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State‐by‐State Compendium of Recent MERS‐Related Litigation
by John R. Chiles 1 , Katrina D. Chisholm, and Zachary D. Miller
Since the earliest stages of the economic meltdown that has rocked the financial system both in the United States and abroad, an inordinate amount of time has been spent searching for someone, or something, to blame. Charges of impropriety have been levied against Wall Street on a consistent basis, and consumer advocates have focused great amounts of energy on the area of mortgage‐backed securities. An instrumental cog allowing for the buying and selling of mortgage‐ backed promissory notes on the open market is Mortgage Electronic Registration Systems, Inc. ("MERS"), 2 a nationwide database that allows lenders to more easily transfer the rights to a mortgage. For the last several years, these allegations of impropriety have spawned federal and state court lawsuits. The arguments asserted by borrowers, either offensively or defensively, have evolved; however, the basic charge of these lawsuits remains the same: the MERS system is fatally flawed and does not, or should not, give transferees of mortgages through the MERS system the authority to enforce remedies under the mortgages they have obtained. Finding that MERS transfers are invalid would have an inconceivable effect, as estimates are that MERS holds mortgages on nearly sixty million American homes, or sixty percent of the nation's residential mortgages. 3 This document is a compendium of cases that have addressed central questions critical to the viability of the MERS system. As shown below, the arguments address numerous factors, from the avoidance of state court recording fees to the ability of a mortgage nominee to transfer beneficial ownership in a promissory note. As no single method of categorization would be perfect, we have chosen a state‐by‐state analysis, with key decisions indicated and examined more thoroughly.
John R. Chiles is a partner in the Birmingham, Alabama office of Burr & Forman, LLP. Katrina D. Chisholm and Zachary D. Miller are associates in Burr & Forman, LLP's Birmingham office.
Additional information on MERS is available on its website, found at: http://www.mersinc.org/.
McIntire, Mike, Tracking Homes Through a Firm that Holds Millions, THE NEW YORK TIMES, available at HTTP://WWW.NYTIMES.COM/2009/04/24/BUSINESS/24MERS.HTML (Apr. 23, 2009); see also Kate Berry, Foreclosures Turn Up Heat on MERS, AM. BANKER, July 10, 2007, at 1.
II. OVERVIEW OF MERS
A. History of MERS 1. 2. Created "in order to streamline the mortgage process by using electronic commerce to eliminate paper." 4 MERS' principal owners are the Mortgage Bankers Association ("MBA"), the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac"), Bank of America, Chase, HSBC, CitiMortgage, GMAC, American Land Title Association, and Wells Fargo. 5 "MERS acts as nominee in the county land records for the lender and servicer. Any loan registered on the MERS System is inoculated against future assignments because MERS remains the nominal mortgagee no matter how many times servicing is traded. MERS as original mortgagee ("MOM") is approved by Fannie Mae, Freddie Mac, Ginnie Mae, FHA and VA, California and Utah Housing Finance Agencies, as well as all of the major Wall Street rating agencies." 6 Purpose is to track changes in servicing rights and beneficial ownership interests when those interests are sold by the original lender into the secondary and tertiary markets. 7 MERS System was created to reduce the costs, errors and delays associated with frequent and numerous assignments of mortgage liens. 8 Comprised of MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc. 9 Operated as a membership organization. 10 Almost all mortgage lenders (about 3,000) are members of MERS. 11
Description of MERS 1. 2. 3.
About Us‐Overview, MERS, available at http://www.mersinc.org/about/ index.aspx (last visited Mar. 7, 2011). Testimony of R.K. Arnold, President and CEO of MERSCORP, Inc., Before the Subcomm. on Housing and Community Opportunity, House Financial Services Comm., 111th Cong. 5 (2010).
6 7 8 5
Id. Id. at 7‐8.
See, e.g., Eisen, Laurence, MERS and the Title Industry, 6 TITLE ISSUES ‐‐ CHICAGO TITLE INSURANCE CO. 4 (July/Aug. 1997)
See Arnold, supra note 5, at 11. Id. at 5.
C. D. 14 Does not make any decisions about whether to loan money.org/sis/ (last visited Mar. D. is registered with MERS. B. 12 MERS maintains a database of mortgage loans that allows servicing rights and transfers of ownership interests to be tracked. Does not serve as a repository for mortgage documents. Does eliminate the expense of recording repeated assignments. 11 12 13 14 15 16 17 Id. Does serve as a convenient place for mortgagors to find out information about their mortgages. Id. Two Main Functions of MERS 1. 2011). MERS Servicer ID. at 5‐6. Id. 6.4. available at https://www. the borrower can always find out information about the Mortgage by calling MERS or accessing MERS website and referencing the Mortgage’s unique MIN. Revenue is derived solely from annual membership fees. at 9. Id. Does not make any decisions about whether to foreclose. at 6. 2. even those loans made by members. Id. III. MERS’ Role in the Lending Process 1. Not every loan. the borrower can access information about the servicer of the Mortgage and. at 9‐10. 3. C. 8. 16 If servicers change. 5. 17 Through MERS. Members tend to register only loans they intend to sell.mers‐ servicerid. MERS AS A MORTGAGE DATABASE A. MERS Servicer Identification System. 4. the identity of the note‐owner. and 13 MERS can be designated by its members to serve as the mortgagee in the public land records. 2. if the owner of the note consents. Does not make any decisions about whether to securitize a mortgage loan. 3 . Id. 15 Each registered mortgage is assigned a Mortgage Identification Number (MIN) at origination. and loan registration and servicing transfer fees.
