A new state Supreme Court ruling could put hundreds of home foreclosures in question in this state, where the foreclosures were initiated by an organization known as MERS.
MERS stands for Mortgage Electronic Registration System. It's a central tracking system that essentially represents the person or investor that holds the note on a loan when a mortgage is sold.
Lenders have been using MERS to initiate foreclosures, even though MERS doesn't actually hold the loans. MERS and lenders maintain that under their system MERS is a legal beneficiary of the promissory note. But in a 9-0 decision justices ruled that's not what Washington state law intended.
When Kristin Bain hired an attorney to fight illegal lending practices involving her Tukwila condo, she never dreamed the case would end up in Olympia. Bain's case is one of two similar cases argued before the state Supreme Court last Spring.
Years earlier, Bain was the victim of a predatory mortgage loan that Huelsman says violated the law and stuck Bain with unfairly high mortgage rates and mortgage payments. While settling that case, Bain got laid off, and began to miss mortgage payments.
She was sent to foreclosure by MERS. Attorney Melissa Huelsman cried foul when no one could identify the actual loan holder and. Citing state law, Huelsman filed lawsuits, and stopped the foreclosure while attempting to identify the loan holder who could rightfully address Bain's concerns about the foreclosure process.
Huelsman says the loan holder was never identified. Her lawsuit made it's way to the state Supreme Court in March, where Huelsman presented oral arguments against MERS, the lenders and their Attorney Robert Pratte.
In a unanimous decision, the 9 justices just ruled August 16th that under our state law, the beneficiary must hold the promissory note.
The bottom line- based on Washington state law, MERS is not a legal beneficiary unless it actually held the promissory note secured by the deed of trust when foreclosure was initiated- which in Bain's case, it did not.
"Obviously the court said no, MERS cannot be that entity, because it is not the note holder and it never is the note holder," explained Huelsman.
Huelsman says the implications are huge- with the potential to affect hundreds, perhaps thousands of foreclosures initiated by MERS in this state in the past 10 years.
The ruling could open the door for legal action by homeowners who've been foreclosed by "MERS," instead of an actual loan holder who's name is on the promissory note. It also has the potential to affect foreclosures currently being challenged because of MERS.
But the justices ruled that simply having MERS on your loan doesn't mean you have a case. The question is whether you suffered unfair ramifications because of MERS.
Washington state is one of several states where the legality of MERS initiated foreclosures is being challenged in court.