The 4th Circuit Court of Appeals — which covers Virginia — has ruled that MERS (Mortgage Electronic Registration Systems) does have the right to foreclose on homes even though the company doesn’t hold the deeds.
This concurs with some rulings and contradicts others. For example, the Kansas Court of Appeals has ruled that MERS cannot foreclose on someone’s home because it doesn’t hold the actual note — only a deed of trust.
But let’s stick with Virginia, although this fight is likely to go on.
The issue is securitized mortgages — the ones split up into pieces and packaged like stocks. MERS handles that process for something like 60 million loans, making it easier on the lenders and financial companies trading the things.
But splitting a loan becomes an issue when foreclosure is in the mix. Who owns the loan when it’s been sold off piecemeal? MERS claimed that it did — or, rather, that it had the power to act on behalf of the actual owner(s). The Court of Appeals agreed, in part because of Virginia’s non-judicial foreclosure laws, which allow lenders to foreclose without involving a court.
So, at least in Virginia and at least for now, the foreclosure engine is back on track.