An owner of real estate obtained a trust deed loan secured by the property. The trust deed named the beneficiary as the Mortgage Electronic Registry Systems, Inc. (MERS), a private agency which maintains an electronic database of off-record assignments of trust deeds. The trust deed granted MERS the right to initiate a non-judicial foreclosure and sell the property if the homeowner defaulted on the loan. The homeowner defaulted, and at the same time, a new lender acquired the trust deed by assignment with MERS remaining the named beneficiary. MERS commenced foreclosure proceedings by causing a notice of default (NOD) and notice of trustee’s sale (NOTS) to be recorded. The property was sold to the new lender at foreclosure sale. The homeowner sought to set aside the foreclosure sale, claiming MERS did not have the right to initiate foreclosure and sell the property since the new lender was required to record an assignment of his interest in the trust deed before any foreclosure proceedings could take place. MERS claimed the sale of the property at foreclosure was valid since the trust deed signed by the homeowner gave MERS the power of sale as the named beneficiary. A California court of appeals held the foreclosure sale of the homeowner’s property by MERS without the recording of the new lender’s assignment was enforceable since a trust deed – unlike a mortgage – which names MERS as the beneficiary and gives the beneficiary the power of sale ensures the right of MERS to initiate foreclosure and sell the property without recording the new lender’s assignment. [Calvo v. HSBC Bank USA, N.A. (2011) 199 CA4th 118]

Editor’s note – This adds yet another story to the accumulating collection of cases which have surfaced since the beginning of the housing crisis to challenge MERS’ growing authority to sequester the details of a mortgage – information which has traditionally been transparent due to the recording of trust deed assignments with the county recorder’s office. Lenders working with MERS do the public a disadvantage by deliberately making it difficult for homeowners to keep track of who holds the note and trust deed on their property. [For a similar case related to the authority of MERS in California, see the April 2010 first tuesday recent case decision, Trust deed beneficiary of record needs no authority to foreclose; for more information on the discussion regarding the operation of MERS and lenders, see the December 2010 first tuesday article, Counties accuse secretive MERS of circumventing recording fees.]