This recent decision out of Oregon does a terrific job of what happens “behind the curtain” on a MERS loan.
Oregon is a non-judicial foreclosure state, like Alabama. Oregon uses an instrument called a Deed of Trust, while Alabama uses a Mortgage. The legal and theoretical differences between those two instruments are not relevant in the court’s decision. What WAS important was an Oregon law that said mortgage assignments must be recorded in the real estate records.
The court said that when assignments are not recorded, borrowers in trouble don’t know who owns their loan. They can’t effectively negotiate a workout or a short sale, because they don’t know the players. Yes, we all know the servicer is the one the borrower talks to, but the servicer is rarely more than a gatekeeper—someone to prevent progress rather than assist in progress.
After analyzing all the factors, and balancing the lender’s need for speedy foreclosure vs. the borrower’s need for knowledge of the assignment trail, the court concluded that MERS could not use non-judicial foreclosure. HERE is a link to the decision.