In a case of first impression for the United States Court of Appeals for the First Circuit, a three-judge panel, which included retired Supreme Court Justice David Souter, held that a mortgagor has standing to challenge a mortgage assignment even though the mortgagor is not a party or third-party beneficiary to the assignment. Plaintiff executed a note and mortgage, which named MERS as mortgagee as the nominee for the lender and the lender’s successors and assigns. The mortgage contained a power of sale, which allowed the mortgagee to foreclose without obtaining prior judicial authorization. The note was subsequently assigned to a trustee of a securitization trust, which engaged defendant as servicer. Subsequently, MERS assigned the mortgage to defendant and defendant began the process to foreclose by exercising the power of sale. Three days prior to the scheduled foreclosure, plaintiff initiated an action seeking injunctive relief and monetary damages. Defendant moved for summary judgment, with the inquiry focusing on whether MERS’ involvement in the chain of title impacted defendant’s ability to foreclose. The district court held that defendant had the authority to foreclose.
Plaintiff appealed and defendant argued that plaintiff did not have standing to challenge the assignment from MERS to defendant because plaintiff was not a party or a third-party beneficiary of the agreement between defendant and MERS. The Court held that plaintiff had standing to challenge the assignment because “a Massachusetts mortgagor has a legally cognizable right under state law to ensure any attempted foreclosure on his or her home is conducted lawfully” and when a mortgage contains a power of sale a mortgagee can foreclose without prior judicial authorization. The Court narrowed its holding by noting that a mortgagor only has standing "to challenge a mortgage assignment as invalid, ineffective, or void." Mortgagors do "not have standing to challenge shortcomings in an assignment that render it merely voidable at the election of one party but otherwise effective to pass legal title." The Court went on to hold that the assignment from MERS to defendant was valid and affirmed the decision of the lower court.