The ubiquitous Mortgage Electronic Registration Systems, nominal holder of millions of mortgages, does not have the right to foreclose on a mortgage in default or assign that right to anyone else if it does not hold the underlying promissory note, the Appellate Division, Second Department, ruled Friday. “This Court is mindful of the impact that this decision may have on the mortgage industry in New York, and perhaps the nation,” Justice John M. Leventhal wrote for a unanimous panel in Bank of New York v. Silverberg, 17464/08. “Nonetheless, the law must not yield to expediency and the convenience of lending institutions. Proper procedures must be followed to ensure the reliability of the chain of ownership, to secure the dependable transfer of property, and to assure the enforcement of the rules that govern real property.” The opinion noted that MERS is involved in about 60 percent of the mortgages originated in the United States.

Here, the court sided with homeowners Stephen and Fredrica Silverberg against the Bank of New York, which had purportedly been assigned the right to foreclose on their home by MERS. Lenders often assign mortgages to MERS, an electronic registration system, which then remains the nominal mortgage holder for county record purposes while they are transferred to other financial institutions, often for packaging into financial instruments.

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