All Lenders Should Be Aware of the MERS Decision

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On July 18, 2012, the Oregon Court of Appeals decided Niday v. GMAC Mortgage, LLC which impacts all lenders, even those who do not participate in the MERS program.  Essentially, the Court emphasized:  “And the import of our holding is this:  A beneficiary that uses MERS to avoid publically recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing – publically recorded assignments.”  The result is that no lender can avail itself to a non-judicial foreclosure unless it has a recorded beneficial interest in the trust deed being foreclosed; and is the party to whom the loan is owed.  The underlying debt and the security for that debt are not separately transferable and, as a result, the person named in the trust deed as the person who is benefited, refers to the person designated in the trust deed as the party to whom the underlying secured obligation is owed.

The import of the ruling is that all assignments of notes and trust deeds should be recorded.  Without the recording, whether it is a MERS transaction or not, the lender may not avail itself of the non-judicial process.  While the court did not extend its decision to judicial foreclosures, without recorded assignments, there is a question as to whether the lender is the “real party in interest” and whether the lender has the right to foreclose.

The remaining open question is what happens to all of the MERS foreclosures or any other non-judicial foreclosure, where the assignments were not properly recorded.  The court provided no instructions for those situations and we would expect the case law to continue developing.

– Gina A. Johnnie

Gina focuses her practice in banking and lending law, creditor’s rights, construction, and real estate law.

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