RSN Fundraising Banner
FB Share
Email This Page
add comment
Print

Excerpt: "Merscorp Inc, a private company known as MERS and owned by large banks and mortgage processors, cannot act as an agent of the banks that own mortgages, wrote Judge Robert Grossman of the US bankruptcy court in Central Islip, New York, located on Long Island."

A gate to a foreclosed home is locked with a chain and padlock in Richmond, California, 04/15/10. (photo: Getty Images)
A gate to a foreclosed home is locked with a chain and padlock in Richmond, California, 04/15/10. (photo: Getty Images)



Judge Rules MERS Cannot Transfer Mortgages

By Reuters

16 February 11

 

company that tracks roughly half of all US home loans has no right to transfer mortgages, a ruling that could significantly affect the foreclosure process nationwide, a federal bankruptcy judge concluded.

Merscorp Inc, a private company known as MERS and owned by large banks and mortgage processors, cannot act as an agent of the banks that own mortgages, wrote Judge Robert Grossman of the US bankruptcy court in Central Islip, New York, located on Long Island.

MERS, which stands for Mortgage Electronic Registration Systems, tracks more than 60 million mortgages, and has filed thousands of foreclosure actions on behalf of lenders.

While MERS was designed to speed up legal recordkeeping of mortgages and sales of mortgage loans through securitizations, critics including borrowers' lawyers and advocacy groups contend it has no right to pursue foreclosures because it does not own the mortgage loans.

"An adverse ruling regarding MERS's authority to assign mortgages or act on behalf of its member/lenders could have a significant impact on MERS and upon the lenders which do business with MERS," Grossman wrote in his Feb. 10 opinion.

"However," he added, "it is up to the legislative branch, if it chooses, to amend the current statutes to confer upon MERS the requisite authority to assign mortgages under its current business practices."

A MERS spokeswoman said the Reston, Virginia-based company disagrees with the court's interpretation of New York real property and contract law. She also said the ruling conflicts with a ruling by a Kansas bankruptcy judge in a separate case.

The decision was earlier reported by Bloomberg News.

If MERS were regularly found not to have authority to foreclose, many foreclosure proceedings could be halted indefinitely, and affected homeowners could end up with clear title to their homes.

Lenders foreclosed on 78,133 properties in January, up 12 percent from the prior month, real estate data firm RealtyTrac Inc said on Feb. 10.

In the Long Island case, a mortgage servicing unit of Credit Suisse Group AG sought to foreclose on a home in Westbury, New York after the borrower, Ferrel Agard, filed for bankruptcy protection. It sought relief from laws that shield debtors from legal claims while in bankruptcy.

Grossman ruled in favor of the Credit Suisse unit, citing an earlier state court ruling authorizing foreclosure.

But he said "MERS did not have authority, as 'nominee' or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal. This court finds that MERS's theory that it can act as a 'common agent' for undisclosed principals is not support(ed) by the law."

He said that in future cases involving MERS, parties seeking in bankruptcy proceedings to avoid the ban on legal claims must show they own both the note and the mortgage.

The case is In re: Agard, US Bankruptcy Court, Eastern District of New York, No. 10-77338.


(Reporting by Jonathan Stempel in New York; editing by Bernard Orr.)

e-max.it: your social media marketing partner
Email This Page

 

THE NEW STREAMLINED RSN LOGIN PROCESS: Register once, then login and you are ready to comment. All you need is a Username and a Password of your choosing and you are free to comment whenever you like! Welcome to the Reader Supported News community.

RSNRSN