MERS Learns The Hard Way: Unable To Prove Note Ownership In Foreclosure, Connecticut Court Tells It To Take A Hike

Connecticut & New York attorney Christopher G. Brown recently reported in MortgageOrb.com:

• A Connecticut court recently joined what is becoming a national trend of road-blocking foreclosure of mortgages that have been traded in the secondary market, and the implications for mortgage servicers could be significant. In April, the Connecticut Superior Court in New Haven dismissed a foreclosure action that Mortgage Electronic Registration Systems Inc. (MERS), as nominee for Finance America LLC, had commenced against Anna M. Miller because MERS did not prove that it owned the note.

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• The court was very definite in its ruling that only the true owner of the loan can start a foreclosure, while imposters will be dismissed. MERS learned the lesson the hard way, pursuing the foreclosure for over three years and coming away empty.

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• [I]n today's environment every legal and factual detail in a foreclosure action is under tremendous scrutiny. Courts are declining foreclosure to those who do not play by the rules. Servicers need to understand that these decisions will make it harder for any servicer or mortgage loan owner to collect if and when the loan goes into default. The bottom-line message is that only the institution that can prove by irreproachable evidence that it owns the loan can foreclose. It may be a monumental task, but servicers will have to do their homework to identify the loan's true owner and secure its cooperation in establishing ownership before commencing a foreclosure. If not, the servicer may find that the bridge is out on the road to recovery.

For the details on this and other cases described in the article, see New Rules Toughen Servicers' Foreclosure Procedures.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, and Go Here.