A decision by New York’s 2nd Appellate Division may not have a direct impact on the issue of when Mortgage Electronic Registration Systems has standing in foreclosure cases, but it contains persuasive language that could be a shot across the bow when it comes to jurisdiction relating to MERS. In Aurora Loan Services v. Steven Weisblum, the appellate court overturned a lower court’s decision to dismiss claims the Weisblum family made against Aurora. The appellate court concluded that Aurora’s motion for summary judgment should have been denied and said Aurora failed to comply with the Real Property Actions and Proceedings Law under the Home Equity Theft Prevention Act. While the decision was not directly based on MERS, attorneys say language in the decision could impact later court rulings because it gives an appellate court’s view on how MERS operated in this particular transaction. “We have not seen that from a New York appellate court up to now,” said Anthony Laura, an attorney with Patton Boggs. “I would caution, though, that it is commentary on MERS’ standing. It is not the holding of the case.” On the MERS standing issue, which is not what the case was decided on, the Weisblums argued that Aurora did not have standing because it failed to provide evidence of MERS’ authority to assign the first mortgage note tied to the home. The court said “Aurora failed to provide a copy of the first note but submitted a copy of the original first mortgage and a series of assignments culminating in the purported assignment of the first note and mortgage to Aurora. The first mortgage was originally held by MERS, as nominee for Credit Suisse; the mortgage document recites that the lender on the first note is Credit Suisse, but there is nothing in this document to establish the authority of MERS to assign the first note.” The court goes on to say MERS later assigned the first mortgage with the underlying note and then made successive mortgage assignments. “While, in some circumstances, the assignment of a note may effect the transfer of the mortgage as an inseparable incident of the debt, here the assignment instruments purport to do the opposite, without any evidence that MERS initially physically possessed the note or had the authority from the lender to assign it.” The case also outlined what is needed for a foreclosing party to have an equitable interest in a mortgage — namely the plaintiff has to be both “the holder or assignee of the subject mortgage, holder or assignee of the underlying note — either by physical delivery or a written assignment prior to the commencement of the action that led to the plaintiffs filing a complaint.” The court ruled Aurora failed to make this showing. The case “is an effort to see problems with the MERS structure and how it has operated, so it has some level of importance,” Laura said. “A couple of things that everyone needs to take away from this case: It is a clear signal from this appellate court that it is scrutinizing the MERS structure.” At the same time, the decision has no precedential value outside the New York appellate jurisdiction. Write to Kerri Panchuk.

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