MERS Takes Another Hit As Appellate Panel Affirms Bankruptcy Court Ruling That It Lacked Standing To Bring Foreclosure Action

In Las Vegas, Nevada, the Las Vegas Review Journal reports:

• Homeowners struggling to avoid foreclosure got some good news [...]. U.S. District Judge Kent Dawson upheld a bankruptcy court ruling that makes it harder for lenders to foreclose on home mortgages. The case, heard by a panel of federal judges in November, concerned whether Mortgage Electronic Registration Systems Inc. could foreclose on residences on behalf of lenders.

• The electronic system records the ownership of residential mortgages for the mortgage banking industry. Dawson said the company could not foreclose on a home, because it did not provide evidence that it held the note on the residence and didn’t show that it was an agent of the lender.(1)

For more, see Ruling may help homeowners trying to avoid foreclosure.

For Judge Dawson's ruling, see Mortgage Electronic Registration System, Inc. V. Chong, et al.

(1) According to the story, the case started in bankruptcy court two years ago. Mortgage Electronic Registration Systems Inc. was unable to show that it had possession of the note. On March 31, 2009, U.S. Bankruptcy Judge Linda B. Riegle ruled in bankruptcy trustee Lenard Schwartzer favor, saying the electronic system was not a “real party in interest” in the foreclosure action. The decision was appealed to federal court.

In his decision Tuesday affirming Riegle's ruling, U.S. District Judge Dawson (sitting in an appellate capacity) found that the Mortagage Electronic Registration must at least provide evidence that it was a representative of the mortgage loan holder, which it failed to do. “Since MERS provided no evidence that it was the agent or nominee for the current owner of the beneficial interest in the note, it has failed to meet its burden of establishing that it is a real party in interest with standing,” Dawson said, affirming the bankruptcy court ruling.

For a report on Judge Riegle's March 31 ruling in the bankruptcy court, see Las Vegas Business Press: Judge's ruling deals blow to national mortgage servicer. For Judge Riegle's ruling itself, see In re Mitchell. EpsilonMissingDocsMtg