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Fifth Circuit Finds in MERS’ Favor

MERS is a Beneficiary with the Power to Assign

FOR IMMEDIATE RELEASE

CONTACT: Janis Smith
Phone: 703-738-0230
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Reston, Virginia, October 14, 2015—MERSCORP Holdings, Inc. today announced that the United States Court of Appeals for the Fifth Circuit affirmed a dismissal in MERS’ favor.

In pdf Ferguson v. Bank of New York Mellon Corp. (128 KB) , borrowers sued MERS, their servicer and the trustee seeking an injunction and declaratory relief preventing the trustee from foreclosing. They alleged that Bank of New York Mellon violated the false lien statute by falsely asserting a right to foreclose. The district court granted MERS and Bank of New York Mellon’s motion to dismiss. On appeal, the borrowers argued that the MERS assignment was void because Texas law did not permit MERS to act as beneficiary of a Deed of Trust.

In its decision, the Fifth Circuit determined that the borrowers agreed to a deed of trust that explicitly designated MERS as the beneficiary with a right to exercise all the interests in the deed of trust. Similarly, the Court rejected the borrowers’ argument that book-entry systems were prohibited from acting as beneficiaries under the Texas Property Code. Citing to pdf Harris County v. MERSCORP, Inc (446 KB) ., which involved deeds of trust with similar language, the Court “concluded MERS had committed no fraudulent misrepresentation because it was a valid beneficiary as a matter of contract law and under [Texas Property Code].” The Court further found that the Texas Property Code “grants MERS authority to act as a beneficiary of DOTs by including book-entry systems in [the Code’s] definition of ‘mortgagees’ …” As the beneficiary, the Court held that MERS had the right to assign the deed of trust. “Therefore, MERS’ acting as the beneficiary did not render the transfer to BNY void …”

Finally, the Court found the false lien claim was “entirely derivative” of the assignment challenge, and that the right to foreclose the MERS Deed of Trust was validly created, and effectively assigned by MERS to Bank of New York Mellon.

“We are pleased that this Court confirmed that MERS can hold and assign a mortgage,” said MERSCORP Holdings Vice President for Corporate Communications, Janis Smith. “MERS has the legal authority to act on behalf of the lender and, as this Court noted, the deed of trust agreed to by the borrowers ‘explicitly designated’ MERS as the beneficiary.”

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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