In a great decision for defaulting borrowers, In re Ferrel L. Agard, which can be found by clicking here, the United States Bankruptcy Court for the Eastern District of New York claims to be setting precedent whereby Mortgage Electronic Registration System (MERS) lacks the authority to assign or foreclose a mortgage.
Prior decisions seemed to state that where MERS was granted the appropriate authority it could assign or foreclose a mortgage. This decision seems to intentionally and expressly state otherwise.
Citing the Court: "MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law".
For those who are unaware of MERS and its role in our mortgage system, Judge Grossman's point is that MERS was designed to provide a database which allowed its member banks to electronically self-report transfers of the Note in an effort to circumvent governmental real estate recording systems and therefore should not be afforded anything, but a strict interpretation of its authority. You mess with the government and the government will win.
For the lawyers who read this blog, the key words used by the Court are as follows: "MERS admits that the very foundation of its business model as described herein requires that the Note and Mortgage travel on divergent paths. Because the note and mortgage did not travel together, Movant must prove not only that it is acting on behalf of a valid assignee of the Note, but also that it is acting on behalf of the valid assignment of the Mortgage."
WOW!!! - I'm betting this goes to the Supreme Court.
Of note, the Court in this case ruled in the lender's favor on a different argument, but made this decision nonetheless for the stated purpose of defining MERS' authority.