Foreclosure Defense/Offense: MERS

Foreclosure Defense/Offense:MERS attempting to justify its actions and instructing its members how to dodge/distinguish Kansas Supreme Court decision while ignoring specific findings made in the decision

October 5, 2009

To: All MERS Members October 1, 2009
Re: Kansas Supreme Court Decision

On August 28, 2009, the Kansas Supreme Court issued a decision that some in the press have tried to interpret to have a broader impact than the actual Court’s finding. The Court’s ruling in Landmark National Bank v. Boyd A. Kesler, Kansas Supreme Court, No. 98,489 is quite limited because it involves the vacating of a final judgment. The Kansas Supreme Court did not want to disturb the final judgment. MERS continues to be entitled to notice and service of foreclosure actions when MERS is the mortgagee because the Court did not say otherwise. In fact, the Court went out of its way to emphasize the narrow scope of its holding by stating: “Even if MERS was technically entitled to notice and service in the initial foreclosure action–an issue that we do not decide at this time…”

Moreover, foreclosure actions can continue to be prosecuted in the name of MERS because the Court made no mention of this issue. Essentially, the Court held that in this particular case, because a default judgment had already been entered, and the property sold to a third party, the trial court did not abuse its discretion in denying a motion to vacate.

In this case, the originating lender, a MERS member, was named as a defendant, but no longer held any interest in the mortgage loan and was no longer the servicer. The plaintiff mistakenly did not name MERS as a defendant even though, pursuant to the Kansas statutes, the mortgage was recorded naming MERS as the mortgagee. The current note holder, also a MERS member, became aware of the action and sought to intervene on its own after entry of the default judgment. But because the member was not the recorded mortgagee, the member was meeting resistance from the trial court on its right to do so. At that point, the member alerted MERS to the issue, but it was too late.

To prevent the circumstances that led to the decision from happening again, we remind and urge all MERS members to take the following steps:

1) If a member is named as a defendant in a lawsuit involving a MOM mortgage loan that the member originated, and MERS is not named as a defendant, please alert the MERS Law Department right away at mers@mers inc.org. This should be done even when the MERS member no longer holds any interest in the mortgage loan. Do not simply ignore the lawsuit.

2) Any MERS member that is foreclosing a mortgage loan in the member’s name, or having MERS foreclose the lien as the mortgagee, and MERS holds another mortgage lien for another mortgage loan on the property, the member should instruct its counsel that MERS must be named as a defendant as the mortgagee for the other mortgage loan and served with the lawsuit.

3) Make sure that when MOM mortgages are recorded, the County Recorders and Clerks are indexing the mortgages correctly to reflect MERS as the mortgagee, grantee, etc.

4) Provide counsel representing MERS with proper documentation, information and an explanation of MERS and its interest in the mortgage. If you are unsure about what to provide, contact the MERS Law Department at mers@mers inc.org.