Court ruling: Mortgage holders needn't be named
A Minnesota Supreme Court ruling means loan documents will remain hard to trace for those facing foreclosure.
By JENNIFER BJORHUS, Star Tribune
Last update: August 14, 2009 - 12:53 AM
Minnesota's Supreme Court on Thursday handed a small victory to the battered mortgage industry.
In a 6-1 decision, the court ruled that state law does allow the name of a widely used electronic registry of home mortgages, Mortgage Electronic Registration Systems Inc. (MERS), to be listed as the mortgagee of record in thousands of foreclosures. MERS is a tracking system and doesn't own the loans. The registry attracted national attention as foreclosures began sweeping the country and it began representing lenders.
MERS tracks some 60 million home loans across the country as they change hands, and during the boom, they were rapidly bundled and sold to bond investors on the secondary mortgage market. It's run by Merscorp Inc., a company based in Reston, Va., owned by an industry group including Countrywide Home Loans, Wells Fargo Bank and Fannie Mae.
The Legal Aid Society of Minneapolis sued MERS in 2008 on behalf of five homeowners in Hennepin County, arguing that the MERS name on foreclosure-related documents effectively hides the identities of the mortgage lenders who ultimately control home loans and foreclose on borrowers, confounding efforts to negotiate with lenders or track problems.
MERS was listed as the lender in up to 40 percent of all home foreclosures in the Twin Cities, it said. The MERS system violates state law by foreclosing on borrowers without identifying all assignees of the mortgage in county records, and listing them in published foreclosure notices, the lawsuit said.
The Supreme Court disagreed. It decided that Minnesota law does not require the actual name of the note's owner -- the lender -- to be listed in records every time a loan changes hands, and that a "nominee's" name is enough. The justices said that given the level of frustration with the financial crisis, it's hard to not "have some nostalgia for earlier times."