Federal Court in Arizona Rules in Favor of MERS
A federal court has ruled that MERS may not hold legitimate title to homes being foreclosed upon.

December 02, 2011 /24-7PressRelease/ -- The Mortgage Electronic Registration System (MERS), a private company that claims to hold titles to approximately half the mortgages in the U.S., won a victory in federal court in Arizona in October 2011. The judge dismissed several lawsuits against MERS that claimed that the company did not hold legitimate titles to mortgages and lacked the power to foreclose. Homeowners should understand how MERS functions, the reasoning behind the court's decision and the important implications of the ruling for homeowners.

How MERS Works

MERS does not actually make or service loans. In 1995 the mortgage industry decided to start an electronic registry of mortgages to facilitate assignment and sale of mortgages. Lenders who register loans with MERS list MERS as the mortgagee of record on the loan and MERS keeps track of the loan servicer and beneficial holder of the note. When lenders that are both registered with MERS buy and sell loans from one another, they no longer need to record them with the counties in which the properties are located and pay the fees for doing so, since the mortgagee of record - MERS - does not change, only the loan servicer does.

Court Decision

The court dismissed the 72 lawsuits against MERS, including six class action suits of homeowners challenging the validity of MERS and its right to foreclose on homes, since it never actually owned the mortgages, or assign rights to other lenders to foreclose. The court affirmed the legitimacy of MERS' business practices in its decision and noted that the mortgage note and deed of trust do not split because MERS is the beneficiary, so MERS has the power to assign its rights and make foreclosures.

The court also ruled that the homeowners had no standing to bring suit against MERS. The homeowners were in default and they had suffered no harm from MERS, since someone did have the right to foreclose on their homes.

Implications for Homeowners

The court's decision has important implications for homeowners facing foreclosure. Homeowners had been staving off foreclosure by challenging MERS' legal right to foreclose, claiming MERS did not really own the mortgage. Now, homeowners will have fewer ways to fight foreclosure in court, and this ruling may end up making it easier for lenders to get away with illegally transferring mortgages and foreclosing with inadequate documentation of mortgages.

Because lenders buy and sell mortgages with such regularity within MERS, it may be difficult for homeowner to tell who owns their mortgages and who has the right to foreclose. If you are facing foreclosure on your home, talk to an experienced attorney who can discuss your situation with you and advise you of your options.

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