A borrower’s home loan was bundled in a pool and sold on the secondary mortgage bond market. The sale was recorded with the Mortgage Electronic Registration System (MERS) as the beneficiary. The borrower defaulted on the loan and MERS as the beneficiary foreclosed. The borrower sought punitive damages, claiming MERS’s status as the beneficiary was fraudulent since MERS had no financial interest in the loan as the MERS system split the beneficial interest of the promissory note and trust deed amongst multiple lenders. The lender claimed MERS’s role as beneficiary was valid since the notes and trust deeds were not irreparably split, and thus was authorized to foreclose. A United States Court of Appeals held the foreclosure was valid since MERS was a legitimate beneficiary of the loan.
Also at issue in this case:
A borrower negotiated a home loan in Spanish. The loan documents provided to the borrower were in English only. The loan was bundled and sold on the secondary mortgage market and recorded with MERS as the beneficiary. The borrower defaulted on the loan and MERS as the beneficiary foreclosed. The borrower sought punitive damages, claiming his rights were violated under the Truth in Lending Act (TILA) since the true nature of MERS was intentionally undisclosed to him as he did not speak the language the loan documents were written in. The lender claimed the borrower could have sought a translation of the loan documents written in English. A United States Court of Appeals held the function of MERS was not intentionally undisclosed to the borrower and the foreclosure was valid since the borrower did not seek a translation of the loan documents. [Olga Cervantes v. Countrywide (9th Cir. 2011) _F3d_]
Editor’s note –Arizona is not your California. While it was the borrower’s duty to seek a translation of his loan documents in this Arizona mortgage, in California, if negotiations are conducted in Spanish, Chinese, Tagalog, Vietnamese or Korean, the lender must provide loan documents written in the same language the agreement was verbally discussed. [For more information on the regulations on translating loan agreements, see the July 2010 first tuesday Legislative Watch, Loan agreements secured by real estate to be provided in translation; for more information on MERS, see the December 2010 first tuesday article, Counties accuse secretive MERS of circumventing recording fees]