Can MERS Foreclose on Homeowners in California? A Court of Appeals Ruling Backs Non-Judicial Foreclosures
California just became the third state, after Massachusetts and Kansas, to rule that MERS (Mortgage 
Electronic Registration Systems) has the authority to initiate home foreclosure proceedings. A new California court of appeals ruling backed non-judicial foreclosures in the state.
MERS has functioned as the facilitator of mortgage trading for over a decade with little controversy. However recent scrutiny related to the subprime mortgage crisis has placed MERS at the center of legal challenges disputing its right to instigate foreclosures.
In a published statement, the ruling by Judge Steven R. Denton of the California Court of Appeal of the Fourth Appellate District (Division One), to the effect that borrowers agree to MERS' jurisdiction when signing on the dotted line, was greeted with much fanfare by MERS spokesperson Karmela Lejarde:
"The California decision validates the MERS process and procedures that we've used in non-judicial states for many years...This decision, combined with a variety of other recent decisions in state and federal courts, confirms the legality of MERS role in the mortgage and helps to provide further clarity for all parties engaged in the foreclosure process."What does this mean for the housing and mortgage markets, in California and elsewhere?
Long, complicated story short: The Court of Appeal has determined that once MERS starts processing a foreclosure, borrowers are unable to question the validity of the proceeding. This could have a major impact if similar decisions continue to be rendered in other states where litigation is pending.
What do you think about Judge Denton's decision? Do you think it will hold up? And will other state courts follow suit?
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.