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Tennessee Court of Appeals Rules MERS Qualifies as Interested Party

Trustee has Duty to Name MERS in the Notice of Foreclosure Sale

FOR IMMEDIATE RELEASE

CONTACT: Janis Smith
Phone: 703-738-0230
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Reston, Virginia, January 13, 2015—MERSCORP Holdings, Inc. today announced that the Court of Appeals of Tennessee at Jackson ruled that under applicable Tennessee law, MERS is a “party interested” in the foreclosure of a senior mortgage lien, and that the trustee who conducted a nonjudicial foreclosure of the senior lien was liable to MERS for damages resulting from the breach of her “affirmative duty to identify MERS as an interested party in the notice of foreclosure sale.” In reaching its decision, the Court recognized MERS’ interest in the junior lien as owner of legal title to the security interest and beneficiary of a recorded deed of trust.

In pdf Everbank v. Henson (128 KB) , MERS and Everbank appealed an order of the Chancery Court of Shelby County dismissing its complaint seeking damages and to set aside a foreclosure sale of the Hensons’ property because the trustee did not name MERS on the foreclosure notice. The Appeals Court held that MERS “qualifies as having a recorded interest in a lien that will be extinguished or adversely affected by the sale. Accordingly, … MERS qualifies as an interested party and the statute requires that the foreclosure advertisement and notice provide the names of the interested parties.”

This Court respectfully disagreed with the Court of Appeals of Tennessee at Knoxville panel decision in pdf Mortgage Electronic Registration Systems, Inc. v. Ditto (97 KB) , 2014 WL 24439 (Tenn. Ct. App. Jan. 2, 2014) holding that MERS lacked standing to set aside a tax sale conducted without notice to it. The panel decision in Ditto has been accepted for appeal to the Tennessee Supreme Court, and that appeal is now pending. The Henson court found persuasive Tennessee federal and other state court decisions upholding MERS’ authority to serve as beneficiary and nominee for noteholders and MERS’ right to enforce a security in its own name. The Court therefore held that MERS could seek damages from the foreclosing trustee under Tennessee law based upon the trustee’s failure to identify MERS, the holder of legal title to a junior security lien, in the foreclosure notice.

“We are pleased the Court recognized that the legal title held by MERS is entitled to protection under state law and that the trustee had an affirmative duty to name MERS in the notice of foreclosure because it was an interested party,” said MERSCORP Holdings Vice President for Corporate Communications, Janis Smith.

For descriptions of cases and other materials pertaining to MERS’ business model and role 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 thousands of 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 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.

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