Before readers get worried by virtue of the headline that the Supreme Court will use its magic legal wand to make the dubious MERS mortgage registry system viable, consider the following:
1. The Supreme Court hears only a very small portion of the cases filed with it, and is less likely to take one with these demographics (filed by a private party, and an appeal out of a state court system, as opposed to Federal court). This case, Gomes v. Countywide, was decided against the plaintiff in lower and appellate court and the California state supreme court declined to hear it
2. If MERS or the various servicers who have had foreclosures overturned based on challenges to MERS thought they’d get a sympathetic hearing at the Supreme Court, they probably would have filed some time ago. MERS have apparently been settling cases rather than pursue ones where it though the judge would issue an unfavorable precedent
3. The case in question, from what the experts I consulted with and I can tell, is not the sort the Supreme Court would intervene in based on the issue raised, which is due process (14th Amendment). But none of us have seen the underlying lower and appellate court cases, and the summaries we’ve seen are unusually unclear as to what the legal argument is
So this filing looks like a probable non-starter. Housing Wire provided an overview of Gomes v. Countrywide:
A controversial case challenging the ability of Mortgage Electronic Registration Systems to foreclose on a California man was filed with the Supreme Court Monday, making it the first major MERS case to reach the nation’s highest court.
Get that: no foreclosure has taken place. The plaintiff is disputing the use of MERS in a foreclosure. But his counsel’s statements make it sound as if he is challenging the validity of non-judicail foreclosures generally:
“Ultimately, what this case is saying is if you are going to be taking someone’s home away from them, do you have the proof or the right to do so?” Gersten said. “If the Supreme Court starts to question MERS, and its business structure, it is going to have an effect on every MERS case in the country.”…..
Gersten argues his client “was entitled to proof that the loan servicer, trustee or an entity such as MERS, either named in the deed of trust or acting through assignments of interest, had legal authority on behalf of the promissory note’s current holder to foreclose.”
I welcome input on this one, but as I read it, to satisfy the standard articulated by the plaintiff, that of proof, would require judicial action on every foreclosure, which means there could be no such thing as a non-judical foreclosure state. A writeup in Roger Berhnhardt’s blog failed to clear up matters for me.
The issue of the validity of the actions of parties engaging in foreclosures in non-judicial foreclosure states has come in various contexts. For instance, in Oregon, a number of judges have found that the use of MERS is in violation of the state’s registration requirements, and one judge’s ruling suggested that MERS foreclosures would have to be judicial foreclosures, which would be a huge procedural change. In Washington, the state attorney general has filed suit against the Bank of America foreclosure trustee Recon. The trustee is required by law to act in a neutral manner, but the AG’s office has found numerous instances of pro-bank bias which Recon has allegedly refused to remedy (as well as failing to have an office in state as required by law). That’s a long-winded way of saying procedural challenges are not unheard of, but this one seems to be awfully broad, in addition to having other warts (such as raising a new argument at this late date). This case is thus almost certain to be a non-starter from the Supreme Court’s vantage.
Given that the Supreme Court has ruled for over 100 years that “dirt law”, meaning real estate law, is a state matter, we’ve deemed it unlikely that the Supreme Court would intercede in the foreclosure mess.
Given that the number of legal battles over mortgage securitizations are escalating rapidly, and securitization law is a cutting edge area, one can expect other filings of this sort. While the Roberts Court has shown itself to be political and creative in the worst sense of both words, I’m not certain it will yield to the fond wishes of the banks, that of reversing itself on jurisdiction over real estate. It would not be that this Court has out of nowhere developed a sense of propriety, but that the Republican party has grown fractious, with the Tea Party being both firmly anti bank and anti Federal intervention. In other words, for a politically sensitive court, the tide of conservative sentiment may be changing in a way that makes it much more difficult to give the banks “get out of liability free” cards.