• October 5, 2008

On September 10, Legal Aid attorney Amber Hawkins argued in favor of plaintiffs in this case before the Minnesota Supreme Court, the question having been certified by the U.S. District Court, District of Minnesota (Ericksen, J.). The issue is the propriety of the widespread MERS system where mortgagees (lenders) use MERS as a sort of “clearinghouse” for foreclosures in light of the secondary market, the transfer and/or securitizations. This arrangement is provided in the disclosures signed by mortgagors (borrowers) when they obtain the secured loan. Under the arrangment, the mortgage originator’s assignments of interest in the promissory note is not recorded. Plaintiffs argue that MERS cannot proceed with foreclosures unless the assignments are recorded per Minnesota Stat. 580.04.

Bob Pratte of DLA Piper, for MERS, argues that the mortgagee of record and beneficial owner need not be the same owner, this is consistent with all preceding Minnesota case law, and that MERS has the authority to foreclose on the mortgage, notwithstanding the fact that the assignments of the note have not necessarily been recorded. Pratte points out that the purpose of the recording statute is to put third parties on notice of security interests. Here, borrowers seek to avoid foreclosure for lack of notice as to assignments.

The Court focused at some length as to whether the borrowers would lose any defensive claims to the foreclosure due to lack of knowledge as to an assignment of the note. Amber Hawkins argued yes. Bob Pratte argued no. The Court is taking the case under advisement. Predicting is always risky, but I bet this will be a win for MERS.

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