Federal Judge Blocks Oregon Foreclosure Due to MERS-Related Problems

This slipped by me last week, but is interesting nonetheless: Judge Owen Panner, a Senior Judge for the U.S. District Court for Oregon blocked the seizure of an Oregon home while questioning whether or not banks should be allowed to foreclose on homes without court proceedings given the issues with the Mortgage Electronic Registration System (MERS) and the robo-signing scandal.  Oregon is one of 27 states that allows for non-judicial foreclosures.  Judge Panner commented in his ruling:

“The MERS system creates confusion as to who has the authority to do what with the trust deed.  The MERS system raises serious concerns regarding the appropriateness and validity of foreclosure by advertisement and sale outside of any judicial proceeding.”

In response to the ruling, banking and mortgage interests attempted to get the Oregon legislature to pass a bill that would end many of the recording requirements necessary for a MERS foreclosure.  This seems like a clear end-run around the ruling and the law to me. Lobbyists claim that the uncertainty surrounding foreclosures creates difficulty for the housing market in Oregon, which is undoubtedly true.  What is also true is that these issues would not have cropped up if the law had been followed in the first place.  Further action on the amendment is expected later today (UPDATE: on June 1st this amendment failed in the Oregon Legislature).  Judge Panner further remarked:

“Given the numerous problems I see in nearly every non-judicial foreclosure case I preside over, a procedure relying on a bank or trustee to self-assess its own authority to foreclose is deeply troubling to me.”

I have to agree with this.  If mortgage servicers and lenders were paragons of accuracy, non-judicial foreclosure would not be such a big deal.  That mortgage and foreclosure abuses have been extremely widespread (here is a pretty good overview, courtesy of the Florida Attorney General) should give pause to anyone who advocates for non-judicial foreclosure.  Maybe it is just me, but I am generally not in favor of allowing the fox to guard the hen house.

Although the judge states that he is ruling on narrow grounds, it will be interesting to see what kind of reverberations, if any, this ruling has on the legal system.  I’m not a lawyer, so I’m not qualified to speculate on whether this ruling could be applicable elsewhere.  As I learn more, I will do my best to keep you updated here.

This is not the first anti-MERS ruling in Oregon.  Earlier in the year, hundreds of foreclosures were halted in Oregon due to MERS-related issues.  About 1 out of every 500 homes in Oregon is in foreclosure, which is more than the national average of about one out of every 600.

 

 

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