Around the country courts are questioning the standing of MERS to assert legal rights in foreclosure or bankruptcy proceedings. Many courts are finding that Mortgage Electronic Registration System, or “MERS,” is not a legal mortgage holder for lenders, investors and their loan servicers, and are invalidating bankruptcy claims or foreclosure processes.
On its website MERS describes itself:
"MERS is an innovative process that simplifies the way mortgage ownership and servicing rights are originated, sold and tracked. Created by the real estate finance industry, MERS eliminates the need to prepare and record assignments when trading residential and commercial mortgage loans."
Since the mortgage bubble burst, MERS has come under increasing attack in state and federal courts. Some courts (most notably in Kansas, Florida, and New York) have found that MERS does not have standing to assert mortgage rights because it is a mere nominee, and not a mortgage assignee (an assignment of a mortgage without the debt transfers nothing. 55 Am. Jur. 2d, Mortgages § 1002). Additionally, MERS routinely skips legally required processes when a mortgage is transferred.
MERS is not the beneficiary of a Deed of Trust, and has no ownership or possession of a promissory note. Therefore, many courts are finding noncompliance with state laws. Recently one bankruptcy court in the State of New York invalidated a bankruptcy claim by MERS when the company could not show how it had standing in the case.
Many bankruptcy attorneys are demanding proof of assignment and documents establishing a paper trail for their client’s mortgage. In many cases MERS is unable to provide this information; much like collection companies often cannot prove a debt. Original documents, recorded deeds, payment history, and executed assignments seem to be inconsequential matters to the MERS powerhouse. Fortunately, MERS is now under attack and accused of not following legal processes. It will be very interesting to see how the state and federal appellate courts address the MERS debacle.
If you are dealing with an uncooperative mortgage company and need assistance saving your home, speak with an experienced bankruptcy attorney and discuss your options. There are many legal options available and your bankruptcy attorney can help you determine the best choice for your family.
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When a borrower signs the mortgage security instrument at closing, they grant and convey the legal title to the mortgage to Mortgage Electronic Registration Systems Inc. (MERS) and MERS is the mortgagee. As the agent for the promissory note owner, upon instructions from the owner, MERS will commence a foreclosure. The mortgage instrument states that MERS has the right to foreclose and sell the property. Courts around the country have repeatedly upheld and recognized this right. For consumers, MERS helps make the loan process more efficient by reducing costs for lenders and eliminating paper. This ultimately makes it easier and less expensive for borrowers to get mortgage loans.
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