A recent ruling by the highest court in the state of Washington has opened up new grounds for litigation against MERS (Mortgage Electronic Registration Systems, Inc.) in Washington, and other states are likely to follow. The court ruled that MERS lacked authority to start out-of-court foreclosures.
In the mid-1990’s the nation’s major banks set up MERS to bundle and sell loans to investors without having to record every assignment with the local recorder of deeds. The banks saved time and money because MERS permitted the lenders to bypass the process of filing paperwork and paying fees every time a mortgage was sold. Approximately 60% or the nation’s residential mortgages are recorded in the name of MERS. However, MERS does not take payments from borrowers or negotiate on behalf of lenders.
The court found that MERS did not meet Washington’s definition of a beneficiary and could not foreclose on behalf of a lender that holds the mortgage note. As a result of this ruling, any home foreclosed by MERS in the state of Washington in the past 15 years could become the subject of a consumer fraud suit. If you have any questions, contact Lance Gould, a lawyer in our Consumer Fraud Section, at 800-898-2034 or by email at Lance.Gould@beasleyallen.com.