3.” 2. Execute mortgage assignments.IV.” “Certifying officers” are persons elected by individual members to act as officers of MERS with limited authority to take certain actions. Three parties: Borrower. MERS’ status as mortgagee and nominee of the lender. MERS AS MORTGAGEE A. supra note 5. Execute proofs of claims and other bankruptcy‐related documents. 3. 2. c. The lender retains “beneficial title. as set forth in the mortgage documents. Lender and MERS MERS is named as the mortgagee of record in a nominee capacity for the original lender and that lender’s successors and assigns. Certifying Officers 18 1. and Take other such action and execute documents necessary to fulfill the member’s servicing duties. 5. Typically. at 12-13 4 .” granting MERS the specific right to act on behalf of the lender to foreclose and sell the property. Interest conveyed to MERS is “legal title. e. 5. MERS Acts as Mortgagee of Record 1. Where MERS acts as mortgagee on behalf of one of its members. Endorse mortgage payment checks made payable to MERS (in error) by borrowers. and its successors and assigns. d. is approved by the borrower in the mortgage documents. it acts through “certifying officers. it serves as a common agent for all MERS members. is recorded in the land records. Requirements for becoming a MERS “certifying officer” include: 18 Arnold. 6. b. B. Individuals are appointed to serve as vice president and assistant secretary. MERS’ status. f. Initiate foreclosures. g. Execute lien releases. Execute modification and subordination agreements needed for refinancing. 4. parties use the Fannie Mae/Freddie Mac Uniform Security Instrument. Authority is granted to these “certifying officers” to: a. When MERS serves as mortgagee of record. 4.
c. Foreclosure is handled entirely by the MERS certifying officer (who typically is also an employee in the member institution’s default department) b. and Passing a certifying examination administered by MERS. 23. making MERS the noteholder. foreclosure can begin in one of two ways: 1. 3. but the following areas have become most popular: 1. Recently. C. These attacks have come on a variety of fronts. Being a company officer of the member institution. Having basic knowledge of MERS. acting through its certifying officer. 2. 09‐0787‐WS‐N. No. 5. Ala. Option 1 ‐ Foreclosure can be conducted in the name of MERS a. MERS can begin the foreclosure process as soon as it is in possession of the note. 5 . Option 2 ‐ MERS. Thus Invalidating the Mortgage? Whether MERS Is A Party In Interest Who Is Entitled To Seek Relief From An Automatic Stay in Bankruptcy? Is MERS A Necessary Party Who Is Entitled to Receive Notice of Proceedings Related to the Property? Whether the Entire MERS System Is Fraudulent? VI. Note‐owner endorses the note in blank (making it bearer paper) and turns over possession of the note to a MERS certifying officer. 2010 WL 5376332 (S. c.a. 4. MERS has been subjected to attacks by defaulting borrowers and consumer advocates who are attempting to avoid valid mortgage debts. the foreclosure will commence. V. b. Whether MERS Has Standing to Conduct Foreclosures In Its Own Name? Whether Naming MERS As Mortgagee Improperly Splits the Note and Mortgage. MERS.D. REPRESENTATIVE CASES VALIDATING MERS Alabama Mortensen v. Once the assignment is recorded. Since MERS is already the mortgagee. Dec. Foreclosures Where MERS Is Mortgagee ‐ When MERS is named as mortgagee. 2. will execute an assignment to the servicer or note‐owner (whichever entity is conducting the foreclosure) and the assignment will be recorded in the land records. CHALLENGES TO MERS AS MORTGAGEE A. 2010) (recognizing an assignment from MERS to purchaser as valid).
. Ariz. . June 18. 2010 WL 2836958 (D. Countrywide Home Loans. Crum v. 09‐2119‐JAT. of course. 2009) Plaintiffs made two attacks on the MERS system: (1) MERS is never really a beneficiary under the deed of trust because it never acquires a true beneficial interest. Ariz. Inc. Ariz. 2009 WL 2986655 (Ala. Ariz. 18. Alaska (no cases found) Arizona √ Key Decision Cervantes v. Such an approach. CV‐10‐8076‐PCT‐NVW. however. . 6 . July 19. See Maxa v..’” Circumventing Public Recording System: “Plaintiffs’ second objection to the MERS system similarly has no effect upon their status as borrowers .” MERS as "Sham Beneficiary": "The fact that MERS does not obtain such rights as to collect mortgage payments or obtain legal title to the property in the event of non‐ payment does not transform MERS’ status into a ‘sham. to future buyers of Plaintiffs’ mortgages does not alter Plaintiffs’ obligations under the mortgages . Inc. and (2) the MERS system is a means of circumventing the public recording system. 25. App.” Splitting of Note and Mortgage: “Plaintiff’s allegations would foreclose the very splitting of a promissory note from a deed of trust.A. . 24. The Court also rejected Plaintiffs’ argument that ‘splitting the note’ automatically voids the notes and the right to enforce them through non‐judicial foreclosure. CV‐09‐2066‐PHX‐JAT.. Court: √ Key Decision In re MERS Litigation. as well as assignments and delegations. CV‐09‐517‐PHX‐JAT. 2010 (same). . No. Civ. Any lack of notice in the public records. LaSalle Bank. 2009) (concluding that MERS had the power to make an assignment to the foreclosing assignee and that mortgage documents expressly authorized MERS to assign its right to the foreclosing party). 2011 WL 251453 (D. operation and use of the MERS system. Jan. 2009 WL 3157160 (D. 2010) (same). Countrywide Home Loans. N. 2010 WL 2534192 (D. would intrude into the realm of third‐party beneficiary contracts. Wells Fargo. MDL Docket No. Split the Note Theory: Should not matter in non‐judicial foreclosure states because defendants do not need to produce the note to the property in order to proceed with a non‐judicial foreclosure. . Sept. No. Sept. 2080110. . See Robinson v. No. No. 2011) Issue: Involves claims that MERS and others conspired to commit fraud and conspiracy to commit wrongful foreclosure through the creation.
