Maine's Greenleaf Decision Creates Mortgage “Insecurity” for MERS
In a decision sure to cast doubt on the validity of numerous mortgages throughout Maine, Maine’s highest court overturned the foreclosure of a mortgage held by MERS. In Bank of America v. Greenleaf, the Maine Law Court held that MERS, a Delaware corporation that acts as nominee for mortgagees around the country, did not have sufficient ownership interest in the mortgage to assign the right to foreclose. 2014 ME 89. A bank that attempts to foreclose on a mortgage received through assignment from MERS, therefore, may lack standing and have no right to foreclose on the mortgage.
MERS is designed to allow banks to freely transfer mortgages. MERS acts as the mortgagee of record, and executes the assignment when the mortgage is transferred. The Court, however, held that MERS possesses only the right to record assignments—not the right to foreclose on the property—and cannot convey rights it does not possess. Because the bank at issue in the case held the mortgage based on an assignment executed by MERS, the Court held that the bank had no right to foreclose and lacked standing to bring a foreclosure.
The Court’s decision builds on a 2010 decision in which the Court held that MERS lacks standing to directly enforce a mortgage. Mortgage Electronic Registration Systems, Inc. v. Saunders, 2010 ME 79, 2 A.3d 289
The decision calls into question a practice that has been integral to the home mortgage industry for over a decade. The practice streamlines the free transfer of mortgages, but has proven controversial because it can make it difficult for homeowners to ascertain who holds title to a mortgage at any given time. It remains to be seen what impact this may have on the availability of mortgages in Maine, and whether this decision will seriously undercut lenders’ ability to enforce existing mortgages.