July 10, 2014
No MERS-Y for Maine Lenders
The Maine Supreme Judicial Court seems to be on a roll against the mortgage industry, having recently issued an opinion that effectively wiped out a mortgage because of the lenders bad faith negotiations during a foreclosure proceeding.
And now, the Maine Supreme Judicial Court issued an opinion in Bank of America, N.A. v. Greenleaf et al., 2014 ME 89 (July 3, 2014), that casts into doubt whether MERS has any life left in it in Maine. The case’s reasoning is, however, somewhat suspect. The Greenleaf court held that the bank did not have standing to seek foreclosure even though it was the holder of the mortgage note. The court stated that
The interest in the note is only part of the standing analysis, however; to be able to foreclose, a plaintiff must also show the requisite interest in the mortgage. Unlike a note, a mortgage is not a negotiable instrument. See 5 Emily S. Bernheim, Tiffany Real Property § 1455 n.14 (3d ed. Supp. 2000). Thus, whereas a plaintiff who merely holds or possesses—but does not necessarily own—the note satisfies the note portion of the standing analysis, the mortgage portion of the standing analysis requires the plaintiff to establish ownership of the mortgage. (8)
This seems to go against the weight of authority. The influential Report of The Permanent Editorial Board for The Uniform Commercial Code, Application of The Uniform Commercial Code to Selected Issues Relating to Mortgage Notes (November 14, 2011), states that
the UCC is unambiguous: the sale of a mortgage note (or other grant of a security interest in the note) not accompanied by a separate conveyance of the mortgage securing the note does not result in the mortgage being severed from the note. . . . UCC Section 9-308(e) goes on to state that, if the secured party’s security interest in the note is perfected, the secured party’s security interest in the mortgage securing the note is also perfected . . .. (12-13, footnotes omitted)
The Maine Supreme Judicial Court is the ultimate authority on the meaning of Maine’s foreclosure statute, of course, but their reasoning is still open to criticism.
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