The First Circuit has affirmed a holding finding that the system under which mortgages are held in the name of Mortgage Electronic Registration Systems, Inc., commonly known as MERS, comports with Massachusetts law relating to mortgage transactions. In the underlying matter, Culhane v. Aurora Loan Services of Nebraska, 826 F.Supp.2d 352 (D.Mass. 2011), Judge Young of the United States District Court had held that a mortgagor possesses standing to challenge the chain of assignment of his or her mortgage in defense to a foreclosure action, but further held that the MERS system of registration and transfer of mortgages is lawful.
Massachusetts' implied covenant of good faith and fair dealing does not apply to negotiations and contract preparations for a mortgage and accompanying promissory note, the First Circuit has held. In Latson v. Plaza Home Mortgage, Inc., the plaintiffs filed suit against their lender alleging, among other claims, violation of the implied covenant based on the lender's alleged failure to provide a proper commitment letter, good faith estimate, or other documents required by law, and gave them insufficient opportunity to review the terms in the loan documents. The United States District Court for the District of Massachusetts dismissed the case for failure to state a claim, and the borrowers appealed.