June 18, 2010

We recently advised of a Florida trial court decision which dismissed a foreclosure action filed by Aurora Loan Services LLC which had claimed the right to foreclose by virtue of a MERS assignment. In dismissing the Complaint, the Court specifically found that the purported assignment was “completely ineffective” and that the assignment was “invalid”, and ultimately finding that the Plaintiff had no standing and thus there was “no justiciable controversy between the parties”, mandating dismissal of the foreclosure action.

The Court specifically held that “There is no evidence of record that establishes that MERS was authorized to assign anything to Plaintiff”, citing the decisions from New York, Nebraska, Arkansas, Kansas, and California. This is what the courts of those states, and the courts of Idaho, Missouri, and Nevada have been saying over and over and over again. The Florida court found, like the Idaho did, that “MERS has no substantive rights itself and, therefore, cannot assign what it does not have”.

Fortunately, most courts have recognized that MERS does not have any authority to assign anything, and as it has no substantive rights, it cannot undertake any actions to further a foreclosure, whether judicial or non-judicial (such as substituting a trustee or claiming itself to be the “beneficiary” for purposes of a Notice of Default or Notice of Trustee’s Sale in the nonjudicial states). However, there are a few courts that still do not get it, and sadly buy into the simplistic argument of the foreclosing party as to the presence of the claimed default and that “the borrower is living in the house for free”.

The issue of the default does not and should even be permitted to be argued unless and until the foreclosing party can first establish that they had the legal right to file a foreclosure action (in a judicial state) or claim a default and schedule a Trustee’s Sale (in a nonjudicial state), for if there is no legal right to foreclose, one never gets to the next issue, which is the claimed default. If MERS is involved in any alleged “Assignment” of the mortgage or deed of trust “together with the Note”, any foreclosure action filed or threatened is legally infirm as MERS has no rights, period, as found by and is continuing to be found by court after court after court from all across the United States.

The tide is turning. It is up to us engaged in this war to make sure that the judiciary understands what MERS is and what it is not, and what MERS can and cannot do. 13 states, at the trial and appellate levels and at the Federal and Bankruptcy levels, could not have all gotten it wrong.

Jeff Barnes, Esq.,