Tag Archives: MERS

Bates Fails to Shake MERS’ Standing in Indiana Superior Court

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In Bates v. MERS, et al., 49D12-0911-CT-051734 (June 22, 2012) Bates filed suit against MERS and several lenders in the mortgage industry on behalf of all counties in Indiana, alleging that the MERS system is an attempt to falsify records to avoid paying recording fees. The Marion Superior Court dismissed Bates’s complaint for lack of subject matter jurisdiction under the Indiana Whistleblower and False Claims Act, as Bates was not an original source to the information as required by the Act. The court notes that the MERS system has been discussed at length publicly, in prior cases, by media outlets, and by MERS itself; Bates’s allegations against MERS merely reiterate these points, and therefore cannot qualify for whistleblower status under the Act. Furthermore, Bates claimed he obtained this information in June 2009, when the information was already public, so “his knowledge cannot be direct and independent”.

This is Bates’s sixth failed attempt against MERS, as he filed similar actions in California, Hawaii, Nevada, Tennessee, and Washington, D.C. MERS comments on the case here.

 

MERS Has Standing to Bring Foreclosure Action as Court Ruled There Was No Question That the Defendant-Homeowner Was the Correctly Named Party

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In the case of Mortgage Elec. Registration Sys., Inc. v. Ventura, No. CV 054003168S, 2006 WL 1230265 (Conn. Super. Ct. April 20, 2006) the plaintiff-lender moved for summary judgment against defendants, a husband and wife, as to liability only. After review of the lender’s complaint and allegation that the husband was indebted to the lender, the court found that because the husband and quit claimed his interest in the property to the wife, she was the owner of the equity of redemption. Consequently, the wife was properly named as a party to the litigation as a defendant.

Moreover, there was no question that the named lender was the correct party to bring the action. Consequently, the lender was entitled to summary judgment as to the husband’s and the wife’s liability only.

The defendants first claimed there was a question of fact as to whether the defendant Tina Galka-Ventura was liable to MERS. However, the court determined this was not a question of fact as the plaintiff properly alleged that the defendant Joseph Ventura quitclaimed his interest to Gina. Thus, the court determined she was the owner of the equity of redemption.

Second, the defendants claimed that there was a genuine issue of material fact as whether a debt was owed to the plaintiff. The court determined that this was not a material fact. Thirdly, the defendants claimed there was material fact as to what entity is the holder of the note securing the property. The court also determined that this was not a material question.

U.S. District Court for Hawaii Rules in Favor of MERS in Non-Judicial Foreclosure Proceeding, Validating its Right to Transfer, Foreclose, and Sell Property as the Lender’s Nominee

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In Pascual v. Aurora Loan Services, No. 10–00759 JMS–KSC, 2012 WL 2355531, at 1-18 (D. Haw. June 18, 2012), the court explained the role of MERS in mortgage transfers and granted Defendant Aurora Loan Services’s motion to dismiss the Plaintiff Pascual’s claim that the non-judicial foreclosure executed by Defendant was void as a result of MERS’s invalid assignment of the mortgage.

Under the language of the mortgage, MERS held the power of sale of the subject property and “the right to foreclose and sell the property and to take action required of the Lender.” The mortgage also notified the Plaintiffs that the “Note [could] be sold without prior notice.” MERS, acting as a nominee for the lender, Lehman Brothers, assigned the mortgage to the Defendant after Lehman Brothers filed for voluntary Chapter 11 bankruptcy. Shortly after the assignment, the Plaintiffs defaulted on their loan. Defendants subsequently filed a Notice of Mortgagee’s Intention to Foreclosure Under Power of Sale. It held a public auction, and as the highest bidder, recorded a Mortgagee’s Affidavit of Foreclosure Sale under Power of Sale.

Under HRS §677-5, the “mortgagee, mortgagee’s successor in interest, or any person authorized by the power to act,” can foreclose under power of sale upon breach of a condition in the mortgage. Plaintiffs argued that because MERS did not match the description of one these parties, it did not have authority to assign the mortgage to the Defendant, thereby making the transfer invalid. In response, the Court denied the Plaintiff’s assertions and explained the role of MERS, citing Cervantes v. Countrywide Home Loans, 656 F. 3d 1034 (9th Cir. 2011). It described MERS as a “private electronic database that tracks the transfer of the beneficial interest in home loans as well as any changes in loan servicers.” It further stated that “at the origination of the loan, MERS is designated in the deed of trust as a nominee for the lender and the lender’s ‘successor’s and assigns,’ and as the deed’s ‘beneficiary’ which holds legal title to the security interest conveyed.” The court elaborated that under Cervantes, “claims attacking the MERS recording system as fraud fail, given that mortgages generally disclose MERS’[s] role as acting ‘solely as nominee for Lender and Lender’s successors and assigns,’” and that “MERS has the right to foreclose and sell the property.”