No. MERS v. No. Inc. Ark. 2. C‐09‐2537‐PJH. Ariz. . 2011 WL 719591 (S. No. June 11.. of the noteholder . 10‐CV‐2482‐BTM (POR). D. 2011) Court first concluded that there was no right of action in California which allows a borrower to file a lawsuit to require a foreclosing party to prove its right to foreclose. Case No. 2010) (concluding that MERS system is “not a sham and does not perpetrate a fraud upon the borrower” and that “MERS.D. as the named beneficiary. Cal‐Western Reconveyance Corp. App. “Under California law MERS may initiate a foreclosure as the nominee. Higton v. LLC v. Mar. 18. concluding that plaintiffs had consented to MERS’ designation as beneficiary and nominee under the deed of trust). subdivision (a)(1) states that a “trustee. Ct. 2011 WL 590911 (E. Kane v. or agent. Feb. MERS. 4:09‐CV‐00966. Labra v. Countrywide Home Loans. LLC.. 11. 10. Jones v. Wells Fargo Bank. 2010 WL 4879177 (D. See also Germon v. Ct. CV‐11‐0197‐PHX‐DGC. 2011 WL 333357 (D. Ariz. 2010) (same). Feb. No. 2011) (same). 2010 WL 889537 (N. LP. also has the power to appoint a trustee or successor trustee under Arizona’s non‐judicial foreclosure statute”). Feb. Jan. 2011) (same). 2:10‐3361‐WBS‐DAD.. Fequiere. Stephanie Gabler. 2010 WL 2384263 (E. No. . Mar. Quicken Loans. 2:09‐bk‐22225‐PHX‐SSC. 2010 WL 3941858 (Bankr. Feb. 2011 WL 683887 (D. In re Madison. Bosco. 2011 WL 566737 (Ca. Aurora Loan Services. Colorado (no cases found) Connecticut √ Key Decision Chase Home Finance. 2004‐17‐II. CIV. Wadhwa v.. Inc. Oct. 18. 10‐CV‐ 01787‐PHX‐JAT. or any of their authorized agents” may initiate the foreclosure process. App. Civil Code Section 2924. 989 A. D057005. Arkansas (2004) (“MERS has standing to seek relief for its Writ of Assistance and is the proper party to foreclose the mortgage as MERS is the mortgagee of record and holder of the promissory note. BAC Home Loans Servicing. . 2011) (recognizing MERS’ status as nominee of Note holder). 2010) (same).D.D. No. or beneficiary. Ariz.D. 22. Cal. et al. 2010) 7 . Circuit Court of Garland County. Nov. Cal. 4. 31. Cal.2d 606 (Conn.”) California √ Key Decision Gomes v. No. No. 2011) (rejecting the plaintiffs’ argument that MERS could not assign the deed of trust to purchaser of note. 2010) (MERS’ assignment to Note purchaser was valid and properly gave purchaser standing to appoint an agent to initiate a non‐judicial foreclosure).” The Court considered also the fact that the borrower’s deed of trust included language whereby the borrower agreed that MERS has the authority to initiate a foreclosure. 23. mortgagee. 2:10‐CV‐01320‐JWS. No. Ariz. Arkansas Peace v.
Wrenn. . Bayview Loan Servicing v. . June 18. We conclude. Super. the defendant's claim fails. 2d DCA 2007) (holding that holder of note has standing to seek enforcement of the Note and that Note can be transferred to MERS without having beneficial interest for purpose of instituting foreclosure proceedings). which MERS can assign to the foreclosing bank.. that the written assignment of the note and mortgage from MERS to Deutsche Bank properly transferred the note and mortgage to Deutsche Bank . Florida √ Key Decision Taylor v. Aug. v. June 10. as a nonholder in possession of the instrument who had the rights of a holder. Azize. .A.” More importantly. 08‐165 (CKK). and also the said property unto the said Assignee forever.D.’ pursuant to which only the rightful owner of the note has the right to enforce the mortgage. N. MERS was lawfully acting in the place of the holder and was given explicit and agreed upon authority to make just such an assignment. Inc. 2009 WL 1705692 (D. The statute codifies the common‐law principle of long standing that ‘the mortgage follows the note. No. accordingly.C. MERS assigned to Deutsche Bank its explicit power. 2d 151 (Fla. . 8 . Super. to enforce the note by foreclosing the mortgage on the subject property. . recites that MERS assigned to the appellee. CV‐09‐5004156‐S. No." See also Mortgage Electronic Registration Systems. 44 So. No. granted by the mortgage. 10. 3d 618 (Fla. . General Statutes § 49‐17 permits the holder of a negotiable instrument that is secured by a mortgage to foreclose on the mortgage even when the mortgage has not yet been assigned to him . Sanchez. . 2009 WL 1874180 (Conn. . "The written assignment . and held that MERS may assign its rights in the mortgage to the foreclosing entity who holds the Note and also may assign rights to the Note itself. Deutsche Bank Nat’l Trust Co. v. 2009 WL 2872844 (Conn. 2009) (recognizing MERS’ status as mortgagee and MERS’ subsequent assignment of the mortgage). 2009) (noting MERS’ status as the “legal holder of the Deeds of Trust for the benefit of the holder of the Promissory notes”). Deutsche Bank. 5th DCA 2010) Court held a MERS mortgage to be valid under Florida law. "Even if we were to assume arguendo that the assignment of the mortgage from MERS to the plaintiff was invalid. The Florida court held that where MERS is described as the “mortgagee under the Security Instrument” the document grants to MERS legal status under the UCC. Johnson. 2009) (rejecting claim that mortgages naming MERS as nominee for the lender were invalid) Delaware (no cases found) District of Columbia Wells Fargo Bank. subject to the terms contained in the Mortgage and Note." LaSalle Bank v. 965 So. “the Mortgage and Note. CV‐085016113.
