January 8, 2010

It is no secret that whether a MERS assignment is valid and legal or not depends on what part of the country you are in. The California courts have said yes and no depending on the circumstances; the Arizona courts apparently believe that whatever MERS does cannot be challenged; the Supreme Court of Kansas recently ate away at MERS’ purported authority; the Idaho Bankruptcy Court has held that purported assignments of the Note in a MERS assignment of mortgage is ineffective; and many state appeals courts have not spoken on the issue at all.

The U.S. Bankruptcy Court for the District of Nevada is the only court we know of so far which has resoundingly rejected MERS’ authority to assign anything. In the matter of In Re Joshua and Stephanie Mitchell, Case No. BK-S-07-16226-LBR, the Court did not mince words:

     MERS does not have standing merely because it is the alleged beneficiary under the deed of trust. It is not a beneficiary, and, in any event, the mere fact that an entity is named beneficiary in a deed of trust is insufficient to enforce the obligation.

Citing the standard MERS language in a Deed of Trust that it is both a nominee and a beneficiary and also citing MERS’ “Terms and Conditions” in its corporate documents whereby MERS affirmatively states that it has no rights to any payments on the mortgage loans, no servicing rights, and agrees not to assert any rights with respect to the mortgage loans or mortgaged properties, the Court then set forth the legal definition of a “beneficiary” and held:

   But is is obvious from MERS’ “Terms and Conditions” that MERS is not a beneficiary as it has no rights whatsoever to any payments, to any servicing rights, or to any of the properties secured by the loans. To reverse an old adage, “if it doesn’t walk like a duck, talk like a duck, and quack like a duck, then it’s not a duck”.

The law is fairly standard in all states that if a state has not spoken on a particular legal issue in an appellate decision that the trial court considering the issue may look to the law of other states for guidance. The Ohio courts did just that in adopting the opinions of Judge Arthur Schack from New York as to standing issues in foreclosure cases. As there are MANY states which have not yet spoken on the issue of MERS alleged authority, continued litigation will be necessary, in the absence of any pronouncement from the United States Supreme Court, in order to resolve MERS’ alleged authority to assign mortgages/Deeds of Trust and Notes in those states which are to date silent on the issue, and as such, the defense as to the lack of MERS’ authority continues to be viable in foreclosure defense cases in those states where there is no opinion on the issue.

Jeff Barnes, Esq. www.ForeclosureDefenseNationwide.com