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MERS Explained in Mortgage Process

The mortgage assignment process involved an intermediary organization called Mortgage Electronic Registration System, Inc. (MERS) which held millions of mortgages as an agent of the original lender and essentially served as a mortgage storage bin to facilitate mortgage transfers during the securitization process.

As most know, during the years leading up to the real estate crisis mortgage lenders originated individual home loans and then assigned packages of these loans to investors who converted the packages to mortgage securities.

Attorneys defending mortgage foreclosures often as part of their defense challenge the plaintiff lender’s standing to bring a foreclosure suit.

The challenge is based on whether the mortgage was properly assigned from the original lender to the investor that holds the mortgage and is bringing the foreclosure action.

A recent New York bankruptcy court decision denied a mortgage lender relief from the bankruptcy stay to pursue a foreclosure because the court found that the lender could not properly substantiate his legal rights as assignee of the original lender and MERS.

In this case the original lender assigned the mortgage note to MERS as nominee. The assignment provided that MERS holds only legal title to the rights in the mortgage.

MERS assigned the note to another lender as a trustee of an investment trust. The court held that the assignment from MERS to the trustee did not adequately evidence what rights in the note were being assigned.

The court concluded that the assignee lender/trustee lacked standing to foreclose the mortgage and was not a party in interest. Therefore, the court denied relief from the banrkuptcy stay necessary for continuation of the foreclosure process in state court.

Mortgages, foreclosures and next steps in bankruptcy can become confusing and overwhelming.

Your bank has an attorney and this is why you shouldn’t take chances in speaking to the bank by yourself. This is your largest investment. Protect your investment by calling Eric Lanigan and Roddy Lanigan Orlando bankruptcy, foreclosure and mortgage workout attorneys.

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