No. 2011 WL 285862 (D. and that MERS’ role as nominee for the Lender extend[ed] to each successive assignee. 9 . . see also Phillips v. Haw. No. Haw. Kootenai County District Court (July 2. et. but that result should follow only upon evidence that the parties to the transfer so agreed. 252 Fed. Idaho Trotter v. Ocwen Loan Servicing. thus. 2011) Security deed granted to MERS satisfied the requirements of Georgia law and the language of the security deed created an agency relationship between the lender and MERS. see also Krakauer v. stating that the Bellistri case only addressed a situation where the noteholder failed to demonstrate that it had an ownership interest in the Note or Deed of Trust.. Georgia √ Key Decision Drake (Trustee) v. 10‐00584. Ga. MERS. et al. Distinguished the opinion in Bellistri v. 14. Haw.W. Appx.D. 2010 WL 5146433 (D. 10‐00272‐DAE‐LEK. Nicholson v. 13. [T]he note and the deed must (and do) retain a legal nexus except 'on the rare occasions when a mortgagee will wish to disassociate the obligation and the mortgage. 2011) (dismissing plaintiffs’ “lack of standing” argument as to MERS). 2010) (same). 10‐00578‐DAE‐LEK. There “was no split of the Note and Security Deed as a matter of contract by any transfer of the Note. 2010 WL 5174380 (D. Ga.. 2010) (holding that the nominee of the lender has the ability to foreclose on a debtor's property even if such nominee does not have a beneficial interest in the note secured by the mortgage. No. al. 27. 10‐4033 (Bankr. Feb. BAC Home Loans Servicing. Dec. Inc. Lordsman. 09‐00518‐ACK‐BMK. 284 S. 28. 22. S. Mier v. Haw.3d 619 (Mo. had the authority to assign the mortgage). Servs. Feb. LP. 2009). Case No. Jan. IndyMac Mortg. Apr. App. because the Security Deed expressly contemplate[d] that the Note [could] be transferred from the original Lender. 293 (11th Cir. No. 1:10‐CV‐0795‐JEC/AJB. 2010) (finding MERS was the beneficiary of the deed of trust under Idaho law and. splitting the Note and Mortgage does not invalidate either document. OneWest Bank. Johnson v.” ". (citing Restatement (Third) of Property (Mortgages) § 5. AP No. Bank of New York Mellon. as long as the foreclosing party obtains possession of both). therefore... BAC Home Loans Servicing. 2011 WL 719482 (D. LP. 2010) (same). 2010 WL 2732325 (N. Dec. No. 20.. 2007) (stating that MERS held the Security Deed as "nominee" for lender). 2011) (rejecting the “show me the note” argument and dismissing plaintiff’s claim that the assignment from MERS was invalid). CV‐10‐95. Citizens Bank of Effingham.D. .4 (1997). Hawaii Sakala v. LLC.
D. et al. but not limited to. AP No. 09‐40886. Kan. the mortgage provided that . 2010) (concluding that the language in the deed of trust is sufficient to create a nominee status in favor of MERS and that MERS may grant signing authority via a Corporate Resolution to permit individuals to assign mortgages). Green.E. Johnston Superior Court (Sept. July 22. Michael R. 41D01‐0901‐MF‐00027.” does not alter the underlying relationship between the two parties.. Iowa (no cases found) Kansas √ Key Decision Martinez v. . 10 . MERS. Ct. Specifically. Court found sufficient evidence to demonstrate that MERS was acting as the agent for the lender by reviewing the language of the Mortgage. MERS. 09‐5229. MERS also submitted the affidavit of its Treasurer to demonstrate that an agency relationship existed. as nominee for the lender. 2010 WL 2926050 (Bankr." Kentucky In re Jessup. Barnes. RE‐08‐340. "According to the terms of the mortgage. 2010) (holding that MERS had the authority to assign the mortgage to Bank of New York Mellon). Feb.' Under those terms. the parties agreed that MERS could bring foreclosure suits in its own name. "The fact that MERS and Countrywide chose to use the word “nominee. Case No. App. Lewiston District Court (2008) (holds that MERS has the authority to assign mortgages by virtue of its status as nominee on the original mortgage). . 10. No. 2011) Assignment of the Note and Mortgage to different entities does not render them void because such a split may be performed when there is an "agency relationship" between the holder of the note and the holder of the mortgage. 'including. 2010) Finding that MERS can maintain foreclosure lawsuit although the beneficial ownership of the note is in another person and that Illinois does not require that a foreclosure be filed by the owner of the note and mortgage. 20.2d 118 (Ill. D. had authority to act to enforce the mortgage." Indiana The Bank of New York Mellon v.” rather than “agent. the right to foreclose and sell [the] property. MERS had the right to exercise any or all of the interests granted by the borrower in the mortgage. 2011 WL 489905 (Bankr. E. Ky. Murphy. Illinois √ Key Decision MERS v. 940 N. Louisiana (no cases found) Maine HSBC v.
by virtue of its nominee status. 4.D. Mich. That power was never taken away from MERS by an transfer of the mortgage or modification of some of the terms of the mortgage. Flagstar Bank. Feb.’ Accordingly. 09‐J‐519 (Mass. Md..” Assignment by a Nominee: As to Plaintiff’s claim that MERS’ nominee status was limited so as to prevent MERS from executing an assignment to the Note purchaser. 09‐11705. Mar. "Plaintiffs clearly and expressly gave MERS the power to foreclose on the defaulted mortgage. Court pointed to the language of the Mortgage that specifically granted MERS the ability to foreclose as the nominee for the lender. 2010) (dismissing state law claims against MERS when MERS acted as nominee on Mortgage and the plaintiff had failed to submit any evidence to demonstrate that MERS did not have an interest in the Mortgage sufficient to foreclose). Mich. Oct. The mortgage contains an express provision giving MERS the 11 . Bassilla v. 09‐10346. even though MERS never had possession of the Note. 2011 WL 576820 (Bankr. 9. Ct. No. transfer the Mortgage on behalf of the Note holder. 2009) ("Plaintiff's argument that MERS did not have the right to initiate foreclosure proceedings is belied by the record. therefore. Even though MERS’ role as nominee is limited. et al. Massachusetts √ Key Decision In re Lopez. Mass. No. Deutsche Bank National Trust Co. 2010) Plaintiffs claimed that MERS could not foreclose because it was not the holder in due course of the Note and had no legal right to foreclose on the Mortgage. 25. Precision Funding. and. No." Safford v. July 20. the court answered that Plaintiff misunderstood the role of a nominee. Mich. the mortgage is regarded as an incident to the obligation.. 2010 WL 1328425 (D.D. Dec. Feb. 2009 WL 3429674(E. Fremont Investment and Loan. D. 1:09‐CV‐939. ‘where a mortgage and the obligation secured thereby are held by different persons. No. Maryland Parillon v. No. it was legally holding the mortgage in trust for the Note holder. it could. 2009) (holding that MERS has authority to assign mortgage interest without owning or holding the promissory note) Michigan √ Key Decision Corgan v. 2011) Splitting of the Note: The court stated that “under Massachusetts law. 21.D. 9. 2010 WL 2854421 (W. L‐09‐3352. Court stated that Michigan law did not require that the named mortgagee be a holder in due course of the Note. GMAC Mortgage. 2010) (dismissing various state law claims against MERS and finding that MERS is the beneficiary of the Security Deed). English v. 09‐14925. No. App. held in trust for the benefit of the owner of the obligation. 2010 WL 548504 (E.
