Secured Claims: MERS Strikes Again, Or Maybe Not


Secured Claims: MERS Strikes Again, Or Maybe Not

Secured Claims: MERS Strikes Again, Or Maybe Not


Tamir v. U. S. Trustee, 566 B.R. 278 (D. Me. 2016) –

A chapter 11 debtor filed objections to proofs of claim filed by holders of his mortgage notes. He argued that the banks did not have secured claims because under state law they did not have standing to foreclose the related mortgages. After the bankruptcy court found in favor of the banks, the debtor appealed.

This case involved MERS (Mortgage Electronic Registration Systems) mortgages. MERS was designed to facilitate residential mortgage transactions by allowing lenders to track their mortgage portfolio transactions through registration with MERS. They avoided the need to record individual mortgage assignments in the land records by instead recording a mortgage identifying MERS as nominee for the lender as the mortgagee. In theory that is all that is required as long as the mortgage is held by a participant in the MERS system (at least until it comes time to enforce the mortgage).

However, use of a nominee to hold title has run into resistance in a number of jurisdictions – giving rise to a variety of state legal issues. This is relevant in bankruptcy because generally courts look to state law to define property rights. In this case the applicable state supreme court held that a party holding a mortgage solely by virtue of a MERS assignment did not have standing to foreclose the mortgage. According to the state supreme court, under the MERS form of mortgage MERS only had the authority to record the mortgage, not to assign it. Therefore, if the foreclosing lender’s ownership of the mortgage was based solely on a MERS assignment, the lender did not qualify as a “mortgagee” and thus did not have standing to foreclose.


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