Clarifying Murky MERS: Does Mortgage Electronic Registration Systems, Inc., Have Authority to Assign the Mortgage Note in a Standard Illinois Foreclosure Action?
Hudspeth, Kevin M.
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As the number of mortgage foreclosure actions has substantially increased over recent years, legal scrutiny of the mortgage foreclosure process has likewise increased. The question of whether a little known corporation called Mortgage Electronic Registration Systems, Incorporated (MERS) has authority to assign the promissory note secured by a mortgage has become an important question faced by courts in recent months and years. Due to the frequency with which mortgage notes are traded on the secondary mortgage market, the plaintiff in a mortgage foreclosure action is rarely the same party who originated the loan. Under Illinois law, the party entitled to enforce the promissory note secured by a mortgage is the proper plaintiff in a mortgage foreclosure action. Many foreclosure plaintiffs in Illinois use assignments of the mortgage and note executed by MERS to demonstrate their right to foreclose the mortgage. But MERS is only named as the mortgagee of record in the mortgage itself; it has no authority to assign the note. Nevertheless, regardless of whether MERS has authority to assign a mortgage note, a plaintiff may still foreclose by establishing its right to enforce the note under the Uniform Commercial Code (UCC), which can be done by demonstrating possession of an indorsed note or by proving the transaction through which the plaintiff acquired its rights. Ultimately, plaintiffs in mortgage foreclosure actions should focus on establishing their right to enforce the note under the UCC rather than relying on the sometimes murky legal concept of MERS.