District Court Upholds MERS Rights to Assign and Foreclose

Mortgage Electronic RegistrationrnSystems, Inc. better known as MERS won a significant victory in court onrnTuesday as the U.S. Court of Appeals for the 11^th Judicial Circuit validatedrnits rights to assign a security deed and/or foreclose on secured property.  The decision upheld the decision of the U.S.rnDistrict Court for the Northern District of Georgia in Smith V. Saxon Mortgage.</p

The plaintiff in the original case hadrncontested the foreclosure of her home on the grounds that: </p

1).   The assignment of the security deed wasrninvalid because MERS, as nominee of a defunct lender could not assign the documentsrnof its own volition.</p

2.rn    The “splitting” of the mortgage andrnthe note rendered the mortgage null and void and therefore notices ofrnforeclosure were invalid as not coming from a secured creditor.</p

In the original District Court opinion in March 2011, U.S. Magistrate JudgernJanet F. King pointed to the standard language in the Georgia security deedrnsigned by all borrowers at closing which grants MERS the power to act on behalfrnof the current and future owners of the loan. rn.   “Unless the instrumentrncreating the power specifically provides to the contrary . . . an assigneernthereof . . . may exercise any power therein contained,” Judge King wrote.rn”[T]he Security Deed . . . transfers rights to MERS, and MERS’ assigns mayrnexercise any power contained therein.” </p

The 11^th District Court which has jurisdiction over federal casesrnoriginating in the states of Alabama, Florida and Georgia, agreed with JudgernKing’s recommendation.  “It is notrndisputed that plaintiff executed the Security Deed which granted MERS the powerrnto sell the Property, if plaintiff was not able to comply with the terms of thernNote,” Senior U.S. District Judge William O’Kelley wrote. “Furthermore, thernSecurity Deed expressly states that it applies to MERS ‘[and] to the . . .rnassigns of MERS.’ Pursuant to the terms of the Security Deed, MERS hadrnauthority to assign the Security Deed.” </p

MERS issued the following statement in response to the District Courtrndecision.  </p

“A significant body of clear and specific federal case law is comingrntogether with this decision from the 11th Circuit Court of Appeals, along withrnfavorable rulings from the First, Fourth, Fifth, Eighth, Ninth, and Tenth circuitrnappellate courts and U.S. District Courts in a number of states,” said Janis L.rnSmith, MERSCORP’s vice president of corporate communications. “The 11thrnCircuit’s ruling underscores the soundness of MERS’ business model byrnsolidifying the legality of MERS’ role in the security deed, explaining howrnthat role came about, and clarifying MERS’ power to act on behalf of thernlender.”

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