Earlier this week, we covered a recent ruling by a New York judge indicating that MERS (Mortgage Electronic Registration Systems) did not have the right to bundle, buy and sell mortgages nor to foreclose on mortgages. (You can read the article here.) This ruling is extremely controversial not only because the judge, Robert Grossman, declared essentially that the entire operating system of MERS is “absurd,” but also because if it is enforced on a large scale, it will completely alter the way that mortgage securities are bought and sold. However, in quick succession, a number of other state judges have also ruled on MERS, and the rulings give no clear indication as to which way MERS’ fate will ultimately swing.
The day after Grossman released his ruling and statement, a Kansas judge ruled in direct opposition. The same happened in Massachusetts – a state plagued by property and note ownership ambiguity. Each of these rulings can stand independently because they are based on state laws, but challenges from contradictory rulings still exist since mortgages can be transferred from lender to lender. MERS hopes to address the issue satisfactorily by announcing a “proposed amendment to membership rule 8 requiring members not to foreclose in MERS’ name.” The hope is that by resolving the foreclosure issue, which is a big one for critics of MERS like Grossman, some of the other issues may be bypassed or resolved. MERS also plans to test and appoint all “certifying officers” using an “enhanced certifying officer process.”
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