A county court in New York ruled in favor of Bank of New York Mellon Corp.'s right to foreclose after a delinquent borrower challenged Merscorp Inc.'s role in the foreclosure process.
Judge Lucindo Suarez of the Supreme Court of New York for Bronx County wrote that the mortgage agreement signed by the borrower, Eddie Sachar of the Bronx, "conferred broad powers upon MERS as nominee to act on the original lender's behalf."
The judge ruled that Bank of New York Mellon sufficiently proved its standing as rightful owner of both the mortgage and promissory note, despite the use of Merscorp's Mortgage Electronic Registration Systems to track ownership changes of the promissory note, which Bank of New York Mellon successfully proved was physically in its possession at the time the foreclosure was initiated.
"Defendant offers no other proof that the mortgage and note were not properly assigned," the ruling added.
Contrary to common use of the term, the Supreme Court that issued the March 3 ruling is not New York's highest court, but rather a county-level trial court akin to district and circuit courts in other jurisdictions.
The case could be appealed to an intermediary appellate court or the state's highest adjudicator, the New York State Court of Appeals.
But the local court's ruling could also be ammunition for any future attempts by MERS advocates to challenge a recent federal judge's ruling that MERS, which is operated out of Reston, Va., has no place in the foreclosure process in New York.
Judge Robert Grossman of the U.S. Bankruptcy Court for the Eastern District of New York on Long Island recently ruled that the agreement between MERS and its members do not meet the state's strict agency laws.
Federal judges throughout the country have been dealing with the task of interpreting state real estate laws in cases where an individual who has filed for bankruptcy protection protests a lien holder's right to continue an ongoing or impending foreclosure.
In these sorts of challenges to MERS' role in the foreclosure process, federal judges in different states have issued conflicting rulings based on their interpretations of the local law where the foreclosure and bankruptcy were occurring.
With the February ruling, Grossman declared that MERS-member servicers seeking to lift an automatic stay of foreclosure in the New York court now had to show that the trustee it represents validly holds both the mortgage and the underlying note in order to prove standing.
At question is the legal concept of agency — whether MERS, as "nominee" and "mortgagee of record" of mortgages filed in municipal recordation offices, has established a relationship that empowers MERS to act on the behalf and control of its member lenders and servicers.
Bankruptcy judges ruled in February that the contractual relationship between MERS and its members met the tests of agency laws in California and Kansas.
