An Arizona federal judge dismissed 72 lawsuits against Mortgage Electronic Registration Systems Inc.
, which tracks ownership and servicing rights of U.S. mortgages.
U.S. District Judge James Teilborg, relying on a September appellate court decision, rejected the argument by plaintiffs in the consolidated litigation that naming MERS as a beneficiary on deeds of trust means they're unsecured and the properties can't be foreclosed.
"This court does not find legal support for the proposition that the MERS system of securitization is so inherently defective so as to render every MERS deed of trust completely unenforceable and unassignable," Teilborg wrote in his order dismissing the claims.
, the parent company of MERS, hailed the ruling as a validation of its business model, which has survived attacks by plaintiffs lawyers in jurisdictions across the U.S., as dozens of states
have ruled in the company's favor.
"The court's dismissal of these 72 cases against MERS, including six class actions, is an extremely significant ruling and shows that claims being made against MERS and MERSCORP alleging fraud, or that security interests are unenforceable, or alleging that foreclosures are inappropriate due to MERS’ presence as a party, are meritless," said MERSCORP in a statement.
Valerie Edwards, co-lead plaintiffs' counsel, said plaintiffs plan to appeal.
"We believe that the court's decision misinterprets the 9th Circuit's previous decision in the Cervantes case," said Edwards, a partner with Koeller, Nebeker, Carlson, Haluck, LLP
in Phoenix, Ariz. She was referring to Cervantes v. Countrywide Home Loans, et al.,
a September ruling
from the 9th U.S. Circuit Court of Appeals that found borrowers were not harmed by the use of MERS and couldn't show that its operations violated state law.
Contrary to the plaintiffs' allegations, MERS' role as a beneficiary and its assignments of mortgages were proper, and MERS and its appointed trustees do have the power to foreclose, Judge Teilborg found. In addition, he ruled that the plaintiffs lacked standing to challenge the assignments.
"[A]s specifically agreed to by the plaintiffs in their deeds of trust, MERS holds legal title to the secured interests and is the beneficiary or lien holder of record, as nominee or agent for plaintiffs’ lenders and the lenders' 'successors and assigns,' " he wrote.
In light of his decision that there was nothing improper about MERS' role as a beneficiary, Teilborg also ruled that shareholders or directors of MERS could not be held liable for aiding and abetting wrongful foreclosure. At the same time, he rejected a motion to certify a question from the case to the Nevada Supreme Court.
"The court’s detailed and reasoned opinion is a major decision for MERS," MERSCORP said.
Write to Liz Enochs