Uh-oh, part two.
A few weeks ago we shared the Ibanez decision, a Massachusetts state supreme court decision which held that two national banks that were attempting to foreclose could not foreclose when they could not prove they were the holder of both the promissory note and the mortgage. The real estate and banking industry paused for a moment after that case and then released a collective “no-big-deal” response. After all, it was just a state supreme court case and the facts were limited to Massachusetts or title theory states. MERS was not involved in Ibanez, even though the application was the same.
Despite the ruling, MERS could live for another day.
Then, last week, Judge Robert E. Grossman, a U.S. Bankruptcy Court Judge in New York, issued a decision in the case In re Ferrel L. Agard that may change everything there is to be said about MERS and its ability to foreclose mortgages from within its registry. In his 37 page ruling — a copy of which is embedded below — Judge Grossman held that unless MERS or the party moving for foreclosure can show that it validly holds both the mortgage AND the underlying note, it will not have standing to pursue remedies in bankruptcy court. The decision is sure to be picked up by counsel for countless mortgagors across the United States who will argue the same in each jurisdiction citing, with breathless praise, Judge Grossman’s analysis of MERS and its registry.
The problems for MERS are only just beginning.