In Stewart v. MERS, No. CV-09-687-PK, 2010 WL 1055131 (D. Or. Feb. 9, 2010), the court granted MERS’ motion to dismiss and found that U.S. Bank was a real party in interest because the assignment from MERS to U.S. Bank was proper under Oregon law. The loan documents indicate that the homeowner executed a Deed of Trust encumbering the Property, delivered to and for the benefit of MERS, as nominee for BNC Mortgage Inc. The Deed of Trus was recorded. The homeowner later defaulted under the terms of the Deed of Trust. The Deed of Trust was subsequently assigned to U.S. Bank as Trustee for Structured Asset Securities Corporation Mortgage Pass-Through Certificates. The assignment was recorded and U.S. Bank appointed NWTS as the successor and foreclosing trustee. The homeowner filed a complaint alleging that US Bank was not a “real party in interest” and therefore did not have “standing to bring this Trustee’s Sale,” and sought an injunction to halt the foreclosure proceedings. The court upheld the lower court’s conclusion that production of the original Note and Deed of Trust satisfied the demand for “proof” that they had a right to proceed with the foreclosure. Moreover, the Oregon Trust Deed Act does not require presentment of the Note or any other proof of “real party in interest” or “standing,” other than the Deed of Trust. Assignment and appointment of a successor trustee must be recorded in the real property records, and in this case the statutory requirements were met because assignment and appointment of a successor trustee were recorded.
Author Archives: Gloria Liu
United States District Court of Nevada Holds that under Nevada Law, Foreclosure Proceedings can be Commenced by the Beneficiary
In Ramos v. MERS, No. 2:08-CV-1089, 2009 WL 5651132 (D. Nev. Mar. 5, 2009), court concluded that, under Nevada law, foreclosure proceedings can be commenced by “the beneficiary, the successor in interest of the beneficiary, or the trustee” and, thus, that MERS had a right to foreclose. Since the deed of trust expressly named MERS as beneficiary, MERS had the right to commence foreclosure and to appoint the substitute trustee. In their purchase of a home, homeowners made a loan and the deed of trust on the loan with Bayporte designated MERS as the beneficiary, and authorized MERS to act as a nominee. MERS then executed a Substitution of Trustee, naming Cal-Western as the trustee under the Deed of Trust. Cal-Western issued and recorded a “Notice of Breach and Default and of Election to Cause Sale of Real Property Under Deed of Trust.” The property was sold at a trustee’s sale. Homeowners claimed that the foreclosure on their home was wrongful and alleged that the party that authorized the foreclosure was not authorized to do so, that the sale was not carried out in accordance with Nevada law, and that Nevada law authorizing non-judicial foreclosures and Defendants’ actions in accordance therewith violate Plaintiffs’ rights to procedural and substantive due process. The court dismissed this claim because they found that MERS was empowered to foreclose on the property and to appoint Cal-Western as substitute trustee for purpose of conducting the foreclosure.
U.S. Bankruptcy Court of Western District Missouri Holds that Agency Relationship created when MERS is Designated as a Nominee
In re Tucker, 441 B.R. 638 (Bankr. W.D. Mo. 2010), court held that designation of MERS as a 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. The case arose from a challenge made by the Chapter 7 trustee. The Trustee asserted that the movant was not the holder of both the Note and Deed of Trust on the date of the bankruptcy filing, that the Note and Deed of Trust were split as of that date, and that the Deed of Trust is now unenforceable. The Debtor had signed an Adjustable Rate Note and a Deed of Trust, which identifies the Lender as “New Century Mortgage Corporation. The Deed of Trust goes on to state that the beneficiary of the Deed of Trust is MERS as “nominee” for the Lender and its successors and assigns.That Deed of Trust was properly recorded with the Recorder of Deeds. While the Note had been assigned several times prior to the bankruptcy, no assignment of the Deed of Trust had been recorded prior to that date. Therefore, as of the date of bankruptcy, the records of the Recorder of Deeds still showed that New Century was the grantee under the Deed of Trust and that MERS, as nominee for New Century, was the beneficiary under the Deed of Trust. Nevertheless, the court concluded that assuming that the note-holder is a member of MERS, thereby creating an agency relationship, the fact that MERS is identified as the beneficiary under a deed of trust for the benefit of the note-holder does not create a split between the note and deed of trust.