MERS. 2010) Held that purchaser of property at a tax sale must give notice of redemption to all parties that may have a claim in the property.D. 2:08‐CV‐1089. 12 . Nev. is an assignment of the underlying indebtedness for which the mortgage serves as security an assignment that must be recorded prior to the commencement of a mortgage foreclosure by advertisement under Minn.D. Stat. foreclosure proceedings can be commenced by “the beneficiary. Furthermore. the successor in interest of the beneficiary. 441 B. held that MERS has "bare legal title to the note and deed of trust securing it. satisfaction. Minnesota √ Key Decision Jackson v.2d 487 (Minn. Mo. 5. thus. under Nevada law. which could include MERS who had a "publicly recorded interest in the property as beneficiary as nominee for the lender and the lender's assigns. 4:09‐CV‐731‐CAS. 2010 WL 2720802 (E. 580?” Holding: "Transfers of the underlying indebtedness do not have to be recorded to foreclose a mortgage by advertisement. W. 2009) Court concluded that. serves as mortgagee of record as nominee for a lender and that lender’s successors and assigns and there has been no assignment of the mortgage itself. Montana (no cases found) Nebraska (no cases found) Nevada √ Key Decision Ramos v. 770 N.R." Also held that party had to join MERS in any quiet title action and failure to do so divests party of interest in the property. ch. Mar. No. Mississippi (no cases found) Missouri √ Key Decision MERS v.W. release or power of attorney to foreclose. or the trustee” and. 2009 WL 5651132 (D. 2010) (holding that designation of MERS as nominee in the Mortgage is "more than sufficient to create an agency relationship between MERS and the Lender and its successors in Missouri" and that MERS may exercise any rights that the Lender may exercise under the Mortgage). Bellistri. 2009) Certified question from the US District Court for the District of Minnesota: “Where an entity. No." which is sufficient to create standing to challenge quiet title action. such as defendant MERS. MERS. Mo. In re Tucker. 638 (Bankr.” Minnesota law expressly permits nominees to record an assignment. that MERS had a right to foreclose.
2d 622 (N.D. Nev. Bank. as here. 4.D. 1:09‐CV‐075. No. 13 . 2011) Question: “Whether MERS.” The Court concluded that MERS is able to enforce the note which was endorsed in blank and in MERS’ possession. Bank of America.” Court: “The assignment of a debt secured by a mortgage carries the security with it. Div. Flynn. 2009 WL 1076807 (D. Contrary to Plaintiff’s assertions .A. by virtue of its possession of both the note and the mortgage. North Carolina Ward v. v. 2011 WL 30307 (D. Feb. 2007) (finding that MERS has standing to commence a foreclosure action based upon the language of the Mortgage itself as the borrower "expressly agreed without qualification that MERS had the right to foreclose upon the premises in the event of a default").S. App. Vazquez v. Aurora Loan Servicing. Case No. MERS had the right to commence foreclosure and to appoint the substitute trustee. 838 N.S. N. a written assignment of the note and mortgage by MERS.N. Security Atlantic Mortgage. Aurora Loan Services.N. 5.Y. 2:08‐CV‐01800‐RCJ‐RJJ. 2010) ("This court finds that where.Y.") New Hampshire Powers v. its successors and assigns.C. Coakley. . New Hampshire (Feb. Ct. . 2009) (granting MERS’ motion to dismiss claims of wrongful foreclosure.Y. 2011) (dismissing plaintiff’s blanket claims that MERS lacked standing as nominee) North Dakota √ Key Decision Bray v. confers good title to the assignee and is not defective for lack of an ownership interest in the note at the time of the assignment.") MERS v. 2011) (“MERS’ status as nominee allows it to perform its core function of facilitating the tracking of mortgages . . No. 25.”) New Jersey (no cases found) New Mexico (no cases found) New York U. the use of MERS as a nominee is in and of itself neither fraudulent nor wrong. 2011 WL 474560 (E. .S. has standing to foreclose. Superior Court of Cheshire County. 213‐2010‐CV‐00181. 897 N. 5:10‐CV‐119‐F. . No. an entity such as MERS is identified in the mortgage indenture as the nominee of the lender and as the mortgagee of record and the mortgage indenture confers upon such nominee all of the powers of such lender. negligence and quiet title as land records "sufficiently demonstrate[d] standing by Defendants with respect to the loan and the foreclosure conducted pursuant to applicable law and the Nevada foreclosure statues. Sup.2d 855 (N. Jan. in its capacity as nominee.Y. Since the deed of trust expressly named MERS as beneficiary.
