A federal court in Washington state dismissed a homeowner's case against the Mortgage Electronic Registration Systems this week after the judge ruled JPMorgan Chase (JPM) could act as a beneficiary for U.S. Bank (USB).
The judge also noted that the deed always follows the debt even in securitization and during the mortgage assignment process.
The decision further highlights how the precedent-setting Bain v. Metropolitan Mortgage Group case – while initially predicted to be a boon for plaintiffs – ended up being more nuanced and not necessarily a slam dunk for foreclosure plaintiffs battling MERS.
The case involves a plaintiff who initially took out a loan from American Brokers Conduit, which served as the initial lender. Early on, MERS functioned as nominee for the lender and its assigns.
American Brokers later endorsed the note and it was eventually held by U.S. Bank. U.S. Bank then had JPMorgan Chase act as the loan's servicer.
When the plaintiff defaulted in 2011, the original lender had already gone bankrupt. In 2012, MERS assigned the deed to U.S. Bank and recorded the assignment.
After facing foreclosure, the homeowner argued that when MERS assigned the deed to U.S. Bank, the original lender was already in bankruptcy. The plaintiff claims with the original lender in bankruptcy at the time of assignment, U.S. Bank could not have been a rightful beneficiary and lacked true standing to foreclose.
Furthermore, the homeowner suggested that Chase maintained no recorded interest in the deed and cited the Bain case out of Washington as its basis for the argument. The Bain case initially determined that MERS cannot act as beneficiary unless it hold the borrower's note.
However, U.S. District Judge Ronald Leighton ruled against all of those claims, and held that "Bain did not … create a per se cause of action based solely on MERS' involvement." He added, "In this case, plaintiff has alleged no injury arising from MERS's actions, and she cannot therefore sustain a CPA (Consumer Protection Act) claim."
Responding to allegations that Chase had no recorded interest in the property and could not foreclose, the judge said state law allows for the use of agents and Chase was an agent for the rightful beneficiary, U.S. Bank.