Oregon Supreme Court Rulings Allow Nonjudicial Foreclosures to Proceed

Foreclosure Mortgage Servicing

On June 6, the Oregon Supreme Court issued a pair of rulings resolving issues around the role of MERS in the non-judicial foreclosure process and allowing such foreclosures to move forward. In Brandrup v. ReconTrust Company, N. A. S060281, slip op. (Oregon Jun. 6, 2013) and Niday v. GMAC Mortgage LLC, SC S060655, 2013 WL 2446524 (Oregon Jun. 6, 2013), the court answered a series of certified questions related to the role of an electronic mortgage registry as the beneficiary listed on trust deeds and applied those answers to the appeal of a state foreclosure action. The court held that, under the Oregon Trust Deed Act: (i) a mortgage registry that is neither a lender nor successor to a lender may not be a beneficiary of a trust deed; (ii) a mortgage registry is not eligible to serve as beneficiary where the trust deed provides that the registry holds only the legal title to the interests granted by the borrower, but, if necessary to comply with law or custom, the registry has the right to exercise any or all of those interests; (iii) assignments of a trust deed that result from the transfer of the secured obligation are not required to be recorded; and (iv) a mortgage registry cannot hold and transfer legal title to a trust deed as nominee for the lender, after the note secured by the trust deed is transferred from the lender to a successor or series of successors. The court also explained that, “even if MERS lacks authority to act as the trust deed's beneficiary, it may have authority to act on behalf of the beneficiary if it can demonstrate that it has an agency relationship with the beneficiary and that the agency agreement is sufficiently expansive.” The court added that this would apply equally to the issue of the registry’s authority to foreclose the trust deed. Effectively allowing nonjudicial foreclosures involving MERS as the beneficiary on trust deeds to proceed, the Court stated that “[i]n either case, MERS' authority to act as the beneficiary's agent depends on who succeeded to the lender's rights, whether those persons manifested consent that MERS act on their behalf and subject to their control, and whether MERS has agreed to so act.”