Mortgage

Federal Court of Appeals finds for MERS, again

Upholds lower court ruling on mortgage assignment authority

Just days after the United States Sixth Circuit Court of Appeals handed a legal victory to MERSCORP Holdings, which saw its mortgage assignment authority challenged in Kentucky, MERS secured another win from the same court.

MERS, parent of the electronic mortgage registry with the same name, announced Monday that the United States Sixth Circuit Court of Appeals issued a ruling that upheld a dismissal by the United States District Court for the Western District of Michigan.

The ruling affirmed MERS' authority to assign a mortgage.

In Margelis v. IndyMac FSB, the plaintiff challenged the assignment of her mortgage by MERS and the subsequent foreclosure.

The plaintiff argued that her promissory note had been separated from her mortgage by securitization, that the separation rendered the mortgage null and void, and that none of the defendants therefore had the authority to assign the mortgage or to foreclose on the property. 

The lower court previously ruled the borrower’s position on separation of the note and mortgage was erroneous under Michigan law and the Court of Appeals upheld that ruling, saying that the plaintiff’s complaint was based on “meritless claims concerning note-splitting and securitization.”

The Court of Appeals quoted Hargrow v. Wells Fargo Bank N.A., in holding that “‘it is lawful for the holder of the mortgage to be different from the holder of the debt’ and there is no bar to the subsequent transfer of the mortgage without a corresponding transfer of the underlying debt.’’

MERSCORP Holdings Vice President for Corporate Communications Janis Smith said that MERS is pleased with the ruling and hopes that the ruling in this case will prove that the law is clear on MERS’ authority.

“We are pleased that the U.S. Court of Appeals affirmed the district court ruling and held that the mortgage and the debt need not be held by the same party under Michigan law, and the rights to assign and foreclose are not affected by such an arrangement,” Smith said.

“This decision is consistent with the Michigan Supreme Court’s 2011 ruling in Residential Funding Co., L.L.C. v. Saurman, and we believe the case law on this point should be considered settled once and for all,” Smith added.

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