March 2, 2013
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.
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