agreement. 	The Servicing
Agreement identified New Century Mortgage Securities LLC as the Depositor who would
acquire “Mortgage Loans” pursuant to the terms of a Mortgage Loan Purchase Agreement.
New Century Mortgage Securities LLC, as Depositor, was also charged with creating New
Century Home Equity Loan Trust 2005-2 (the Issuer) and with transferring the Mortgage
Loans and all of its rights under the Mortgage Loan Purchase Agreement to the New
Century Home Equity Loan Trust 2005-2 (the Issuer) in exchange for certificates issued by
New Century Home Equity Loan Trust 2005-2. 	New Century Home Equity Loan Trust
2005-2, in turn, was obliged to issue and transfer to, or at the direction of, the Depositor
(New Century Mortgage Securities LLC) the Trust Certificates, Series 2005-2. Additionally,
pursuant to the terms of an Indenture dated April 22, 2005 between New Century Home
Equity Loan Trust 2005-2 and Deutsche Bank National Trust Company, as Indenture
Trustee, New Century Home Equity Loan Trust 2005-2 was obliged to pledge the Mortgage
Loans and issue and transfer to, or at the direction of, the Purchaser various asset backed
notes identified by series and class. 	Finally, New Century Mortgage Corporation was to3
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service the Mortgage Loans set forth on the Mortgage Loan Schedule, which was attached
to the Service Agreement as Exhibit A, either directly or through one or more Sub-
Servicers. The Servicing Agreement filed with the Court indicated that the actual schedule
of mortgages was “filed in paper pursuant to a continuing hardship exemption available
pursuant to “Rule 202 fo Regulation S-T.”
The Servicing Agreement executed on April 22, 2005 incorporated by reference the
Indenture and its definitions, which were contained in an appendix to the Indenture
identified as Appendix A. Neither the Indenture nor Appendix A were submitted into
evidence. 	The Mortgage Loans which New Century Mortgage Securities LLC, as
Depositor, transferred to Deutsche Bank National Trust Company as Indenture Trustee,
supposedly were included on a Schedule A, which, as noted above, was not attached to the
Servicing Agreement filed with the Court. Moreover, because the Indenture was not filed
with the Court, the Court does not have a definition of what constitute “Mortgage Loans.”
On August 31, 2005, four months after the execution of the Servicing Agreement and
related Indenture, Ameripath recorded with the Suffolk County Registry of Deeds an
assignment, dated August 24, 2005, “without recourse in any event said mortgage [from
Ann C. Jones] and the note and claim secured thereby to Deutsche Bank National Trust
Company, as Indenture Trustee for New Century Home Equity Loan Trust 2005-2 c/o New
Century Mortgage Corporation. That document contains a purported assignment of the
mortgage, as well as the note executed by the Debtor, to Deutsche Bank as Indenture
Trustee for New Century Home Equity Loan Trust 2005-2, although the parties agreed that
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the note had been assigned on February 15, 2005 by Ameripath to New Century Mortgage
Corporation.
On October 24, 2005, Deutsche Bank National Trust Company, as Indenture Trustee
for New Century Home Equity Loan Trust 2005-2, claiming to be the holder of a mortgage
covering the Radcliffe Street property, recorded notice that it had filed a complaint in the
Land Court, Department of the Trial Court, for authority to foreclose the Debtor’s
mortgage, “now held by Plaintiff by assignment.”
On December 15, 2006, approximately 14 months after Deutsche Bank, as Indenture
Trustee for New Century Home Equity Loan Trust 2005-2, recorded notice of its intent to
foreclose, and approximately 16 months after Ameripath assigned the mortgage to
Deutsche Bank National Trust, as Indenture Trustee for New Century Home Equity Loan
Trust 2005-2, New Century Mortgage Corporation recorded an assignment in the Land
Court pursuant to which Ameripath assigned the Debtor’s mortgage to it, although there
was no mention in the assignment of New Century Mortgage Corporation’s role as Master
Servicer under the Servicing Agreement dated April 22, 2005 or of New Century Mortgage
Services LLC.
