A California appeals court handed MERScorp
, the operator of Mortgage Electronic Registration Systems,
another legal victory by ruling MERS can launch foreclosure procedures even when it lacks possession of a promissory note.
In its Ferguson v. Avelo Mortgage verdict, the California Second District Court of Appeals refused to accept the plaintiff's assertion that MERS as nominee of lender lacked possession of the original promissory note. Ferguson argued MERS could not foreclose if it did not hold the note.
The Court disagreed with that argument after applying findings from another California MERS decision, Gomes v. Countrywide Home Loans.
In Gomes, the court "rejected Gomes's argument that MERS lacked authority to initiate the foreclosure because the deed of trust explicitly provided MERS with the authority to do so," court records say. The court in Gomes also stipulated that "the deed of trust contains no suggestion that the lender or its successor and assigns must provide Gomes with assurances that MERS is authorized to proceed with a foreclosure."
In the recent Ferguson
decision, the court said "just as in Gomes, the deed of trust in this case specifically states 'borrower understands and agrees that MERS holds only legal title to the interest granted by the 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 these interests, including, but not limited to, the right to foreclose and sell the property."
Looking at the latest decision, attorney Anthony Laura with Patton Boggs said the take-away is "this court approves of the procedures MERS employs in its administration of security agreements." Laura says the drafters of the opinion recognize that "other courts disagree with the conclusion," but the Second Appellate Division's conclusion is that MERS does have the right to partake in these proceedings under California law.
While MERS has obtained unfavorable rulings from courts in other jurisdictions, including Oregon
and the California bankruptcy court system
, the battle between MERS and parties who are challenging the firm's authority to foreclose continue to be decided on a case by case basis.
Write to Kerri Panchuk.