WISBAR-
Do your clients include borrowers, lenders, or businesses that rely on the services of the Mortgage Electronic Registration System (MERS)? If so, you may want to keep your eye on a case that is headed to the Wisconsin Supreme Court.
The court recently accepted review of 10 new cases, summarized below. One is a foreclosure case, Dow Family LLC v. PHH Mortgage Corp., involving a company that bought a condo but later faced a foreclosure action by an apparent assignee.
Dow Family purchased the condo from a couple who originally issued a promissory note to U.S. Bank for $146,000. The note, recorded in 2001, was secured by a mortgage on the condo and listed MERS as the mortgagee. U.S. Bank was a member of MERS.
MERS is a private electronic registration system for mortgages and acts as mortgagee for the loans owned by its members, which include lenders, financial institutions, and servicers who pay a membership fee. Mortgages are recorded but subsequent assignments between MERS members are not. MERS remains the mortgagee.
According to court documents, MERS has saved the banking industry approximately $1 billion in mortgage-related recording fees.
Before the condo purchase, however, a title search revealed two mortgages on the condo. The sellers said the second listed mortgage was just a refinance; there was only one mortgage. The deal closed and showed mortgage satisfaction to U.S. Bank.
Several months later, PHH Mortgage Corporation asserted that a mortgage on the property was not paid in full and was delinquent. Apparently, U.S. Bank’s mortgage assignment to MERS was transferred to PHH Mortgage but it was never recorded.
The circuit court entered a foreclosure judgment for PHH Mortgage. The court of appeals applied the doctrine of equitable assignment and ruled that PHH did not need to prove a written assignment of mortgage to show it held a mortgage interest.
According to court staff, the case implicates MERS and “examines the doctrine of equitable assignment and whether a mortgage automatically transfers upon the transfer of the associated note, without the need for a written mortgage assignment.”
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