The parties also agreed to introduce into evidence an order issued by the United
States Bankruptcy Court for the District of Delaware pertaining to the sale of New Century
Mortgage Corporation’s mortgage servicing rights. The Court takes judicial notice that
New Century Mortgage Corporation filed a Chapter 11 bankruptcy petition on April 2,
2007. Its case is jointly administered with those of 14 affiliates under the lead case of New
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Century TRS Holdings, Inc., whose affiliates include NC Capital Corporation, which
together with its affiliates, was referenced in ¶ 2.03 of the Servicing Agreement.
Two days after the commencement of the bankruptcy cases, 	New Century TRS
Holdings, Inc. and its affiliates filed an emergency motion in connection with the proposed
sale of certain mortgage loan servicing assets to Carrington. In its emergency motion, it
represented the following:
The Debtors’ Servicing Business is among the most substantial of the
Debtors’ operations being offered for sale, as loan servicing has been and
remains a very important and profitable part of the Debtors’ businesses. The
Debtors presently service approximately $19 billion of loans owned by third
parties. 	The Debtors’ mortgage servicing rights (“MSRs”) are generally
established in servicing contracts with securitization trusts or third party
whole loan purchasers. For performing these functions, the servicer (usually
NCMC [New Century Mortgage Corporation]) generally receives a servicing
fee, one-twelfth of which is paid monthly, or 0.05% per annum of the
outstanding principal balance of each loan in the mortgage servicing
portfolio. 	These servicing fees are typically collected from the monthly
payments made by the borrowers on the loans. 	In addition, the Debtors
receive remuneration for loan servicing including float benefits representing
interest earned on collection accounts where mortgage payments are held
pending remittance to investors, as well as mortgagor-contracted fees such
as late fees and, in some case, prepayment penalties.
***
. . . Carrington and its affiliates own the primary interests in 12 securitization
trusts established from 2004-2006 (the “Carrington Securitization Trusts”)
which hold approximately $8.6 billion of mortgage loans that the Debtors
originated and sold to these securitization trusts. NCMC is the servicer of
the mortgage loans held in the Carrington Securitization Trusts; so, the
Carrington Securitization Trusts provide a significant portion of the revenue
realized by the Debtors’ Servicing Business.
On May 23, 2007, the United States Bankruptcy Court for the District of Delaware
entered the order referenced above, captioned “Order Pursuant to Sections 105, 363 and
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365 of the Bankruptcy Code and Rules 2002, 6004, 6006 and 9014 of the Federal Rules of
Bankruptcy Procedure Approving (i) the Sale of Debtors’ Servicing Business to Carrington
Capital Management, LLC and Carrington Mortgage Services, LLC pursuant to the Second
Amended and Restated Asset Purchase Agreement, dated as of May 21, 2007, Free and
Clear of Liens, Claims, Encumbrances, and Interests, and (ii) the Assumption and
Assignment of Certain Executory Contracts and Unexpired Leases to Carrington as part
of Such Sale.” The May 21, 2007 Agreement referenced in the caption of the order listed
28 so-called RMBS [residential mortgage-backed securities] Transactions, including New
Century Home Equity Loan Trust Series 2005-2.
On April 16, 2008, following the sale of New Century Mortgage Corporation’s
servicing rights to Carrington, Deutsche Bank National Trust Company executed a Limited
Power of Attorney. It provided in pertinent part:
Pursuant to that New Century Home Equity Loan Trust 2005-2, Servicing
Agreement dated as of April 22, 2005 (the “Agreement”) by and between and
[sic] Deutsche Bank National Trust Company and Carrington Mortgage
Services, LLC as successor Servicer to New Century Mortgage Corporation
(the “Servicer”) hereby constitutes and appoints the Servicer, by and through
the Servicer’s officers, the Trustee’s true and lawful Attorney-in-Fact, in the
Trustee’s name, place and stead and for the Trustee’s benefit, in connection
with all mortgage loans serviced by the Servicer pursuant to the Agreement
solely for the purpose of performing such acts and executing such documents
in the name of the Trustee necessary and appropriate to effectuate the
following enumerated transactions in respect of any of the mortgages or
deeds of trust . . .and promissory notes secured thereby . . . for which the
undersigned is acting as Trustee for various certificateholders (whether the
undersigned is named therein as mortgagee or beneficiary or has become
mortgagee by virtue of endorsement of the Mortgage Note secured by any
such Mortgage or Deed of Trust) and for which Carrington Mortgage
Services, LLC is acting as Servicer.
