MERS out of the foreclosure business? It needs to get out of the assignment of mortgage business as well...

Nicholas M. Moccia, Esq.
Law Offices of Robert E. Brown, P.C.


John Brancato of the Law Offices of Robert E. Brown, P.C., has brought an interesting article to my attention.  MERS is officially out of the foreclosure business.  This means that financial institutions who are members of the MERS system may not hide behind MERS' name and commence foreclosure actions with MERS named as the Plaintiff.  This was common several years ago, but, at least in New York, I have not seen MERS as a plaintiff in a foreclosure action for a long time--certainly not in recently filed foreclosures.  NY judges have been throwing out MERS foreclosures for several years now.

In the State of New York, MERS does not merely have problems with commencing foreclosures, but now the real issue is whether MERS is allowed to transfer ownership interests in mortgages, which is one of the very purposes for MERS to exist.  The NY Appellate Division, Second Department, has ruled that MERS does not, in general, have the requisite ownership interest to transfer mortgages between financial institutions unless MERS happens to be the holder of both the note and the mortgage.  MERS rarely, if ever, is the holder of the note and the mortgage, but is given the title "nominee" on behalf of some other financial institution.  As nominee, MERS is nothing more than an agent of some other entity, but is not the actual holder of the note and the mortgage.  In New York (at least in the Second Department) any mortgage that has passed through the MERS system is now tainted in the eyes of the courts, and so this may make it difficult, if not impossible, for banks to foreclose.

Link to MERS article:  http://www.dsnews.com/articles/mers-bows-out-of-foreclosure-and-bankruptcy-proceedings-2011-07-27