A California appeals court gave MERS another legal victory by holding that MERS can commence foreclosure procedures even when it lacks possession of a promissory note. A number of California attorneys have preyed upon desperate homeowners by pitching the “produce the note” scam. These attorneys charge large up-front fees to initiate litigation based upon the theory that a bank or foreclosing trustee can proceed to foreclosure without having the actual, original promissory note in their possession.
In Ferguson v. Avelo Mortgage, the California Second District Court of Appeals reject the plaintiff's claim that MERS as nominee of lender lacked possession of the original promissory note and could not foreclosure on the home. The Court disagreed completely with that argument and applied the holding from another California MERS victory, Gomes v. Countrywide Home Loans.
The court in Gomes rejected the argument that MERS lacked authority to initiate the foreclosure. That court also stipulated that the deed of trust contains no suggestion that the lender or its successor and assigns must provide Gomes with assurances that MERS is authorized to proceed with a foreclosure. In a non-judicial foreclosure, the beneficiary can rely upon the deed of trust without having to produce the promissory note.
The deed of trust specifically states that the borrower understands and agrees that MERS holds only legal title to the interest granted by the borrower in the security instrument, but, if necessary to comply with law or custom, MERS (as nominee for lender and lender's successors and assigns) has the right to exercise any or all of these interests, including, but not limited to, the right to foreclose and sell the property.
Homeowners should be leery of any solicitation from attorneys or otherwise which promises to find errors in the loan documentation or the foreclosure process. Please search for Consumer Warnings on our website for the latest in scams and frauds being perpetrated by loan mod companies, trustee postponement services, loan auditors and attorneys alike.