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In the Limited Power of Attorney, Deutsche Bank National Trust Company did not grant
Carrington authority to execute assignments of mortgages, except in connection with the
repurchase of mortgage loans or upon payment and discharge of the mortgage.
The final document submitted by the parties was an Assignment dated July 18, 2008.
Pursuant to that Assignment, New Century Mortgage Corporation, as the holder of the
Debtor’s mortgage, assigned the mortgage to Carrington Mortgage Services, LLC.
The Debtor filed her voluntary Chapter 13 petition on September 7, 2007, after the
bankruptcy court authorized sale of New Century Mortgage Corporation’s servicing rights
to Carrington, but before the execution of the Limited Power of Attorney and the July 18,
2008 assignment.
III. DISCUSSION
The Court recently addressed the issue of standing to file both a proof of claim and
a motion for relief from the automatic stay in In re Hayes, __ B.R. __, No. 07-13967-JNF,
2008 WL 3870820 (Bankr. D. Mass. Aug. 19, 2008). 	The Court shall not repeat that
discussion here and, instead, incorporates its discussion herein. Id. at *5-*7.
Pursuant to Fed. R. Bankr. P. 3001(f), “[a] proof of claim executed and filed in
accordance with the Federal Rules of Bankruptcy Procedure constitutes prima facie
evidence of the validity and amount of the claim.” See In re Long, 353 B.R. 1, 13 (Bankr. D.
Mass. 2006). See also Juniper Dev. Group v. Kahn ( In re Hemingway Transp., Inc.), 993
F.2d 915, 925 (1st Cir. 1993). An objecting party, in order to rebut the prima facie validity
of the proof of claim must produce “substantial evidence,” and, if the objecting party
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produces substantial evidence in opposition to the proof of claim, rebutting the prima facie
evidence, the burden shifts to the claimant to establish the validity of its claim. See Long,
353 B.R. at 13 (citations omitted).
In this case, the evidence submitted by the parties in the form of various documents
supports the Debtor’s position that Carrington, either as servicer for Deutsche Bank
National Trust, as Indenture Trustee under the New Century Home Equity Loan Trust
2005-2, or on its own behalf lacked standing to file a proof of claim. Although Carrington
established that it is the successor to New Century Mortgage Corporation as Servicer of the
of the New Century Home Equity Loan Trust 2005-2 as a result of the May 23, 2007 order
of the United States Bankruptcy Court for the District of Delaware, the Court finds that it
failed to establish that the Debtor’s mortgage actually was part of the New Century Home
Equity Loan Trust 2005-2, or that Ameripath’s assignment of the mortgage on August 24,
2005 to Deutsche Bank National Trust as Indenture Trustee for New Century Equity Loan
Trust 2005-2 was a nullity. Absent an assignment from Deutsche Bank back to Ameripath,
Ameripath’s 	purported 	assignment 	of 	the 	mortgage 	to 	New 	Century 	Mortgage
Corporation, which was recorded on December 15, 2006, was ineffective to convey an
interest it no longer had. Moreover, the defect was not cured by the July 2008 assignment
of the mortgage by New Century Mortgage Corporation to Carrington.
The creation of the New Century Home Equity Loan Trust on April 22, 2005
preceded the August 24, 2005 assignment of the mortgage on the Radcliffe Street property
from Ameripath, the original holder, to Deutsche Bank National Trust Company, as
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Indenture Trustee for New Century Home Equity Loan Trust 2005-2. 	The Servicing
Agreement dated April 22, 2005 referenced the transfer of “Mortgage Loans” to the New
Century Home Equity Loan Trust 2005-2, by New Century Mortgage Securities LLC, but
the Court was not provided with a definition of the term “Mortgage Loans” and, thus,
cannot conclude whether those loans included the Debtor’s mortgage. 	The evidence
established that the note relating to the mortgage on the Radcliffe Street property was
assigned by Ameripath to New Century Mortgage Corporation on February 15, 2005, but
the assignment of the mortgage from Ameripath to Deutsche Bank National Trust
Company post-dated the creation of the New Century Home Equity Loan Trust 2005-2.
