U.S. District Court Rules Non-Judicial Foreclosure of MERS Mortgage Violated Oregon Trust Deed Act

On May 25, Judge Panner, ruling for the U.S. District Court for the District of Oregon, granted the plaintiff’s request for a declaratory judgment that the defendants violated the Oregon Trust Deed Act, ORS 86.735(1), in pursuing non-judicial foreclosure of their loan without recording all assignments of the trust deed. Hooker v. Northwest Trustee Services, Inc., Civ. No. 10-3111-PA (D. Or. May 25, 2011). In this case, the plaintiffs had obtained a loan from GN Mortgage, LLC in 2005. At that time, a trust deed was recorded naming the Mortgage Electronic Registration Systems, Inc. (MERS) as the beneficiary, "solely as nominee for Lender and Lender’s successors and assigns." The note was subsequently assigned several times, and MERS tracked the new lenders in its system. No assignments of the deed of trust were recorded. When the plaintiffs defaulted on their loan in 2009, MERS assigned the deed of trust to Bank of America and appointed Northwest Trustee Services as successor trustee, and Northwest executed a notice of default and election to sell. The assignment of the trust deed, appointment of successor trustee, and notice default were then recorded. After the plaintiffs filed suit, the defendants attempted to correct the documents by having the current lender appoint the trustee, and new documents were recorded. However, the court ordered the defendants to submit a complete chain of title. The MERS records submitted by the defendants indicated a chain of title beginning with Guaranty Bank, with no indication of how Guaranty Bank obtained the loan from GN Mortgage. The court noted that under Oregon law, only the beneficiary of the deed of trust may invoke the power of sale, not merely a nominee for the lender. GN Mortgage (or its successor in interest), as the lender of record, was the beneficiary of the trust deed. The court then noted that under Oregon law, a trustee could invoke the power of sale only if "any assignments of the trust deed by the trustee or the beneficiary ... are recorded in the mortgage records." The court held that tracking the successive assignments of the deed of trust by MERS was insufficient to protect the interests of the homeowner and violates the Oregon Trust Deed Act, because the assignments of the trust deed were not recorded as required by law.