The Mortgage Electronic Registration System (MERS) is a private corporation that tracks the ownership interests and servicing rights in mortgage loans. The system was developed so that holders of loans did not have to record assignments every time they were transferred. It saved the industry money and created an impenetrable wall so that the public could not learn who actually owned, or claimed to own, a mortgage.
A homeowner in San Diego went into default, and the foreclosure process began. The owner sued, claiming that whomever owned the loan did not authorize MERS to commence with the foreclosure. The defendants argued that the deed of trust authorized MERS to exercise the power of sale and institute foreclosure proceedings.
The court of appeals upheld the right of MERS, as nominee, to conduct a non-judicial foreclosure. It found that allowing suit to determine if a nominee had a right to proceed with the foreclosure “would fundamentally undermine the nonjudicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosures.”
Thus, because the lawsuit may be abused, reasoned the judge, we will not look at the underlying right of MERS as nominee to proceed. This is the old floodgate argument, as in ‘allowing this to go forward will open the floodgates.’ This ruling is problematic for ow2ners, and borrowers faced with mortgage trouble should seek help from a real estate attorney. This is from just one of many California Appellate Districts, and they do not always rule uniformly, but all lenders will be relying on this decision.