February 14th, 2011
Econintersect: A U.S. Bankruptcy Court Judge, Robert E. Grossman of Islip, NY, has ruled that Merscorp has no standing to transfer the mortgages that are subject to its membership rules. Merscorp Inc. is the operator of the electronic-registration system that contains about half of all U.S. home mortgages. Follow up:
Follow up:From Bloomberg:
“MERS’s theory that it can act as a ‘common agent’ for undisclosed principals is not supported by the law,” Grossman wrote in a Feb. 10 opinion. “MERS did not have authority, as ‘nominee’ or agent, to assign the mortgage absent a showing that it was given specific written directions by its principal.”
Merscorp was created in 1995 to improve servicing after county offices couldn’t deal with the flood of mortgage transfers, Karmela Lejarde, a spokeswoman for MERS, said in an interview last year. The company tracks servicing rights and ownership interests in mortgage loans on its electronic registry, allowing banks to buy and sell the loans without having to record the transfer with the county. It played a major role in Wall Street’s ability to quickly bundle mortgages together in securitized trusts.
MERS was still reviewing Grossman’s decision and didn’t have an immediate comment, Lejarde said in an e-mail Feb. 11. Lejarde didn’t immediately respond to an e-mail seeking comment today.
Judge Grossman wrote in his ruling that legislative action would be necessary to establish the standing of MERS to transfer mortgages.
If MERS is not able to pursue foreclosures on delinquent mortgages, the process of clearing the foreclosure backlog that exists could be extended for years longer than otherwise might have occurred.