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Florida Second District Court Rules in Favor of MERS
By James Comtois
The Mortgage Electronic Registration System, an industry utility that operates an electronic loan registry eliminating the need for assignments when trading mortgage loans, recently experienced another court -- and ideological -- victory, this time in Florida.
The Second District Court of Appeals of Florida ruled that MERS has the right to be a party in a foreclosure action. According to MERS, this victory not only affirms the legal premise upon which MERS was created but also verifies already established state law.
"We undertook this lawsuit not just for MERS but for the industry as a whole," said R.K. Arnold, president and CEO of MERS. "This victory is for the entire mortgage lending community because MERS is no different than a servicer when it comes to foreclosures, and this case was our opportunity to prove it in court."
The ruling has broad industrywide implications for the state of Florida, which now formally confirms that holders, including MERS and traditional servicers, can be a party in a foreclosure. The decision affects more than just MERS foreclosures since an adverse ruling could have halted foreclosures by mortgage servicers as well.
"If the Trial Court's opinion stood that you had to have the beneficial interest in the property foreclosed, that would have meant that servicers wouldn't be able to foreclose," added Mr. Arnold. "MERS is no different than a servicer, [so] if MERS could not foreclose, servicers could not foreclose."
According to the text of the decision, "The holder of a note has standing to seek enforcement of the note." It also stated that "standing is broader than just actual ownership of the beneficial interest in the note" and that "the Florida real party in interest rule permits an action to be prosecuted in the name of someone other than, but acting for, the real party in interest."
A similar case in Miami-Dade County's Third District Court of Appeals is pending.
Separately, the New York Court of Appeals unanimously made a similar ruling this past December that the MERS mortgage is a valid method of transferring rights from the borrower to MERS. The court affirmed the Appellate Division's decision that county clerks must record MERS mortgages, assignments and lien discharges as required by New York Real Property Law.
The New York Court, in a 7-0 decision, found that the model MERS mortgage and mortgage assignment "satisfies the limited requirements of the recording statute," concluding that "the county clerk must accept the MERS mortgage when presented for recording."
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