Last week the Oregon Court of Appeals weighed in on an issue being litigated around the country by homeowners who have defaulted on their mortgages: whether a nonjudicial foreclosure can occur where there has been no recorded assignment to the party seeking to foreclose. In Niday v. GMAC Mortgage, LLC, the defaulting homeowner filed suit to stop a foreclosure, claiming that the holder of the promissory note was not the original lender, and that the assignment of the note had not been recorded with the county.
At issue was the Mortgage Electronic Registration System, Inc. -- known as MERS -- which lenders have used for nearly 20 years to track electronically the transfer of beneficial interests in loan obligations. Lenders using the MERS system do not record the sale or assignment of a beneficial interest because MERS remains in place as the "beneficiary" of a trust deed notwithstanding the sale or assignment.
The Court of Appeals, interpreting Oregon's 1959 law allowing foreclosure by a private, advertised trustee's sale rather than through a court-ordered foreclosure, held that a nonjudicial foreclosure cannot occur if an assignment of the beneficial interest was not recorded. The Court rejected the argument by MERS that, even though it was not the lender or a successor to the lender, foreclosure was proper because it had been designated as beneficiary of the trust deed when the homeowner took out the loan.
There was evidence in Niday that the lender assigned its interest in the trust deed without recording the assignment, and the Court of Appeals ordered a trial on whether the predicates to nonjudicial foreclosure had been satisfied.
The day after the Court of Appeals issued the opinion in Niday, the Oregon Supreme Court accepted a certified question from the U.S. District Court in a case also addressing nonjudicial foreclosures of mortgages tracked by MERS.