Massachusetts Appellate Court Upholds MERS’ Authority to Assign Mortgage
In Bassilla v. GMAC Mortgage, et al., No. 09-J-519 (Mass. App. Ct. Dec. 4, 2009), Court upheld MERS’ authority to assign the mortgage as the mortgagee. Such authority to assign its mortgage interest was held to exist despite the fact that MERS did not own or hold the underlying promissory note. This Court specifically held that MERS, “the lender’s nominee and record title holder had the ability to make a valid assignment.”
Tennessee Court of Appeals Dismisses Homeowner Complaint as Unripe
In Mills v. First Horizon Home Loan Corp., No. W-2010-00310-COA-R3-CV, 2010 WL 4629610 (Tenn. Ct. App. Nov. 16, 2010), the court dismissed the homeowners complaint as unripe for declaratory judgment. It did not find that the mortgage would be unenforceable based on the involvement of MERS.
The appeal arose from a complaint to quiet title filed by the homeowners against First Horizon Home Loan Corporation MERS. The homeowners had two mortgages and asserted that, although the second mortgage held by First Horizon on their residence had been satisfied and the deed of trust released, First Horizon had failed to surrender the note as required by Tennessee Code Annotated § 47-3-501(b). Moreover, they were told that the second “note” was destroyed, therefore under Tennessee Code Annotated § 47-3-309, First Horizon had a burden to prove that the second mortgage was enforceable “when the note went missing.” The homeowners also argued that despite language in the deed of trust, MERS cannot be a beneficiary of the first mortgage deed because it never had a right to their mortgage note payments.
The court held that even though the complaint is styled as an action to quiet title, there is no suggestion that the homeowner’s title currently is encumbered other than by a mortgage which they do not deny executing. The second deed of trust securing the second mortgage has been released. The terms of the first mortgage are not in dispute, the mortgage is not in default, and no enforcement proceedings have been initiated against the homeowners. Therefore the action is actually in the nature of a declaratory judgment action that seeks to ascertain whether there is a right to enforce the first mortgage in foreclosure action. The court also found that the real question raised in this action is whether a potential foreclosure action or action to enforce the note upon default would be successful if the original note cannot be produced. Because this was not an enforcement proceeding or foreclosure action, the court found that the issue is not ripe for review where the note is not in default and no foreclosure or enforcement proceedings have been initiated against the homeowners.
US District Court of Nevada Dismisses Motion of Wrongful Foreclosure, Negligence and Quiet Title
In Vazquez v. Aurora Loan Services, No. 2:08-CV-01800-RCJ-RJJ, 2009 WL 1076807 (D. Nev. 2009), the court granted MERS’ motion to dismiss claims of wrongful foreclosure, negligence and quiet title and found that the 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.” The court rejected the negligence claim because it found that neither Aurora nor MERS were the broker or lender of Plaintiffs’ conventional home mortgage loan and neither owed the alleged negligence duty as a matter of law. The quiet title claim was also dismissed because no claim was stated for wrongful closure, therefore no basis to quiet title.
Kansas Bankruptcy Court Finds that Agency Relationship Exists With Use of the Word “Nominee”
Martinez v. MERS, et al., No. 09‐40886, 2011 WL 489905 (Bankr. D. Kan. Feb. 10, 2011), the court held that 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. The court also looked to the language of the mortgage and found that there was sufficient evidence to demonstrate that MERS was acting as the agent for the lender. MERS also submitted the affidavit of its Treasurer to demonstrate that an agency relationship existed. The court reasoned, “the fact that MERS and Countrywide chose to use the word “nominee,” rather than “agent,” does not alter the underlying relationship between the two parties.”
The homeowner executed and delivered a promissory note to Countrywide. The loan was made to enable the homeowner to purchase real property, which she claimed as her exempt homestead in the bankruptcy proceeding. Countrywide has remained the holder of that note. To secure repayment of the debt to Countrywide and its successors and assigns, the homeowner signed a mortgage on the property to “MERS, as the nominee for Countrywide and its successors and assigns.” The mortgage specifically identifies the lender as Countrywide Home Loans, Inc., the same Lender identified in the note, the amount of the mortgage is identical to the amount borrowed under the note, and the mortgage instrument, itself, grants Countrywide various rights. The Mortgage further states that: “MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender.” The mortgage was properly and timely recorded with the county.
