Consumer Financial Services Law Blog
Dykema Gossett PLLC
Dykema Gossett PLLC

Consumer Financial Services Law Blog

Consumer Financial Services Law Blog

News and analysis regarding Consumer Financial Services litigation and regulation, and activities of the Consumer Financial Protection Bureau

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Showing 10 posts in MERS.

Despite Repeated Challenges, Courts Continue to Affirm Legitimacy of MERS Business Model

As readers of this blog well know, the legal authority of Mortgage Electronic Registration Systems, Inc. (MERS) and its business model are under constant attack by borrowers hoping to delay foreclosure and eviction proceedings. In an article published in the July 2013 issue of Mortgage Banking entitled “MERS Weathers The Storm”, Dykema attorneys Thomas M. Schehr and Andrew J. Kolozsvary analyze some of these cases and identify “a continuing trend toward affirming MERS’ business model” as compliant with mortgage and agency law. In the article, Schehr and Kolozsvary examine several cases--at both the state and federal level—and conclude that, despite the likelihood of future challenges to MERS’ authority, these court decisions reinforce the legal standing of the firm’s operational practices. Schehr and Kolozsvary draw from personal experience in several of the referenced cases. The two achieved a favorable outcome in Residential Funding Co., LLC v. Saurman (in which the Michigan Supreme Court reversed a Court of Appeals decision holding that tens of thousands of MERS-conducted foreclosures by advertisement were void ab initio). Schehr and Kolozsvary also collaborated on a win in Conlin v. Mortgage Electronic Registration Systems, Inc. (in which the Sixth Circuit affirmed dismissal of claims of robo-signing and fraud and upheld a contested foreclosure).

Stay tuned as we continue to monitor these challenges to MERS’ legal authority and business practices. Read More ›

MERS Update: Southern District of Illinois Joins Growing Number of Federal Courts In Dismissing Lawsuit Against MERS to Recover Recording Fees

The Southern District of Illinois has dealt another blow to municipalities seeking to recover damages against Mortgage Electronic Registration Systems, Inc. (MERS) for failing to record mortgage assignments and pay the accompanying fees. In Union County v. MERSCORP, Inc., --F.Supp.2d-- (S.D. Ill. Jan. 30, 2013), the U.S. District Court for the Southern District of Illinois, interpreting Illinois law, dismissed a putative class action filed by Union County for failing to record assignments and to pay the required recording fees for those assignments. Judge Patrick Murphy dismissed the action holding that, under Illinois law, “there is no mandatory duty to record.” This ruling is another victory affirming MERS’s business model.   Read More ›

Federal Court Dismisses $8 Billion Recording Fee Class Action Against MERS

In yet another blow to local municipalities seeking to recover damages against Mortgage Electronic Registration Systems, Inc. (MERS) for failing to record mortgage assignments and pay the accompanying fees, the U.S. District Court for the Western District of Missouri dismissed an $8 billion putative class action suit filed by Jackson County, Missouri. U.S. District Senior Judge Ortrie D. Smith of the U.S. District Court for the Western District of Missouri, Western Division, ruled that Jackson County's complaint failed to state a claim because “there is no duty to record assignments under Missouri law.” Read More ›

Nevada Supreme Court Continues the Trend of Upholding the Legitimacy of MERS

In two separate cases the Nevada Supreme Court has upheld the validity of a mortgage assignment from MERS and rejected borrowers arguments that use of MERS somehow invalidates a foreclosure. In both Davis v. US Bank, Nat. Ass'n, No. 56306, and Volkes v. BAC Home Loans Servicing, LP, No. 57304, the Court rejected the contention that a MERS-generated assignment is insufficient to establish the ownership of a loan.  The appellants argued that the assignment was invalid solely because it was generated by MERS and that MERS is a sham or fraud entity.  The Court specifically rejected this argument, citing numerous opinions from courts in Nevada and across that nation that have recognized MERS as having a legitimate business purpose. 

