Our Moreno Valley foreclosure defense attorneys have written here before about the Mortgage Electronic Registration Systems, the huge national database that large banks have created to keep track of loan ownership among themselves. The system has no legal authority or accountability and in fact bypasses local registration systems, but courts have frequently ruled that it can be used as an owner of a loan for legal purposes. Interestingly, an April 19 article from HousingWire reported on a ruling that went the other way -- it said assigning interest in a loan to MERS did not give it authority to assign the loan to another institution. If adopted outside the Southern District of California, the ruling could throw the role of MERS into doubt for foreclosures of securitized loans.
The case was filed by Eleazar Salazar, who was trying to invalidate a foreclosure sale by U.S. Bank. According to the article, MERS, not U.S. Bank, was the original beneficiary of the deed of trust, but U.S. Bank was the trustee for the security into which Salazar's loan was bundled. Salazar sued and later filed for bankruptcy, claiming U.S. Bank had no standing to foreclose because it was not the beneficiary of record and hadn't recorded an assignment of interest in the loan as required by California law. In essence, this meant he claimed U.S. Bank did not own the loan. U.S. Bank countered that California law does not require assignments of interest for deeds of trust, just for mortgages -- and that MERS obviated the need for interest in the loan to be reassigned.
The bankruptcy court disagreed. It said that even if MERS was the beneficiary of record when the foreclosure took place, it had no authority under California law. The ruling may contradict one out of the state's Fourth District Court of Appeal, Gomes v. Countrywide, which said the deed of trust itself contains the language necessary to give MERS the right to foreclose. The bankruptcy attorney for Salazar said one vital difference in the cases was that Gomes signed a document explicitly giving MERS the right to foreclose.
As Mission Viejo foreclosure defense lawyers, we're interested to see what other developments come in the way California courts handle MERS. MERS is an oddity: It is a private corporation taking the place of local land use or deed recording offices. Unlike the county, it is not accountable through elected officials or public records laws. For that reason, we think it's a good thing that judges are casting a critical eye on the way MERS is used in foreclosures. After the robo-signing scandal, courts and homeowners have stopped trusting (if they ever did) that lenders' paperwork is truthful or in order. When ownership of the note is in question, MERS can be used to simply fabricate that ownership. When a foreclosure is at stake, it's important for judges to watch this kind of behavior carefully.
Howard Law PC represents borrowers throughout California who are struggling to get fair consideration for their loan modification applications. Unfortunately, borrowers can't rely on loan servicers to behave fairly by default, because the financial incentives in the loan servicing world go the other way. When loan servicers grant a modification, they don't save any money because they don't own the loan -- but when they foreclose, they can tack on lots of extra fees. Our Vista foreclosure defense attorneys suspect this is the real reason why the loan servicing arms of major banks seem so much less competent than other parts of the banks. We fight back through aggressive negotiation and, when necessary, litigation.
If you're tired of calling and calling your loan servicer and never getting a straight answer, call Howard Law instead. We offer free, confidential case evaluations for potential clients. To set one up, send us a message through our website or call toll-free at 1-899-872-5925.