Tag Archives: non-judicial foreclosure

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, 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.

Arizona Court Affirms a Lower Court Decision That Possession of Note Was Not Needed for a Party to Initiate a Non-Judicial Foreclosure

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The Arizona court in Maxa v. Countrywide Loans, Inc., 2010 WL 2836958 (D. Ariz. 2010) affirmed a lower court decision that possession of the note was not needed for a party to initiate a non-judicial foreclosure. The court also affirmed that MERS had the authority under the deed of trust to commence foreclosure.

The court in reaching their decision rejected the plaintiff‘s claim that the defendants lacked the right to enforce the note; therein making the foreclosure was invalid. The court noted that a trustee’s sale was not an action to enforce the note, but rather it was an exercise of the power of sale upon default.

The court explicitly held that Arizona law bestowed power of sale on the trustee upon default or breach of the contract secured by the trust deed without reference to enforcing or producing a note or other negotiable instrument.

The court in reaching their decision also found that the plaintiff not only gave the power of sale to the trustee, but also agreed to empower MERS, as the lender’s nominee, to exercise the right to foreclose. Lastly, the court directly rejected the plaintiff’s claims of fraudulent misrepresentation based upon the notion that MERS was not a valid beneficiary.

Arizona Court Rejects Plaintiff’s Argument That MERS Lacked Authority to Foreclose

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The Arizona court in Kane v. Bosco, No. 10-CV-01787-PHX-JAT, 2010 WL 4879177 (D.Ariz. 2010), after considering the plaintiffs contentions that MERS lacked the power to assign mortgages, proceeded to reject those arguments.

In making such a rejection, the court held that MERS could assign mortgages. Contrary to plaintiffs‘ allegations, the court failed to see how the MERS System lacked authority as a nominee of lenders to assign deeds of trust. Further, the court failed to see how MERS, in assigning deeds of trust, committed any form of fraud as the plaintiff alleged.

The United States District Court for the District of Arizona Reasons That the Plaintiff Agreed to Empower MERS to Foreclose

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The United States District Court for the District of Arizona, in Silvas v. GMAC Mortgage, LLC, et al., cv00265 (AZ Dist., 2009), reaffirmed MERS’ standing as the beneficiary of a deed of trust.

In the present case, the plaintiff brought a host of claims against the defendant. One such claim included conspiracy to commit fraud by making use of the MERS System. The court considered the plaintiff’s arguments, however the court rejected them. In rejecting the plaintiff‘s contentions, the court found that they were not only inaccurate, but that the claims were also insufficient to support the plaintiff’s assertions.

The court also reasoned that the plaintiff agreed to empower MERS to foreclose. In reaching this conclusion the court noted that the deed of trust designated MERS as the beneficiary, and authorized MERS to take any action to enforce the loan. One such right included the power to foreclose.

Alabama Court Rules That Demonstration of Note Ownership is Not Needed

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The court in Farkas v. SunTrust Mortgage, Inc, et al., 447 F. App’x 972 (11th Cir. 2011) found that Alabama is a non-judicial foreclosure state and that the party seeking foreclosure was not required to demonstrate ownership of the promissory note before taking action on the corresponding mortgage. This action involved MERS as the foreclosing mortgagee.

The debtor claimed that Article 3 of the Uniform Commercial Code (UCC) required that the party seeking foreclosure had to prove an interest in the note. However, the court reasoned that the UCC was not relevant to non-judicial foreclosure proceedings.