MERSCORP, the electronic mortgage registry system, said it will propose a rule to stop its member/users from foreclosing in its name.
"We encourage members to bring foreclosures only in the name of the holder of the note, in the name of the trustee or the servicer of record acting on behalf of the trustee," the Reston, Va.-based company said in a statement issued earlier in the week.
Mortgage banking firms have been foreclosing on homes in the name of MERS as the nominee even though the electronic registry does not actually own the loan.
In several court cases, attorneys working for home owners have argued that because MERS does not actually own the loan it therefore does not have standing to foreclose. (Without an assigned note, it also is not clear whether the lender has the right to foreclose.)
MERS, which was created by key players in the mortgage banking industry back in 1998 – including Fannie Mae, Freddie Mac, and the Mortgage Bankers Association -- is the nominee for roughly half of the 60 million outstanding residential loans in the U.S.
Meanwhile, last week a federal bankruptcy judge in Massachusetts granted Aurora Loan Services its motion for relief from stay, finding that the MERS assignment gives the company standing to foreclose.
"The Mortgage specifically identifies MERS as the mortgagee under the instrument and granted it and its 'successors and assigns' a power of sale," wrote Judge William C. Hillman in his decision on IN RE: Henry Lopez.
