Montana SC rules mortgage registry is not a beneficiary

By Jessica M. Karmasek | Dec 4, 2013

HELENA, Mont. (Legal Newsline) -- The Montana Supreme Court ruled last week that the national mortgage registry known as MERS is not a beneficiary under state law.

In September 2006, plaintiffs Troy and Teresa Pilgeram obtained a fixed rate home loan from Mann Mortgage for $512,000 and executed a deed of trust, or DOT, naming Citizen's Title & Escrow trustee and Mann lender.

Also, the Pilgerams signed a promissory note, which Mann endorsed to GreenPoint Mortgage Funding Inc.

The DOT provided that the promissory note could be sold without advance notice to the borrower. It also provided that the loan services entity could be changed with written notice to the borrower.

Pursuant to the promissory note, the Pilgerams waived their rights of presentment and notice of dishonor.

Mortgage Electronic Registration Systems Inc. was not named in the promissory note but was identified in the DOT as "[t]he beneficiary of this Security Instrument... solely as a nominee for Lender and Lender's successors and assigns."

After several transfers of the interest in the DOT and promissory note, the Pilgerams defaulted on the note in April 2008.

In July 2008, MERS assigned its interest in the DOT to GreenPoint, which subsequently held the interests in both the promissory note and the DOT. GreenPoint then appointed and substituted Charles J. Peterson as the successor trustee.

In November 2008, the Pilgerams received notice that GreenPoint was assigning the servicing rights to Countrywide effective Dec. 1, 2008.

In early December, the couple received notice from Countrywide that it was now the loan servicing entity and that future payments were to be made in the manner indicated in the notice. They also received notice that the loan was in default and had been accelerated and/or was in foreclosure, and were instructed on how they could bring the note current.

Following a series of canceled foreclosure sales, the Pilgerams filed a complaint in district court, alleging the lenders lacked the authority to foreclose.

The lenders moved for summary judgment, and the district court granted the motion in December 2011, reasoning that MERS qualified as a "beneficiary" under Montana's Small Tract Financing Act, or STFA.

In January 2012, the Pilgerams filed a motion to amend judgment. The district court denied the motion in April 2012 because "the time for ruling expired 60 days after the motion was filed."

The Pilgerams then appealed to the state Supreme Court in October 2012.

On appeal, the couple argues that the lenders failed to meet their burden for summary judgment, and that the complicated assignments between and among MERS, GreenPoint and Countrywide create genuine issues of material fact.

The lenders contend the Pilgerams "fail to explain what facts are supposedly in dispute, and why they are material."

In its Nov. 25 opinion, the high court said neither the district court's reasoning nor MERS' assertion that it is a "special agent" of the lender warrants summary judgment in favor of the mortgage registry.

"MERS may ultimately obtain some benefit based on its relationship with the Lenders but that benefit is not granted by the DOT," Justice Mike Wheat wrote in the 14-page majority opinion.

"MERS holds only legal title to real property and receives no benefit or secured obligation from the DOT."

The court reversed the district court's ruling and remanded the case back to the lower court for "further findings of fact" regarding MERS' principal-agent relationship with the lenders.

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.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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