Bank was a real party in interest because the assignment from MERS to U. Aug. No. but providing that any and all assignments would have to be recorded prior to commencing foreclosure). 2009 WL 3328373 (R. 2010) (holding that because the Mortgage follows the Note. CV‐09‐687‐PK. 09‐6244‐HO. “Even if the ownership of the mortgage passed with the ownership of the note pursuant to N. 3. Or. also recognized MERS authority to assign Mortgage when designated as both a nominee and mortgagee). MERS v. District Court of Oklahoma City (Mar. Ralich. Mosley.. Lehman Bros. Stewart v. Bank was proper under Oregon law). as nominee for Lender and Lender's successors and assigns.”) Rhode Island √ Key Decision Bucci v.D. No. MERS’ possession of the note would give it ownership of the mortgage. Feb. Feb. Pennsylvania MERS v. MERS was the nominee holding legal title for Fremont.” The fact that paragraph twenty‐two of the Mortgage states that the Lender “may invoke the STATUTORY POWER OF SALE” does not negate the previous language in the 14 . even without an assignment from MERS the transfer of the Note operated as an equitable assignment of the Mortgage to the purchaser. Trust Co. MERS (as nominee for Lender and Lender's successors and assigns) has the right to exercise any or all of those interests. Ct. finding that U. 2010‐Ohio‐3940 (Ohio Ct. 2010) (granting MERS’ motion to dismiss. concluding that plaintiff’s argument that MERS lacked standing to pursue was without merit) Oregon Burgett v.. PC‐2009‐3888.2. 2009) (affirming the trial court’s determination that the mortgage vested MERS with the authority to enforce the loan) Straker v. "The Mortgage further stated that “if necessary to comply with law or custom. 25. but not limited to.) Oklahoma MERS v. the right to foreclose and sell the Property . June 24. Super. Deutsche Bank Nat'l Trust.2d 77 (Pa. in and of itself. Oct. MERS. 2009) Borrowers through the Mortgage specifically granted “the Statutory Power of Sale” to MERS. the originating lender. Pa. including. Traxler. § 35‐03‐01. 2010 WL 4282105 (D.” Ohio Deutsche Bank Natl.D. App. 982 A.C. 20. Warden. 3. No. No. 2010 WL 1055131 (D. Bank. 2010 WL 2541245 (Ohio Ct.C. 2006) (refusing to vacate a judgment of foreclosure. No. 3:09‐CV‐338. 9.S.S.I. 2010) (finding that MERS had authority to foreclose on the property because it was named as the lender's nominee in the Mortgage. William C. 93170. 2011) (noting that “[a]s the amended complaint and mortgage documents note. v.. CJ‐2005‐7027. MERS. Or. violate Oregon law. 2011 WL 398374 (M. App. despite the fact that it had no beneficial interest in the Note. 2010) (recognizing that the MERS system does not.
First Horizon Home Loan Corp. 314 S. 2.. 2010) (dismissing as unripe plaintiffs’ complaint for declaratory judgment that their mortgage would be unenforceable based on the involvement of MERS) Texas Hunt v. H‐09‐4038. 2010) (rejecting plaintiff’s argument that MERS lacked standing) Athey v. Tex. 2010) (interpreting the language of the deed of trust.3d 161 (Tex. 2010 WL 3064047 (S. 6:10‐CV‐119. 2011) (dismissing plaintiff’s “cookie cutter” complaint that MERS lacks standing to sue). 03‐10‐00031‐CV. had authority to conduct a non‐judicial foreclosure). Nov. Aug. held that MERS had the authority to initiate foreclosure proceedings. 2:10‐CV‐00885. American Mortgage Network. No. See also Richardson v. No. Utah Nov. Commonwealth Property Advocates. No. 2010 WL 3516475 (D. No. W‐2010‐00310‐COA‐R3‐CV. 2011) (“Plaintiff offers no evidence or legal argument that MERS cannot contract for the right and power of foreclosure regardless of who holds the note. appoint a trustee. App. 5. CitiMortgage. 2010 WL 4818556 (E.W. MERS. 1:09‐CV‐162‐DAK. therefore. App. No. 16. Tex. Utah Jan. Utah King v. Nov. had the right to foreclose). Jan. 2:10‐CV‐440‐TS. 2010 WL 3271966 (Tex. or the beneficial interest under the trust deed. 20... CIT Group/Consumer Finance. CitiMortgage. 2010) 15 .D. 2010) (relying on language in deed of trust to establish that MERS. Ct. MERS. Maxwell v. Aug. 2011 WL 181345 (S. Tex. et al. and to foreclose and sell the property). Inc. Aurora Bank FSB. No. 2010 WL 4609368 (D. LLC v. Utah Sept. Ct. No. 3.’”) √ Key Decision Witt v. 2010) (deed of trust expressly provided that MERS was to have power of sale). 2010 WL 4629610 (Tenn. "MERS has the right to invoke the Statutory Power of Sale here because it is the named mortgagee and nominee of [the lender] and its “successors and assigns. App. as nominee. H‐10‐0720. 22. 2011 WL 98491 (D. 19. 12.D." South Carolina (no cases found) South Dakota (no cases found) Tennessee Mills v. Chase Home Finance. Inc. Ct. holding that MERS was the beneficiary of the deed of trust and. Santarose v.D. 2010) (affirming trial court’s grant of summary judgment to MERS. Nor does Plaintiff demonstrate that such rights are actually ‘lost by the transfer of the debt. No..
