Tag Archives: MERS

Texas Appellate Court Holds that Formal Transfer of Deed is Not Required to Initiate Foreclosure

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In Robeson v. Mortgage Electronic Registration Systems, Inc., No. 02-10-00227-CV (Tex. App. –Fort Worth [2nd Dist.] 2012, pet. denied), the Texas Court of Appeals affirmed a summary judgment motion by MERS and the Midfirst bank granted by the trial court. The homeowner plaintiff argued that the bank did not have standing to accelerate the loan and begin foreclosure on January 2009 because the deed of trust was assigned to the Bank on February 2009 and there was no evidence of an endorsement of the note (the note contained a blank endorsement).

The Court of Appeals held that, as to the blank endorsement in the note, no special endorsement is necessary under the Texas Business and Commercial Code, only possession of the note. Two vice presidents of Midfirst bank testified that the bank held both the note and the deed of trust. In addition, one testified that both the note and deed of trust were received on October 2008. Since the plaintiff did not challenge the accuracy of the statements made, the court found that the evidence was sufficient. The court also held that the date the deed of trust was assigned does not create a factual issue of when the interests were transferred to the bank relying on a prior holding that an assignment of the deed of trust from MERS to a lender dated two years after the actual date of transfer does not raise a factual issue of whether the assignment was fabricated. The court held that the date of transfer is not evidence of when the bank is entitled to initiate foreclosure relying on prior holdings which found that the mortgage typically follows the note it secures.

The deed of trust granted both the lender and the beneficiary various lender’s rights in the agreement, particularly the power of sale. As a result, the court stated that MERS was authorized to exercise the right to invoke the power of sale in the deed of trust.

The Texas Supreme Court recently denied the petition for review of this case.

Federal District Court in Texas Rules That Third-Party Lacks Standing in Recording-Fee Case

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It appears that although courts may be receptive to claims about lost recording fees because of MERS, they won’t hear cases brought by third parties (at least, not in federal court). The citizens of a Texas county brought the claim seeking lost recording fees from MERS as a defense while they were in foreclosure. In Huml v. Mortgage Electronic Registration System, Judge David Guaderrama of the U.S. District Court in El Paso, Texas, rejected the plaintiffs’ theory of MERS gaining unjust enrichment. The plaintiffs alleged that the county lost recording fees that would have been acquired had MERS not taken “undue advantage of real property recording systems.”

The Judge found that the plaintiffs lacked standing to bring the claim. Since the plaintiffs alleged that counties were harmed by MERS, Judge Guaderrama found the argument of standing “piggy-backs on the direct injury, if any, to the counties.” Since the plaintiffs couldn’t assert direct injury from lost recording fees, and because plaintiffs cannot sue to enforce a third party’s rights in federal court (unless the suit falls under a particular exception, which didn’t happen in this case), the Judge dismissed the claim.

Nevada Supreme Court Unanimously Rejects Irreparable Split Theory and Grants Bank Standing

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In Edelstein v. Bank of New York, the Nevada Supreme Court unanimously rejected the irreparable split theory. The theory was brought up to challenge the Bank’s standing to foreclose on the plaintiff’s property. The irreparable split theory provides that a promissory note and a deed of trust that is separated prevents a nonjudicial foreclosure from occurring. This is because a note is a promise to repay the loan, while the deed of trust establishes the property as security for the loan.

The Court rejected the “traditional rule” that prevents the transfer of notes or deeds of trust separately, particularly because it would conflict with a previous holding recognizing the ability to transfer notes and deeds of trust separately. Instead, the Court adopted the Restatement approach, which permits separate transfers if the parties agree to it.

The Court held that identifying MERS as the nominee for the original lender and its assignees in the note is sufficient to hold “an agency relationship with [the original Lender] and its successors and assigns with regard to the note.” The Court found that the recorded beneficiary is considered “the actual beneficiary and not just a shell for the ‘true’ beneficiary.” As a result, naming MERS as the beneficiary of the deed of trust effectively split the note and deed of trust, but they were unified prior to foreclosure proceedings.

However, the Court found that no law requires them to be unified at inception, only in order to foreclose. The Nevada Supreme Court ultimately held that if the “split is cured when the promissory note and deed of trust are reunified.” As a result, the Court found that the bank, which held both the mortgage and the note at the time of foreclosure, had standing to continue the foreclosure mediation process.

Borden & Reiss: “Beneficial Ownership and the REMIC Classification Rules”

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We just posted “Beneficial Ownership and the REMIC Classification Rules” which can be most easily downloaded here.  It follows up on our previous piece, “Wall Street Rules Applied to REMIC Classification,” which ban be easily downloaded here.