MONTGOMERY, Ala. (Legal Newsline) -- The Alabama Supreme Court, in a ruling last week, upheld a lower court's decision which, in part, validated the ability of the national mortgage registry known as MERS to assign mortgages as the nominee for the original lender and its successors and assigns.

In Federal National Mortgage Association v. Steele, the state's high court unanimously ruled, without opinion, that the Jefferson County Circuit Court properly upheld Fannie Mae's ejectment action judgment against the borrowers.

MERS was not a party to the lawsuit.

In Steele, the borrowers, Jeffery and Matilda Steele, defaulted on their loan. After a completed non-judicial foreclosure and sale, the foreclosing servicer conveyed title to the property to Fannie Mae.

Fannie Mae received a judgment in its favor in the subsequent ejectment action and the borrowers sought to set aside the judgment.

They claimed that the underlying foreclosure was invalid because Mortgage Electronic Registration Systems Inc., or MERS, was not authorized to assign the mortgage to the servicer who conveyed title to the property to Fannie Mae after the foreclosure sale.

The circuit court denied the borrowers' request and affirmed Fannie Mae's standing to bring the ejectment action and the judgment in favor of Fannie Mae.

The court found that the borrowers' claim regarding MERS' lack of authority to assign the mortgage as "being contrary to Alabama law," noting that the ability of MERS to assign a mortgage or take other actions as the nominee for a lender and that lender's assigns in a mortgage "has been affirmed in Alabama."

"The fact that MERS was named as the original mortgage... and subsequently executed an assignment of mortgage to Everhome Mortgage Company does not cause the judgment in favor of FNMA to be void," Circuit Judge Eugene Verin wrote in his 10-page final order, filed in May 2011.

The state Supreme Court agreed and affirmed the circuit court's decision without providing an explanation.

Read both courts' rulings here.

"The Alabama Supreme Court's ruling leaves undisturbed MERS' role as a mortgagee and its authority to assign a mortgage, which is consistent with other court rulings across the country," said Jason Lobo, director of corporate communications for MERSCORP Holdings.

MERSCORP and Mortgage Electronic Registration Systems Inc. were formed in 1995 to facilitate the growing mortgage finance market.

The privately-held electronic registry is designed to track servicing rights and ownership of mortgage loans in the United States.

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