In a victory for the practice by large banks of assigning beneficiary status to loans for which the beneficiary does not hold the promissory note, two Washington state courts have dismissed lawsuits by plaintiffs against the practice.
MERS, the Mortgage Electronic Registration System, is a shadowy black box by which banks, among other benefits, sell and re-sell the notes to residential homes without having to pay taxes upon the transfers. When a borrower goes into default, s/he or she often finds in near-impossible to contact the note-holder in order to negotiate a loan modification or other terms. MERS, without being the holder of the note (which is often lost) often stands in the place of the bank and takes the borrower to court in order to effect a foreclosure.
In the first case, Reid v. Countrywide Bank NA, U.S. District Court Judge John Coughenour granted MERS’ motion to dismiss this case, in which the plaintiff claimed Countrywide (the lender), LS Title (trustee) and MERS (the beneficiary) “committed fraud, violated the Washington Consumer Protection Act, were negligent, breached the duty of good faith and fair dealing, placed a cloud on their title, and inflicted emotional distress.” Judge Coughenourfound otherwise, writing “Plaintiffs do not state, for example, that they have attempted to identify who holds the note in order to negotiate a loan modification,” the court document says. “Nor have they directed the court any authority stating that the loss of opportunity to engage in such negotiation is a cognizable injury.”
Judge Marsha Pechman, Chief U.S. District Judge of Washington reached a similar conclusion in the case Ryan Wear filed against Sierra Pacific Mortgage Co., MERS and other defendants. In her ruling, Judge Pechman noted “The only injury identified by plaintiff is the pending foreclosure of his home,” the judge said in her ruling. “Plaintiff does not claim that any action by the defendants caused or induced the plaintiff to default on the loan…therefore, regardless of who the actual beneficiary was…plaintiff’s property would still face foreclosure.”
Read the original article in National Mortgage News.