The California Court of Appeals in the Second Appellate District declared that MERS (Mortgage Electronic Registration Systems, Inc) can be a beneficiary on a deed of trust and that Avelo Mortgage does need to possess the promissory note on the mortgage before beginning foreclosure proceedings[1]. Essentially, the ruling sets a precedent in California that MERS can foreclose without having a promissory note in its possession[2]. The decision was based on another California MERS decision in which the homeowner (Gomes) argued that MERS could not initiate foreclosure and the court determined that the deed of trust “explicitly provided MERS with the authority to do so.” The Gomes decision also included a note that MERS did not have to provide the homeowner with assurances that MERS was authorized to proceed with the foreclosure.

At least in California, it looks like the courts are going to side with MERS, although the conflicts continue to be decided on a case-by-case basis. Do you think that California’s decision to uphold MERS is the right one, or do you believe that Oregon and New York – states that have tended to throw out MERS cases or even decide in favor of the homeowner – are making the right decisions?

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