From: Charles Cox [mailto:firstname.lastname@example.org]
Sent: Thursday, March 15, 2012 4:15 PM
To: Charles Cox
Subject: Max Gardner’s Newsletter – MERS in State and Federal Courts
MERS in State and Federal Courts
By Tiffany Sanders on March 15, 2012
In the last newsletter, we addressed general standing issues in bankruptcy and other federal courts. Here’s the next installment from the bibliography compiled for the Boot Camp by Robin Miller. One area in which standing issues regularly take center stage (or should) is in foreclosure actions involving MERS. Many state and federal courts have issued opinions regarding the rights and authority of MERS and the organization’s standing to bring foreclosure actions.
MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 861 N.E.2d 81, 828 N.Y.S.2d 266 (N.Y. 2006): Precise question was whether Suffolk County Clerk must record mortgages and assignments of mortgages which name MERS. The final paragraphs of opinion note the confusion created for homeowners, potential that errors are hidden, even talks about the problem created by loss of revenue. Though creditors cite this case as some sort of approval of MERS, a footnote specifically says that the following questions are left for another day: the underlying validity of the MERS mortgage instrument, whether its failure to transfer beneficial interest renders it a nullity under real property law, whether it violates the prohibition against separating the note from the mortgage, and whether MERS has standing to foreclose.
Bank of New York v. Silverberg, 86 A.D.3d 274, 926 N.Y.S.2d 532 (2nd Dept. June 7, 2011): MERS’s authority as “nominee” was limited to only those powers that were specifically conferred to it and authorized by the lender; hence, although the consolidation agreement gave MERS the right to assign the mortgages themselves, it did not specifically give MERS the right to assign the underlying notes, and the assignment of the notes was thus beyond MERS’s authority as nominee or agent of the lender.
Deutsche Bank Nat. Trust Co. v. Pietranico, 33 Misc.3d 528, 928 N.Y.S.2d 818 (N.Y. Sup., July 27, 2011): MERS, as nominee, had authority to assign mortgage.
In re Agard, 444 B.R. 231 (Bankr. E.D.N.Y. 2011): A written assignment by MERS of the mortgage to U.S. Bank was not sufficient to establish an effective assignment of the note to U.S. Bank, as the language in the assignment was vague and insufficient to prove an intent to assign the note, and, in any event, MERS was not a party to the note, and the record was barren of any representation that MERS had any authority to take any action with respect to the note.
Bank of New York v. Alderazi, 31 Misc.3d 1209(A), 929 N.Y.S.2d 198 (N.Y. Sup., April 11, 2011) (unreported table opinion; text found at 2011 WL 1364466): While the mortgage granted some rights to MERS, it did not grant MERS the specific right to assign the mortgage.
In re Freeman, 446 B.R. 625 (Bankr. S.D.Ga., Feb. 10, 2010): MERS, which was the grantee, as nominee for the lender, under the security deed given by the debtor, had standing, as the security deed gave MERS the right to foreclose on the debtor’s property, that right was impaired by the automatic stay, and relief from the stay would redress that injury.
In re Fontes, Case No. 10-1345 (9th Cir. B.A.P., April 22, 2011): While MERS was named as the beneficiary of the deed of trust on the Chapter 13 debtors’ property, as the nominee of the lender, MERS did not have the authority to transfer the debtors’ promissory note, where there was no evidence that MERS had any interest in the note, and the deed of trust, although giving MERS the authority to assign the deed of trust, did not mention the note.
In re Martinez, 2011 WL 996705 (Bankr. D. Wyo., March 16, 2011): MERS, which assigned the mortgage from the original lender to Ocwen, had the authority to do so, as in the mortgage MERS is designated as the nominee of the lender with authority to “take any action required of Lender”.
In re Thomas, 2011 WL 576830 (Bankr. D.Mass., Feb. 9, 2011): The creditor could not rely on the recorded assignment of the debtor’s mortgage from MERS to the creditor as evidence that the note was transferred to the creditor; while the assignment purported to assign both the mortgage and the note, MERS, which is a registry system that tracks the beneficial ownership and servicing of mortgages, was never the holder of the note, and therefore lacked the right to assign it.
In re Koontz, 2010 WL 5625883 (Bankr. N.D.Ind., Sept. 30, 2010): The purported mortgage creditor failed to establish the chain of title for its proof of claim; while the debtors’ mortgage had been assigned to the creditor by MERS, as the nominee of the original lender, MERS admitted that the individual who executed the assignment on behalf of MERS was not a MERS employee.
In re Tucker, 441 B.R. 638 (Bankr. W.D. Mo., Sept. 20, 2010): The holder of the Chapter 7 debtors’ mortgage note was entitled to seek relief from stay, although the note holder was not also, on the petition date, the owner of the deed of trust on the debtors’ property, as (1) the note holder was a member of the MERS system, (2) MERS was the beneficiary under the deed of trust as nominee for the note holder, and (3) all parties to whom the note had been transferred in the chain from the original lender to the current note holder had been members of the MERS system.
In re Box, 2010 WL 2228289 (Bankr. W.D. Mo., June 3, 2010): A purported transfer of a note to a creditor by MERS was ineffective in the absence of evidence that MERS possessed the authority to transfer the note.
Mortgage Electronic Registration Systems, Inc. v. Medina, 2009 WL 4823387 (D. Nev., Dec. 4, 2009): MERS, which provided no evidence that it was the agent or nominee for the current owner of the beneficial interest in the note, did not establish that it was a real party in interest, as required under Bankruptcy Rule 7017.
In re Sheridan, 2009 WL 631355 (Bankr. D. Idaho, March 12, 2009): Mortgage Electronic Registration Systems, Inc., which filed a motion for relief from stay “as nominee HSBC Bank USA, National Association, as Indenture Trustee of the Fieldstone Mortgage Investment Trust Series 2006-3,” did not establish its standing to prosecute such a motion, even assuming that MERS as a “nominee” had sufficient rights and ability as an agent to advance its principal’s stay relief request.
Keep watching the newsletter for additional information and case citations relating to more specific aspects of standing in mortgage foreclosure cases.