District Court Upholds MERS Rights to Assign and Foreclose

Mortgage Electronic Registration
Systems, Inc. better known as MERS won a significant victory in court on
Tuesday as the U.S. Court of Appeals for the 11th Judicial Circuit validated
its rights to assign a security deed and/or foreclose on secured property.  The decision upheld the decision of the U.S.
District Court for the Northern District of Georgia in Smith V. Saxon Mortgage.

The plaintiff in the original case had
contested the foreclosure of her home on the grounds that:

1).   The assignment of the security deed was
invalid because MERS, as nominee of a defunct lender could not assign the documents
of its own volition.

2.
    The “splitting” of the mortgage and
the note rendered the mortgage null and void and therefore notices of
foreclosure were invalid as not coming from a secured creditor.

In the original District Court opinion in March 2011, U.S. Magistrate Judge
Janet F. King pointed to the standard language in the Georgia security deed
signed by all borrowers at closing which grants MERS the power to act on behalf
of the current and future owners of the loan. 
.   “Unless the instrument
creating the power specifically provides to the contrary . . . an assignee
thereof . . . may exercise any power therein contained,” Judge King wrote.
“[T]he Security Deed . . . transfers rights to MERS, and MERS’ assigns may
exercise any power contained therein.”

The 11th District Court which has jurisdiction over federal cases
originating in the states of Alabama, Florida and Georgia, agreed with Judge
King’s recommendation.  “It is not
disputed that plaintiff executed the Security Deed which granted MERS the power
to sell the Property, if plaintiff was not able to comply with the terms of the
Note,” Senior U.S. District Judge William O’Kelley wrote. “Furthermore, the
Security Deed expressly states that it applies to MERS ‘[and] to the . . .
assigns of MERS.’ Pursuant to the terms of the Security Deed, MERS had
authority to assign the Security Deed.”

MERS issued the following statement in response to the District Court
decision. 

“A significant body of clear and specific federal case law is coming
together with this decision from the 11th Circuit Court of Appeals, along with
favorable rulings from the First, Fourth, Fifth, Eighth, Ninth, and Tenth circuit
appellate courts and U.S. District Courts in a number of states,” said Janis L.
Smith, MERSCORP’s vice president of corporate communications. “The 11th
Circuit’s ruling underscores the soundness of MERS’ business model by
solidifying the legality of MERS’ role in the security deed, explaining how
that role came about, and clarifying MERS’ power to act on behalf of the
lender.”

…(read more)

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