California Bankruptcy Court: Mortgage Assignments Must Be Recorded Before Assignee Exercises Power Of Sale In Deed Of Trust

Lexology reports on the recent In re Salazar case, in which a U.S. Bankruptcy Court in California gave MERS the boot in a foreclosure action:

• MERS was the original named beneficiary in the DOT securing the borrower’s loan and, despite the assignment of the original lender’s interest in the note and DOT, MERS remained the named beneficiary of record on the DOT when the assignee foreclosed. The Bankruptcy Court, in In re Eleazar Salazar, issued on April 11, 2011, held that MERS’ recorded interest did not allow the assignee to bypass the California Civil Code Section 2932.5 requirement that an assignment be recorded before the assignee exercises the power of sale under a DOT.

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• In rejecting the assignee’s argument that MERS’ recorded interest as beneficiary of the DOT was sufficient to satisfy Section 2932.5, the Court noted that it was joining “the courts in other states that have rejected MERS’ offer of an alternative to the public recording system.” Among such courts was the U.S. Bankruptcy Court for the Eastern District of New York, which held in In re Agard that MERS lacked authority to assign mortgages. (Click here to read an earlier legal alert summarizing Agard.)

For the story, see California bankruptcy court: state foreclosure law trumps MERS (requires paid subscription; if no subscription, GO HERE; or TRY HERE, then click appropriate link for the story).