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U.S., Mass. courts rule in favor of MERS in foreclosures

Rulings separately affirm MERS assigning mortgages

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Two recent decisions affirm MERS’ role as mortgagee with the authority to assign a mortgage.

The U.S. Court of Appeals for the First Circuit and the Massachusetts Superior Court affirmed dismissals of wrongful foreclosure lawsuits, which challenged the validity of MERS as the mortgagee and its subsequent assignment of the mortgage.

In Mills v. U.S. Bank, N.A., the U.S. Court of Appeals for the First Circuit rejected the appellant’s theory that to avoid violating the Massachusetts statute of frauds, a written recording was required each time the promissory note was sold during the time that MERS served as mortgagee as nominee for the lender and lender’s successors and assigns.

The Court found that this theory rests on a “misperception of the MERS framework” and is contrary to Massachusetts precedent holding that the transfer of a promissory note between MERS System members did not affect legal title to the mortgage separately held by MERS.

The Court similarly rejected the appellant’s claim that MERS was a not a proper mortgagee under Massachusetts law and that as the Court held in Culhane v. Aurora Loan Services, “the MERS System fit comfortably within the structure of Massachusetts mortgage law.”

In Cohen v. The Bank of New York Mellon, the Massachusetts Superior Court concluded that the Bank of New York Mellon, as trustee for the certificate holder CWALT, Inc. Alternative Loan Trust 2006-AO10, had the authority to foreclose as lawful holder of the mortgage that MERS assigned to it. The Court found that MERS had the authority to assign the mortgage, reasoning that the mortgage, signed by the borrowers, expressly named MERS as the mortgagee and therefore “MERS had an explicit contractual right to assign the [m]ortgage.”

Moreover, the Court cited the language contained in the 1st Circuit Court of Appeals Culhane decision that “MERS possessed authority ‘twice over’ to assign the mortgage stemming from MERS’s status as equitable trustee and from the terms of the mortgage contract.” The Court rejected all three arguments which Cohen made in an attempt to undermine MERS’ assignment.

“These two opinions build on existing case law in Massachusetts that confirms MERS’ role as mortgagee and its authority to make assignments,” said MERSCORP Holdings Vice President for Corporate Communications, Janis Smith.

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