The Tennessee Supreme Court has ruled against a mortgage registration business, saying that the business has no constitutionally protected interest in a Hamilton County property.
MERS showdown in Tennessee
The Mortgage Electronic Registration System (MERS) is an electronic registry that automatically tracks and records residential mortgage transfers so that members do not have to record each transfer in the county’s land records.
The property in question was purchased with a loan given by a MERS member lender. The purchasers issued a promissory note secured by the deed of trust. The deed described MERS as “a separate corporation that is acting solely as nominee” or the lender.
MERS foreclosed – was it legal?
Later, the lender sold the promissory note to another lender. When the land owners failed to pay their 2006 taxes, Hamilton County foreclosed on the property, sending notices to the borrowers, the new lender, and the previous lender. They did not send a notice to MERS. The land was then sold at a tax sale to Carlton Ditto.
Courts upholds the first court’s decision
MERS filed suit against Hamilton County and Ditto, claiming that they should have been notified of the sale. MERS claims that they have an “independent interest” in the property. According to due process law under the U.S. constitution, if the government sells someone’s land to pay their taxes, they must notify the taxpayer and the lenders. If they fail to give notice, the sale is void.
MERS would like the court to void the sale of the Hamilton County property, because they feel that they should have been notified. However, the trial court ruled against MERS, saying that MERS was merely an agent of the lender, and did not have constitutionally protected interested in the property. Therefore, Hamilton County was not legally obligated to inform MERS about the sale.
The court of appeals affirmed the court’s first decision, as did the Tennessee Supreme Court, who argued that MERS was an agent of the beneficiary, but a beneficiary itself.