9th Circuit Court Ruling Legitimizes MERS

A ruling from the 9th Circuit Court - Cervantes vs. Countrywide gives legitimacy to MERS and deals a major blow to many of the arguments that attorneys representing homeowners try to make.

The 9th Circuit takes appeals from Arizona, California, Hawaii, Montana, Nevada, Idaho, Oregon, and Washington.

Homeowners Claim: The homeowners claimed that MERS was a “sham beneficiary” and use of MERS was unlawful and misrepresentative.

Ruling: The Court found that the MERS operation had been disclosed in detail to the borrowers through the Deed of Trust. Therefore, there was no misrepresentation. This is especially important in that it destroys arguments for fraud on the part of MERS.

Homeowners Claim: MERS split the Note and Deed and that eliminated any possibility of foreclosure.

Court Ruling: The court ruled against this action. They cited that though there might have been a question of MERS being a legal beneficiary, some entity still had the right to foreclose. If MERS had been trying to foreclose, then the Court “might” have looked deeper into MERS, but the Deed had been assigned, so the foreclosure could occur.

The key element of this portion of the ruling suggests that use of MERS does not split the Note and Deed permanently, and by inference, that MERS does have an ability to execute assignments.

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Addendum: Calvo v HSBC

This case in California just clarified that there is no need for any Assignment of the Deed of Trust to be recorded prior to foreclosure. Statute CCC 2932.5 is put to rest.

It essentially nails the coffin lid closed on foreclosure defenses that attorneys have been using, when combined with the 9th Circuit ruling and Gomes v Countrywide.

Most of the homeowner lawsuits to come will be based upon issues with loan modifications. There will still be some based upon foreclosure processes, but these will likely be on pre Aug 13, initiations. Of course, for large numbers of attorneys, they will still file actions based upon the old allegations, but such attorneys only care about the income stream.