Further, the Court was not provided with Exhibit A to the Servicing Agreement, and there
is no evidence that either the Debtor’s mortgage was part of the securitization trust or
subsequently added to the trust res pursuant to the terms of the Indenture. Moreover,
because New Century Mortgage Securities LLC, as the Depositor under that trust, not New
Century Mortgage Corporation, was obligated to transfer “Mortgage Loans” to Deutsche
Bank National Trust Company as Trustee of the New Century Home Equity Loan Trust
2005-2, it would appear that an assignment of the mortgage from Ameripath or New
Century Mortgage Corporation to New Century Mortgage Securities LLC may have been
required to establish an accurate chain of ownership of the mortgage. 	The documents
submitted by the parties, including the Limited Power of Attorney and assignments made
in December of 2006 and July of 2008, failed to cure the defects outlined above.
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IV. CONCLUSION
Upon consideration of the foregoing, the Court grants the Debtor’s motion for
summary judgment and denies Carrington’s motion for summary judgment. The Court
sustains the Debtor’s objection to the proof of claim. Pursuant to 11 U.S.C. § 502(j),”[a]
claim that has been allowed or disallowed may be reconsidered for cause. A reconsidered
claim may be allowed or disallowed according to the equities of the case.” Thus, if and
when the chain of ownership of the mortgage executed by the Debtor on February 11, 2005
can be conclusively established, the appropriate party may file an amended proof of claim.
By the Court,
Joan N. Feeney
United States Bankruptcy Judge
Dated: October 3, 2008
cc: David G. Baker, Esq., Jessica Rodger, Esq., Carolyn Bankowski, Esq.
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EXHIBIT A - TIMELINE
February 11, 2005 	Debtor executed Note and Mortgage to Ameripath Mortgage
Corporation
February 15, 2005 	Ameripath Mortgage Corporation assigned Debtor’s Note to
New Century Mortgage Corporation
April 22, 2005 	New Century Mortgage Corporation, as Master Servicer,
Deutsche Bank National Trust Company, as Indenture Trustee,
and New Century Home Equity Loan Trust 2005-2, as Issuer,
executed a Servicing Agreement for New Century Home
Equity Loan Trust 2005-2 regarding certain Mortgage Loans
purportedly attached on a schedule as Exhibit A
August 24, 2005 	Ameripath Mortgage Corporation assigned Debtor’s note and
mortgage to Deutsche Bank National Trust Company, as
Indenture Trustee for New Century Home Equity Loan Trust
2005-2
October 24, 2005 	Deutsche Bank National Trust Company, as Indenture Trustee
for New Century Home Equity Loan Trust 2005-2 recorded
notice of complaint to foreclose Debtor’s mortgage
December 15, 2006 	New Century Mortgage Corporation recorded an assignment
of Debtor’s mortgage from Ameripath Mortgage Corporation
to New Century Mortgage Corporation
April 2, 2007 	New Century Mortgage Corporation filed Chapter 11 petition
in District of Delaware
May 21, 2007 	Carrington Mortgage Services LLC executed agreement to
purchase 	servicing 	assets 	of 	New 	Century 	Mortgage
Corporation and its affiliates
May 23, 2007 	United States Bankruptcy Court for the District of Delaware
entered order approving sale of New Century Mortgage
Corporations’s servicing business to Carrington Mortgage
Services, LLC and Carrington Capital Management, LLC.
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September 7, 2007 	Ann 	C. 	Jones 	filed 	Chapter 	13 	petition in District of
Massachusetts
September 28, 2007 	Carrington Mortgage Services, LLC, as successor to New
Century Mortgage Corporation, filed secured proof of claim
for $393,211.09 in Ann C. Jones’s Chapter 13 case
April 16, 2008 	Deutsche Bank National Trust Company, as Indenture Trustee,
executed 	Limited 	Power 	of 	Attorney 	to 	New 	Century
Mortgage Corporation
July 18, 2008 	New 	Century 	Mortgage 	Corporation assigned Debtor’s
mortgage to Carrington Mortgage Services, LLC
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