What Is MERS in Mortgage ?
What is Mortgage Electronic Registration Systems, Inc. (MERS)?
The Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256 court explained MERS:
"MERS is a private corporation that administers a national registry of real estate debt interest transactions. Members of the MERS System assign limited interests in the real property to MERS, which is listed as a grantee in the official records of local governments, but the members retain the promissory notes and mortgage servicing rights. The notes may thereafter be transferred among members without requiring recordation in the public records. Ordinarily, the owner of a promissory note secured by a deed of trust is designated as the beneficiary of the deed of trust. Under the MERS System, however, MERS is designated as the beneficiary in deeds of trust, acting as 'nominee' for the lender, and granted the authority to exercise legal rights of the lender." (Fontenot, supra, 198 Cal.App.4th at p. 267.)
In Fontenot, the plaintiff gave Alliance Bancorp a promissory note secured by a deed of trust in real property. MERS was identified as the nominee of the lender in the deed of trust. (Fontenot, supra, at p. 260.)
Another entity served the plaintiff with a notice of default. Subsequently, MERS assigned the deed of trust to HSBC Bank USA, N.A. (Ibid.)
Wells Fargo later foreclosed on the property and sold it. (Id. at pp. 260-261.)
The plaintiff's complaint alleged "MERS was not the 'true' beneficiary under the deed of trust, never had ownership of the promissory note, and never held an assignable interest in the note or deed of trust. As a result, any assignment of the note by MERS to HSBC was invalid. In addition, plaintiff alleged the 'trustee substitution' was 'invalid due to the fact that the transmission of any interest in Plaintiff's note from MERS is void.'" (Id. at p. 262.)
The trial court sustained MERS's demurrer to the complaint without leave to amend. (Id. at p. 263.)
The court of appeal rejected the plaintiff's arguments relating to MERS. The court explained that "the lack of a possessory interest in the note did not necessarily prevent MERS from having the authority to assign the note.