Posted by PAW on 9/28/09 7:46pm
Msg #305481

My turn to stir a pot here. Actually the KS Supreme Court is

http://tinyurl.com/ydd6spa

A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose – on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.

Do a Google search using "kansas supreme court MERS ruling" for a whole lot of opinions on the subject. Then weigh in, if you wish, with your thoughts.

Reply by John_NorCal on 9/28/09 8:36pm
Msg #305487

Very interesting legal theory, discovery, as it is applied in this case. Looking at the reasoning of the KS court it does make sense that with the securitization of mortgages there is no defined damaged party. As you say other state courts will look to this decision and make their own decision based on their own interpretation. I suspect we will see this at the US Supreme Court in due time.

Reply by GA/Atty on 9/28/09 8:48pm
Msg #305488

Once the note and mortgage become separated, I wonder if

they can be effectively reunited?

Anyway - best argument for MERS (and their member lenders) would seem to be that the nature of their status as "nominee" was clearly defined - or at least defined well enough. I think that is the basis upon which they will eventually prevail.

Or a higher court might decide that this court went way further than it had to to rule on the very limited question that was before it. If Sovreign didn't file their assignment, then they (and MERS) should be SOL, regardless of what their relationship was.

Cool case though.

Reply by MikeC/NY on 9/29/09 12:11am
Msg #305521

In all the searches of public records I've had to do, I've never seen MERS listed as the lien holder. That's probably because the NY Court of Appeals decided years ago that MERS could record the mortgage but had no standing as lien holder - and someone at MERS realized that this was not a good thing, so they apparently don't do it in NY.

The Kansas case is interesting; although it doesn't make law that other states have to follow, it is a precedent they can look at. There was an article in today's NY Times that pretty much laid out the facts:

http://tinyurl.com/ybc4mpl

My understanding of this is that it wasn't even MERS that was directly involved - it was the bank holding the second mortgage and hiding behind MERS that filed suit. The court said that the bank had no standing because it wasn't listed as a lien holder, and MERS (as its nominee) had no standing because it had no interest in the property. Game, set, and match - kiss that mortgage goodbye...

I don't think this is going to be the magic bullet that will stop millions of foreclosures - not every lawsuit filed involves MERS - but it is another thing the courts will look at when deciding foreclosure cases. MERS has created a kind of "Where's Waldo?" situation with the note and mortgage, and some courts are just not buying that anymore.

Reply by Linda_H/FL on 9/29/09 9:35am
Msg #305547

Interesting...just for giggles I did a quick search of my

home county recorded records for MERS...found several where they are indexed as the Grantee/Mortgagee....pulled up an image of one and here's the wording in the definition contained within the mortgage itself - please note the third sentence where they are declared the mortgagee under the security instrument:

"MERS is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as nominee for Lender and Lender's successors and assigns. MERS is the mortgagee under this security instrument. MERS is organized and existing under the laws of Delaware and has an address and telephone number of P.O. Box 2026 Flint, MI 48501-2026, tel. (888) 679-MERS."

Next definition is "Lender is <<name of lender>>.."

Does this new decision invalidate all the mortgages where MERS is described as above? I know I've seen many many foreclosure notices in our newspaper where the plaintiff is MERS...

Reply by MikeC/NY on 9/29/09 10:47am
Msg #305563

Re: Interesting...just for giggles I did a quick search of my

I don't think it invalidates the mortgage, but MERS will have a tough time foreclosing in Kansas because of this ruling. The mortgage would have to be recorded again under the lender's name, and the lender would have to be the one to foreclose. In this particular case it was too late to do that, because there was a bankruptcy involved. As I read this, the KS Supreme Court basically rejected the idea that MERS could be a nominee. The NY Court of Appeals (our highest court) has said that MERS can record the mortgages but is only acting in an administrative capacity - it has no standing to bring foreclosure proceedings in NY, so the mortgages have to be recorded in the lenders name.

Whether or not it will have any effect on MERS foreclosures elsewhere depends on whether or not the courts in those jurisdictions will accept the same argument. The attorneys for the homeowners could certainly cite the KS and NY cases, but it's up to the judges to decide.

Reply by MW/VA on 9/29/09 1:24pm
Msg #305585

Another interesting twist in the mortgage mess. Yikes!

Reply by PAW on 9/29/09 1:33pm
Msg #305590

More reading, in English

http://www.pawnotary.com/documents/big-trouble-in-kansas.pdf

Reply by Mia on 9/29/09 2:11pm
Msg #305596

You know, I used to see a lot of Foreclsures with "MERS" mentioned,
but haven't seen any for a few months now. I wonder if there may
be something going on in MI too.

However, "MERS" does come up almost every year in the delinquent
property tax notifications in the local paper here.