Multiple California Appellate Court Rulings Affirm MERS’ Role as Beneficiary

Two Appellate Panels Sustain MERS’ Authority in the Nonjudicial Foreclosure Process

FOR IMMEDIATE RELEASE

CONTACT: Jason Lobo
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Reston, Virginia, July 23, 2012 – MERSCORP Holdings, Inc. today announced that two three-justice panels within the California Court of Appeal system rejected borrower complaints challenging MERS’ authority and role as beneficiary.

In the Taasan v. Family Lending Services, Inc. et al. decision written by Justice Paul R. Haerle of the First Appellate District, Division Two, the Panel agreed with the March 2011 lower court finding that the borrowers “executed a deed of trust conferring on MERS or any successor in interest the right to exercise the power of sale as the named nominee beneficiary.” Justice Haerle was joined by Justice James A. Richman and Presiding Justice J. Anthony Kline.

The initial complaint and the first amended complaint were largely based on the theory that MERS did not have possession of the promissory note and therefore lacked authority to assign beneficial interest in the deed of trust and promissory note.

“Appellants’ attempt to require a foreclosing entity to have physical possession of the note in order to initiate a nonjudicial foreclosure is also without merit,” Justice Haerle wrote. “Moreover, we note that our colleagues in Division One of this court have also rejected the contention that, because MERS (identified as the lender’s nominee in the deed of trust) did not have possession of the note, it did not have authority to assign it.” Justice Haerle, relying specifically on MERS’ nomination as the beneficiary in the language of the deed of trust, upheld MERS’ right to assign or foreclose, without possessing the promissory note.

The Panel also emphasized in its ruling that the California nonjudicial foreclosure statute in Civil Code sections 2924 through 2924k governs foreclosure in the state, not Uniform Commercial Code, Article Three as argued by the borrower.

Separately, in Skov v. U.S. Bank N.A., Justice Nathan D. Mihara of the Sixth Appellate District also rejected a borrower contention that MERS lacked authority to execute the notice of default and the assignment of the deed of trust. “We reject her contention,” Justice Mihara wrote. “[s]tatutes and standard legal texts establish that MERS’s execution of the assignment of the deed of trust and its authorization of the notice of default were ‘required’ and ‘necessary to comply with law or custom.’” Acting Justice Eugene M. Premo and Justice Franklin D. Elia joined Justice Mihara in the ruling.

“MERS’ authority to assign mortgages has been upheld in hundreds of lawsuits,” said Janis Smith, MERSCORP’s Vice President for Corporate Communications. “Not only has the notion that MERS doesn’t have authority to assign been routinely rejected as baseless by courts, including multiple courts in the California system, it’s also an ineffective strategy for avoiding foreclosure after default.”

For descriptions of cases and other materials pertaining to MERS’ role and business model in U.S. housing, please visit www.mersinc.org.

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MERSCORP Holdings, Inc. is a privately held corporation that owns and manages the MERS® System and all other MERS® products. It is a member-based organization made up of approximately 3,000 lenders, servicers, sub-servicers, investors and government institutions. Mortgage Electronic Registration Systems, Inc. (MERS) serves as the mortgagee in the land records for loans registered on the MERS® System, and is a nominee (or agent) for the owner(s) of the promissory note. The MERS® System is a national electronic database that tracks changes in mortgage servicing and beneficial ownership interests in residential mortgage loans on behalf of its members.