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MERS Wins Federal Court Battles Over Deed of Trust in Georgia, New York, and Texas

tech-sightsThree federal courts have ruled in favor of Mortgage Electronic Registration Systems, Inc. (MERS), dismissing borrowers' suits to quiet title and affirming MERS' authority to assign the mortgage lien, according to an announcement from MERSCORP Holdings.

The plaintiffs in the cases of Bradley v. Branch Banking Trust (BB&T) (Georgia), Garza v. Flagstar Bank, FSB (Texas), and McCarty v. Bank of New York (New York) all sued MERS and other financial companies, attempting to avoid foreclosure based on claims that MERS could not hold or assign a security instrument.

The plaintiffs in the Bradley and Garza cases further claimed that the mortgage or deed was unenforceable because the note and security instrument were split due to the use of MERS in the loan transaction.

  • In the Bradley case, Magistrate Judge Russell G. Vineyard from the U.S. District Court for the Northern District of Georgia dismissed the quiet title claim because the borrower could not claim that he held the full title to the property due to the fact that "it is undisputed that [the borrower] executed a security deed that conveyed the property to MERS."
  • In McCarty, U.S. District Judge Analisa Torres from the Southern District of New York ruled that the “Plaintiff voluntarily executed the Deed of Trust to obtain the loan. And even construing the amended complaint liberally, Plaintiff has not alleged a proper basis for a discharge of that loan.” In a decision similar to the Bradley case, Torres dismissed the quiet title claims against MERS and upheld the validity of the deed of trust assignment executed by MERS, according to the announcement.
  • Judge David Hittner from the U.S. District for the Southern District of Texas Court ruled in the Garza case that the borrowers “fail to make any allegations to support their assertion that Defendants’ claim to the property is invalid or unenforceable[.]” Like in Bradley and McCarty, the judge dismissed the quiet title claims and upheld the validity of the assignment of the deed of trust to MERS. In all three cases, the quiet title claims were dismissed with prejudice.

“These federal courts affirmed that MERS can rightfully hold a security instrument on behalf of the lender and its assigns,” MERSCORP Holdings Vice President for Corporate Communications Janis Smith said. “In addition, the federal court in New York found in McCarty that the borrower’s quiet title and fraud claims were contradicted by the plain language in the mortgage and assignment.”

The three court rulings are the latest in a series of victories for MERS in the last two months. In Kentucky earlier in September, 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 in the last two months.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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