Applying the holding to the present case, the court concluded that the mortgage expressly notified the Plaintiffs of MERS’s role as the “nominee for the ‘Lender and Lender’s successors and assigns,’” which had the power of sale of the subject property without giving notice to the Borrower. For these reasons, the court concluded that the transfer from MERS to the Defendant was valid. As a result, it dismissed the Plaintiff’s claim for a violation of HRS § 667-5.

The Court also dismissed Plaintiff’s motion to amend their claim. Contrary to Plaintiff’s assertions, it concluded that there was not a statutory requirement for the Defendants to provide affirmative evidence that its assignment of the subject property was valid. It also denied Plaintiff’s claim that Lehman Brothers’ entrance into Chapter 11 bankruptcy proceedings precluded it from validly transferring the mortgage to the Defendant.

Dirty REMICs, Revisited

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Brad and I have posted, Dirty REMICs, Revisited (also on BePress).  The abstract reads:

We review the differences between two visions for the residential mortgage markets, one driven by the goal of efficiency and the other driven by the goals of efficiency and consumer protection. Both visions advocate for structural reform, but one advocates for industry-led change and the other advocates for input from a wider array of stakeholders. Broader input is not only important to ensure that a broad range of interests are represented but also to ensure the long-term legitimacy of the new system. This is a response to Joshua Stein, Dirt Lawyers Versus Wall Street: A Different View, Probate and Property (2013 Forthcoming), which in turn is a response to Bradley T. Borden & David J. Reiss, Dirt Lawyers and Dirty REMICs, Probate and Property 12 (May/June 2013).

Washington Court Holds That the Language of the Security Instrument Gave MERS Both the Authority to Foreclose and Assign the Deed of Trust

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The court Salmon v. Bank of America, MERS et al., No. 10-446 (D. Wash. May 25, 2011) dismissed claims against Bank of America and MERS. The plaintiffs argued that MERS was a “ghost-beneficiary” and as such could not be the beneficiary of a deed of trust under Washington law, as it did not have an interest in the note. The court rejected this argument, and noted that the beneficiary of a deed of trust is not required to be the note holder

The court, in their holding, noted that MERS had both the authority to foreclose and the authority to assign the deed of trust, based on the language of the security instrument.

Utah Court Holds That Under Utah Law, MERS Was Not Required to Identify the Note-Holder in Order to Permit the Trustee to Proceed With Foreclosure

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The plaintiff in Nielsen v. Aegis Wholesale Corporation, MERS et al., No. 10-606 (D. Utah May 4, 2011) argued that MERS divided the deed of trust as well as the promissory note. The court, in reaching their decision and rejecting the plaintiff’s argument, noted that “the court adopted the defendant’s argument that plaintiff had latched onto a failed theory—that a note and trust deed can be ‘split’ and rendered null and void.” The court subsequently dismissed the plaintiff’s claims against MERS with prejudice.

The court further went on to state that, “by law, each successor to the note also received the benefit of the security, and by contract, MERS was appointed as the nominee beneficiary under the First Deed of Trust. Contrary to the plaintiff’s argument, MERS had established its rights with respect to foreclosure on the security and MERS had, at all relevant times been, entitled to act as beneficiary under the First Deed of Trust.”

The court further noted that under Utah law, MERS was not required to identify the note holder in order to permit the trustee to proceed with foreclosure.

Oregon Court Rules That MERS’ Role as Beneficiary is Not Inconsistent With the Purpose of Oregon’s Non-Judicial Foreclosure Statute

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The Oregon court in Nigro v. Northwest Trustee Services and Wells Fargo Bank, No. 11 CV 0135 (May 15, 2011) denied the plaintiff’s motion for a preliminary injunction to stop a non-judicial foreclosure sale.

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The court in reaching their holding found that the plaintiff failed to establish the necessary elements to sustain a request for a preliminary injunction. Most notably, the plaintiff failed to demonstrate the likelihood of success based on the merits.

The plaintiff alleged that the defendants violated the Oregon Deed of Trust Act by failing to record all transfers of the assignment as well as the note. The court, in their ruling, cited Bertrand v. SunTrust Mortgage, Inc., which held that MERS was specifically designated by all parties as the beneficiary and had the authority to assign the deed of trust. Although MERS was not a party to this case, the court in Nigro ruled that MERS’ role as beneficiary is not inconsistent with the purpose of Oregon’s non-judicial foreclosure statute, and that the Act did not require the recording of note transfers.