MERS Emerges Triumphant

The legal right of Mortgage Electronic Registration Systems (MERS) to act as mortgagee has been repeatedly challenged in the last few years, and MERS has repeatedly emerged victorious in court.

The latest court decision in favor of MERS came this week from the New Hampshire State Supreme Court, which upheld a July 2015 decision that the language in a mortgage granted to MERS as the mortgagee as nominee for the lender and the lenders successors, and assigns evidences an agency relationship between the note holder and the assignee of a MERS mortgage, according to an announcement from MERSCORP Holdings, Inc.

The borrower in the case of Castagnaro v. Bank of New York Mellon filed a wrongful foreclosure action, claiming that BNY Mellon lacked the authority to foreclosure non-judicially under New Hampshire state law without also proving that it was the holder of the borrower’s note. The trial court ruled in favor of BNY Mellon and the plaintiff appealed the case to the First Circuit court, which subsequently certified two questions to the New Hampshire State Supreme Court with regard to whether or not the state law requires that the party initiating the foreclosure must be the owner of both the note and the mortgage at the time the non-judicial foreclosure is brought about.

The Supreme Court referred the First Circuit Court to its opinion in Bergeron v. N.Y. Community Bank, issued in July 2015, which involved answering similar questions on the law pertaining to foreclosure. Both cases involved mortgages creating an agency relationship between MERS and the noteholder and granted expressly to MERS (or whomever MERS assigns) “the power of sale and the right to foreclose and sell the mortgaged property,” according to the announcement.

“We are pleased that the Supreme Court of New Hampshire consistently recognizes the plain language in the mortgage agreement signed by a borrower at closing establishes the lawful agency relationship between MERS and a lender and its successors,” MERSCORP Holdings Vice President for Corporate Communications Janis Smith said. “The New Hampshire Supreme Court ruling recognizes MERS’ authority to take action on behalf of the lender, including assigning the mortgage.”

MERS won a number of court decisions just since the second half of 2015 in cases that challenged its right to act as mortgagee. In late September, MERS won similar decisions in Montana, Georgia, New York, and Texas. In Kentucky in early September 2015, the U.S. Sixth Circuit Court of Appeals denied an en banc rehearing of a case that held that recording statutes in the state do not required a recording in the land records when promissory notes are transferred. MERS has also had court victories in North Texas, Tennessee, and Pennsylvania since July.