Nevada Supreme Court Validates MERS' Role as Beneficiary and Its Relationship to Note-Holder

Foreclosure Mortgage Servicing

On September 27, the Nevada Supreme Court held that when Mortgage Electronic Registration Systems, Inc. (MERS) is named as the beneficiary of a deed of trust but a different party holds the promissory note, such a split does not invalidate the instrument if the promissory note and deed of trust are later reunified. Edelstein v. Bank of New York Mellon, No. 57430, 2012 WL 4461716 (Nev. Sep. 27, 2012). In Edelstein, a borrower challenged a bank’s standing to foreclose on his property arguing that the initial designation of MERS as the beneficiary on the deed of trust and another entity as the beneficiary of the promissory note irreparably split the documents such that the bank’s foreclosure was precluded. The borrower argued that state law requires a party seeking to foreclose to demonstrate that it holds both the deed of trust and the promissory note. While acknowledging this requirement, the court rejected the borrower’s argument that the bank lacked standing to foreclose. The court held that while the designation of MERS’ as the initial beneficiary of the deed of trust effectively “split” the note and the deed, that split was not fatal and MERS could and did properly assign its interest in the deed of trust to the bank that had been assigned the promissory note at some point after the inception of the loan. Because the bank held both the deed of trust and the note, the court concluded that the bank had standing to foreclose on the borrower’s property.