–– “Badges? We ain’t got no badges. We don’t need no badges! I don’t have to show you any stinkin’ badges!”

Gold Hat to Dobbs,in Treasure of the Sierra Madre (1948)

–– “Gomes has not asserted any factual basis to suspect that MERS lacks authority to proceed with the foreclosure. He simply seeks the right to bring a lawsuit to find out whether MERS has such authority. No case law or statute authorizes such a speculative suit.”

4th District Court of Appeal, in Gomes v. Countrywide Home Loans, Inc. (2011)

The recent foreclosure crisis has brought into focus an area of real property law that until now was rarely controversial––the right and power of an assignee of mortgage indebtedness, acting for itself or through an agent, to foreclose and collect on real property secured debt. Due to the proliferation of secondary market transactions, including sales of whole loan portfolios and securitization transactions, the high volume of mortgage transactions in the early 2000’s produced an unprecedented number of sales and transfers of the debt interests and the mortgages and deeds of trust to which they relate. Records of such transactions–– and files of the original loan documents themselves––were sometimes not created or maintained, and often can be difficult if not impossible to locate. As the loans went into default in equally large numbers, the existence, sufficiency and authenticity of paperwork in the mortgage transfer process has become a focus of conflict and dispute.

The resulting flood of foreclosures and related litigation has produced a number of recent reported appellate decisions concerning the process of transferring real property secured debt instruments and the related security instruments as well as the substitution of trustees and related actions of parties in the foreclosure process. The courts have been filling in gaps in the prior authorities, re-construing statutes and prior case law in sometimes new and surprising ways, and reviewing arcane and sometimes plainly incorrect ancient case law. In so doing, the courts also have been wrestling with the ubiquitous corporate nominee for mortgage lenders, known as MERS (Mortgage Electronic Registration Service, Inc.), which was formed to act as the holder of the beneficial interest in deeds of trust and mortgages in its capacity as the nominal “agent” or “nominee” of the holder of the debt. Sometimes they have been surprisingly tolerant of non-adherence to or sloppiness in following time-honored prudent documentation, transfer and recording processes, while at other times the courts have been sticklers for the formalities and precision in such matters.

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