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MERS’ Role as Mortgagee Acknowledged in Landmark Massachusetts Foreclosure Ruling

FOR IMMEDIATE RELEASE

CONTACT: Jason Lobo
Phone: 703-652-1660
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Reston, Virginia, June 27, 2012—MERSCORP Holdings, Inc. today announced that the recent Massachusetts Supreme Judicial Court decision on the validity of foreclosures in the state acknowledged Mortgage Electronic Registration Systems, Inc. (MERS) as mortgagee.

The June 22, 2012, decision in pdf Eaton v. Federal National Mortgage Association (596 KB)  brought clarity to state foreclosure law on the definition of “mortgagee” and set the ground rules when undertaking foreclosures in the state.

The Court noted the role MERS played in the Plaintiff’s mortgage lending process. “Under the mortgage executed by Eaton, MERS as mortgagee (or its assignee) holds legal title to the Roslindale property with power of sale ‘solely as nominee’ of the lender BankUnited (or its assignee),” the Court recited. “However, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender…” The Court then acknowledged without remark MERS’ subsequent assignment of the mortgage to the foreclosing mortgagee.

The Court concluded that a foreclosing mortgagee does not have to physically possess the mortgage note in order to initiate a valid non-judicial foreclosure sale. Rather, the state’s statutes “authorize a ‘mortgagee’ to foreclose by sale pursuant to a power of sale in the mortgage …” the Court wrote. “[the Court] now construe[s] the term [‘mortgagee’] to refer to the person or entity then holding the mortgage and also either holding the mortgage note or acting on behalf of the note holder.” (emphasis added) MERS holds its mortgage liens as mortgagee and nominee on behalf of the owner(s) of the promissory note corresponding to the mortgage lien.

“What’s telling about this ruling is that the validity of the role MERS played as mortgagee was never in question under Massachusetts law,” said Janis L. Smith, MERSCORP Holdings Vice President of Corporate Communications. “The decision characterizes MERS’ role as a matter of fact.”

For descriptions of cases and other materials pertaining to MERS’ business model and role in U.S. housing, please visit www.mersinc.org.

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MERSCORP Holdings, Inc. is a privately held corporation that owns and manages the MERS® System and all other MERS® products. It is a member-based organization made up of thousands of lenders, servicers, sub-servicers, investors and government institutions. Mortgage Electronic Registration Systems, Inc. (MERS) serves as the mortgagee in the land records for loans registered on the MERS® System, and is a nominee (or agent) for the owner of the promissory note. The MERS® System is a national electronic database that tracks changes in mortgage servicing and beneficial ownership interests in residential mortgage loans on behalf of its members.

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