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New York Appeals Court Rejects MERS Foreclosure - Bank of New York v. Silverberg

June 16, 2011

Our San Bernardino County foreclosure defense lawyers have written in the past about the Mortgage Electronic Registration System, the corporation that banks created to end-run around the need to register deeds with local land offices. So we were very interested to read about a decision out of the appellate department of the Supreme Court of New York in Bank of New York v. Stephen Silverberg et al. In the case, decided June 7, Stephen and Fredrica Silverberg moved to dismiss a foreclosure action against them by MERS for lack of standing. The trial court denied this motion, but they succeeded on appeal. The decision could set a precedent for MERS-owned mortgages in New York.

The Silverbergs borrowed $450,000 from Countrywide Home Loans to buy a home in 2006, then took out a second mortgage in 2007. Both deals gave MERS the right to hold the note, named Countrywide as the owner of the note and gave MERS the right to foreclose. The loan was later securitized, with Bank of New York acting as the trustee. The Silverbergs defaulted around the same time, and Bank of New York began the foreclosure. The couple moved to dismiss for lack of standing, saying Bank of New York didn't have their note, which showed legal ownership of the debt. The trial court denied that motion, saying MERS had assigned the note to Bank of New York.

On appeal, the Silverbergs had more luck. They argued that Countrywide never transferred or assigned the note to MERS and MERS never assigned it to Bank of New York. Thus, Bank of New York didn't own the note at the time of the foreclosure, they said, giving it no right to foreclose under New York law. The court agreed. Reading the language of the contracts between the lenders and the Silverbergs, it found that MERS never owned the debt. Because Bank of New York was merely standing in the shoes of MERS, it had no more right to the debt and could therefore not foreclose. Thus, the foreclosure lawsuit against the Silverbergs was dismissed. The court noted that the decision could have a negative effect on other foreclosures, but said its interest in protecting property rights and ensuring reliable ownership was more important.

As Moreno Valley foreclosure defense attorneys, we're interested in this decision especially because it is not the first. More and more, homeowners are challenging foreclosures on the grounds that the lender seeking to foreclose cannot actually prove ownership of the note. Along with robo-signing, MERS is part of the reason for those challenges. And while some decisions, like a recent California appeals decision, find that MERS does have the authority to foreclose, this decision shows that it cannot get around compliance with basics like actual ownership of the debt.

Howard Law PC represents clients who are challenging their foreclosures on any grounds, including failure to meet basic ownership and paperwork requirements. We have represented clients in foreclosure and loan modification cases since the beginning of the housing crisis, so we understand the most common tricks loan servicers use to improperly delay and deny modifications. Our San Juan Capistrano foreclosure defense lawyers can challenge actions by lenders that break HAMP rules as well as state and federal fair lending laws. In fact, if a foreclosure sale is scheduled immediately, we can ask a judge to delay it long enough to hear your case -- and decide it on its merits, not according to what serves the lender's financial interests.

If you're facing a foreclosure despite your best efforts to modify your loan, and you're ready to fight back, you should call Howard Law right away. For a free, confidential case evaluation, send us an email or call 1-800-872-5925 today.

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