California foreclosure defense strategy using the MERS defense

California foreclosure defense strategy using the defense that Mortgage Electronic Registration Systems, Inc. (MERS) does not have standing to commence a foreclosure in California is the topic of this blog post. As a foreclosure defense strategy in California the so called “MERS defense” is not very effective as will be shown by this blog post.

Some loan documents will state right in the document that the borrower consents to MERS having authority to initiate foreclosure.  Anyone considering using the MERS defense in California needs to read this blog post and then read their Deed of Trust.

In at least one case decided by a California Court of Appeal, the plaintiff actually attached a copy of the Deed of Trust to the complaint in which they argued that MERS had no standing to initiate the foreclosure.  The big problem was that the Deed of Trust mentioned MERS by name! Keep reading to find out what happened.

The trial Court sustained a demurrer to the complaint and all causes of action therein without leave to amend, a California Court of Appeal affirmed that order in Gomes v. Countrywide (2011) 192 Cal. App. 4th 1149, 1157 where the Court stated that, “As an independent ground for affirming the order sustaining the demurrer, we conclude that even if there was a legal basis for an action to determine whether MERS has authority to initiate a foreclosure proceeding, the deed of trust -- which Gomes has attached to his complaint -- establishes as a factual matter that his claims lack merit. As stated in the deed of trust, Gomes agreed by executing that document that MERS has the authority to initiate a foreclosure. Specifically, Gomes agreed that "MERS (as nominee for Lender and Lender's successors and assigns) has . . . the right to foreclose and sell the Property." (Emphasis added.)

It is true that in other parts of the country, and in some bankruptcy courts, borrowers have had some success with the argument that since MERS is a "nominee" and "nominee" is not defined in the loan documents, that it does not have standing to initiate foreclosure.

That argument has not been particularly successful in California, mainly because of these reasons:

1.         Non-judicial foreclosures only require that the trustee on the deed of trust conduct the foreclosure.

2.         The deed of trust is recorded and so are any substitutions and assignments. In other states   MERS had tried to circumvent the recording statutes by not recording these transfers with the County recorder.

 
3.         The borrower  also known as the Trustor has signed the Deed of Trust and voluntarily consented to a 3rd party conducting the Trustee's sale, regardless of who the beneficiary is.

Despite several recent Court decisions rejecting the MERS defense many people are still under the mistaken impression that the defense is valid. The fact is that the MERS defense has been rejected by the California Courts.  

Note that the author has NO sympathy for major lenders or loan servicers who like most large corporations want to privatize their profits, but socialize their losses.

 
Attorneys or parties in California who would like to view a portion of a 22 page sample complaint to stop a trustee foreclosure sale that includes a verified complaint, ex-parte application for temporary restraining order with points and authorities, sample declarations, and a proposed order sold by the author can see below.

http://www.scribd.com/doc/146074976/Sample-California-Complaint-to-Stop-Foreclosure-Sale-by-Trustee

The author of this blog post, Stan Burman, is a freelance paralegal who has worked in California and Federal litigation since 1995 and has created over 225 sample legal documents for California and Federal litigation.

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Copyright 2013 Stan Burman. All rights reserved.

DISCLAIMER:

Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.

These materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.