Court Ruling Upholds Foreclosure Sale Despite MERS' Appeal
A ruling by the Kansas Supreme Court determined Mortgage Electronic Registration Systems (MERS) was not a "necessary party" in a mortgage foreclosure proceeding initiated by a first lien holder. MERS acts as the representative for lenders and services in county land records for mortgages registered with the company. MERS keeps track of the loan, even when servicing rights are traded or sold, and notifies lender and servicer clients of action against the property. The court’s ruling involves a case where MERS was listed as the mortgagee of a second-lien mortgage originated by Millenia Mortgage Corp. When the primary lien holder, Landmark National Bank went to court to seek foreclosure action, MERS wasn’t notified. Although Millenia was notified, it already sold its interest in the loan to Sovereign Bank. Representatives from the second lien loan were not present at the hearing. The lower court allowed Landmark to proceed with the foreclosure and sell the property at sheriff’s sale. In response, Sovereign and MERS attempted to vacate the judgment, which was denied by the trial court. The ruling to deny the motion was upheld by the state’s court of appeals and later, its supreme court. In its ruling, the supreme court said that MERS was not a “contingently necessary party." It added since Sovereign Bank didn’t register its interest with the county’s register of deeds, it had no rights in the foreclosure preceding. In response to the ruling, MERS president and CEO RK Arnold said the firm was disappointed, but respected the court’s decision, and said it is considering its options, including filing a motion for reconsideration. MERS has defended its operations in court. According to the company’s Web site, MERS was successful in getting a class action suit dismissed in 2007 that was filed in US District Court and that questioned the firm’s right to operate. The Second District Court of Appeals of Florida ruled in 2007 that the company has a right to be a party of foreclosure actions in the state. The New York Court of Appeals also ruled in the company’s favor in 2006 in a similar case. Write to Austin Kilgore.