Firm Commentary: An Oregon Federal Court addressed MORTGAGE ELECTRONIC REGISTRATION SYSTEMS,INC. (MERS) power to facilitate substitutions of trustee and non-judicial foreclosure under the Oregon statutes. California has a similar statutory scheme and logic behind the decision, (MIRARABSHAHI v. RECONTRUST COMPANY, BANK OF AMERICA THE BANK OF NEW YORK MELLON and MERS) may soon have an effect on the decisions of California judges facing the same issues. Read the full 55 page decision at http://www.publications.ojd.state.or.us/docs/S060281.pdf. The case tracks the “standing” arguments made by this Firm and others in bankruptcy matters and lawsuits filed on behalf of California Homeowners in Financial Distress. Til now, most Courts have ignored logic and supported the MERS model. While not legally binding on California Courts, this Oregon case could be a game changer and lends judicial credibility to the argument that MERS is an AGENT of the true Note-holder at best and therefore lacks the power to foreclose itself.
The case resolved four certified questions of law crucial to most MERS foreclosures. The questions all are concerned with a practice that has arisen in the home mortgage industry in the last twenty years that of drafting mortgages and trust deeds so that a certain Delaware corporation, Mortgage Electronic Registration Systems, Inc. (MERS), rather than the lender, is identified as the security instrument “mortgagee” or “beneficiary”.
Certified Question 1: The Court found that the term “beneficiary” under Oregon Law, is the lender to whom the debt is owed or their successor and that MERS is neither. You could say this is obvious even under California law yet Courts have often ignored plain logic the last 5 years.
Certified Question 2: Under Oregon law, the Court found that the MERS cannot serve as beneficiary for purposes of acting as the “beneficiary”…as in the case where MERS substitutes a Trustee, since MERS has no right to receive repayment of the debt.
Certified Question 3: Under Oregon law, the Court found that the recording of Assignments is not required to facilitate a transfer of ownership or change in beneficiary.
Certified Question 4: Under Oregon law, the Court found that even as an agent to the true owner of a debt, MERS lacks the authority to act on its own behalf with respect to the transfer of a mortgage or the substitution of a trustee. The court held that the only pertinent interests in the trust deed are the beneficial interest of the beneficiary and the legal interest of the trustee. MERS holds neither of those interests in typical non-judicial foreclosure cases absent a specific showing of the existence, scope, or extent of any such authority.
Again, this ruling is perfectly suited to support the same arguments in California. When and if the California Courts will seize upon this logic remains to be seen…but it seems that the tide may be turning for homeowners.
Home Owners in foreclosure or previously denied a loan modification can get a second bite at the apple if they present their facts to the loan servicer in the proper way and use the new and emerging laws to prevent a wrongful foreclosure. Call the Firm to have your case analyzed.
–J. Arthur Roberts, Esq.