First Circuit Affirms Culhane, Woods, and MERS Assignments of Mortgages

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The United States Court of Appeals for the First Circuit has reaffirmed its prior holdings in Culhane v Aurora Loan Services of Nebraska, 708 F.3d 282 (1st Cir. 2013) and Woods v. Wells Fargo Bank, N.A., 733 F.3d 349 (1st Cir. 2013) regarding Mortgage Electronic Registration Systems, Inc.’s (“MERS”) assignments of mortgages. The Court in Wilson v. HSBC Mortgage Services, Inc., 2014 WL 563457 (1st Cir. Feb. 14, 2014) found that while a plaintiff has standing to challenge a void assignment, they lack standing to challenge allegedly voidable assignments, and the MERS system for assignments comports with Massachusetts law.

In 2004, the Plaintiffs took out a loan with Ameriquest Mortgage Co., which assigned the mortgage securing the loan to MERS by written assignment recorded February 8, 2005. In 2009, MERS recorded an assignment of the mortgage to HSBC Mortgage Services, Inc. (“HSBC”). In 2012, following attempts to secure a modification of the mortgage and note, the Plaintiffs sued HSBC on the grounds that the MERS assignment to HSBC was invalid and HSBC therefore held no interest in the mortgage.

The First Circuit noted that the District Court, acting before the issuance of the Culhane and Woods opinions, had dismissed the complaint on the grounds that the Plaintiffs lacked standing to challenge the assignment. While this basis was overruled by the later First Circuit cases, the court had no difficulty finding that Plaintiffs’ claims fared no better under the more recent precedent.

The major thrust of Plaintiffs’ claims was that the signatory on the assignment was not a MERS employee, but rather an employee of HSBC. As the Court noted, however, she was also a Vice President of MERS. As such, she had the authority to assign the mortgage to HSBC. “Significantly, the Complaint does not allege that such dual agency violates the common law or any statute or applicable regulation.” Wilson at * 7. As the Court noted in Culhane, Massachusetts law “neither places restrictions on who may be elected as an officer of the assignor nor imposes special requirements (say, regular employment) on who may serve as a vice president of an assignor corporation.” Culhane, 708 F.3d at 294.

The signatory’s positions as both an employee of HSBC and a Vice President of MERS comported with Massachusetts law, and any other allegations by Plaintiffs failed to undermine the assignment. “Indeed, everything the [Plaintiffs] have put before us gives us no reason to question the validity of the 2008 mortgage transfer from MERS to HSBC.” Wilson at *12. The MERS system of mortgage assignments remains valid under binding First Circuit precedent.

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