Bank. 2010) (same). Utah Aug. 2010) (rejecting “split the note” argument as the holder of the instrument retains the ability to foreclose). Courts have consistently held that MERS has the authority to foreclose in behalf of the lender and that MERS need not possess the note in order to appoint a trustee in behalf of the lender who does hold the note.. Va. 2010) "The Deed of Trust authorized MERS to foreclose the Property in the event that Plaintiffs defaulted on the loan. 2d 689 (E. 2. Aurora Loan Services. 2010 WL 2934473 (E.”) Vermont (no cases found) Virginia Ramirez‐Alvarez v. et al. 29. Supp. without any formal assignment or delivery. No. 16 .A. 01:09‐CV‐1306. 19. U. Bank of New York. Va." "By signing the Deed of Trust. McGinnis v. No. 2009) (“MERS had authority under the Deed of Trust to initiate foreclosure proceedings and to appoint Woodall as successor trustee. 2010 WL 3418204 (D. 718 F. 2010) (dismissing plaintiff’s “split the note” argument).” King v. N. 27. Jan. Plaintiffs agreed that MERS.. American Mortg. 2010 WL 3516475 (D. Utah Aug. Inc. 2010) (dismissing plaintiff’s claim that MERS lacked standing to conduct foreclosure).S. Va.. Court then stated that the Note was not "split" with the mortgage by being assigned to MERS. 1:09‐CV‐00069‐DAK. 2010) (“Although MERS does not own the note.. Rhodes v.” Also finding that the borrowers had failed to submit any "legally‐supported" argument as to why MERS as nominee did not have the right to foreclose and sell the borrower's property in accordance with law or custom.D. 2010 WL 3219310 (D. Network. GMAC Mortgage Corp. 2010 WL 538039 (E. Corp. or even mention of the latter. Utah Oct. 2:10‐CV‐00230. Horvath v..D. Va. Merino v. it is given authority to foreclose on the note by the note’s owner through the language in the trust deed. as nominee for Lender and Lender’s successors and assigns. MERS. 2:10‐CV‐00301‐TC.”) Burnett v. 2010 WL 1039842 (E. 2009 WL 3582294 (D. 13. 1:09‐CV‐162‐DAK. 27. 1:09‐CV‐01129. 1:09‐CV‐1121. Utah Sept. No.D. Mar. Court noted the "well‐settled precedent in both the United States Supreme Court and Utah Supreme Court which clearly establish that “[t]he transfer of the note carries with it the security. 2010) (“MERS had the authority and ability to enforce the terms of the security instruments. No. had the right to foreclose the Property and recognized that MERS could take any action required of Lender.”) √ Key Decision Tapia v. Aurora Loan Services. LLC. No. July 21. No.D. Court first found that lender did not have to obtain the consent of the borrower before assigning note to purchaser. EMC Mortg. No.
App. 2011) (rejecting plaintiffs’ claims “regarding MERS not being a beneficiary under the security instrument. Countrywide Home Loans. 2011 WL 321992 (W. Wash. The mortgage provides that the note and mortgage may be sold one or more times. The assignment of mortgage transfers both the note and mortgage. of Washington. No.A. Rohlf. 2009). Kesler. including the ‘right to foreclose and sell the Property. [Plaintiffs] presented no evidence to refute the assignment of both the note and mortgage to Countrywide. 17. Wyo. The deed of trust.3d 158 (Kan. N.D. Quality Loan Service Corp. MERS is also designated American Sterling Bank's nominee which allows it to act as American Sterling Bank but not possess any ownership rights. 2010 WL 4630328 (Wis. 707 F. Supp. 22. 09‐20806. 2010) (dismissing claim on basis that MERS was properly a beneficiary and entitled to effect sale of defaulted‐upon property) West Virginia (no cases found) Wisconsin √ Key Decision Countrywide Home Loans Servicing. 2009‐AP‐2330. This assertion is baffling. 2010 WL 2102485 (W. of which the court takes judicial notice. The deed of trust grants MERS not only legal title to the interests created in the trust. "The mortgage designates MERS as the mortgagee and American Sterling Bank as the lender." Plaintiffs also "failed to establish that MERS designation as nominee for American Sterling Bank did not include authority to assign the note.” Wyoming In re Relka. Inc. and that Recontrust therefore has no power as MERS’s designee to initiate a foreclosure action. Feb. The note and the mortgage securing the note are to be construed together. 22. 17 . The note references the mortgage as the controlling security instrument.’” Vawter v. May 20. explicitly names MERS as a beneficiary. Nov. “[t]he judgment of foreclosure and sale determines the parties' legal rights in the underlying obligation. Moreover. No.D.) √ Key Decision Daddabbo v. No. 2010) Distinguished decision of Landmark v. C09‐1417‐RAJ. LP v. No. 2010) “Plaintiffs’ sole basis for blocking the foreclosure is their contention that MERS has no beneficial interest in the note that the deed of trust secures. 2.” In so ruling. D.. Dec. Wash.D. 2009) (finding that MERS had properly assigned the mortgage to the note purchaser and validating foreclosure).. HSBC Bank USA. 216 P. 2009 WL 5149262 (Bankr. Wash. 2d 1115 (W. Washington Cebrun v. Apr. the Court considered that plaintiffs had signed a mortgage that expressly named MERS as beneficiary. C10‐5742‐BHS. but the authorization of the lender and any of its successors to take any action to protect those interests.
Without notice. the Court simply stated that. CASES PRESENTING QUESTIONS REGARDING MERS VALIDITY Arkansas MERS v. The circuit court denied MERS’ motion. but did not address whether MERS was entitled to notice. It simply was not a necessary party. even if MERS would have been entitled to notice. 2009 WL 631355 (Bankr. No. Kesler. and to do only. would have the right to lift the automatic stay.3d 1 (Ark. Property was sold to a third party. as nominee. MERS has no interest to protect. Idaho Mar. as mere agent of the lender. and a default judgment was entered extinguishing the second mortgage. 08‐20381. Instead. 2009) Action by MERS to set aside a decree of foreclosure where MERS had not been served with process. MERS moved to vacate the default. was not a necessary party that was entitled to receive service of process. 12." Idaho In re Sheridan. Two views on Kesler: First view. concluding that MERS. the bankruptcy court denied the request for stay relief on the basis that there was no proof that the trustee on whose behalf MERS was purporting to act had any interest in the note or deed of trust. In this dispute over foreclosure on the subject real property under the mortgage and the deed of trust. 2009) Facts: MERS was mortgagee as nominee for the owner of the junior mortgage loan. 301 S. arguing that it had not received notice of the foreclosure. and the one adopted by MERS. “[A]n agent is authorized to do. proponents of this view claim that Kesler was based on procedure (high 18 . First mortgagee foreclosed. but did not notify MERS even though MERS was the recorded mortgagee. "We specifically reject the notion that MERS may act on its own.VII. what it is reasonable for him to infer that the principal desires him to do in the light of the principal's manifestation and the facts as he knows or should know them at the time he acts. Southwest Homes of Arkansas.” "MERS holds no authority to act as an agent and holds no property interest in the mortgaged land.W. The Court denied MERS’s motion. MERS would not have had a meritorious defense to the action. Specifically. 2009) Without deciding whether MERS. MERS failed to defend. It is not a necessary party. complete relief may be granted whether or not MERS is a party. 3d 158 (Kan. Kansas Landmark National Bank v. D. is that Kesler is a narrow decision. independent of the direction of the specific lender who holds the repayment interest in the security instrument at the time MERS purports to act. 216 P.
