(Adds previous appeal case in seventh paragraph.)
Oct. 4 (Bloomberg) -- Mortgage Electronic Registration Systems Inc. won dismissal of 72 lawsuits questioning the legality of its system for allowing banks to use it to register home loans.
U.S. District Judge James A. Teilborg in Phoenix, where the cases have been centralized, dismissed the litigation in an order yesterday. Teilborg rejected the homeowners’ claims that MERS is a “sham beneficiary” and that foreclosures based on MERS documents are invalid. The decision echoed a federal appeals court ruling last month that upheld an earlier holding of his.
“MERS serves as the beneficiary on plaintiffs’ deeds of trust, as the nominee or agent for ‘any valid note holder,’” Teilborg wrote.
MERS, a unit of Reston, Virginia-based Merscorp Inc., bills itself as a provider of “support services to the mortgage industry,” specifically tracking the servicing rights and ownership interests in mortgage loans. The company lets banks electronically register their sales of home loans so they can avoid trudging down to the county records office.
“The master complaint has been dismissed and we’ll be appealing that decision,” Robert Hager, a Reno, Nevada-based lawyer for the borrowers, said in a phone interview.
Teilborg said the borrowers failed to show that MERS isn’t a beneficiary on the deed of trust, that the MERS deeds are invalid or that MERS’s assignments of the deeds were defective because it didn’t have the right to make the transfers.
The federal appeals court in San Francisco ruled Sept. 7 that Teilborg properly threw out a lawsuit against MERS in 2009 by three borrowers alleging conspiracy and fraud in lending and foreclosure procedures.
“The plaintiffs’ claims that focus on the operation of the MERS system ultimately fail because the plaintiffs have not shown that the alleged illegalities associated with the MERS system injured them or violated state law,” the three-judge appeals panel said.
In September 2010, Teilborg rejected six proposed class actions, or group lawsuits, against the MERS system that were part of the consolidated litigation.
The case is In re Mortgage Electronic Registration Systems (MERS) Litigation, 09-md-2119, U.S. District Court, District of Arizona (Phoenix); the appeal is Cervantes v. Countrywide, 09- 17364, U.S. Court of Appeals for the Ninth Circuit (San Francisco).
--With assistance from Karen Gullo in San Francisco. Editors: Peter Blumberg, Andrew Dunn
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