A decision delivered by Oregon’s highest court impacts foreclosures on loans utilizing the Mortgage Electronic Registration Systems Inc. But MERS, itself, said the decision was consistent with its role and authority in the state.
The decision was filed Thursday by the Supreme Court of the State of Oregon in two MERS-related cases.
The first case was filed by Bart G. Brandrup and his wife Jessica D. Brandrup against Bank of America, N.A., and the second case was filed by Rebecca Niday against GMAC Mortgage LLC.
The cases concern non-judicial foreclosures under the Oregon Trust Deed Act when MERS is named as beneficiary of the trust deed instead of the lender.
“The questions all are concerned with a practice that has arisen in the home mortgage industry in the last twenty years — that of drafting mortgages and trust deeds so that a certain Delaware corporation, Mortgage Electronic Registration Systems, Inc. (MERS), rather than the lender, is identified as the security instrument’s “mortgagee” or ‘beneficiary,'” the decision states. “That practice allows lenders and other entities dealing in home loans to track their transactions in a database maintained by MERS. In Oregon, the practice has come under scrutiny in a number of foreclosure cases arising under the Oregon Trust Deed Act.”
The court determined that since a “beneficiary” is the lender to which the obligation is owed, then an entity like MERS, which is not a lender, cannot be the beneficiary of a trust deed unless it also a successor in the lender’s interest.
The court also determined that MERS is not eligible to serve as beneficiary under the state law even when the trust deed provides that MERS “holds only legal title to the interests granted by borrower in this security instrument, but if necessary to comply with law or custom, MERS as nominee for lender and lender’s successors and assigns) has the right: to exercise any or all of those interests.”
The decision indicated, however, that the ORS 86.735(1) doesn’t require recordation of deed assignments by operation of law that result from the transfer of the secured obligations. MERS noted in a statement that this ruling will allow lenders to move forward with non-judicial foreclosure proceedings in the state.
The court additionally found that the Oregon Trust Deed Act does not allow MERS to hold and transfer legal title to a trust deed as nominee for the lender, after the note secured by the trust deed is transferred from the lender to a successor or series of successors.
MERS was found to have no authority, as an agent for the original lender, to act on their behalves when it comes to the transfer of the beneficial interest in the trust deed or the non-judicial foreclosure process.
“The power to transfer the beneficial interest in a trust deed or to foreclose it follows the beneficial interest in the trust deed,” the decision stated. “The beneficiary or its successor in interest holds those rights. MERS’ authority, if any, to perform any act in the foreclosure process therefore must derive from the original beneficiary and its successors in interest.”
But in its statement, MERS said that today’s opinions are consistent with its role and authority to act on behalf of lenders in Oregon.
“The court said, ‘if it can be shown that the original lenders and their successors conferred sufficient authority on MERS, to act on their behalves in the necessary respects, MERS may have the authority, as the true beneficiary’s agent, to hold and transfer interests in the trust deed,” the MERS statement said. “We are confident that we have and can prove such authority.”
