MERS Winning War

While the Mortgage Electronic Registration Systems Inc. has faced some setbacks recently, dozens of decisions have been issued in favor of the registry by judges in several states.

In Alabama, Erica Sumpter Congress defaulted in February 2007 on her loan with Mortgage Lenders Network USA Inc. MERS was the nominee on the loan. GMAC, which had since become the servicer, started the foreclosure process in June 2008. A month later, an assignment was executed transferring the ownership of the mortgage from MERS to U.S. Bank.

A foreclosure sale took place in August 2008, but when Congress failed to leave the property, U.S. Bank filed an ejectment action in March 2009 and obtained a judgment in February 2011. Congress appealed, and the Court of Civil Appeals of Alabama reversed the decision and remanded the case.

MERS was the nominee for a mortgage made in August 2005 by Fremont Investment & Loan to Philip Baldeo Rambaran and Hemant K. Rambaran. But the Fremont note was never recorded. In March 2007, Hermant Rambaran conveyed his interest in the property to his daughters who immediately took out a loan with Delta Funding Corp. that was subsequently assigned to HSBC Bank USA, N.A., as indenture trustee for a mortgage-backed security.

MERS sued in September 2009 claiming that its position was superior to Delta’s. A motion for summary judgment by HSBC was denied. HSBC appealed the decision with the Appellate Division of the Supreme Court of New York, but the decision was affirmed.

Chicago Title Insurance Co. challenged an Ohio federal judge’s decision to grant summary judgment to Fifth Third Mortgage on claims that the title insurer was required to defend and indemnify Fifth Third in a dispute over property in Ohio. Fifth Third was duped by a fraudulent title agent, Jolie Neal of Direct TItle — the owner of the property at issue who obtained multiple fraudulent loans on the property. But the U.S. Court of Appeals, Sixth Circuit, affirmed the district court’s decision.

“The party that should have been more careful here was Chicago Title itself,” the decision stated. “Chicago Title, not Fifth Third, chose to enter into an agency agreement with a fraudulent agent. That agreement was the sine qua non of everyone’s losses here. And Chicago Title, not Fifth Third, failed to catch the publicly recorded encumbrances on the Plantation property before issuing the policy here. The consequences that followed are simply those spelled out in the policy itself.”

An unreleased opinion from the Supreme Court of Oklahoma that is still subject to change involved a February 2005 mortgage from Ameriquest Mortgage Company Inc. with MERS as nominee. The borrowers demanded strict proof of ownership of their note in their answer, but the trial court granted summary in March 2011 judgment to U.S. Bank, N.A. The borrowers’ motion to vacate judgment was denied, but the state’s supreme court reversed the decision on June 12.

Pavel Petrashishin alleged that ReconTrust Co., as the successor trustee to MERS, lacked authority to conduct a non-judicial foreclosure sale because MERS didn’t record the assignments. The loan, originated by America’s Wholesale Lender, is serviced by BAC Home Loans. A motion to dismiss the case by BAC was denied on April 13 by the U.S. District Court for the District of Oregon.

MERS, as nominee for Encore Credit Corp. d/b/a ECC Credit Corporation of Texas, appealed a default judgment in favor of Khyber Holdings LLC. MERS argued that error is apparent on the face of the record. The Court of Appeals of Texas, First District, reversed the trial court judgment and remanded the case.

MERS reported a host of cases where its title transfer system was affirmed by various courts, as reflected in the following table.