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Backed by Big Banks, MERS Gains Momentum in the Courts

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In the high stakes game of billiards being played between the Mortgage Electronic Registration Systems (MERS) and government officials, the automated mortgage registry continues to run the table against its opponents in court as more judges deny plaintiffs’ causes of action for a litany of reasons.

At the end of the day, the common relief sought by state and county governments going after MERS is one thing …MONEY! Money they feel has been more or less stolen from their coffers through MERS circumventing the prescribed system for recording the transfer of real property. And the courts, more often than not, are simply not buying into those arguments.

At issue in many cases is the fees counties charge every time a mortgage is recorded — adding up to potentially millions of dollars in lost revenue for their cash-starved economies.  Closely tied to this issue is whether MERS has a sufficient agency relationship with its member banks and mortgage servicing companies to properly represent their interest in court. In other words, if MERS has no legal standing to foreclose on behalf of its members, then the foreclosure at issue in the case is null and void.

As a flurry of recent cases against MERS suggest, courts in many jurisdictions have held that either the plaintiff does not have standing to sue MERS, or that MERS itself is the proper party to foreclose for its members.

MERS was established back in 1995 with the express purpose of streamlining the mortgage process by utilizing ecommerce to track changes in mortgage servicing rights and beneficial ownership interests, thus supplanting the need for paperwork.

Its duties include serving as the mortgagee in land records for loans registered on its system, and as a nominee for lenders and subsequent buyers (“beneficial owners”) of a mortgage loan. It also serves as a common agent for the mortgage industry.

Established by some of the nation’s largest lenders at the time — today its shareholders number around 3,000 lenders, servicers, investors and government institutions including Bank of America, CoreLogic, First American Title Insurance, Fannie Mae, the Mortgage Bankers Association, GMAC Residential Funding Corp. and Wells Fargo Bank, N.A.

A glance at the MERS home page (www.mersinc.org) features a list of recent cases decided in the registry’s favor. So far in 2013 MERS is continuing to rack up the wins. Just this morning the chief judge of the U.S. District Court for the Western District of Washington dismissed plaintiff’s allegations that MERS violated both the state Deed of Trust Act and its Consumer Protection Act.

That ruling follows closely on the heels of a ruling that came down late last week from a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit dismissing plaintiffs allegations related to MERS ability to assign a mortgage to a foreclosing lender. Siding with MERS, the court affirmed that MERS is the nominee for the lender and its successors and assigns and thus had the ability to act, including assigning a mortgage to a third party.

Earlier this year MERS prevailed in to two appeals cases in Minnesota, won dismissal of recording fees cases in Illinois, Missouri and Kentucky, and won affirmation of its role in a Wyoming bankruptcy court.

A New York state judge ruled in favor of MERS as the being the lender’s agent in February. Now Hennepin and Ramsey counties in Minnesota, and Multnomah County in Oregon are all seeking monetary damages, alleging the already tested argument over recording fees that courts have lined up to deny. The Oregon Supreme Court recently agreed to hear two Oregon cases regarding the registry’s standing to represent its member lenders on real estate deeds.

MERS may be the 800-pound gorilla occupying the mortgage space, but so far it’s been able to push its weight around pretty well without fear of retribution or having to cough up millions of dollars.

Is this fair to the counties and states suffering cuts in services due to lower revenues? We’d like your comments on MERS success in court cases nationwide and whether you believe MERS has a place in the real estate transaction of the future?

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