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First Horizon Home Loan Corporation v. Brown

A-4784-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

FORECLOSURE; MORTGAGES; MERS — Even though a mortgage may be held in the name of MERS, where the actual note holder demonstrates that it is the beneficial owner of the note and mortgage, it has standing to pursue the foreclosure action in its own name.

Homeowners borrowed money from a bank and executed a note and mortgage in the bank’s favor. The bank assigned the loan documents to Mortgage Electronic Registration Systems (MERS). After the homeowners defaulted, the bank filed a foreclosure complaint, which was subsequently amended to include other interested parties. The homeowners defaulted and the lower court entered a judgment of foreclosure in the bank’s favor. The homeowners then filed a bankruptcy petition, which was later dismissed.

The homeowners filed a motion to vacate the foreclosure complaint pursuant to Court Rule 4:50-1, arguing that since the bank assigned the loan documents to MERS before it filed the foreclosure complaint, the bank had no standing to prosecute the complaint. The homeowners contended that they did not know about the assignment until the bank’s servicer filed a certification in support of its motion to vacate the automatic stay in bankruptcy. The bank argued that assignments to MERS were only done to eliminate the delays and confusion arising out of frequent servicing changes. Further, it claimed that the bank, and not MERS, was the beneficial owner of the note and mortgage. The bank argued that MERS was merely the bank’s nominee and the bank remained the beneficial owner of the note.

The lower court found that the bank had demonstrated that the bank was the beneficial owner of the note and mortgage, and thus had standing to pursue the foreclosure action. Therefore, the lower court denied the homeowners’ motion to vacate the foreclosure judgment. The homeowners then filed a motion for reconsideration, arguing that the bank lacked standing to prosecute the foreclosure action, and that the bank and MERS had improperly concealed the assignment. The lower court denied this motion for reconsideration, again finding that the bank was the beneficial owner of the loan and had standing to file the foreclosure action. The homeowners appealed.

The Appellate Division affirmed for the reasons expressed by the lower court.


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