Monday, August 20, 2012

Washington Supremes Give MERS' Foreclosures The Boot; Say Outfit's Actions May Also Violate State UDAP Statutes

In Olympia, Washington, The Oregonian reports:

  • The Washington Supreme Court ruled unanimously [] that the mortgage industry’s controversial document-recording system lacked authority to start out-of-court foreclosures and might have violated state consumer protection laws.

    The state’s highest court ruled that lenders could not foreclose on homeowners in the name of the Mortgage Electronic Registration Systems Inc. It found that MERS did not meet Washington's definition of a beneficiary and could not foreclose on behalf of a lender that holds the mortgage note.

    Simply put, if MERS does not hold the note, it is not a lawful beneficiary,” the court wrote in an opinion written by Justice Tom Chambers and released today.

    The Oregon Supreme Court also is considering whether MERS can be a beneficiary under Oregon law, said Rick Fernandez, an attorney in Lake Oswego whose cases are before the court.

    In July, the Oregon Court of Appeals ruled that lenders could not use MERS to skirt state law requiring that all mortgage sales be recorded in county offices before launching out-of-court foreclosures.

    Washington's court today also found that MERS's involvement in robo-signing mortgage documents, among other behaviors, appeared to violate Washington’s Consumer Protection Act. But consumers must try such claims on a case-by-case basis, the court said.
  • Melissa Huelsman, a Seattle attorney, represented homeowner Kristin Bain in one of the cases against the court. Bain had sued Metropolitan Mortgage Group, Indymac Bank, Fidelity National Title and MERS.

    Huelsman said the ruling cleared the path for homeowners to recover damages and attorneys fees from lenders found to have wrongfully foreclosed. She called the decision a victory for the rule of law. "Too often we've seen courts twisting themselves into knots to get to a decision that's inconsistent with the statute," Huelsman said.

    Attorneys said they were still evaluating how the decision impacts existing cases and already completed foreclosures.
  • The court cited previous federal court rulings in Washington in favor of MERS as "not well taken."(1) The justices declined to evaluate the legal impact of their ruling, as U.S. District Court Judge John C. Coughenour asked them to last year when he sought their opinion.

    Under the state's Consumer Protection Act, MERS's characterization of itself on deeds of trust as a beneficiary could be considered an unlawful deceptive practice, the court said.

    "The fact that MERS claims to be a beneficiary, when under a plain reading of the statute it was not, presumptively meets the deception element of a CPA action," the court said. So could MERS's participation in robo-signing mortgage documents, the court said.

    "MERS's officers often issue assignments without verifying the underlying information, which has resulted in incorrect or fraudulent transfers," the court said. "Actions like those could well be the basis of a meritorious CPA claim."(2)
For the story, see Washington's highest court rules MERS cannot foreclose on homeowners.

For the ruling, see Bain v. Metropolitan Mortgage Group, Inc., No. 86206-1 (Wn. August 16, 2012).

(1) The state high court was rather gentle in its excoriation of those federal judges for their earlier screw-ups that favored MERS.

(2) The Consumer Protection Act is Washington State's version of the state laws that prohibit unfair and deceptive acts and practices in trade and commerce (generically referred to as state UDAP statutes). For more on UDAP statutes across the U.S., see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

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