California Appeals Court Rules in Favour of MERS having the Right to Foreclose

There has been controversy surrounding the right of MERS to foreclose. This entity was set up by major mortgage institutions like Fannie Mae and Freddie Mac, apart from others to digitally record the frequent transfer of mortgage ownership that took place with the securitization process gaining wide popularity. But it resulted in bypassing the county land records office and this has raised doubts about the legal standing of MERS to foreclose. But recently a judgment has gone in favour of MERS.

Homeowner Jose Gomes was represented by attorney Ehud Gerstein. The court ruled against Gomes. The suit by Gomes had been filed in 2009 asking for annulling foreclosure measures taken by MERS to take over his property. In 2004 Gomes had taken a loan of $331,000 and was served with a default notice in 2009. The decision by the court was that under the “non-judicial scheme” Gomes could not file such a lawsuit. California is a non-judicial state wherein the process of foreclosure does not have to go through the court.

Justice Joan Irion of California Court of Appeal wrote, “Nowhere does the statute provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized, and we see no ground for implying such an action”. On the panel were two other judges who endorsed her views. Their interpretation was that by asking MERS to prove its legal standing would not be consistent with the policies working behind the system of non-judicial foreclosure for seeing to it that the remedy is speedy, efficient and less costly. Irion referred to the suit filed by Gomes as a “speculative suit”. It is the legislature of the state that has the authority to give the need for such litigation. By inking the deed of trust Gomes had also agreed to the authority of the MERS to foreclose.

Gerstein explained in an interview that basically the Court of Appeal was stating that once the foreclosure started the borrowers “can’t seek any right” from that entity or question it. He argued, “The beneficiary under the deed of trust can authorize MERS to foreclose but they never did that. We don’t know who the beneficiary is”.

On February 15th the court of appeals gave a similar ruling in favour of MERS. The case by filed by homeowner Nancy G. Jimenez. Gerstein also represented Jimenez said he would appeal against the ruling.

Since the raising of doubts about the legal standing of MERS many of its members have stopped taking its name to foreclose.