The Rhode Island Supreme Court upheld the Mortgage Electronic Registration Systems right to foreclose as an agent of the actual promissory note holder this week.
The case creates precedent in Rhode Island by granting the real estate registry foreclosure authority as an agent of the lender. MERS, which is part of MERSCORP, has frequently faced foreclosure challenges. One of the more common accusations is that the registry holds legal title to mortgages while lacking the promissory note.
But that theory is not holding up in Rhode Island based on the latest case.
The key Rhode Island case – Bucci v. Lehman Brothers Bank – is a common example of a MERS dispute stemming from the mass home loan securitization era.
The plaintiff in the case obtained a mortgage from Lehman Brothers, which was eventually granted to MERS as nominee of the lender and the lender’s successors and assigns.
When the plaintiff defaulted on the loan in Oct. 2008, he ended up challenging MERS’ foreclosure, saying the registry lacked the actual note, leaving it with no legal right to foreclose.
A lower court and the Rhode Island Supreme Court disagreed with that assessment.
"The holder of the legal title to the mortgage—MERS—always has acted as an agent of the owner of the equitable title," the Rhode Island Supreme Court held this week. "In our opinion, this transactional structure is consistent with the law of this state."
The court concluded, "We see no reason why MERS, as an agent of the owner of the note, cannot foreclose on behalf of that entity."