Massachusetts Appeals Court Reaffirms MERS’ Role As Mortgagee

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The Massachusetts Appeals Court, in a Rule 1:28 decision, has once again reaffirmed its holdings in Sullivan v. Kondaur Capital Corp., 85 Mass.App.Ct. 202 (2014) and Shea v. Federal Natl’ Mort. Assn., et al., 87 Mass.App.Ct. 901 (2015), that the Mortgage Electronic Registration Systems, Inc. (“MERS”) system of mortgage assignments comports with Massachusetts law. The Appeals Court further reaffirmed that MERS’ status as mortgagee, even “solely as nominee for [lender] and [lender]’s successors and assigns,” grants to MERS all the rights and powers of a mortgagee, including the right to foreclose and exercise the power of sale in the mortgage. Epps v. Bank of America, N.A., et al., 15-P-1095, 2016 Mass. App. Unpub. LEXIS 974 (Oct. 11, 2016).

MERS is an organization that allows for the transfer or mortgages among its member banks without the need for a new recording in the applicable registry of deeds for each transfer. MERS appoints employees of its member banks as officers or secretaries of MERS, who then have the power to assign mortgages to other members, or from other members to themselves. Throughout any transfer, MERS remains the mortgagee of record for the benefit of the member bank currently holding the note.

Plaintiff Leslie Epps refinanced her mortgage through Mortgage Network, Inc. (“MNI”) in 2003, executing a promissory note in favor of MNI and a mortgage deed to MERS as mortgagee and nominee for MNI. In September 2008, after Epps had defaulted, MERS recorded an assignment of the mortgage to Countrywide Home Loans, Inc. (“Countrywide”). Following foreclosure, Epps filed suit arguing that Countrywide’s foreclosure was invalid because Countrywide did not hold the note. The Appeals Court noted that pursuant to U.S. Bank Natl. Assn. v. Ibanez, 458 Mass. 637, 648 (2011), an entity has the authority to exercise the power of sale in a mortgage if they are the assignee of the mortgage at the time of the notice of sale and the subsequent foreclosure sale, and MERS made such an assignment to Countrywide prior to the foreclosure.

The Appeals Court further rejected Epps’s assertion that MERS never held the status of “mortgagee” because it never held the note. Because the notice of foreclosure was provided prior to June 22, 2012, the Supreme Judicial Court’s decision in Eaton v. Federal Natl’ Mort. Assn., 462 Mass. 569, 588-589 (2012), requiring the foreclosing entity to also hold the note, did not apply. “MERS’s interest as mortgagee was not inherently invalid because it was separated from ownership of the underlying debt. MERS was the lawful mortgagee, and there was no requirement that the foreclosing entity also hold the note.” Epps (internal citations omitted). Epps’s attack on MERS’s status as mortgagee was ultimately unavailing. “The mortgage was given by Epps to MERS, and assigned to Countrywide. No evidence in the record disputes that by the time of the foreclosure sale notice and the sale itself…Countrywide was the record holder of the mortgage, and was vested with all the authority granted to MERS under the mortgage, including the power of sale.” Id. (emphasis added).

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