Editor: David Reiss
Brooklyn Law School

February 9, 2013

Tenth Circuit Holds that MERS has Authority to Initiate Non-Judicial Foreclosure in Utah

By Justin Rothman

In Commonwealth Property Advocates, LLC v. Mortgage Electronic Registration Systems, Inc, 474 F. App’x 732 (10th Cir. 2012), the United States Court of Appeals for the Tenth Circuit held that Mortgage Electronic Registration Systems, Inc (“MERS”) had authority to initiate non-judicial foreclosure on property of the plaintiffs. In this case, the property owners filed a complaint alleging that MERS “had no authority to foreclose on their home because the obligation had been securitized and the investors, who actually own the debt, are unknown.” According to the plaintiffs, the securitization process severed the debt from its security, which, under Utah Code Ann. § 57-1-35, rendered the trust deed unenforceable. MERS claimed it had authority to foreclose because the trust deed “specifically established MERS as beneficiary and ‘nominee for Lender and Lender’s successors and assigns.’”


The court, quoting a Utah Court of Appeals decision, rejected plaintiffs’ argument that § 57-1-35 invalidated MERS’s authority to foreclose, reasoning that the statute “’simply describes the long-applied principle . . . that when a debt is transferred, the underlying security continues to secure the debt.’” In deferring to the Utah Court of Appeals decision, the court here found that Plaintiffs’ argument “’had no legal basis under Utah law’ because even assuming the securitization scheme divested defendant of their implicit authority to foreclose as holders of the trust deeds, ‘the trust deeds explicitly granted Defendants the authority to foreclose’ and § 57-1-35 in no way prohibits such an authorization.” Thus, the court held that Plaintiffs’ claim was without merit and granted MERS’s motion to dismiss.

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