May a trustee substituted under the Mortgage Electronic Registration System (MERS) initiate foreclosure?

Facts: A homeowner obtains a mortgage, executing a promissory note secured by a trust deed naming Mortgage Electronic Registration Systems (MERS) as the named beneficiary. MERS substitutes trustees and the owner later defaults. The substituted trustee files a notice of trustee’s sale (NOTS) and commences foreclosure.

Claim: The owner seeks to avoid foreclosure and void the assignment of the trust deed, claiming the authority granted to the substitute trustee is invalid since MERS has no authority to substitute trustees.

Counterclaim: The substitute trustee seeks to proceed with foreclosure, claiming the authority granted to the substitute trustee by MERS is valid and therefore the NOTS is also valid.

Holding: A California Court of Appeals held the assignment of the trust deed was permissible and the substitute trustee was authorized to foreclose since the authority granted to it from MERS as the named beneficiary was valid, as was the NOTS. [Keshtgar v. U.S. Bank (June 9, 2014)_CA4th_]

Editor’s note – This continues the accumulated collection of cases challenging MERS’ authority to sequester the details of a mortgage.