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Home Foreclosures: 4.6.1 MERS’s Assignments of Mortgages and Deeds of Trust

In a number of decisions, courts considered the validity of assignments of mortgages and deeds of trust executed by MERS’s signing officers. Courts have expressed concerns about the practice whereby individuals who are not employees of MERS but act in MERS’s name wear various hats to sign documents as assignor and assignee, or as trustee and agent, in connection with the same loan.

Home Foreclosures: 4.6.2 Transfers of Notes by MERS

MERS’s rules prohibit its members from referring to MERS as a “note-owner” in foreclosure proceedings.253 MERS Terms and Conditions provide that “MERS shall have no rights whatsoever to any payments made on account of such mortgage loans.”254 Individuals purporting to act as MERS’s representatives have no authority to transfer notes.255 This fact has not hindered servicers’ attorneys from arguing to the contrary.

Home Foreclosures: 4.7 Challenging MERS’s Standing in Bankruptcy Proceedings

If the consumer files bankruptcy, MERS requires that for actions taken after July 22, 2011, the MERS’s member assign any security interest in MERS name to the name of the beneficial owner and take the action in the name of the beneficial owner.270 This rule applies to filing proofs of claim and motions for relief from the bankruptcy stay.

Home Foreclosures: 4.8 Other Challenges Involving MERS

Advocates should consider challenges to MERS’s foreclosure practices and other activities including whether they violate any state laws related to banking, mortgage lending, foreclosure, or debt collection,279 whether they violate state licensing regulations,280 and whether MERS’s prosecution of foreclosures without any beneficial interest in the note gives rise to causes of action such as wrongful foreclosure.281

Home Foreclosures: 4.9 Local Recorders’ Actions Against MERS

A number of counties have brought suits against MERS, sometimes joining as defendants various financial institutions that use the MERS system, asserting claims for recovery of lost revenue from recording fees. The counties sought orders to require public recording of transfers of loans in the MERS system. MERS has consistently prevailed in having these actions dismissed.293 Typical of these rulings was Fuller v.

Home Foreclosures: Wyoming

Wyo. Stat. Ann. §§ 34-4-101 to 34-4-113 (power of sale), 1-18-101 to 1-18-115 (judicial sale)

Most Common Method of Foreclosure: Power of sale.

Preforeclosure Notice:

Number of Notices: Two; notice of intent to foreclose and notice of sale.

Home Foreclosures: 3.4.3.3 The Eaton Decision

In Eaton v. Federal National Mortgage Association,183 the Massachusetts Supreme Judicial Court looked at the related question of whether, at the time of foreclosure, the “mortgagee” must also have authority to enforce the promissory note that the mortgage secures.

Home Foreclosures: 3.6.1 Do Borrowers Have Standing to Challenge Loan Document Transfers?

Lenders have occasionally argued that borrowers lack standing to challenge the validity of preforeclosure transfers of mortgages, deeds of trust, and notes. According to the lenders, the validity of assignments and other transfers of loan documents is purely a matter between the parties to these transactions and borrowers have no stake in questions about their validity.302 Lenders have raised these standing objections most frequently in the context of non-judicial foreclosures, when borrowers file complaints to enjoin or set aside a sale.

Home Foreclosures: 3.6.3.3 Is the Loan Properly Included in the Trust?

The terms of a pooling and servicing agreement govern when and how a trust acquires mortgages. For example, some PSAs permit the trust to acquire only mortgages that are current, precluding the trustee from accepting loans that are in default. A trust agreement may set a closing date after which new mortgages may not be added to the trust pool.

Home Foreclosures: Alabama

Ala. Code §§ 35-10-1 to 35-10-30, §§ 6-5-247 to 6-5-257

Most Common Method of Foreclosure: Non-judicial; Power of sale in mortgage.

Preforeclosure Notice:

Number of Notices: One; notice of sale. §§ 35-10-8, 35-10-13.

Amount of Notice Required: Thirty days prior to sale.

