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Financial Services Law Insights and Observations

Maine Court Holds MERS Lacks Standing To Foreclose In Maine

State Issues

On August 12, the Maine Supreme Judicial Court held that Mortgage Electronic Registration Systems, Inc. (MERS) - the "nominee" for the lender under the mortgage - was not the proper party to commence a foreclosure action against delinquent borrowers. MERS, Inc. v. Saunders, No. 09-640, 2010 ME 79 (ME Sup. Jud. Ct. Aug. 12, 2010). In this case, the plaintiffs executed a residential mortgage that named MERS as a nominee for the lender. After the plaintiffs defaulted on their loan, MERS filed a complaint seeking to foreclose. The plaintiffs opposed, arguing that MERS lacked standing because it could not show that it was the holder of the mortgage. The Supreme Judicial Court agreed, holding that, because MERS was a "nominee" for the lender and not a "mortgagee," it lacked standing to foreclose on the mortgage under Maine law. However, the court also held that the substitution of the bank for MERS during the foreclosure proceedings was proper. Nonetheless, the court found that the lower court’s grant of summary judgment on the foreclosure proceeding was improper because the record did not establish what property owned by the borrowers actually secured the mortgage.

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