The Oregon Supreme Court affirmed a big part of a lower court’s decision challenging the authority of the Mortgage Electronic Registration Systems during the foreclosure process when the registry’s construction butts up against certain aspects of Oregon law.
This is the outcome of the Niday v. GMAC decision — a precedential case the mortgage industry has been waiting months for.
The court issued two decisions Thursday that impact MERS – Niday v. GMAC as well as Brandrup v. Reconstruct Co.
MERS believes the court left the registry room to show its authority to act on behalf of lenders in the state. After analyzing a portion of one case, MERS said the court “held that Oregon’s nonjudicial foreclosure statute ‘does not require recordation of assignments of the trust deed by operation of law that result from the transfer of the secured obligation.”
Based on that line, MERS said “these rulings will allow lenders to move forward with nonjudicial foreclosure proceedings in the state.”
But before getting to that part of the case, the justices do undermine some of MERS key arguments.
In its final ruling, the Oregon Supreme Court agreed with a lower appellate court, holding that MERS is not a rightful ‘beneficiary of the trust deed’ when analyzing its construction against the Oregon Deed Trust Act.
The Supreme Court also said MERS could have maintained some authority to assign foreclosure rights if it had provided evidence of an agency relationship with some of the financial firms it acted on behalf of.
However, the court also shot down this argument saying “as far as we can tell, there is nothing in the summary judgment record in this case that identifies the successors to the original lender’s interests or shows MERS is authorized as the agent of the successors to the original lender’s interests.”
Without this agency relationship or status as the trust deed beneficiary, MERS’ ability to assign foreclosing power is virtually shot down, making this a landmark decision in a state where this pending appeal alone made financial firms weary of nonjudicial foreclosures.
The original appellate court decision – which overturned a ruling favorable to MERS — limited the meaning of the term beneficiary of the mortgage contract as the agent or person that is owed repayment on a loan.
The appellate court then evaluated MERS against that definition and decided the registry had no authority to assign foreclosure authority — a theory that disempowered many assumptions made when it comes to MERS’ role in the foreclosure process.
That case alone prompted analysts to project a slowdown in nonjudicial foreclosures in Oregon — and a preference for judicial foreclosures to guarantee some certainty. The case eventually went up to the state supreme court on appeal and resulted in Thursday’s decision.
The failure of MERS to get the entire decision overturned is significant.
But sources say the court essentially left MERS room to prove on remand to a lower court that ‘evidence’ does exist showing the registry acting as an agent for various banks, thereby maintaining its authority to assign various interests in the trust deed.
It’s one of the four questions answered by the court in a summary of the case.
The justices write “insofar as MERS does not have the right to receive repayment of the notes that the trust deeds in these cases secures, it cannot hold legal title to those trust deeds under the OTDA, or transfer legal title to another entity; but (b) if it can be shown that the original lenders and their successors conferred sufficient authority on MERS to act on their behalves in the necessary respects, MERS may have authority, as the true beneficiary’s agent, to hold and transfer interests in the trust deed.”
MERS responded to this line saying, “We are confident that we can establish this authority.”
Read the full Niday decision here.
Read the Brandrup v. Reconstruct Co decision.