Does MERS (Mortgage Electronic Registration Systems) — the company that turned mortgages into securities for lenders — have the right to foreclose? The decision may be up to the Supreme Court.

There have been a lot of court cases against MERS from homeowners who were being foreclosed upon by the company. The general argument is that MERS lacks the authority to take action.

Some courts have agreed, others have not. (In Virginia’s case, the 4th Circuit Court of Appeals ruled that yes, MERS can foreclose.) A lot depends on state law and the exact wording of the contract. Virginia is a lender-friendly state, for example, and our non-judicial foreclosure process was cited by the Circuit Court in its decision.

California (which tends to have some wonky laws) doesn’t even allow a borrower to ask a state court if MERS has the authority. And California is where we find Gomes v. Countrywide.

The 4th Appellate District Court of California essentially refused to allow José Gomes to question MERS’s authority to foreclose on his home. Because of that, Gomes says he was denied due process, and he’s asked the Supreme Court to hear the case.

Although the Housing Wire story on this is entitled “Case against MERS reaches Supreme Court,” that’s not entirely accurate — the chances of the Court hearing this specific case are small. I wouldn’t bet against some MERS case getting to SCOTUS, though.

An interesting note: Dan Schechter, Professor of Law at Loyola Law School in Los Angeles, commented that the California Court has

sent a clear (and perhaps inadvertent) message to borrowers and their attorneys: instead of filing suit in state court, file a bankruptcy petition. That shifts the burden to the creditor, who will have to file a motion for relief from stay in the bankruptcy court and will have to establish its right to foreclose as part of that motion.