10th Circuit Affirms Securitized Mortgage Trustee’s Standing to Foreclosure

A recent ruling could put an end to some of the more wacky Internet-driven legal theories about mortgage securitizations.  In a February 1,2011 ruling, the U.S. Court of Appeals for the Tenth Circuit rejected just such a challenge to a securitized mortgage trustee’s standing to foreclose.  In Scarborough v. LaSalle Bank National Association, No. 11-4092, the Court affirmed a prior 10th Circuit holding, as well as a line of cases from the Utah Court of Appeals, that the securitization of a mortgage loan does not affect the foreclosure rights of the holder of an underlying trust deed or the rights of the holder's nominee.  The Court also rejected the borrower’s argument that the trustee was required to obtain the express authorization from all the investors in the asset securitization trust before initiating the foreclose process.  The Court explained that the borrower’s arguments were based on “an incorrect legal assertion . . . that securitization of a mortgage nullifies the rights of the holder of the underlying trust deed and its nominees.”  The court's analysis is spot on.  It's just a matter of time before this oft-copied legal theory bites the dust. Read More ›

Court Grants Preliminary Injunction That Prevents CFPB From Enforcing TILA Rules on Credit Card Fees

A federal district court in First Premier Bank v. U.S. Consumer Financial Protection Bureau (D.S.D.) granted a preliminary injunction to First Premier Bank (“Premier”) to block the CFPB’s enforcement of an amendment to Regulation Z, which would narrow the scope of fees credit card companies can impose on the type of cards typically offered to subprime borrowers. The injunction, based in part on the finding that the Federal Reserve Board (“FRB”) had exceeded its authority, prevents the CFPB from enforcing the amendment until a final decision is made in the case. Read More ›

Senate Committee Approves Cordray to Head Consumer Financial Protection Bureau

The Senate Banking Committee voted 12-10 to approve Richard Cordray’s nomination to be the first director of the CFPB. Cordray is a former Ohio attorney general who currently leads the Bureau’s enforcement division. The committee voted along party lines, with no Republican committee member voting to approve the nomination. Cordray’s nomination now proceeds to the full Senate for a vote. Read More ›

Date Calls for Greater Transparency in Checking Account Fees

On the heels of Bank of America’s announcement that it will impose a monthly fee on debit card users, the Consumer Financial Protection Bureau (“CFPB”) has signaled that it will work toward increasing transparency regarding checking account fees and might require more simplified checking account disclosures. Raj Date, special advisor to the Secretary of the Treasury on the CFPB, recently issued a statement noting that “checking accounts often come with a wide variety of unexpected costs that can quickly add up for consumers.” Read More ›

CFPB Drafting Qualified Mortgage Regulations in Hopes of Expanding Mortgage Loan Originations

The CFPB is currently drafting regulations that define the requirements of a Qualified Mortgage (“QM”) and the benefits to lenders whose loans fall within the QM parameters. Recognizing that “[t]here can be little or no access to credit unless suppliers of capital are willing to finance home mortgages,” Patricia McCoy, the CFPB’s assistant director for mortgage markets, is appreciative of the hundreds of extremely thoughtful comment letters received that will inform this “critical and difficult rulemaking.” Read More ›

CFPB Releases Mortgage Servicing Examination Procedures and Manual

The Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) announced its initial approach to supervising mortgage servicers. Specifically, the Bureau released its Mortgage Servicing Examination Procedures (the “Procedures”), along with its CFPB Supervision and Examination Manual (the “Manual”). The devotion of CFPB resources to servicer regulation was foreshadowed by a speech from Raj Date, special advisor to the Secretary of the Treasury, on September 20, 2011. The CFPB, of course, was the brainchild of Professor Elizabeth Warren, who argued in a November 2008 law review article for the creation of a “single, highly motivated federal regulator” to police mortgage servicing activity. The Manual and the Procedures constitute the CFPB’s first broad attempt to implement that vision. Read More ›