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Conflicting Rulings Abound in MERS Judgments

Last week a New York judge ruled that the relationship between ""Mortgage Electronic Registration Systems"":http://www.mersinc.org (MERS) and its members is not one in which the company can act on behalf of the lenders in filing documents and proceeding with foreclosures.


But the next day a judge in Kansas ruled the connection between the company and its members does allow for such actions.

And a ruling that same week in Massachusetts gave the company the same rights.

All of the judges ruled based on specific laws and statutes within their respective states, but that does not make the rulings any less confusing.

The company has its members sign documents saying that MERS can assume rights and responsibilities on their behalf.

But Judge Robert Grossman, who presided over the New York case, said those documents are not enough to give the company such responsibility.


""MERS did not have authority as 'nominee' or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal,"" he said.

The Kansas Bankruptcy Court, on the other hand, ruled that the relationship MERS establishes with lenders and servicers is valid.

The Massachusetts Bankruptcy Court ruled in kind in a case with Aurora Loan Services. In the case, the debtor challenged that because MERS never officially held the note to his loan the company could not bring foreclosure actions.

But Judge William Hillman said, ""Under Massachusetts law, ‘where a mortgage and the obligation secured thereby are held by different persons, the mortgage is regarded as an incident to the obligation, and therefore, held in trust for the benefit of the owner of the obligation.""

Because of that, the company ""… was legally holding the mortgage in trust for the note holder"" and ""though MERS never held the note, it could by virtue of its nominee status, transfer the mortgage on behalf of the note holder,"" Hillman said.

MERS said in a statement it is pleased with the judgement.

""The Massachusetts Court understood the legal principles MERS is based on and confirmed MERS as a mortgagee who has the authority to assign the mortgage interest,"" said MERS spokesperson Karmela Lejarde.

Despite the rulings in its favor, MERS issued a statement Wednesday saying: ""MERS will shortly announce a proposed amendment to membership rule 8 requiring members to not foreclose in MERS' name. Additionally, all MERS certifying officers must be tested and appointed under our enhanced certifying officer process.""

About Author: Joy Leopold


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