Content of Notice: Time, place, terms of sale, and property description.

Home Foreclosures: Alaska

Alaska Stat. §§ 34.20.070 to 34.20.135

Most Common Method of Foreclosure: Non-judicial; Power of sale in deed of trust.

Preforeclosure Notice:

Number of Notices: One; notice of default and sale.

Amount of Notice Required: Notice is to be served not less than thirty days after default and not less than ninety days before sale.

Home Foreclosures: Arizona

Ariz. Rev. Stat. Ann. §§ 33-741 to 33-750, 33-801 to 33-821

Most Common Method of Foreclosure: Non-judicial; power of sale in deed of trust. (Judicial foreclosure for some existing mortgages, which were common prior to 1971.)

Foreclosure by Power of Sale Permitted?: On deeds of trust only. § 33-807.

Home Foreclosures: Arkansas

Ark. Code Ann. §§ 18-49-101 to 18-49-106, §§ 18-50-101 to 18-50-117

Most Common Method of Foreclosure: Non-judicial; power of sale in mortgage (except for agricultural land).

Judicial Foreclosure Procedure: See §§ 18-49-101 to 18-49-106.

Preforeclosure Notice:

Number of Notices: One; notice of default and intention to sell; must be recorded.

Home Foreclosures: California

Cal. Civ. Code §§ 2920 to 2924l (West); Cal. Civ. Proc. Code §§ 580a to 580d (West)

Most Common Method of Foreclosure: Non-judicial; power of sale in deed of trust.

Judicial Foreclosure Procedure: See Cal. Civ. Proc. Code §§ 725a to 730.5 (West). Generally judicial foreclosure used only if there are problems requiring court resolution or if likelihood for recovery of deficiency judgment.

Preforeclosure Notice:

Home Foreclosures: Colorado

Colo. Rev. Stat. §§ 38-38-100.3 to 38-38-114

Most Common Method of Foreclosure: Power of sale by a public trustee, with court supervision.

Preforeclosure Notice:

Home Foreclosures: Delaware

Del. Code Ann. tit. 10, §§ 5061 to 5067

Most Common Method of Foreclosure: Judicial.

Foreclosure by Power of Sale Permitted?: No.

Judicial Foreclosure Procedure: Scire facias Order to show cause why the mortgaged premises should not be seized upon breach of a condition. Writ served like a summons. §§ 3105, 5061. Twenty days to answer. Del. Super. Ct. Rule of Civ. Proc. 4.

Notice of Sale:

Home Foreclosures: District of Columbia

D.C. Code §§ 42-815, 42-816

Most Common Method of Foreclosure: Power of sale.

Preforeclosure Notice:

Number of Notices: One.

Amount of Notice Required: Thirty days prior to sale.

Content of Notice: Amount of loan and amount of default, and date, time, and place of sale and such other information as required by D.C. regulations.

Home Foreclosures: Florida

Fla. Stat. §§ 702.01 to 702.12, 45.031 to 45.035

Most Common Method of Foreclosure: Judicial action. The mortgagee can request the issuance of an order to show cause to the mortgagor why final judgment of foreclosure should not be entered. § 702.10.

Foreclosure by Power of Sale Permitted?: No.

Home Foreclosures: Georgia

Ga. Code Ann. §§ 44-14-160 to 44-14-191

Most Common Method of Foreclosure: Power of sale.

Preforeclosure Notice:

Number of Notices: One; notice of sale.

Amount of Notice Required: By mail, thirty days prior to sale. Copy of notice of sale to be given to publisher shall be mailed or delivered to debtor. § 44-14-162.2.

Home Foreclosures: Guam

Guam Code Ann. tit. 7, §§ 24101, 24104 to 24105, 24107, 23113, 23124

Most Common Method of Foreclosure: Judicial foreclosure.

Judicial Foreclosure Procedure: All foreclosures must be brought in superior court. § 24101.

Preforeclosure Notice:

Number of Notices: One; notice of sale.

Amount of Notice Required: Twenty days prior to the sale.