Tag Archives: Mortgage Electronic Recording System

The United States District Court for the Eastern District of California Finds That MERS Was the Beneficiary and Did Not Breach Duty of Care

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The United States District Court for the Eastern District of California in deciding Knowledge Hardy v. IndyMac Federal Bank, et al, No. CV F 09-935 (E.D. Cal. 2009) found that MERS was the beneficiary and did not breach a duty of care.

The court found that MERS did not breach duty of care owed to the borrower by acting as the beneficiary and assigning the deed of trust to IndyMac. The court found that MERS participation in the foreclosure failed to amount to a violation of the covenant of good faith and fair dealing.

Court Holds That California State Law Did Not Require Possession of the Note to Commence a Non-Judicial Foreclosure

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The court in Chilton v. Federal National Mortgage Association, No. 1:09-cv-02187-OWW-SKO (2010), held that California state law did not necessitate possession of the promissory note in order to proceed with a non-judicial foreclosure.

The court dismissed the plaintiff’s complaint, after hearing the plaintiff’s arguments alleging wrongful foreclosure and lack of standing. Even though MERS was not named as a party to the action, the plaintiff argued that based on recent Kansas case law, MERS did not have standing to foreclose since the note and deed of trust had been separated.

The court distinguished Kansas’s recent precedent from this case in that the court held that Kansas’s case law did not consider the requirements of California’s non-judicial foreclosure process.

Court Holds MERS’ Previous Business Activities Prior to Proper Registration in California Did Not Render its Foreclosing Illegal

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The court in Perlas et al v. MERS, No. C 09-4500 (N.D.Cal. 2010) held that MERS’ previous business activities prior to becoming registered to do business in California did not render its foreclosing activities illegal.

Despite the plaintiff’s arguments to the contrary, the court noted that since MERS is now registered in California any alleged error had since been retroactively fixed. The Court in delivering their holding also noted that MERS, acting as the lender’s agent, had the authority to initiate non judicial foreclosures.

California Court of Appeals Holds That the Right to Challenge a Nominee’s Authority to Foreclose on Behalf of Note Holder Would Fundamentally Undermine the Non-Judicial Nature of the Process

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The Fourth District California Court of Appeals in considering Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011), affirmed the lower court’s decision upholding MERS’ ability to initiate non-judicial foreclosure actions.

The appellant argued that he was entitled to bring a lawsuit to challenge whether MERS was authorized to initiate a foreclosure action, however the California Court of Appeals rejected this argument. In rejecting the appellant’s argument, the court held that the text of the statue failed to provide a judicial action to determine whether the person initiating the foreclosure process is indeed authorized. Further, the court noted that there were no grounds for implying such an action.

The Court found that “the recognition of the right to bring a lawsuit to determine a nominee’s authorization to proceed with foreclosure on behalf of the note holder would fundamentally undermine the non-judicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.”

United States District Court Rules That MERS Had The Power to Assign the Deed of Trust

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The United States District Court of the Eastern District of California in deciding Coburn v. Bank of New York Mellon, N.A., 2:10-CV-03080 (2010) granted defendants’ motion to dismiss. The court also handed down the ruling that the plaintiff’s claim of deceit was without merit.

The plaintiff argued that MERS simply lacked the power to assign the deed of trust to The Bank of New York Mellon since MERS was neither the owner of the mortgage nor holder of the note. The court rejected this assertion.

The court held that MERS had the authority to assign its beneficial interest to another party. The court also held that MERS did not violate California Civil Code §1095 in assigning the deed of trust to the bank.

Arkansas Court Finds That Based on Security Agreement, MERS Was the Mortgagee

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The Arkansas court considering Coley v. Accredited Home Lenders, Inc. et al, 4 10 CV01870 (E.D. Ark. 2011) ultimately granted the defendants’ motion for dismissal. The court granted the dismissal with prejudice as to the plaintiff’s wrongful foreclosure claims. The court however, did not apply dismissal with prejudice to the plaintiff’s fraud claim.

The court held MERS acted within its role as agent when it transferred the mortgage to the foreclosing lender. Likewise, the court held, and ruled that the assignment to MERS was valid as such the court dismissed the wrongful foreclosure claim.

The plaintiffs based their argument on the allegation that the foreclosing lender lacked standing to foreclose. The plaintiff based this assertion on the claim that MERS was not authorized to transfer or assign the mortgage to the foreclosing lender and that the lender named in the security agreement was the only entity that could pursue foreclosure. The court, however found that MERS was the mortgagee under the security agreement as an agent of the originating lender.

United States District Court, Eastern District of Arkansas Dismisses Borrower’s Claim of Invalid Assignment

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The United States District Court, Eastern District of Arkansas in Kimberly Peace v. MERS, 4:09-cv-00966 (2010) granted MERS’ motion to dismiss. The court found that the assignment to MERS was valid.

This also led the court to decide that BAC had standing to appoint Recon Trust as BAC’s agent to exercise its right to start a non-judicial foreclosure. The borrower unsuccessfully alleged that the assignment from MERS to BAC had no legal effect as MERS was not on the note and was not an agent for the note holder. The court rejected this contention.