By
Paul F. Alphen
In
a recent Lawyers Weekly article by
Kris Olson on Epps vs. Bank of America,
it was suggested that MERS (Mortgage Electronic Registration Systems Inc) is
“controversial.” On the contrary, case law in Massachusetts continues to
support the conclusion that Mortgage Electronic Registration Systems, Inc.
(“MERS”) and the MERS® System database operate in compliance with Massachusetts
law.
By
way of background, MERS (a wholly-owned subsidiary of MERSCORP Holdings, Inc.)_
serves as mortgagee in the land records for mortgages registered on the MERS®
System database on behalf of lenders and investors that own mortgage loans that
are traded in the secondary market. MERS holds the secured interest in the
property pledged as collateral for the repayment of the loan in the capacity as
nominee (a limited form of agency) for the lender making the mortgage loan and for
subsequent purchasers (“beneficial owners”) of the mortgage loan. The MERS®
System database is a national electronic database owned and operated by
MERSCORP Holdings that tracks changes in mortgage servicing rights and
beneficial ownership interests in mortgage loans secured by residential real
estate. Certainly, when MERS documents
first appeared of record in our local Registries of Deeds about fifteen (15)
years ago many old school conveyancers like I had questions and concerns; we
are conservative by nature and slow to adopt new technologies in general.
Nevertheless, with the passage of time and experience we grew to understand and
appreciate the system.
Notwithstanding
MERS success in both federal and state courts and the fact that MERS assigns
its mortgage lien interest prior to the commencement of foreclosures, legal
challenges against MERS related to foreclosure actions continue to be raised
here in Massachusetts. Assertions that MERS was not the lawful mortgagee were
raised and dismissed by the trial court, and affirmed recently by the Appeals
Court of Massachusetts in Epps v. Bank of
America (2015-P-1095). This is the very same case where Olson
questioned the validity of MERS. In Epps, the Appeals Court ruled against
the proposition that only the original “Lender” can be the mortgagee, based on both
the mortgage’s contractual terms and as a matter of law in Massachusetts. This
decision, rendered on Oct. 11, 2016, held MERS was the
legal mortgagee under the express terms of the homeowner’s mortgage until MERS
assigned its interest in the mortgage to a subsequent party.
Further supporting the Epps holding are several other decisions by the
Appeals Court that reject the theories underlying Epps’s action and appeal,
such as Sullivan v. Kondaur, 85 Mass.
App. Ct. 202 (2014) (“Sullivan”),
Shea v. Federal
Nat’l Mort. Ass’n, 87 Mass. App. Ct. 901 (2015) (“Shea”),
and others. Prior
to Epps, the Appeals Court made clear
in Shea that MERS may serve as
mortgagee with authority to assign the Mortgage, even though MERS never held
the Note. 87 Mass. App. Ct. at 902-03. And,
in Sullivan, the Appeals Court (in
confirming the validity of a MERS assignment just like the Assignment here at
issue) determined that MERS was the original mortgagee with power to assign the
mortgage, and it needed no instruction from the owner of the debt in order to
do so. See 85 Mass. App. Ct. at 208-09.
Just
recently, the United States District Court of Massachusetts held the mortgage’s
express language provided that MERS was the mortgagee and authorized MERS to
assign the mortgage. The court also noted that, pursuant to First Circuit
precedent, a note and mortgage need not be held by the same entity and that
MERS can validly assign a mortgage. See Hayden v. HSBC Bank USA, N.A
Hayden v. HSBC Bank USA, N.A., No. 16-11492-DJC, 2016
U.S. Dist. LEXIS 135977 (D. Ma. Sept. 30, 2016).
Today, there are more than 5,000
lenders, servicers, sub-servicers, investors and government institutions using MERS
and the MERS® System database, including MassHousing, the Commonwealth’s independent, quasi-public agency created to provide
financing for affordable housing in Massachusetts. Far from controversial, the
validity of MERS is settled law.
Paul
Alphen is an Emeritus member of the REBA Board of Directors and a member of the
Association’s Strategic Planning Committee.
Paul can be contacted by email at palphen@alphensantos.com.
