In MERS, Inc. v. Cabrera, (11th Cir. Sept. 16, 2005), the court held that MERS’s allegations that it “owned”, “held” and “possessed” the mortgage notes are clearly, palpably and inherently false because it never held the Note in its physical possession. The plaintiff Cabrera alleged that it owned and held the Note and Mortgage. MERS joined itself as a nominee for Fermont Investment and Loan, the lender. MERS conceded that it had no “beneficial interest” in the Mortgage Notes. The court reasoned that because MERS never held the note and had no “beneficial interest” it did not have standing in the case.
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Arkansas District Court Holds MERS’s Note Assignment Valid and Gives Purchaser Standing to Appoint Agent to Initiate Foreclosure
In Peace v. MERS, 2010 WL 2384263 (E.D. Ark. June 11, 2010), the court held that MERS’ assignment to Note purchaser was valid and properly gave purchaser standing to appoint an agent to initiate a non-judicial foreclosure. The promissory note provides that in return for a loan received from American Home Mortgage, Peace will pay the principal sum of $56,000.00. The mortgage names Defendant MERS as mortgagee, solely as the nominee for AHM, and grants MERS and its successors and assigns the power to sell the property. MERS later assigned the mortgage to BAC Home Loan Servicing. Therefore, since BAC was the holder of the note and mortgage, and ReconTrust was acting as agent of BAC and not on behalf of MERS, BAC had standing to initiate a non-judicial foreclosure.
Arkansas Supreme Court Holds that MERS is Not a Beneficiary and Not a Necessary Party in Foreclosure Proceedings
In MERS, Inc. v. SouthWest Homes of Ark., Inc., , 301 S.W.3d 1 (Ark. 2009), the court held that MERS was at most the mere agent of the lender Pulaski Mortgage Company, Inc., and thus held no property interest and was not a necessary party in foreclosure proceedings. The borrowers entered into a deed of trust on a one-acre lot in Benton County to secure a promissory note. The lender on that deed of trust was Pulaski Mortgage, the trustee was James C. East, and the borrowers were the Lindseys. MERS was listed on the deed of trust as the “Beneficiary” acting “solely as nominee for Lender,” and “Lender’s successors and assigns.” The second page of the deed of trust states “the Borrower understands and agrees that MERS holds only legal title to the interests granted by the Borrower and further that MERS as nominee of the Lender has the right to exercise all rights of the Lender including foreclosure.” The deed of trust was recorded. The borrowers later granted the subject mortgage on the same property to Southwest Homes of Arkansas, Inc. to secure a second promissory note. The court emphasized the fact that Arkansas was a recording state and noted that all the required parties to a deed of trust under Arkansas law are present, the borrower in the Lindseys, the lender in Pulaski Mortgage, and the trustee in James C. East. Under a deed of trust in Arkansas, title is conveyed to the trustee and here, MERS was neither a trustee nor a beneficiary. Moreover, no payments on the underlying debt were ever made to MERS. MERS did not service the loan in any way. It did not oversee payments, delinquency of payments, or administration of the loan in any way. The court thus held that it was at most an agent to the lender, but had no further rights to standing.
Circuit Court of Arkansas Holds that MERS has Standing to Foreclose because Ownership of Note is not Required to have Standing
In MERS, Inc. v. Stephanie Gabler, et al., (Circuit Court of Garland County # 2004-17-II), the court held MERS had standing to seek relief for its Writ of Assistance and is proper party to foreclose the mortgage because it was the mortgagee of record and holder of the promissory note. The borrowers claimed that MERS did not have standing because MERS was not the owner of the note but the court found that ownership of the note is not required to have standing.
Kansas Court of Appeals Holds that Severance of Mortgage and Note Cured by Subsequent Assignment of Mortgage from MERS to Bank
In U.S. Bank v. Howie, 280 P.3d 225 (Kan. App., 2012), the court held that U.S. Bank had standing to foreclose because there was an agency relationship between MERS and U.S. Bank. It also upheld that severance can be cured by MERS’s subsequent assignments. Therefore, it falls under the agency relationship exception of unenforceability when the mortgage is not held by the same entity that holds the promissory note. The homeowner, James Howie executed a promissory note to U.S. Bank and executed a mortgage on real property they owned in Ottawa. Under the terms of the mortgage, the Howies were named as the borrower, U.S. Bank as the lender, and MERS was named as the mortgagee “acting solely as a nominee for Lender and the Lender’s successors and assigns.” The mortgage stated: “Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this [Mortgage], 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 including, but not limited to, releasing and canceling this [Mortgage.]:” When the note entered into default following James’ death, MERS assigned the mortgage to U.S. Bank, which subsequently filed an action to foreclose the mortgage. The lower court held that even if there was no agency relationship between MERS and U.S. Bank such that the note and the mortgage were severed, any severance was cured by MERS’s subsequent assignment of the mortgage to U.S. Bank. The Appellate court agreed but also found that according to the plain language of the Mortgage, MERS was acting as an agent of U.S. Bank at all relevant times.
Kansas Court of Appeals Holds that Secondary Market Investor Bank has Standing to Foreclose Even Without Mortgage Assignment
In Metlife Home Loans v. Hansen, 286 P.3d 1150 (Kan. App. 2012), the court held that a mortgage assignment is not necessary to the right of a secondary market investor to foreclose in Kansas and that even if an assignment were necessary, the separation of the note and mortgage does not impair the right to foreclose if the two documents end up in the same hands. MetLife Home Loans claimed to be the holder of both the promissory note and the corresponding mortgage on property owned by the homeowners. The note was in default and Metlife sought to foreclose on the property to collect on the Note. The Mortgage named Sunflower Mortgage as the “Lender.” It also referenced the Note signed between the homeowners and Sunflower. The Mortgage defined MERS as the mortgagee and stated that MERS was acting “solely as nominee” for Sunflower and Sunflower’s successors and assigns. The Note and the Mortgage came under MetLife’s common holding through a series of nonparallel endorsements or assignments. The court acknowledged that the only evidence regarding the existence of an agency relationship between MERS and MetLife in this case is the language of the Mortgage itself, but was sufficient to show an agency relationship that would allow it to fall under the exception of unenforceability when it is not held by the same entity that holds the promissory note. Moreover, the court asserted that Kansas law favors keeping the mortgage and the right of the enforcement of the obligation it secures in the hands of the same person or entity. With regards to Metlife’s standing, the court found that as a downstream assignee of the Note, it also retained a beneficial interest in the Mortgage. Therefore, even if the language of MERS’s assignment of the Mortgage to MetLife were somehow faulty, the result would be the same as far as MetLife’s standing to foreclose is concerned because MetLife did not need that assignment in order to vest it with a beneficial interest in the Mortgage.
Mortgage Mediation Program May Come to Attention of Oregon Legislature
Oregon had created a mediation program in 2012 but the program faced opposition from the banks because they believed the authorizing bill was unclear and exposed them to liability.
Lenders have shifted from nonjudicial foreclosures to court-supervised foreclosures, which are more costly and time-consuming. The number of court-supervised foreclosures in Oregon has exploded. Washington County, for example, recorded 840 judicial foreclosures during the first 11 months of 2012, compared with 199 during all of 2011.
Sens. Brian Boquist, R-Dallas, and Lee Beyer, D-Springfield, plan to introduce legislation to close loopholes in the 2012 bill. Their goal is create a short-term way to establish clear title for foreclosures until the Supreme Court rules on a pending foreclosure case.
Read article here: https://www.oregonlive.com/opinion/index.ssf/2013/01/mortgage_mediation_mers_need_q.html
