Ratings agency DBRS says a lack of consistency when it comes to court rulings on the legal standing of the Mortgage Electronic Registration Systems, or MERS, could negatively impact RMBS deals by causing further delays in the foreclosure process. For this reason, the agency is watching MERS cases closely to determine what sort of pattern emerges. DBRS said it has found a lack of consistency among courts who have addressed MERS' legal standing in situations where a foreclosure is filed on a servicer's property that is assigned to MERS. An Eastern District of New York case recently limited a servicer's ability to foreclose on loans assigned by MERS, DBRS points out. The ratings agency is concerned the New York "court’s decision creates uncertainty regarding MERS owner status, and its ability to validly assign mortgage interests, and consequently, may encourage borrowers to raise technical challenges on foreclosures on MERS related loans." In another recent New York case -- In re: Ferrel L. Agard -- a debtor challenged MERS authority to assign and validate an 'enforceable interest' in a mortgage, according to DBRS. MERS countered that argument, saying mortgage documents gave it the authority to carry out the assignment. The court ruled MERS could not assign the mortgage, but decided against the debtor anyway, saying it would accept the state's foreclosure judgment "as evidence of U.S. Bank's status as a secured party." While the case worked out in MERS favor, DBRS sees the potential for difficult times ahead when the MERS name is brought into default proceedings. "In future proceedings the servicer will need to produce additional proof, aside from the assignment from MERS, that the RMBS trust legally holds both the mortgage and the note in order to foreclose. The court’s decision could hinder foreclosure proceedings in the Eastern District of New York and create a further precedential basis for more widespread challenges," DBRS said. The Kansas Supreme Court recently said MERS cannot move against a borrower in a foreclosure proceeding. At the same time, DBRS points out that MERS is permitted to act as mortgagee and nominee for the lender in several other states, including California, Georgia, Massachusetts, Michigan and New Hampshire. In the Eastern California District Court of California, a judge deciding the Bates v. MERS case recently ruled  the plaintiff's "false claims" suit against MERS should be dismissed because the plaintiff was not the original party to disclose information about data registry, which is a requirement under the California False Claims Act. The plaintiff alleged he became aware of false claims made by MERS while working in the secondary-mortgage market. However, the court said, the plaintiff  "was not a catalyst that led to any public disclosure because the MERS system" has been in the spotlight for years. "This ruling represents to us that lawsuits alleging baseless attacks on MERS will not be tolerated in the court system any longer," said MERS spokesperson Karmela Lejarde. "We have proven over and over again in courts around the country that MERS can be a mortgagee.  We are very transparent in what we do and will continue to defend ourselves against other meritless lawsuits brought by Mr. Bates in other states." Freddie Mac recently told servicers managing the GSE's loans to stop foreclosing in the MERS name. That change takes effect April 1. In May of last year, Fannie Mae directed its servicers to cease naming MERS as a plaintiff in any of its foreclosure actions. In February, MERS told its members not to foreclose on residential mortgages in its name while it considers an amendment requiring members “not to foreclose in MERS name.” Members are about 40 days into a 90-day comment period on the proposed rule change. Write to Kerri Panchuk.