As to MERS standing: “The relationship of MERS to the transaction between the [borrowers] and [their lender] is ‘not subject to an easy description’ or classification. however. Ct. Court concluded. MERS is the mortgagee of record. Later. that real party in interest was Deutsche Bank and that the Court did not err by substituting the lender for MERS. and one endorsed by consumer advocates.” The only rights conveyed to MERS is “bare legal title to the property for the sole purpose of recording the mortgage…” Accordingly. 12. Court disregarded the propriety of using nominees in secured transactions.W. Borrowers provided evidence (RFAs answered by MERS) that showed that the bank was the holder of the note. Saunders. 14 M. is that this decision questions MERS’ right to notice of foreclosure actions. therefore. Missouri Bellistri v. LLC. particularly. Key Points: MERS did not receive notice of the suit because the foreclosing party sent notice to the lender on the second mortgage.” thus prohibiting the assignee of the deed of trust from foreclosing. App.R. the bank was substituted as a party in place of MERS. Ocwen Loan Servicing.3d 289 (Me. MERS is defined as “a separate corporation that is acting solely as a nominee for Lender and Lender’s successors and assigns … For the purposes of recording this mortgage.” The Court noted that MERS is not mentioned in the note and has no interest in the note. Court did not recognize that MERS has capacity to act on behalf of an assignee of the note because of its “legal title” as mortgagee. MERS argued that it was the “holder” of both the mortgage and the note. the real property of the borrowers was involved. §§ 6321‐6325 and.S. 284 S. had no standing to foreclose. Maine MERS v. Because of this dispute. it lacks standing to foreclose as the mortgagee. 2 A. 19 .3d 619 (Mo. 2009) Court held that because “MERS never held the promissory note … its assignment of the deed of trust separate from the note had no force. Aug. because MERS sole right is to record the mortgage. In the mortgage. The alternate view. but did not submit any evidence regarding whether real property secured the note or whether. 2010) Court concluded that MERS is not a “mortgagee” within the meaning of Maine’s foreclosure statute. and the Court granted summary judgment in favor of the bank. the Court denied summary judgment to MERS.
powers and security conferred by the deed of trust upon the beneficiary therein and the payee in the notes. Div. 20 In re Agard. Bank’s rights can be no greater than the rights transferred by its assignor ‐ MERS ‐ the Debtor argues that the Movant.” Court recognized that when the holder of a DOT is an agent for the holder of the note. it vests in the transferee “all the interest.Y." Facts: Servicer of mortgage loan sought relief from the automatic stay. "When the holder of the promissory note assigns or transfers the note. The Motion for relief from stay did not even explicitly state that US Bank held the note.” Effectively.D. finding that the MERS system itself altered this practice by naming MERS as mortgagee and some other party as the noteholder. 810‐77338‐reg. 2006) Stating that “a nominee of the owner of the note and mortgage. there was no evidence before the Court showing that US Bank had physical possession of the note. Bank. acting on behalf of U. App.S. Further. 10. the note and the deed of trust are inseparable.S.Y. E. New York LaSalle Bank v. has failed to establish that it holds an enforceable right against the Property. 2011) .” Additional Facts: Because the state court had already entered a judgment of foreclosure in favor of US Bank. and when the promissory note is transferred.2d 769 (N. no improper splitting occurs. No evidence was produced showing that US Bank holds the note. US Bank (or its agent) must show that US Bank is a valid assignee of both the Note and the Mortgage. absent the state court foreclosure order.N. the Court was not satisfied that US Bank had received transfer of the note by assignment.S. The Court framed the issue as follows: “The Debtor’s argument raises a fundamental question as to whether MERS had the legal authority to assign a valid and enforceable interest in the subject mortgage. 2011 WL 499959 (Bankr. For these reasons. Lamy. Not only was US Bank’s noteholder status defective. Because U. The Court went on to address whether. In order to prove standing to foreclose. 824 N. the deed of trust is also transferred. US Bank and its agent would have had authority to foreclose where the assignment had come from MERS. rights. Only an Assignment of Mortgage by MERS was produced. but it also could not show that it was the holder of the Mortgage. Court: First rejected the argument that the mortgage stays with the note. Feb.Y. No. the Court stated. such as MERS. the bankruptcy court concluded that the Debtor’s objection to the motion for relief from the automatic stay must be overruled pursuant to the Rooker‐Feldman doctrine. An assignment of the deed of trust separate from the note has no “force. may not prosecute a mortgage foreclosure action in its own name as nominee for the original lender because it lacks ownership of the note and mortgage at the time of the prosecution of the action.
firstname.lastname@example.org or Zachary D. For more information.com or Katrina D.email@example.com or your Burr & Forman attorney with whom you regularly work. The Court also rejected the argument that MERS membership rules created an agency relationship. Chiles in Birmingham at (205) 458‐5464 or john. 21 . Chisholm in Birmingham at (205) 458‐5126 or katrina. Miller in Birmingham at (205) 458‐5250 or zachary. No representation is made that the quality of services to be performed is greater than the quality of legal services performed by other lawyers. The court also concluded that no agency relationship was created because it was not memorialized in writing as required by the Statute of Frauds. please contact the author at: John R.chiles@burr.