DS News

74 Legal Industry Update State Focus MAINE MERS ASSIGNMENTS OF MORTGAGE AND STANDING TO FORECLOSURE IN MAINE By Santo Longo, Esq., Bendett & McHugh, PC In its July 3, 2014 landmark decision in Bank of America v. Greenleaf, the Maine Supreme Ju- dicial Court held that when Mortgage Electron- ic Registration Systems, Inc. ("MERS") is listed as "Nominee" for the lender in a mortgage, it does not have authority to assign full ownership interest in the mortgage to a third party. Under Maine law, in order to have standing to bring a foreclosure action, the plaintiff must be the "owner" of the mortgage, either as the original mortgagee or pursuant to a valid assignment of the mortgage. As a result of the Greenleaf deci- sion, large numbers of investors and servicers of Maine mortgages who were mortgagees of record through chains of title including MERS assignments were left without full ownership interest in their mortgages, and thus without standing to foreclose those mortgages. e Court's decision in Greenleaf raised many questions regarding plaintiffs' standing to initiate and prosecute foreclosure actions in Maine. As discussed below, subsequent develop- ments have addressed some of these important questions, while others remain unanswered. In order to correct the gap in the chain of title to mortgages with MERS-as-nominee assignments, many servicers and investors have been able to obtain an assignment of mortgage from the original lender listed in the mortgage to the foreclosing plaintiff. Maine courts have generally accepted this fix not only when the assignment is obtained prior to filing the com- pliant, but also for pending foreclosure actions, when the complaint was filed with only the MERS assignment of mortgage in place. Unfortunately, such an assignment of mortgage is not available in many cases where the original lender listed in the mortgage is no longer in business and no individual or successor entity retains authority to execute the assignment. In these circumstances, some servicers and investors have filed a Declara- tory Judgment action or Quiet Title action, seeking to have the court issue an equitable ruling that the record mortgagee through the MERS chain of assignments also possesses adequate ownership interest in the mortgage to maintain a foreclosure action. Unfortu- nately, some Maine trial courts have been unwilling to extend their equitable jurisdic- tion to issue such a ruling. As a result, some servicers and investors facing this situation are presently unable to foreclose their mort- gages. At this time it appears they may not be able to go forward unless and until Maine's highest court favorably addresses this issue. Another issue left unresolved by the Green- leaf case was how trial courts should ultimately dispose of cases where the plaintiff is found to lack standing to foreclose because there is a MERS-as-nominee assignment in the chain of title to the mortgage. Specifically, trial courts were left to decide whether the final ruling in such cases should be a dismissal with prejudice, a dismissal without prejudice, or possibly even judgment for the defendant. is issue has been resolved by the Maine Supreme Judicial Court in a recent series of de- cisions that includes subsequent proceedings in the Greenleaf case. Fortunately for foreclosure plaintiffs, the court has held that where a plain- tiff lacks standing to sue because of a MERS- as-nominee assignment in the chain of title, the trial court is without authority to reach the merits of the case, and therefore the case must be dismissed without prejudice. Significantly, when the dismissal is without prejudice, the plaintiff is free to initiate a subsequent foreclosure action on the default. Also as a result of the Greenleaf ruling, in cases where the plaintiff was found to lack standing because of a MERS-as-nominee as- signment of mortgage, consent judgments were generally unavailable to resolve the default. e reasons for this were two-fold: first, many trial courts ruled that where the plaintiff was without standing to sue, the court lacked authority to enter a consent judgment, regardless of the defendant's willingness to do so; second, even if the trial court was willing to enter a consent judgment, title companies were generally un- willing to insure for fear of future claims based on the issue. Fortunately, Maine's high court recently resolved this issue, ruling that even where the chain of title to the mortgage contains a MERS-as-nominee assignment, the trial court nonetheless has authority to enter a binding consent judgment. Furthermore, the title insur- ers have indicated their willingness to insure in these cases. As discussed above, the law in Maine regarding MERS assignments of mortgage and standing to foreclose continues to develop, though unanswered questions remain. Servicers and investors involved with these issues will need to stay abreast of future developments to protect and represent the loan and mortgage interests at stake.

• Cover