Editor: David Reiss
Brooklyn Law School

January 23, 2013

Plaintiff’s Challenge to MERS While Not in Default Dismissed by Nevada Court

By Karl Dowden

In Wellington v. Mortgage Electronic Registration Systems, Inc., et al., No. 2:12-CV-00541-KJD-VCF (D. Nev. Oct. 30, 2012), the plaintiff decided to challenge the use of MERS after learning of fraudulent activity in the mortgage industry. After failing to obtain documents she requested from CMI, the entity that was assigned servicing rights by MERS (who is listed as the beneficiary in her deed of trust), she filed this suit. In this case, the plaintiff is representing herself and she is not in default, making it an unusual case since there is no foreclosure proceeding in process.

The plaintiff challenged the use of MERS as a nominee under her deed of trust. However, the court found that MERS has been recognized as a valid entity that can be named as a nominal beneficiary of deeds of trust by the courts in both the Nevada district court system and the 9th Circuit court system. In addition, the deed of trust signed by the plaintiff permitted MERS to exercise the rights and interests accompanied by legal title, including the right to sell the note without notice to the plaintiff. As a result, the court found that the initial appointment of MERS as a nominal beneficiary by the lender was valid.

The plaintiff also alleged a violation of the federal Fair Debt Collection Practices Act. However, the court found that the statute does not apply to the relevant mortgage institutions as long as the debt was not in default at the time it was assigned. In this case, it does not apply to the defendants since the plaintiff was not in default at the time of the assignment. In addition, the plaintiff did not state any specific abusive or fraudulent debt collection practices by CMI. She only challenged CMI’s collection of payments and failure to forward her payments to the actual creditor. However, the plaintiff failed to identify the actual creditor. As a result, the court granted the defendant’s motion to dismiss the claim.

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