5th Circuit U.S. Court of Appeals Affirms MERS Authority to Assign Mortgage

The U.S. Court of Appeals for the Fifth Circuit affirmed MERSCORP Holdings’ authority to assign the mortgage lien as its basis for affirming the dismissal of a wrongful foreclosure lawsuit.

In Reece v. U.S. Bank National Association, the plaintiff appealed the dismissal of his wrongful foreclosure suit, claiming, among other things, that the recorded security instrument “constituted a fraudulent claim against real property because MERS never acquired a security interest in the mortgage properties, and therefore, the recording denominating MERS as a beneficiary of the security instruments are fraudulent.”

The plaintiff went on to allege that the bank lacked standing when it foreclosed on his property because MERS lacked the ability to assign the Deed of Trust.

The Fifth Circuit Court based part of its opinion on its previous ruling in Golden v. Wells Fargo Bank, finding that the plaintiff failed to state a claim under the fraudulent lien statute of the Texas code by failing to plead facts sufficient to show that the Bank intended to cause injury by its use of an assignment.

Further, the standing claim was precluded by Fifth Circuit precedent, when it stated, “Our Court has expressly recognized that MERS may assign a deed of trust to a third party and that such assignments confer the new assignee standing to non-judicially foreclose on property associated with that particular deed of trust” in its ruling.

“We are pleased with this decision made by the U.S. District Court of Texas and the Fifth Circuit Court of Appeals,” said MERSCORP Holdings Vice President for Corporate Communications, Janis Smith. “These courts have upheld MERS’ authority and the validity of its assignments time and time again.”