Oregon Court of Appeals rules against banks, MERS in foreclosure case
The Oregon Court of Appeals struck a blow to the mortgage industry in Oregon today, ruling that its controversial document-registry system could not be used to skirt state recording law in out-of-court foreclosures.
In a decision with implications beyond the Mortgage Electronic Registration Systems Inc., the state’s second-highest court also held today that a lender must ensure a complete ownership history of the mortgage on file in county records before it can foreclose outside a courtroom.
MERS was created by the mortgage industry to make it easier to bundle and sell loans to investors without having to record every assignment with county clerks. It is involved in an estimated 60 percent of mortgages across the country.
But the court found that the Oregon Trust Deed Act requires the party who receives loan payments to publicly record all changes in mortgage ownership before starting a so-called nonjudicial foreclosure.
MERS does not take loan payments and does not qualify as a “beneficiary” of a trust deed, so it does not usurp the recording requirement, the court ruled.
“A beneficiary that uses MERS to avoid publicly recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing–publicly recorded assignments,” the court ruled. Judge Lynn Nakamoto wrote the decision.
Copy of the opinion below…