GRANTS PASS, Ore. (AP) — The Oregon Court of Appeals ruled Wednesday that lenders using an electronic system to rapidly package and sell mortgages must go through the courts to begin foreclosure proceedings.
The ruling issued by a three-judge panel of the court said creditors that use Mortgage Electronic Registration Systems Inc. instead of publicly recording the ownership history of a trust deed cannot take advantage of a foreclosure process outside the court system.
To foreclose on a property without judicial involvement, lenders must file with county authorities a full history of who has owned a loan.
The service known as MERS was created by the mortgage industry in the 1990s to make it easier to bundle and sell home loans on the secondary market. It handles about 60 percent of mortgages nationwide.
The case stems from a foreclosure case filed against a Clackamas County homeowner in 2009. The homeowner challenged a trustee sale of her house on grounds that MERS never received any loan payments, so could not act as the beneficiary of the trust deed.
A Clackamas County judge ruled in favor of MERS and the lender, allowing the sale to go forward. The appeals court reversed the ruling.
“A beneficiary that uses MERS to avoid publicly recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing — public recorded assignments,” wrote Justice Lynn Nakamoto.
MERS Vice President Janis Smith said the ruling goes against the bulk of state and federal rulings on the issue and will increase the costs of foreclosures for lenders, as well as add to the burden of the courts.
Smith said they will appeal to the Oregon Supreme Court.
