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Bankruptcy
Appellate Panel
Rejects Split-theNote Theory
A three judge panel representing the
United States Bankruptcy Appellate Panel of
the Tenth Circuit sided with Mortgage Electronic Registration Systems, Inc., (MERS)
in a case involving a split-the-note theory.
In the case Royal v. First Interstate Bank
(In re Trierweiler), the debtors argued that a
split between the note and mortgage had occurred since Fannie Mae held the note while
MERS held the mortgage, according to the
decision.
This, the debtors argued, invalidates the
mortgage and makes the note unsecured.
The note in the case was sold to Fannie Mae
by First Interstate Bank (FIB), who serviced
the loan, while MERS maintained the role
as mortgagee.
The bankruptcy court rejected the
plaintiff���s argument that defining MERS
as the mortgagee had split the note from
the mortgage, according to the decision.
The court also held that the mortgage was
properly recorded.
���We conclude there is no split between the note and mortgage arising from
MERS being named as mortgagee on
behalf of the original lender and its successors and assign. At all times, the note
and the mortgage were united,��� wrote U.S.
Bankruptcy Judge Dale L. Somers of the
District of Kansas.
Somers was joined by Chief Judge William T. Thurman of the District of Utah and
Judge Elizabeth E. Grown of the District of
Colorado.
The case affirmed a decision from the
U.S. Bankruptcy Court for the District of
Wyoming.
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