The Oregon Court of Appeals struck a blow to the mortgage industry, ruling that lenders using an electronic system to rapidly package and sell mortgages must go through the courts to begin foreclosure filings.
Oregon's second-highest court also held on July 18 that a lender must ensure a complete ownership history of the mortgage on file in county records before it can foreclose outside a courtroom. The ruling issued by a three-judge panel said lenders that use the Mortgage Electronic Registration Systems Inc., or MERS, instead of publicly recording the ownership history of a trust deed cannot take advantage of a foreclosure process outside the court system.
The electronic service known as MERS was created by the mortgage industry in the 1990s to make it easier to bundle and sell loans to investors in the secondary market without having to record every assignment with county clerks. According to MERS, it handles 60 percent of mortgages nationwide.
The court found that the Oregon Trust Deed Act requires the party who receives loan payments to publicly record all changes in mortgage ownership before starting a so-called non-judicial foreclosure.
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