Monday, January 14, 2013

MERS' Role In Non-Judicial Oregon Foreclosures Now In Hands Of State Supremes

In Salem, Oregon, the Statesman Journal reports:

  • The Oregon Supreme Court heard arguments Tuesday about whether a mortgage-industry database can stand in for lenders on real estate deeds under Oregon law — and in effect trigger out-of-court foreclosures.

    The court’s responses in a pair of actions will be awaited by lenders and homeowners facing foreclosures.

    The central question in both actions is whether Mortgage Electronic Registration Systems can be considered a “beneficiary” under a 1959 law governing real estate deeds in Oregon. The national database was launched in 1997 to track home mortgage loans — about two-thirds of the nation’s loans are covered by it — but it does not lend or collect money itself.

    The Oregon Court of Appeals decided July 18 that individual lenders — not the national system — must file deed assignments with counties before they can begin out-of-court foreclosures. The decision would compel lenders to file each change of ownership of a loan.

    Coupled with new state legislation during the 2012 session, it put a halt to most out-of-court foreclosures.

    Based on how the 1959 Oregon Trust Deed Act defines “beneficiary,” the database “cannot be a beneficiary under any circumstances,” said Jeff Barnes, a California lawyer representing Rebecca Niday, who is challenging a foreclosure action brought by GMAC Mortgage.

    Only the lender or a successor can be a “beneficiary” under the law, Barnes said. “What MERS does is provide a service,” he said, but it has limited legal powers.
  • The justices are considering similar questions put to them by the U.S. District Court in Portland, which has four other foreclosure cases before it. The federal court is seeking how the Oregon Supreme Court interprets the 1959 state law.

    A month after the Oregon Court of Appeals decision, which reversed a judgment against Niday in Clackamas County Circuit Court, the Washington Supreme Court decided a case against the national database.

    But the Oregon Supreme Court will have to decide based on Oregon law, and justices had plenty of questions for the lawyers Tuesday.

    “Our goal is not to figure everything out today, but to get information from you so that we can figure everything out later,” Chief Justice Thomas Balmer said.

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