U.S. District Judge Kent Dawson in Las Vegas upheld a bankruptcy court ruling making it harder for lenders to foreclose on home mortgages. This case involved MERS, (Mortgage Electronic Registration System) asking bankruptcy court to lift a stay against foreclosure of a home belonging to Lisa Marie Chong while she was in bankruptcy.
The case, which was heard by a panel of federal judges in November, concerned whether Mortgage Electronic Registration Systems Inc., or MERS, could foreclose on residences on behalf of lenders. The electronic system records the ownership of residential mortgages for the mortgage banking industry.
Dawson said the company could not foreclose on a home because it did not provide evidence that it held the note on the residence and didn’t show that it was an agent of the lender.
This case was joined with 18 other separate cases, one of which was reported here earlier.
In his decision Tuesday, Dawson said the registration system does not lose money when borrowers fail to make payments on home mortgages.
Dawson ruled that Mortgage Electronic Registration Systems must at least provide evidence that it was a representative of the mortgage loan holder, which it failed to do.
“Since MERS provided no evidence that it was the agent or nominee for the current owner of the beneficial interest in the note, it has failed to meet its burden of establishing that it is a real party in interest with standing,” Dawson said, affirming the bankruptcy court ruling.
The decision is expected to have a significant effect on the ability of lenders to foreclose and could encourage short sales.