Federal Judge Holds MERS Not Required to Own Note to Transfer Mortgage

The U.S. District Court for the Eastern District of Michigan held that Mortgage Electronic Registration Systems, Inc. was not required to own the note in order to assign the mortgage. The plaintiff filed suit against MERS alleging violations of the Fair Debt Collection Practices Act and state common law after MERS sought to foreclose on plaintiff after she defaulted on her loan.  After moving to foreclose, MERS assigned plaintiff’s mortgage.  Plaintiff argued that MERS sought to transfer rights that it did not possess.  More specifically, plaintiff argued that MERS sold the note to an investment trust in 2005 and, therefore, did not have the legal rights to assign the mortgage. The Court disagreed, holding that MERS was the record holder of the mortgage and as such had the authority to foreclose.  Plaintiff further alleged that separation of the note and mortgage rendered the mortgage a “nullity” or extinguished the note.  However, the Court also rejected this argument, finding that MERS was not required to own the note to assign the mortgage.

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