Knowing the Difference Between Nominating a Lender and Assigning a Mortgage

by Isaac Benmergui, Esq on April 2, 2014

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I won’t lie to you: real estate law can be a bit confusing. There are so many guidelines to follow that it can cause headaches, unless you’re a top-notch real estate attorney knowing the system from front to back and left to right. Specifically, mortgages have their own set of rules as evident in the case between Chhun and Mortgage Electronic Registration Systems, Inc. where the plaintiffs had revealed two parties over the execution of a mortgage – Domestic Bank being the one and the Mortgage Electronic Registration Systems, Inc. agreement(MERS) being the other.

This was the setup: Domestic Bank actually was the “lender.” The latter, though, MERS, was the “nominee” for the lender and mortgage assignments. All that means is that MERS oversaw all “assignments” for specific registrations pertaining to the lender. This is crucial to understand, though, in that because MERS was the nominee for this situation, MERS was only allowed to assign mortgages to the lender and not any other party. It became an issue when MERS went ahead and assigned a mortgage to Aurora Loan Services, LLC (Aurora), overstepping their boundaries, all without the lender’s approval.

Needless to say, the plaintiffs filed their complaint. However, the superior court did dismiss it, stating that no authority as assignor or assignee existed with the plaintiffs at all, in addition to the fact that there wasn’t enough evidence to support the claim. It turned out, though, after filing for an appeal with the Supreme Court, that the decision was reversed given the natural interest in the property. Contractual law, too, was central in the idea of allowing this complaint to go through.

The bottom line is this – if you have a role, whether it’s real estate agent, broker, seller, owner, buyer, title company, lawyer, whatever, stick with it. Everyone has a role. If there’s any overlap, better believe that it’ll cause legal problems!

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