The Kansas Court of Appeals upheld a favorable ruling for the Mortgage Electronic Registration Systems real estate registry this week, saying a financial firm can foreclose on a home even when the mortgage remains recorded in the MERS' name.
The three-judge panel essentially ruled in MetLife Home Loans v. Hansen that a homeowner trying to prevent a foreclosure by using the split-the-note theory that so frequently pops up in MERS cases cannot prevail in court because MERS possessed an agency relationship with the all of the lenders that were assigned the MERS note in the securitization chain.
The case involved a dispute with MetLife Home Loans, which tried to foreclose as the holder of the note even though the bank was not the original lender. MERS, on the other hand, remained the sole nominee for the original lender and its successors and assigns.
The homeowners argued that the note and the mortgage were split, making it impossible for MetLife to have the power to foreclose. But the panel of Kansas Court of Appeals judges disagreed, finding that MERS had an agency relationship with all of the lender's successors, essentially making the splitting of the note and mortgage a non-issue.
The court wrote: "A mortgage may become unenforceable when it is not held by the same entity that holds the promissory note. However, an exception exists where there is an agency relationship between the holder of the mortgage and the holder of the promissory note."
Click here to access the case.